Welcome to the Franchising and Real Estate Second Life Method Podcast.I'm your host, Kelly Maxwell.
Join us here each week as we discuss the revolutionary new investment method that teaches you how to become financially free, to rise to your highest potential, and live your second life. Thank you for joining us today.
We are talking about cashflow millionaires versus net worth millionaires and to know the difference.Okay.Sometimes, especially when things aren't going well and you're maybe a little bit broke, it feels like everyone is richer than you.
and you feel like first everyone has what they need and you don't.Everyone has a nice car, they have houses, it's like, oh, they have it all figured out, right?
Then if you get a little money and you get a little stable and you're like, oh no, okay, I see, I could do this too.
But there are certain people out there, and this was me for a lot of years, you can kind of, let me just run this by you and you see what you think.
people especially online recently it's been like a millionaire is a millionaire is a millionaire right and the point of that is it's like well all millionaires are basically created equal why would there be a debate about this if you're a millionaire you have a million dollars that's what that means okay not true okay so cash flow millionaires
is someone who makes a million dollars a year in cash flow.So that's, and we'll go over this in the episode, it's like 80 grand a month or something.
And the net worth millionaires are, we'll get into this, but these are people who have a total value of assets that equals roughly a million dollars, okay?And they're very different.It's two totally different lifestyles.
And most people don't realize that there are different kinds of millionaires and the different ways to that there are different ways to become a millionaire as well.
And that's kind of the exciting news about this is that not all millionaires are created equal and that there are different ways to become a millionaire and you can kind of decide which one appeals to you, okay?
So these days, hearing the term millionaire doesn't quite inspire the prestige that it used to, right?
like you remember back in the day it was like a millionaire like this guy's a millionaire they were always portrayed as having like the sports car and the big house and you know these days hearing the term millionaire just doesn't quite inspire that same prestige like it used to okay and so being a genuine millionaire is still a distinction that confers honor in our culture
And possessing wealth, I mean, is probably always going to be in style and certainly hasn't gone out of style, but possessing wealth conveys that one has done something right in our capitalist industrial system, right?
If you say start a business or you've invested well, or you've contributed to the overall production of our country, that's considered to be an honorable or an honorary act, okay?And so maybe you know someone who's built a company
Maybe you've built a company.You've invested in real estate.Maybe you've built up money in the stock market, sold a business, sold investments.Maybe you invested in a startup and made money.It means that society saw great value
in whatever this person offered, right?These elusive millionaires, right?Be it a service or a product or an investment, or perhaps they, you know, maybe they won the lottery.And I mean, this happens actually more often than you think.
And people win the lottery and it's just not very highly publicized.And the amounts are sometimes really, really large amounts.And sometimes it's just like, you know, 60 grand, you know, 300,000, you know, 2 million.
And they pay taxes and they kind of get a payout.And it's not,
something that, you know, they're not gonna get on TV, they're not gonna get a huge check, but they do get paid out, they do, and sometimes they have, like, small periodic wins, too, and this kind of keeps them betting on the lottery, but, um, you know, and then there are people who have inherited the money, as well, and have people who pass away, and they just happen to be in the will, or you have people who have family trusts, and things like that, either way, society respects people who have money, pretty much regardless of
how they obtained it, okay, for better or for worse.However, not every millionaire is created equal, okay, as I will demonstrate for you in today's episode.
First of all, I'm skeptical of all wealth created in the 90s and pretty much the 80s as well, especially the net worth millionaires.
And there's a great book called The Millionaire Next Door, and it talks about the most popular millionaires are just these people who kind of are in the middle class and they just kind of pick up assets
as they go maybe they own a few houses and they have a couple rentals and some basic assets and they're just they're worth a million bucks and it's actually really common and it's just you wouldn't know these are people that live right next door um but just in the 80s and the 90s um it's just full of like many many self-important millionaires okay of that era
And they have kind of an everyone else works for me and me and my friends, we're kind of in a different league attitude.And it's unfortunate that they think that way, but especially some boomers, they do think that way.
So you understand the markets in the US starting in 1982 with Ronald Reagan, they boomed for literally over a decade, okay?Until 1997.
when things started to cool off a little bit, and the market just absolutely surged during that period from 1982 to 1997.So simply for owning assets and holding them, all throughout that period, people became very wealthy.
Not because they were really smart or innovative or creative or daring or bold and they invested, No, just because they were smart and they owned simple assets.
And so first of all, they deserve that wealth because they've invested in those assets, but also and mostly because the financial tide rose dramatically during that time. without any significant dips or declines in the economy to speak of.
So a lot of people's wealth today is fairly inflated for that reason.And most investors would say, well, that's just part of investing, Kelly.Like if you get invested and you have a windfall or if you have successes and of course the passing of time.
But it's just like a very long, long period where like just holding your assets and fogging a mirror and existing like you would get rich, okay?
So it's part of the reason we have rich people living among us who barely understand why they're rich, okay?
They're not active investors, they just live off their investments and they spend less than they bring in and they just call it a day and they spend a lot of money on stuff, okay?
These people are all over the place and so you may even have some of these people in your family and you may not even know it, okay? It's important for you to understand that there are different types of millionaires in the world today.Okay.
And here are the basic types.There are, there are five of them that we can easily point at.So one, the first one is employee with a million dollar salary.Okay.
So you see this in, on wall street and sometimes at big companies and CEOs and C-suite people will have a salary that exceeds the seven figure. per year mark, especially including bonuses and equity and things like that.
And so these are millionaire W-2 earners.These are NBA players, professional baseball players, hockey players, all the sports players and entertainers, and they pay
you know, they pay away half of their money in taxes, sometimes, uh, you know, uh, sometimes more.So depending on kind of if they're incorporated or if there, but, but these people can't be incorporated cause they're, they're W2 earners.
So they're basically high earning employees, right?Number two, net worth millionaires.Um, and this is kind of who we've been talking about so far, the name, the sort of the millionaire next door.This means the total worth of your equity in your home.
plus your cars, plus your pension, plus your retirement accounts.Most people are net worth millionaires in this way, okay?Who basically came up, like I said before, with just simple investments, kind of a simple middle-class lifestyle.
And then there are Number three, the capital gains millionaires.And this means you have expensive assets or assets that can be sold for a lot of money in excess of a million dollars.
So you can pay, you know, you'll pay tax on these earnings if you have if you're going to just spend sell an asset to cash out, say.But, you know, you have capital gains taxes from anywhere from 10 to 20%.
But there are people who fit this description.Say they own a business that's worth a couple million bucks.
They have, say, some shares in a startup business or, say, an apartment building that they own with some other partners and that's maybe their equity and that is worth a couple million bucks or maybe just a million bucks.
And they're a capital gains millionaire.Okay, number four, the cash flow millionaires. Okay, this means you have one million in cashflow each year in assets that flows in say businesses, real estate, so you own apartments, homes, things like this.
You have control over your future and you can take far more risk than other investors if you're a cashflow millionaire because of the abundance and the diversity of your cash inflows.Okay, so your equity may be far more than a million dollars.
but that's just a bonus aspect of it to you because you really only care about how much cash flows in.Okay.And number five is we'll throw it on here.It's less, I mean, I guess it's, It's more common, you think, but it's not really one to aspire to.
But this is the lucky millionaire, okay?And they're certainly out there.And this is like your lottery winners, basically, I was talking about before.And so it's very hard to keep lottery winnings.Just an interesting caveat on lottery winners.
Most people lose it within a few years because they don't understand money.We know that. Um, there, there was this, I remember seeing a television program a few years back and it was, uh, there was this guy that made $60 million.
That was what he took home after taxes, uh, hit one, the lottery, just a, um, humble kind of a working class guy.And he, he invested it all in like some super low return.I don't think he got very good advice.
Um, but it was super stable, like something like bonds or just something like very, uh, I mean, you'll see in a minute when you see the math, but on $60 million, he only makes 500k.I mean, it's, it's like a couple percent a year in interest.
And so, and he was walking around like with all these fancy toys and lives at this on this big house and has a big barn and has all these tractors and these vehicles.And he's thinking that that's a great deal on $60 million invested.
I mean, any capable investor could have taken $6 million and turned that into way more than the 500k, let alone the 60 million after taxes.
You know, you could have, I mean, a capable investor could have, you know, bought up at a seriously cash flowing profile for that money and then still had some money left over.Okay.
And so they would have made that person seriously wealthy as well in about a 10 to 15 year time span as well.But lottery winners don't have the financial education to multiply money like investors do.They just don't know how to swing like that.Okay.
They give it away to family members and they had done that.They had like given a bunch of it away and like set up their family and stuff, which is all great.
But I'm just like, you know, this is just what happens when people don't, they don't have that wherewithal in their minds.
They're like, we don't ever have to work or worry about money again, but I'm like, no, you guys could have grown this up so much bigger, but Hey, like that's, sometimes that's not in their plans.
They were just playing the lottery and heck they won and they're just going to keep being them.And so I can understand that aspect of it too, but people who, you know, borrow the money and gamble it away and it's not.
pretty to watch people win money or make a lot of money and they give it away.And then those people kind of lose the money and then they're back at your door.And then when you don't loan the money, it ruins those relationships and it's very sad.
So you want to be number four in that list of five.You want to be a cash flow millionaire and have... That's about 83,333 repeating, right?That's the old calculation there.But that's roughly how much you bring in
every month if you're a cashflow millionaire.So 83 plus thousand a month off of businesses, real estate, equity and different projects.I know that can sound like a lot, but it is absolutely possible.
You just have to set yourself up and invest for cashflow.Don't invest for capital gains. don't passive income above and beyond your living expenses that gives you a bit of an investment budget every month.
And that's what it's all about, to live your second life.And so let's be clear about one thing.You want to be a millionaire entrepreneur, okay?You want to be number four on that list.
You want to be an active investor who actively is studying and meeting with other investors to understand how to calculate your investments, listening to podcasts and studying and learning to become successful even in hard economic times, okay?
So no matter who's in the White House or what the economy is doing, you know how to be successful.You've chosen recession-resistant businesses.And if your cash flows your inflows exceed your outflows, then you're good.
I mean, you're in a good financial condition, you know, assuming you don't have a bunch of toxic debt.But you want to have an influx of cash flow, like I said, that covers your burn rate.
And to get your $83,000 a month, you know, you're going to need about $10 million in assets.And you can use leverage from, say, things like real estate and things like that to get, say, if you had like a roughly a 10% cash on cash ROI,
Well, you'd need to have about 10 million in assets if you were getting 10 back a year, and maybe it's 15, depending on where you live or what the situation is, but those are attainable numbers.I know a million dollars a year might sound like a lot.
It's like, Kelly, I mean, geez, some people brag about eight to 10,000, and you're talking about 10 times that much, 80,000.
Well, yeah, but when you get up on step and, I don't know, say you have two or three homes, and then you've got some businesses, and then say you've got some investments, You know what I mean?
You can get the cash to flow from five or six different sources to create that number for you, okay?Robert Kiyosaki, in his book, he talks about teaching from the I quadrant.
He wrote a book called Who Took My Money, Rich Dad, Poor Dad, Why the Rich Are Getting Richer.He talks about all this stuff, and he talks about learning from the I quadrant, which is the investor quadrant, and helping to create more entrepreneurs
who can strengthen economies and help change our world, okay?And then the I quadrant in his formulation means that you've made it, okay?So it's like, with an abundant monthly cash flow, you're no longer a slave to money.
You are what he calls a master of money. a lot they're personally capable of and what their trajectory looks like, okay?
There are entrepreneurs, just so you know, I just want to get down to the nitty-gritty with you so that you understand this, there are entrepreneurs who own publicly traded companies and who on paper are rich but have an annual salary of around 150 grand a year, pay high taxes, live in hot places where it costs a lot to live and otherwise don't
have much cash flow at all to speak of off of assets, if any.Many CEOs with impressive high salaries have no assets at all, like very little.They might have some equity in the company that they run.
But to people who understand money, the high salary, and I'm making 150, I'm making 200, I'm making 500, it's not impressive.Owning assets that produce a lot of cash That's worthy of envy to many investors.Okay.
Not the high salary that you're going to pay 55% tax on.Okay.Because we know cashflow is the real financial wellspring.I guarantee you the high salary earner, the 250 a year, 300,000 a year, the 500,000 a year people out there.
They do not feel nearly as rich or nearly as wealthy if you will as the cash flow millionaires who have millions coming in Each year from different sources, okay?Cash flow millionaires do not have to go to work each day
Um, and each day they get paid from different investments, different clients each week, each month, each quarter, each year.So yeah, they feel wealthy indeed and can service risky debt if they wish.
Um, and invest more effectively because of it with far less fear of financial insolvency.So if they want to go off and do a risky project, that's going to take say $10,000 a month in cashflow.If they have 80.
I mean, you can do a project like that and fund it, and it may make you a whole lot of money over a short time horizon if you can maybe take a negative cash flow for a while.So I have done that with great success.
It's no fun to just be putting money into something for a while until it starts to make money, but that's just how it is.That's how you get started.That's how you invest in things.Investments blossom into something great.They don't just start. Great.
And so the cashflow millionaires, they get access to all the best financing and credit available.Okay.So banks love the cashflow. especially when it's diversified and it's abundant, okay?
And so whereas a stock can lose value or a business can be acquired or lose clients or do layoffs and just report underwhelming numbers and things like that, cash flow off of assets over long time horizons is seen by banks and analysts as much more stable than other forms of wealth, okay?
So even if you have a business that like made $10 million because it just sold something, they're going to be like, well, you haven't been in business that long.
that looks like a one-off and so don't expect to get loans based on the size of the transactions you're doing just because they're large.It's more about how long you've been in business and kind of what your track record is.
It's very much you have to create a relationship with the banks.So instead of jumping to conclusions or creating a false reality inside your head, consider what a person's wealth is comprised of and decide if you're still impressed or not.
Okay, so you may be surprised to find out that some net worth millionaires just don't have the money to live that much larger than you or really buy anything that you can't buy, okay?
But cash flow millionaires can buy whatever they want and the bank will lend them money to do it.Apart, I mean, from that they have their own money to do it.So the richest people tend to have multiple
businesses and assets and royalty payments and passive income streams, et cetera, et cetera.
Um, and it may be driven by, you know, one large company or one major contributor to their wealth, like a large earning source, like for Jeff Bezos, it's Amazon.And, you know, for, that's just for a simple example, but it gets,
diversified into businesses, public and private, and then their capital gets lent out at high interest rates, and it gets invested into projects, into startups, into stocks, securities, property, tax-minded investments, etc., etc.
So, companies also take out loans from the bank and invest the bank's money using their own value equity as collateral. meaning the bank takes the risk and not the company.And so I did that.I loaned $80,000 to grow my company.
I was able to pay back the money.It allowed me to hire some people and get a couple of vehicles.And it was great.And we opened up a new area of the market, which opened up a new income stream for us.And so that was a totally successful venture.
I can imagine loaning money and having it not work out.Okay.And so This, in turn, stabilizes the wealth, grows it, provides cash flow, as wealth just can't be stored in the bank.You guys cannot store your money in the bank.
It loses value and it does not pay almost anything in cash flow.Bank interest is negligible.It's almost zero.In some cases, it is zero.
and when you add up all the fees that they charge you and they try and nickel and dime you everywhere because your money is a liability on their books.They need to lend it out, okay?So they want it, but they don't want it.
It's this complicated thing.
The interest used to be much higher, and banks were kind of a come one, come all, and they were very friendly, and people would keep their money in the bank, and it would just earn interest as it paid quite well, 10 to 15%, but not anymore, okay?
You can't get that virtually anywhere.You have to invest in assets, okay?It's virtually 0% these days, and so this is why the wealthy
store their money in or another way of saying that is they buy assets they store they trade fiat currency dollar bills or pounds or pesos or whatever and they convert at a certain price that fiat currency into an asset and then that asset grows in value way faster than the currency would as the currency is losing value and so it immediately changes direction and starts to grow in value
when it's converted and someone buys with money any kind of an asset like a property or a business and that business starts to grow and produce income.Okay.
And so this is where the wealthy store their wealth is in cash producing assets, not just assets, but cash producing Assets, cashflow millionaires are truly the wealthiest of the millionaires.
And there are people that make way more than a million a month.There are people that make millions and millions a month and they just have it on on autopilot and their full-time job is just to reinvest that money and grow their family's empire.
That's what your goal ought to be if you can swing it, okay?So get out there, build those cashflow streams up in business and in real estate.You want the flow, baby. When you get big gains, reinvest them back in for more cash flow.
You'll be so glad that you did, okay?Teach your loved ones how to free themselves from financial bondage.Take care of yourselves, and I will see you out there.Thank you for listening.You can do this. You can be the one who sets your family free.
Finally gain that traction in your career.Take flight today with our world-class franchise and investment opportunities.You can do this.You will do this.You will live your second life.
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