An often overlooked aspect of the wealth gap in America is the fact that it is accompanied by a financial literacy gap. Most people have grown up surrounded by money myths which are the exact opposite of what the wealthy do with their money to get even richer. Andrew Cordle, the Founder and CEO of Money Is, does not buy into the money shortage myth. Andrew is an eclectic entrepreneur, an in-demand speaker, and a highly regarded wealth strategist. He believes that people have to change their mindset about money, get financially educated, and get some money movement going to be one of the nation’s wealth creators. Growing up in a working-class family, Andrew’s perspective was massively influenced by his journey towards wealth, which he achieved through real estate. Listen to him share his story with Marco Santarelli.
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Money “Secrets” Of The Wealthy
We have a great and interesting show. It is the Money Secrets of the Wealthy. My guest is going to be talking about some of the things that the wealthy people know and ways that they think about money. The strategies they use to help create wealth and preserve it and grow it. This is a big topic and it is something that we could talk about for hours. It’s important to know that at the end of the day, there aren’t any true secrets. It’s an understanding of money, how it works, how to put it to use, how to preserve it, how to grow it, how to protect it. These are topics in and of themselves, but at the end of the day, it’s important to know that this stuff can be learned and implemented.
You can learn how money works, how investing works, how to become a better investor. This is nothing new and nothing that I’ve created. Being a shepherd of information, I’m passing it along and bringing great guests on the show like our guest who is willing to share, educate and teach the things that they have learned in their journey to becoming financially independent. Even in many cases, incredibly wealthy and rich. That is what our show is about, the so-called Money Secrets of the Wealthy. It will give you a lot of insight and perspective. You’re going to enjoy the show.
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It’s my pleasure to welcome Andrew Cordle to the show. Andrew is an experienced real estate investor and a trainer who has fixed and flipped over 500 properties. He has done over 200 wholesale deals, over 100 lease option and subject-to deals. He invested in single-family and multifamily rentals. He is a two-time Amazon bestselling author. He’s an international speaker. His businesses have generated over $100 million in sales in a three-year period, which is absolutely incredible. He’s a respected thought leader in the business area of financial literacy. He is the host of the Money Is podcast. He does like to educate the 99% of people out there about money secrets, about what the 1% wealthy do. With all that, Andrew, welcome to the show.
Thank you, Marco. I’m excited to be here.
I’m glad to have you on. You are a good friend of mine. I know you and I have met long ago. We’ve crossed paths multiple times. Finally, we are getting together here to talk about something that you and I are passionate about. I know that our audience love to talk about money, wealth and income. Before we start going down that road, let’s find out who Andrew is. Tell us a little bit about yourself.
I grew up in a very low to middle-income family that had nothing to do with money. We didn’t understand money and almost had a negative connotation about money. From the background of our family, money was a bad thing and a negative concept to a certain degree. My family history were teachers. I followed the suit and went off to college to become a third-generation teacher. Along those lines in college is where I realized that teaching is not for me in the traditional sense of going to a school. That’s where that birth of entrepreneurship hit. Once I cracked that Pandora’s box of entrepreneurship open, it has never been closed since then. I don’t think I could ever close it again. From college, I started businesses and then got into real estate right after college. It’s been many years since I’ve been in business and real estate together.
You weren’t born in a wealthy family or with a silver spoon in your mouth. You had to teach yourself financial literacy. At what point did you make that realization and what did you do to educate yourself?
When I started, I knew nothing about money. I just knew that I was frustrated with what I was doing maybe financially or even in my life. I was looking for a way out. Real estate for me was the bridge that allowed me to try to get to the other side. A lot of that has to do with all the things like leverage that’s built into real estate. We don’t have a lot of money but there is an average you can at least play into that world of real estate that would leverage. This is where I made a lot of mistakes. Even as I was doing deals, I was flipping houses, and I built a company. This was in 2003 to 2006 and we were doing buy fix and sell during that time. During that era right there, we probably did 150 to 200 buy, fix and sells in that heyday of pre-bubble.
When the 2007, 2008 crash hit, that’s where I found out that I did not know anything about money. I became good at doing a flip. I was good at my craft, but I realized a very costly lesson that being good at that craft and being good at money was not the same thing. When that crash died, I ended up losing everything in 2008. I lost all my houses, my company’s down, all my staff and employees went as a lot of people did. That’s when I realized it wasn’t just about knowing how to flip a house or create some money. It was about understanding the game of money. I knew nothing about that, which is what I went into saying, “I don’t want to necessarily maybe learn everything about real estate or business. I want to know about money because that’s what I was going after.” Why was I flipping these houses? Why was I willing to risk my time, money and career? Why was I willing to do all that? It wasn’t because I loved a house or a flip. It was because I was trying to get the end goal, which was money. In 2008 is when I learned that experience and then shifted my focus on learning more about money. Financially, my whole life changed in that 2008 crash, at ground zero bottom.
That story well illustrates the idea and need for financial literacy. Understanding money and how it works is critically important. When you start flipping houses because you think it’s the right thing to do, that’s the tactical side of the equation. You’re looking at the tree and you’re not stepping back and looking at the entire forest. You’re not understanding how to create streams of income and why you should create it, how to make it, how to grow it, how to protect it. It gets into the whole concept of asset protection, tax strategies, tax advice, and all that stuff is financial literacy. A lot of investors, including myself, make the mistake of jumping in head first, doing the deals and then realizing, “There’s a lot more to this that I need to consider.” You then have to step back and start reinventing some of what you’ve done and what you’ve learned. This is why financial literacy is important. You agree with me that financial literacy is important.
I have passionate opinions on this because I think that financial literacy is extreme, ranking it in the very of top things that is out there that what we need in our society. If you think about it, money intertwines in everything. We could talk about the divorce rate in America and how high it is. If you go back into the studies and they say, “What was the number one cause for divorce?” The answer is finances. You go through all of these different categories for getting even like money and retirement. Money intertwines in everything that we do, what our kids do, where they go to school, what we eat, where we live, where we go to vacation.
To me, financial literacy is one of the most important things that we could study. Unfortunately, it is not out there being taught anywhere. This was so frustrating and you know this, Marco. You can’t go to some school and say, “Teach me about money.” Most of the time, the actual teachers, and I’m talking about my own family here, my mom and dad were teachers but they couldn’t teach in a school system about money because to teach money, you’d have to understand money. The majority of people don’t understand how money works and how it operates. I talk a lot about money movement and how important it is. The number one rule or law of money is money movement.
I would argue that it’s impossible to create wealth without money movement, which goes against everything we’re always taught growing up. It is the opposite of that which is, “Save all your money and hold on to it as much as you can.” In reality, give it to someone else, let them make money and you hold on to it. There’s a huge break in society in understanding money and being able to teach the principle of money movement or whatever it may be.
Look at the stats. Forty-three percent of American households spend more than they earn. That is proof that people don’t understand how to properly preserve, manage and invest money. The 76%, which is three quarters of the US population, live paycheck to paycheck. That’s a scary thought because if they have a $400 repair bill next month, they are screwed.
I use the stat all the time of how many people live paycheck to paycheck. There’s not a stat for this one, but it’s just me thinking through it. If 73% of the population live paycheck to paycheck, that’s a stat that we know that’s out there. I don’t think that that necessarily means that the other 22% of the population is not living paycheck to paycheck. I think there’s still that the part of society that is living below paycheck to paycheck. That paycheck is not even covering their expenses. This is where it comes down to the 99% of the people in America and the 1%. We hear this terminology all the time. To me, that stat of saying 73% live paycheck to paycheck is true, but I think there’s another 21% in there that are not living paycheck to paycheck. They’re under it. There’s the 1% that has money and understands the game of money that’s out there. That’s why there’s this massive generational divide between the 99% and the 1% when it comes to money.
We can go on and on about the stats. We’ve made the point loud and clear. I always wonder how much of that comes from a scarcity or shortage mindset? I personally believe that becoming wealthy and financially independent starts upstairs in your head. The number one rule of my ten rules is all about educating yourself. You have to invest in yourself because that pays us the highest dividends.
There’s no greater investment than in yourself. You couldn’t invest in gold, silver, stock, real estate and have a better return than you investing in yourself first because you are the brand, the product, and the investment. When it comes to money, you as an individual can only grow as much as you understand. This is why there’s this large group of people that are in that paycheck to paycheck side because mentally, when it comes to money, they’re at a level where they capped off that and they can’t get above it because they’re not investing in themselves and learning more about money. Therefore, they’re capped there. The more that you know about money, the more that you can have. The less that you know about money, the less that you will have. Therefore, the greatest investment is always in yourself first.
Some people think that there’s a shortage of money, which we all know is not the case. The Fed just finished printing $4.2 trillion of new currency and pumped it into the system. There’s no shortage of money. The problem is not in money. The problem lies within you, within how you think. The book, Think and Grow Rich, nails it. That’s exactly why it was titled that way.
A lot of times, I teach on the 99% and the 1%. I call those contributors and creators. When it comes to money, you would have one group. The 99% that I refer to as the contributors of money or wealth. and you have the 1% which I refer to as the creators of wealth. At the end of the day, if you break these down, what we start to realize is everything that the contributors do with money, every philosophy they have with money, everywhere they put money, everything they do with money is the exact opposite of the 1%. The myth that is inside of money that a lot of people misunderstand is that a lot of times, when you talk to someone, they’ll say, “There are two different games or concepts of money when it comes to the middle class, maybe in the wealthy.” The two games are similar. Maybe they don’t use their 401(k), but they have a Roth.
They try to justify the process and say that the games are similar. It’s not true at all. The first thing that the contributors or the 99% would have to understand is everything they do with money, the 1% does the opposite of what they do. When you take a step back of the picture and realize the 99% does not have money and the 1% does have money, you have to ask yourself the question of, “If this side is this has money and they do certain things with money, and I do the exact opposite things with money. If I want money, I would have to reprogram my internal brain of money and how it works to the creator side versus how we do it over here.” A myth that people always talk about is, “If I just work long and hard enough, then eventually I’ll be wealthy.” That’s not true at all because you could go back for generations like in my own family.
My family were extremely hard workers. My dad like many fathers from my generation, they went to work every single day, they didn’t miss a day and they work extremely hard, but it doesn’t mean that at the end of it, they were wealthy. That was 30 or 40 years of working. My grandfather was the same way. Time is not the issue that’s lying there with money. A lot of times the contributors will say, “I have to have this 40-year plan in place. One day, if I do all this work and do all this stuff, eventually I’ll be wealthy.” To me, if you understand how money works. It’s not timing as an issue. Not that it doesn’t take time to create wealth. I don’t believe in any get rich quick concepts, but it’s not a time thing. It’s understanding money in the sense of a great concept. Maybe what I want to talk about is how money movement works. How one side does not move money and one side always does move money. It’s what I refer to as the law of money there.
I want to talk about money movement because you mentioned it often. Before we go there, to take what we’re both talking about one step further and become a little bit more granular with it. I always like to ask people, even myself, “How do we fix this problem?” The approach I’m taking with it is let me put out some quality content. Let me interview guys like you, Grant Cardone, Robert Kiyosaki, and share their message with the world, the podcast and YouTube channel. I’m going to ask you the same question. In your opinion, how do we address and fix this problem?
I have spent many countless hours of my life trying to answer that question internally because I have a legitimate want and desire and even purpose in my life to solve that problem. It drives me crazy. It’s not like we all went to school. We were all taught how money worked and some of us chose to do it and then some of us chose not to do it. That’s not what took place. What took place was we weren’t taught anything about it in school systems. Where we learned about it from was our parents. If our parents had money, then we probably learned those principles and philosophies and could develop money. If our parents didn’t have the money, like my parents did, then we were taught how not to do it.
This whole concept drives me crazy. Coming from the teaching standpoint, I don’t know if we could ever get it in depth into an actual school system because I believe to truly be able to teach money, you have to understand money. To understand money, you’d have to have money because when you have it, the choices become very real and not hypothetical anymore. It’s one thing to talk about money from a hypothetical standpoint, from a classroom perspective. It’s another thing when that teacher can get up on stage and talk to you from, “This is how it works because I’ve done it, felt it and understand it.” We get into the concept of, “Do we pay our teachers enough money?” That’s a different conversation. I don’t know if we could ever truly get education to a school system.
There could be progress made in some underlining themes. I think that could happen, but truly teaching it, I don’t think could happen. I think it’s what you’re doing, what I’m trying to do, and what others are trying to do, where we’re saying, “Let’s pull back the curtain on this thing. Let’s have an authentic conversation.” The whole brand that I have on money is about trying to have an authentic conversation about money. Let’s put it on the table and talk about it. It’s not a taboo topic. It’s exactly what you’re talking about. We have to have these podcasts, YouTube channels, blogs of getting true information out with wanting nothing in return.
As soon as you make it about a sale or some, “Buy this from me,” which I’m not against because I believe in capitalism. In the game of money, once you do that in your voice, there’s a piece of you where you’ll lose credibility of producing content information. You then try to turn it into this course for $3,000 and I can coach you through it. I’m not bashing that. I believe in the concept but for me, I don’t want people to come see me with a bias like, “You’re trying to sell me this thing?” I’m just trying to show you how money works. I’m trying give it to you as best as I can.
I’d probably add one more thing to it, which is a precautionary comment for our audience. There are a lot of people out there giving advice and often it’s good advice. Some of the best advice comes from the people who have walked that path, who have the experience and have done things like created businesses and failed, created businesses and succeeded, invested and failed, invested and succeeded. I was talking to my daughter about this. We were doing a one-hour course on financial education. We got talking about politics and I said, “Nobody should ever run for office unless they’ve started and failed at least two businesses and have experienced at investing.” Can you imagine if someone has gone through the process of starting and building a business, failing and succeeding and invested in understand how money works like you’re talking about? It would be a complete game changer.
We’re going into a topic that I’m already passionate about, which is politics. You’re right. I am tired of seeing politicians making laws, telling business owners how they have to go do something when this person is coming at it from a position that they have zero understanding about and zero information about. On paper, it probably looks halfway good like, “This is a good theoretical concept here.” If you had started a business, went through those failures and pushbacks, you’d realize how much of that stuff is not practical and applicable laws that you’re implementing. It would change America as we know it if all these politicians have to go through that.
I think that political side of it should be an in and out process. I do not believe in his lifelong career, “I’m going to be a politician for 40-plus years,” type of concept. In the political side, I believe it should be an act of service. I even have some opinions. I’m not saying they’re my beliefs yet, that you should run for Congress once you don’t need money from Congress. You should not be a leech officers’ society. If you go back in the olden days when it was first started, there were farmers that left their farms, went to DC to became this politician, and then they’d go home back to their business or farms back in that day. I agree with you. We could do that. I don’t know if that ever take place, but it was great advice you gave your daughter and hopefully the audience would agree with this as well.
There are always mixed opinions and thoughts. To close that loop there, there are two quick comments. One, what you’re referring to does exist to some degree and it’s called term limits. Do we enforce term limits? The second comment, and a lot of people don’t know this. Interestingly enough, the more you study American history, the more fascinating it becomes. For the longest time, to run in politics, there was never any income. It was done as a voluntary service. You are committing your time. You are not getting paid. It wasn’t a job. Public service is exactly what it was.
Pure act of service that you felt obligated to help your country, your city, your community out. You would give to go do that. We have gotten so far from that concept. It’s unique.
I’m a perpetual student and I love the topic of money. I try and learn everything I possibly can about money and wealth. You talk about this concept of money movement. I don’t know enough about it because I have never talked to you about it. Talk to me about money movement. What is it? Explain it. I’m genuinely curious to know what it is.
This is from my own life and studying wealthy people and also studying middle-class people for all these years that I’ve been doing it. What I call the number one rule or the number one law of money is that money constantly must move. If money does not move, money begins to die. You have one option and that’s that money is going to move. Uniquely enough in a game of money, it’s going to move with or without you. What I tell people as I teach this concept is that money movement happens. It’s happened your whole life. If you have known that you were playing the game or not knowing you’re playing the game, you were still playing the game because the true game is money movement.
It’s going to happen with or without you. Let me dive a little deeper so you can see what I mean. On the contributor side or the 99% side, we’re taught to not move money. In a study that you were talking about earlier about the 72%, there’s another study by Prudential Financial. They interviewed people and said, “What’s your number one emotion about money?” It was fear. They said, “If you’re number one emotion about money is fear, what are you afraid of when it comes to money?” The answer was, “I’m afraid of not having enough or I’m afraid of losing it.” What you find is that on the contributor side, which we’ll refer to as the 99% or paycheck to paycheck side, what we’re taught is that we should go to work a job, and then you’re going to put money into your retirement account. The rest of the money, you’re going to end up spending in America. We can get into the debate that the majority people in America are not even putting money in retirement accounts at this point. What happens is that person is not moving money. When they get their paycheck, they hold onto it because they’re afraid they’re going to lose it.
What’s driving their decisions of money is fear. The fear is, “I’m going to lose it. I’m going to hold onto it so I don’t lose it.” Because you’re breaking the law of money movement, that money you’re trying to hold onto so tight, you will eventually lose it. We go into all the different reasons of how it’s lost even to the point of inflation that takes place with money throughout time. When you try to hold onto it and break the law, which is what all the 99% do, therefore you don’t have money. To have money, you have to abide by the law of money movement. When I went interview to Kevin O’Leary from Shark Tank, I was talking about this concept about money movement. As soon as I’ve mentioned it, I was intrigued to know if he would know what I was talking about or engage in it and he did. He said, “Money movement is the most important thing to do with money.” He gave a whole illustration of how he views money as war. He said, “My job is to make money move, which means my job is to take my money and not hold on to it. I want to trade my money for assets constantly. I don’t want the cash. I want the assets.”
His whole point was, “I view money movement as war. I’m going to make my money and go to war. I’m going to play the general of this war. My job is to make sure that my money is out to war as safe as possible as I want to make it. I understand there would be risk involved in it. If I’m a general, I’m going to make sure that my people and my money is safe as much as possible. For me to win, my money has to bring me back more money.” He viewed money movement as war, which is the money has got to go out, buy an asset and then that asset continually produces more money for a person. As a person, if you want to create wealth, it is not the concept which you see so many people is saying, “I’m going to save up all this money through my job. Eventually, I’ll be able to save up enough money that I could go buy me a second house and a rental property, or a third house and a rental property.” They’d convinced themselves that the way to do this is to sit there and save their money for 30-plus years or 20 years or 10 years to be able to buy this second house. As we know, that concept takes forever in that world of saving up until you go do something.
In the side of money movement, which is the 1% or the creators, their whole perspective is, “As soon as I get money, I’m trying to move that money out, not hold on to it, not save it and trade it for an asset. That asset will now produce me my second income. As soon as that income hits that next month, I have one job. I’ll move it again and go get more assets, and then next month, getting more assets.” This is where everything changed for me as well. Once I realized that my true job with money was to always every month move it more and every month and move it again, my whole perspective on money changed. Every month, it’s grown throughout the time. It started with single-family homes and then it got to storage units and apartment buildings. Now, we’re building a $54 million apartment building. All of these things that I’m doing is I’m taking that money that I have and I was looking for the next thing to go move it into.
Going back to the contributor side. When contributors talk about money movement and you ask them about it, they’ll say, “I am an investor. I move money.” What they referred to is, “I invest money in my 401(k) or mutual funds or bonds.” I’m not against those things. For the contributors, that’s what they refer to as money movement. If you could take a step back from that picture right there, what they’re doing in what they call investing or money movement is they’re taking their money and giving it back to the 1% of the world. Those people are investing it, making the money, and then giving back very little money to this other side on this side, just enough to keep them hooked or addicted to, “Let me put more in there and I get this little bit money back.” I don’t want to get to the word unless you want to. It’s a whole other topic, but the word is diversification. That is a complete farce that was sold to the contributors. If you start looking into it, who sold it? The 1% who manage the money came with this idea.
Think about it from a sales perspective for a second. If I was trying to sell you on the idea of, “Let me personally manage your money for you” as the money manager. When I went and talked to you as a sales person, I would want to know what is your pain. This is how sales works. This was called pain sales. As a sales person, you would find this person and figure out what their pain is. The pain for contributors when it comes to money is they’re afraid. “What are you afraid of?” “I’m afraid I’m going to lose it.” Therefore, to sell the idea of, “Then give me all your money,” the way to sell that to that person is by saying, “What we should do is diversify this portfolio for you. That way you won’t feel afraid that you’re going to lose your money.” This contributor says, “I feel better if my money is safe and diversified. Here, take all my money.” Watch what happened right there.
All that right there had been the same thing I’ve always talked about, money movement. Money moved from this side to this side. In the world of money, it always moves from the contributor side to the creator side. You mentioned earlier the $3.6 trillion printed. There’s plenty of money, but the money is always moving from this side to this side. We can talk about all this stimulus that they’re passing out and the unemployment they’re passing out. I’m not saying it’s right or wrong. My point is as they pass that money out and they print that money, where is it going? That goes in the hands of the contributors, but where does it end up at? It ends up back on this side because you’re paying your rent, mortgage, car, groceries, cell phone bill and all that money goes back to the 1%, the creators’ side. That’s what I mean by money movement inside of money and wealth creation there.
The concept of saving that you mentioned is one of the mistakes a lot of people make because save for the sake of saving, not realizing that there is no money movement to tie it back to what you’re saying. If you’re saving your money is sleeping, it’s dormant. The only reason you save money is because you want one day to invest it. You want to turn it into a stream of income. You want it to go to work for you and keep that money moving and build it and move in. You want to save and redeploy. That’s how the wealthy get wealthy. I don’t know if you’ve ever done the calculation, but you put money in the bank and you’re getting a savings rate of 0.25%. In order for you to get a 10% overall return on your money, not even adjusting for inflation, it would take you 40 years’ quarter point to make a 10% return on your money. Meanwhile, it would have been completely eroded away by the effects of inflation.
You’ve got to bring in the other side of it, which is taxes as well. Even though you made it to 10%, you’ve got to add in inflation and you’ve got to add back in taxes and then let’s see where that got you over those 40 years there. If the contributors would take the time to do this math themselves, they start to realize, “This doesn’t sound as good or as sexy as what I was sold or told to believe growing up that I should go do.”
One more thing I’d like to add to everything you said is all these 99% or the contributors, the whole thing about that is when you’re putting money away in savings and handing it over to other people to invest for you, you don’t realize it, but you’re taking on all the risk. The risk is not on them. You’re taking on all the risk. Not only are you getting the tiniest slice of the pie in return for your investment, but you’re taking on all the risks so you’re holding the bag. A lot of people don’t realize that.
I could go into all of these stats and all this data. I don’t want to necessarily bore everybody with stats and data, but you’re hitting a nail on the head when you talk about the contributors don’t understand that at the end of the day, they’re the ones taking the risks. You go back to the diversification as well. If diversification was true and accurate in what they were saying that there was this less amount of risk that was involved there. What happened in 2008? Think about it. The 401(k)s dropped on average by 52%.
If your opinion is true diversification game that you were led to believe, isn’t that the exact moment, that when all your diversification would have kicked into gear and you would have not lost 52% of your entire retirement account in the 401(k)s because you were all diversifying your portfolio. What we uncovered in that timeframe is all the risk was still on you. When you lost that 52%, whatever the amount may be back in 2008, did you call your broker or your financial advisor back and say, “Can you put that money back in the account really quick for me?” The answer is no, you didn’t even consider it because you realized you were the one taking the risk.
One more point here, most of the time, when you do call the person or the money manager that’s doing this and you say, “I’ve lost this money. The market has crashed. I’ve lost 52% of my income. What should I do? I want to get my money out.” What is the go-to answer of that person? It’s always, “No, you can’t pull out now. What you need to do is put more money in right now.” If I was investing with someone that was managing my entire life savings for my family’s retirement and they lost me all this money and I called them and their answer was, “Give me more of your money.” I don’t even understand the concept of why someone would do that. It works time after time again. It’s what happens to that contributor or that 99%. Contributors is not a bad word. I’m not saying it as a negative connotation. I’m just saying, when it comes to the game of money, there are those that contribute to money and there are those that create money and they’re not the same thing.
You’ve opened up Pandora’s box here probably three times. We do need to touch on diversification for a moment and then we can start to wind it all up with the concept of money movement. At the end of the day, one of the biggest money secrets of wealthy people is about what we’re talking about here, especially with money movement. With diversification, I don’t want people to get confused because I do talk about diversification. When I talk about diversification, I’m referring to geographic diversification within the asset class. You’re building a portfolio in Kansas City, in Jacksonville, Florida and in Houston, Texas, you’re still within the asset class. It’s income producing real estate, but you’ve got that geographic diversification for the reasons that you do it.
Mark Cuban has said, “Diversification is for idiots,” and even Andrew Carnegie said, “Take all your eggs, put it in one basket and just watch over that one basket.” I agree with all that. Ultimately, you get to a point where you’ve mastered whatever you’re investing in or whatever you’re building, whether it’s a business or an investment. It’s at that point that you could probably start to diversify and build another empire or income stream in a different asset class once you’ve got everything under control and it’s on autopilot. Do you agree with that philosophy or no?
That’s a great point to bring up because I don’t want people to think that I’m against diversification. I’m not against diversification. I am against how we were originally taught about diversification when it comes to money. Here’s a great speech that Warren Buffett gave, “Diversification has never created wealth.” If you take a step back as a contributor, you’ve got to stop thinking and ask yourself, “What do you mean?” Here’s one of the wealthiest people in the face of the planet telling us that diversification has never created wealth. He went on to say, “Diversification was created by the wealthy to sustain their wealth.” If you say, “I’m going to have this massive diversified portfolio,” you have to understand that was sold to you by a money manager to try to overcome your fear so that you would give them their money and it made you feel good, but it has never created wealth.
How many people are inside their 401(k)? AAA came up with this stat and said that the average American needs between $1 million and $1.5 million to retire in America depending on what state you live in. If you then ask the average person that’s headed to retirement, how’s that working out for you with that philosophy of what you’re going down in this diversification old school mentality? They will start to realize, “I’m not even close to $1 million or $1.2 million of income inside of my 401(k). I’ve been doing this for 22 years now.” This is the concept we’re talking about. Diversification is what you referring to and when you find wealthy people like Andrew Carnegie, which at one point they said was 2 to 3 times wealthier than Jeff Bezos.
You talked about how Andrew Carnegie said, “You put all your eggs in that one basket and then oversee that one basket.” What you’re finding in the wealthy 1% is they find what they’re very good at. They hyper focus on what they’re good at. As that grows to where they want it to get, at that level is when they start going into what you referred to as another stream or concept of investments. They don’t just go out there and say, “I’m going to go buy this amount of this,” and they’re spread themselves so thin that they can’t master all those classes especially at one time. When you find wealthy people, do you find like that with single-family homes? I said, “I’m going to make my wealth in single-family real estate.”
That has been proven for generations. If you wanted to diversify inside of single-family homes, you would then go in different geographical locations in case something happens in that one market. Maybe you couldn’t even put on paper that it could happen, but it did so that then your portfolio is diversified from that one tragedy or whatever took place in that one market there. You’re better off staying in that realm or that lane there and when you get to a certain point, then diversify into something else and not diversify way back at the beginning. When you find wealthy people, you’ll find the same thing. They found what they’re good at and they do a bunch of that, and then they diversify from there at the top of that because that’s what sustains the wealth and it does create the wealth.
Let’s tie this all together, and staying on the topic of money movement. What advice can we share with people reading this about how to be properly involved in money movement? How does someone know that they are putting their money to work in the right way and that they are moving their money so they can create wealth?
When you study business owners, entrepreneurs, real estate investors, what you find out is that great wealthy individuals, investors, business owners. When it comes down to money, I look at it as a circle and the middle of this circle is where I call this Wealthy Business Structure, WBS. You have an outer circle and then inner circle. It’s the right structure of a business. I say wealthy because wealthy people do this. When I interviewed Grant Cardone, O’Leary and Gary Vaynerchuk, it’s the same thing. From there, you have three components when it comes to the money that you have to make sure you are very good or accurate at. One is you have to know how to control money. Number two, you have to know how to keep money.
Number three, wealthy people know how to protect their money. In a broad sense, around this inner circle here, you have the layer that goes around it in three components, controlling money, keeping money and protecting money. If you ask the wealthy person how they protect their money, they wouldn’t know how they do it. They could explain to you how the structure is. If you asked a wealthy person how they controlled it, control is more about understanding how the tax side of business works and what type of tax structure you should be inside of. Whether it should be incorporated in more of a C corp, LLC or GLP. It affects your tax and how much money you control at the end of the year.
Keeping it is more about the custodian side. I want to know how I can grow my wealth and keep my money as it grows. This is where you would hear stories on news and it happens all the time, but we only hear certain pieces of it, “Here’s this wealthy person or company that’s made all this money. They made $9 million but paid $0 in taxes.” What that means is that person has learned how to keep their money. They made $9 million and kept $9 million. Where contributors struggle at is they may make $400,000 that year in their business. At the end of the year, they want to get their taxes to zero so bad that they end up spending all their money because they don’t know how to keep it. Therefore, the end of the year, they made $0.
What’s crazy is they get excited about it like, “I did it again. I pay nothing in taxes again.” That part is true, except if you look at it from a standpoint of, “How much money do you have right now?” The answer is still zero. You made $400 but you spent $400. Therefore, how much did you keep? Zero. In that example, wealthy people know how to make $400 and keep $400 or make $400 and keep $300 of it. Wealthy people have mastered the art of knowing how to control money, keeping money and protecting money. The magic happens on that center core WBS, Wealthy Business Structure, when all three of those components are utilize together at the same time. A lot of times in business, when I got started, I might have had a CPA. I might have had some random attorney or maybe I’d used them online to set up my entities or whatever it was.
My CPA and my attorneys were never on the same page. It’s like I had a conversation with my attorney and then I went and had a conversation with my CPA, and then I had to go have a conversation with my financial advisor. None of them were working together. When you find high levels of wealthy families, those three components are always congruent, working together on the same goal and objective for that person. If you could dive deeper into wealthy families, there’s a thing called a family office, which is where they are sitting in an office together. It’s these wealthy families, their own attorney, their own CPA, their own financial advisors in their own room. That’s where they keep all their money.
They will bring them all those components in one office that they own and control. That group manages their money. Where we struggle as business owner is we don’t have that same type of thing there for us. We have this random piece over here, online attorney, and it prevents us from growing the way that we want to grow. What I try to focus on is helping the business owner to understand, “Here’s how the taxes should work for you. I don’t care who you use, but this is how they should work. Here’s how you should keep your money with the custodians and then here’s how you protect your money.” I’m trying to show the overall concept of how it works and then give you a game plan. You can use whoever you want to, but this is how it should be.
I know that you’ve got a hand in this area. I’m sure a lot of people are nodding their head saying, “I understand it. I get it. How do I take the next step to get to that level?” They may have separate pieces that are not talking to each other. What’s the next step in someone’s journey there?
I’ll give you two different answers here. One answer is that person has to go figure out how all that piece of the puzzle work, which is what I did. It is a very up and down frustrating world, but it can be done. You can go figure it all out. It’s going to take you quite a long-time, dedication and you got to be passionate about it because there’s no simple like, “Here’s a book, go do this.” The concept is inside of it. One of the things that we try to do is we created what we called a blueprint. It’s a game plan that the attorneys, the CPAs, the custodians have all created. We give different people a blueprint. You’ve got to answer a couple of questions. It’s probably maybe a dozen or so questions. They’re generic, not personalized like your Social Security.
It’s generic like where your business is. The firm of CPAs, attorneys and custodians will answer, “Here are these things you should look at in where you’re at right now in your specific case,” because every case is different. “Here’s where you should go look at in these categories right here.” Once you’d have that game plan, they’ll give you the answers for free. It doesn’t cost you anything. Then you can go do that with whoever you want to or if you like to work with their attorneys or their CPAs, they’ll set it up for you. It’s free and you can go work with whoever you want to if you have your own attorney that you like. This will give that business owner an actual legitimate blueprint to start off with from attorneys, CPAs and custodians to help them out.
Tell us where we can do that test and how they can find out more about you or get more information.
If you want that little blueprint there, which is extremely valuable for you as a business owner, go to our website, MoneyIs.com/blueprint. It will go through all those little categories. There are 4 or 5 questions with each of those three components. You answer them and they’ll give you the blueprint of what you should go look at doing in your own business. If you want to follow me, go to my website, MoneyIs.com. We have all kinds of educational stuff there. Ninety-nine percent of it is free. We try to give away like a book. It may cost you some money. We do have free books, but if you want my book, it may cost you $10. Pretty much everything on that side is free to help you.
Andrew, this has been a great pleasure. I know you and I could probably go on for hours here and I love talking about this stuff.
Thank you so much for having me on this show too.
Thanks again for your time. I appreciate it.
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One of the takeaways from this episode is to continually educate yourself and work with the right people, have the right team surrounding you because these things are not unreachable. It’s a matter of educating yourself, taking action, making it happen and working with the right team of people. I hope this was helpful. I believe that I’m going to have another follow-up conversation with Andrew about these topics. We’ll probably dive a little deeper into it and maybe roll some more real estate into the conversation about money and wealth. Download your free The Ultimate Guide To Passive Real Estate Investing. It’s available as a free download on our two websites at PassiveRealEstateInvesting.com or NoradaRealEstate.com. Spread the word. We love sharing this information with like-minded people. We will see you on the next episode.
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