How to set yourself up for life
A hidden, dark secret among many entrepreneurs and doctors is that while they have established a business and often look rich on the outside, they have no real wealth behind the scenes. This works well for awhile or during stable times, but as they age and don’t want to keep working so hard or the world turns volatile; there is anxiety, depression, disillusionment, and extreme discontent.
I got pretty lucky early on. A series of courses I took right out of college and a lecture I heard from a private bank that went to over a billion in assets faster then any other bank in history taught me 1 critical point that I’ve tried really hard to follow now for 25 years.
THE ASSET GAME VS. THE INCOME GAME
The key to continual financial stability and potential real wealth is in building your overall asset value over time. The asset game is proven to be far greater than the income game.
In the income game, you make enough income and try to make more and more to pay your bills and hopefully have some excess to buy the things you like or even invest some of the money in stocks and bonds. This is the most common game people play and some even win it.
In the asset game, you build asset value over time. Rather than just spending or trying to make more money, you acquire assets that grow in value and ideally cash flow. This is true wealth accumulation and if done well, leaves a wealth legacy behind.
REAL LIFE EXAMPLES
INCOME GAME AND THE 48-YEAR-OLD DOCTOR
Has a continuously grown his practice and made more income. In the process he’s purchased a very nice home, all 4 members of the family have new vehicles that are leased or purchased, there are many toys such as a boat and jet skis, and many lavish vacations a year.
Sounds nice right? Here’s the challenge, at 48 – he’d like to slow down, but he can’t. He still has his student loan, all of the car payments and the mortgage, the first two of three kids going to college, as well as the cost to leading the lavish lifestyle. His asset value is what he could sell the practice for and the equity in his home minus his debt. He’s not going anywhere but to work every day.
ASSET GAME AND THE 50-YEAR-OLD ENTREPRENEUR
This business woman does pre-prepared meals for private clients. Her profit margins are only $3-$4 per unit, well below that of an adjustment or clinical procedure. If playing the income game, she’d be losing the game. Thankfully, she’s been playing the asset game.
She’s leveraged her earnings to buy two commercial properties in great areas that have radically appreciated in value the last several years. In both, she rents one side to a tenant and utilized the other side for her business. This entrepreneur generates positive cash-flow every year. Additionally, she’s started an online business selling frozen items from her leftovers that has been convergently leveraged to generate a 70%+ profit margin.
In the process of working with her clients, she has partnered in 3 other real estate investments including on-campus housing where she rents to 8 students every year at a prestigious university and does meal prep for them along with other house on campus.
Other than the mortgage on the properties, which are all paid by rents or cash-flow from the business, she has no debt. Her asset value is in the millions and she could easily stop working right now and live either off the sale of the assets or keep them in-tact and use the cash-flow coming in from all of them.
THE GOOD NEWS:
Both of the above examples are clients of mine and turned their finances and their lives around.
The doctor playing the income game and his wife were very unhappy when they came to me for help. We turned his story around almost overnight. They had a piece of property they planned to build more things on that we sold. Rather than buying more things, our evaluation proved it better to bite the bullet and extinguish a whole lot of bad debt. This allowed us to take practice income and divert it from continually paying debt to playing the asset game. In the process, we started an additional business that generates $5-10,000 in revenue per month, invested in a cash-flowing duplex, and they are now part of a larger investment group that is involved in a major building project.
Originally, the entrepreneur was working for someone else and playing the income game. She made good money and not much debt, but had 0 asset value. By helping her get past her income fears and focused on the asset game, the results (Which took place over 4 years) shared above have set her up for life.
Have fun saving the world!
Dr. Ben
