On this episode I break down the Indestructible Wealth Method, using real life examples from poker, Crypto mining and real estate investing. I also drop some hints about my new book, and what it takes to write one. Let ‘er rip!
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About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #59 – The Indestructible Wealth Method
If I could summarize the Indestructible Wealth Method in 1 sentence, it’s the focus of converting earned income into passive income, and then from passive income to capital gains. I’m going to explain what each of these are and how they work, but first let me give you some examples to get you excited about the possibilities for yourself.
There’s infinite ways to earn money. For me, playing high stakes poker is a fun way to earn it. The past couple of years just playing one night a week, many weeks not getting to play due to family time, I’ve earned darn near $100,000. If I don’t put the hours in, then I don’t continually earn on that time. So it’s what we call linear income – trading time for dollars. Fortunately, it’s a hobby and I wouldn’t care if I didn’t make anything (although winning is so much fun so I definitely enjoy it more). My mind is always thinking “how can I convert this earned income into passive income?” So, I’ve been taking all my winnings and buying Bitcoin mining machines. Yes, I could certainly go spend that on clothes, electronics, I could even buy a new boat for that matter, but I want the passive income to buy those things. I buy things to then buy me things. With that $100k, I’ve been able to purchase 20 machines. I don’t even know how these things really work to be honest. I know that they send thousands and thousands of guesses to validate transactions on the Bitcoin network. The network “rewards” me with little pieces of Bitcoin – the more machines I have running and guessing, the more I’m going to get. That Bitcoin that flows into my crypto wallet will continue as long as the machines last. I can immediately sell the Bitcoin and convert it to cash, and then spend it on whatever I want, or, I can hold onto it and hope it goes up. Since I believe that Bitcoin will reach $500,000 per coin within the next 5 years, I’m holding it all for the increase in the value – the capital gains. This gets me excited just talking about it – taking the earned income, converting it to passive income, and then eventually capital gains. There are always a lot of “IF’s” in investing and things that have to go right, and they certainly do not always go your way. If the machines work for 5 years, and if they mine as much Bitcoin as we project, and if Bitcoin goes to $500,000 – we are talking about converting that $100,000 into over $7 million. If Bitcoin stays at $50,000 where it is today, we are still talking about over $500,000 in passive income over those 5 years. You can plug any scenario of earning income here into these examples. I picked the poker example because that’s more fun.
So let’s explain in more detail what Earned, Passive, and Capital Gains Income are all about. Earned income is you trading your time, energy, and skills for dollars. When you clock in at your job, you are being paid for the hours that you put in. I’ll never forget the day I resolved to never work for anyone again. I was 19 and had just gotten started in my direct sales business. I wasn’t making very many sales, so I needed to raise some additional cash for summer fun. My Uncle Duke, an Entrepreneur with 3 different businesses, owned a farm and had just purchased some adjacent land that needed to be cleared of sticks to start farming. That was not fun work let me tell you. It felt like a little menacing Leprechaun was hiding out in the woods and kept throwing the sticks back into the land, thwarting my every effort. I don’t know if I was done with the parcel or if I was just done with the work, but I turned in my time sheet showing 20 hours. My Uncle gave me $100. I couldn’t believe it. $100 for that much terrible work? Around that same time, I had managed to make a pretty nice sale. It was called an Ultimate nutrition program selling for $200. I made $100 and it took me not quite an hour to finalize. I realized I could never go back to working for wages. Jim Rohn always reminded me “Profits are always better than wages”. Those words couldn’t ring any truer in that moment. The side by side comparison of the earning power of an Entrepreneur and an Employee was all the lesson I needed.
If you are in business and you personally make a sale, you were just paid for your time and expertise. If you stop clocking in at your job, or you stop making sales, then your income stops. Earned income is the starting point of wealth creation, however it’s big limitation is that it’s not scaleable and it 100% resides on your efforts. In order to build wealth, you need either 1) people at work or 2) money at work. In the Earned income stage, you have neither. This is why a high income doesn’t guarantee wealth. My massage therapist told me at my last appointment that she’s interested in building wealth. Her challenge is that she’s very highly skilled, and booked up for months. She only earns money when she’s hands on (pun intended) and she will have to hire other therapists to have people at work. I say being highly skilled is her main challenge because no one can do it like her. However, if she can get someone to do it 70% as good as her, then she should absolutely expand and hire. In that business, it’s the only way to produce meaningful wealth. People at work. My Mom used to drill into me many different “words of wisdom” type quotes she heard growing up on a farm. “Many hands make light work” was one of my favorites. For a massage therapist, many hands not only make light work, but they produce a lot more income.
In my real estate business, I started off making sales with the sole intention to take that income and convert it into long term rental properties to produce passive income. When you invest into long term buy and hold real estate, not only do you get passive income, but it’s likely that you’ll get capital gains from the property increasing in value over time. Unlike any other asset class, I can take a smaller amount of cash and put a down payment and leverage the rest of the purchase price with bank money. So a simple example is if I have $100,000 cash to invest, I can buy 1 property for $100,000. However, if I get a loan from the bank, or really whoever will loan me money to buy, I can put $25,000 down on 4 different properties, and have the bank finance the rest of the purchase price.
This allows me to buy more properties, create more cash flow, and instead of 1 property increasing in value, I have 4. The tenants by paying their monthly rent not only provide positive cash flow (unless things go very wrong, which certainly can happen), they also pay down my note to the bank. I recently sold a property that I had only $12,000 of my own cash in, that over 5 years went up $150,000 in value. Not only did I capture that gain, but I had 5 years of positive cash flow from the rents and 5 years of my loan being paid down. This is exactly why more millionaires have been created in real estate than any other asset class – there are so many different ways you increase your net worth! However, you don’t stop here. You take the rental free cash flow and you buy crypto every month. You have the opportunity to safely grow some incredible wealth because even if the crypto doesn’t work out and goes to 0, you still have cash flow cranking out each month, your property is still going up in value, and you are paying down the loan with the renter’s money. This is a classic example of how powerful the Indestructible Wealth Method is – your lifestyle isn’t affected, and you continually keep taking these swings for the fences with your safe passive income.
In my direct sales business, I sold a nutrition program to a customer not because I wanted the income from the sale, but I wanted the customer to get a physical result. Once they had that, they fell in love with the product and I set them up to order for themselves right online. I have customers who still order 24 years later from what I did in college. The initial work of marketing, selling, and onboarding the customer and coaching them is done, yet because it’s a consumable product, and I helped them solve a problem, each time they get to the bottom of the can or bottle, they place a new order. That ongoing income stream was what I was always after.
If you look at what I’m doing with my company Indestructible Wealth, the intention is not to create another earned income. It’s to produce assets that will continually sell over and over again once the initial work is done. It took a lot of work to create my step by step video course, but now that it’s finished, those that are reading this book and following my social and podcast channels will certainly purchase it. The additional products I offer, the Mastermind and limited 1:1 coaching, is still earned income. Once the business has plenty of excess cash flow, I’ll start taking that cash flow and investing it into more great assets. In the first couple years of starting a business, my mindset is always to keep investing profits back into the business to hyper-drive growth and produce more income over the long term. You should be thinking the same way with your own business. There really isn’t a better investment you can make provided you have a solid business plan that you can scale.
Passive income definition is earnings derived from a rental property, or other enterprise in which a person is not actively involved. Passive income is paid to you over and over again for work that you did in the past, in some cases, from effort you put in years ago. There are assets that can produce both passive income and appreciation, or capital gains income. Real estate is probably the best example and why more millionaires have been created in this asset class than any other. You get income from the rental of the units, whether it be single family, multi-family, or self storage facilities. But you also can get an increase of the value, also called appreciation, which is income on paper. You don’t realize that income until you sell the asset. Stocks provide dividend payouts which is passive income, but they also can appreciate in value. Cryptocurrency is widely invested in for it’s potential for huge value increases, however there are ways to lend and stake your crypto that provide passive income. I’m currently earning over $1,000 per month by simply placing my crypto on exchanges that lend it out to others, and then pays me in additional crypto. I’ll dive into this in a later chapter on the exciting world of this technology. You can also mine it as I’ve described, and I’ve found a way for you to do this without large amounts of capital, or any skills or connections to someone that does. You can get that right here on episode #53 of my podcast: https://www.myindestructiblewealth.com/episode-53-how-to-legally-print-money/
So that leads to capital gains, which is defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property like a house or a car, a business, or intangible property such as shares. When I buy $10,000 worth of stock, and the stock rises in price to $15,000, then the $5,000 is capital gains income. The challenge with investing for capital gains is that you are speculating, in other words you are buying and praying that the value of the asset goes up. The #1 biggest mistake that I made as a young college student with $50,000 burning a hole in my pocket, and what I see so many do today, is they skip from Earned income straight to Capital Gains investing, often times without knowing and understanding what they are investing into. Memes like “Dogecoin to the Moon” or statements of creating huge wealth on highly risky investments is speculation at it’s worst. Yes you can make some quick gains but you can easily go the other way just as fast, as several of these popular meme bets with no underlying value are starting to see. Capital gains investing shouldn’t be pure gambling, on the contrary, all the capital gains investing I do is extremely well researched and has very promising long term value to the marketplace.
Capital gains investing is a critical part of building Indestructible Wealth and retiring young much sooner than age 65. However, it is filled with risk and educated guesswork. Capital gains has huge tax advantages, right now depending on your tax bracket, it could be anywhere from 0-20% whereas earned and passive income are taxed much higher. This type of investing can also provide huge leaps of wealth. My friend Lance who bought 10 Bitcoin for $1,000 each is the benefactor on some incredible capital gains, turning $10,000 into $500,000 in a few short years. That is absolutely impossible to do with Passive income investing.
What you should expect from each of these 3 buckets in terms of immediate rewards? Well, with earned income you have a pretty good idea what you’re going to get for the time you put in. It’s a little trickier for business owners and commissioned sales reps, although they do know with some precision after a period of time what they will earn from a given amount of time and activity. With passive income investing, you should know about what you will earn when you buy the asset. Of course things can go wrong, but if you’ve done your homework, bought a great asset that produces ongoing cash flow, then your chances of immediate downswing in price is not too high. With capital gains, I almost expect when I buy for the asset to drop in price. You cannot possibly time the bottom of stocks or crypto. So do not be at all surprised when you buy, in the very short term they drop in price. The key is not to panic, and remind yourself that you bought good projects that have incredible long term potential. Hold your ground. Time in the market will always trump timing the market.
I’m guessing you have some mixed feelings after this section. On the one hand, you’re totally excited with the prospect of converting your Earned Income dollars into Passive Income, and then taking your Passive Income and speculating with it into some high growth Capital Gains investments. On the other hand, you could be saying to yourself “this all sounds great, but I have no idea how to implement this – what should I buy, and where do I find these investments?”
I’m a bit limited in what I can do to immediately move the needle on your Earned Income ability, as each individual has a totally unique situation and it would likely take some intensive 1:1 for me to help you increase your income. I do have a podcast where I record 2 episodes per week, and typically 1 of those episodes is geared toward Entrepreneurialism and the mindset shifts needed to expand your earning power. It’s called the Indestructible Wealth Show with Jack Gibson, and you can find it right here on my site: myindestructiblewealth.com/podcast. I can’t dance or sing or do art for shit, I can’t fix anything to save my life, but I absolutely do know how to make money, and I can do it in multiple areas. As of this writing, I have 4 LLC’s that have all done over $2 million in revenue, and it won’t be long before I have 2 more (Bitcoin Mining and this platform). So, learn from me for free on my podcast and blogs.