Do you usually think about compounding your income, or are you more worried about compounding interest? It’s a hot topic and I’ve got some hot takes for you all to consider!
I’ll dive into what the masses advise about what you should do with your money, which is typically to “set it and forget it” and to save as much money as you can in an IRA, 401K, or the stock market and wait until you’re retired to use it so you can hopefully survive on what you’ve made. But what if you could make more money NOW, use it to improve your life NOW, and still be prepared for retirement?
Think about how that would change your life. Let’s learn together about what steps you can take to achieve this, and how you can change your mindset to build more wealth.
Link to our recent masterclass: https://www.youtube.com/watch?v=9qq7dvUAYkg&t=1196s
Listen here or watch on YouTube!
TRANSCRIPTS
The compounding interest does not change your life day to day. In fact, compounding interest is always, always been about scarcity, right? How do we save more? And then of course it never feels like it’s enough and they’ll of course tell you, do you realize that any asset you die with is taxable life insurance?
Hello my fellow rippers. This is Chris Miles, your cashflow expert at an financial advisor. This show is for you, those that work so hard for your money and you’re now ready for your money to start working harder for you today so that you’re work optional. You work because you want to, not because you have to, and it’s not just about getting rich, about living a rich life because as you are blessed financially, you have a greater capacity to bless the lives of those around you. Thank you for allowing me to create a ripple effect through you guys. Again, I appreciate so much so of you guys have been reaching out, you’ve been giving us great feedback on this show recently. I know that I’ve put a lot more thought and attention to these episodes and want to add more value. Not to mention guys, if you haven’t already checked it out, we’ve been throwing out new, we’ve upgraded YouTube videos on our Money Ripples channels, so if you haven’t seen those, be sure to check that out today.
That’s different than this channel. This is the Money Ripples podcast channel. Be sure to subscribe to the Money Ripples channel as well. Alright, so I want to go back to something that for me, I realize I take it for granted because it’s basic in my mind, but I realize that for many of you, you may not be able to see it. Now for those of you listening, hopefully you’ll still be able to follow along. You can picture in your head. If not, I would still recommend going to watch these YouTube videos as well, just so you can understand really, how do we create an income avalanche, right? How do you compound income versus just focusing on compounding interest? Compounding interest does not change your life day to day. In fact, compounding interest is always a promise of someday. But what about now? This is one of the biggest problems I have in the financial advisor world, is that they’re always telling you to compound your interest, right?
Set it and forget it, put it away forever. Save everything you possibly can, but it does nothing for your day-to-day living. It does nothing to protect you here and now. It gives you money. Yeah, it looks great on a computer screen or on a piece of paper, but at the end of the day, it does nothing to improve or enrich your lives and especially blessing your family’s lives and giving you the freedom that you really deserve. And that’s one of the biggest beefs that I have in the financial world. And of course, I was the one as a financial advisor teaching this very thing, but seeing that it didn’t work for my father who of course had to work into his seventies before he was finally forced into retirement due to health reasons, versus of course on the other side, which is what we’re doing is creating that freedom now.
And that’s what I was able to do in my own life and many of our clients’ lives as well. And so I want to talk about compounding income versus compounding interest and really how does this whole wealth wheel work For those of you watching this right now, yesterday I just did video actually on the wealth wheel, so if you can go check out, it’s actually going to be on our other, it’s actually on this channel, the Money Ripples podcast channel. We did an actual masterclass on the subject. You go more in depth here. I’m just going to give you a good overview, but I recommend you also go check out that masterclass we did yesterday. Alright, so let’s talk about first and foremost if there’s a cause and effect relationship. You’re always taught always, and I was taught this too, that you got to build and compound your money inside some retirement accounts or whatever it might be.
And then finally, when you get to those old and golden years, you can start pulling money off, but don’t pull out too much because you don’t want to lose too much, right? You don’t want to pull out too much and then run out of money and then you can’t live. And that’s always been the case. It’s always been about scarcity. How do we save more? And then of course it never feels like it’s enough and they’ll of course tell you that you didn’t save enough. They’ll tell you they’ll promise you all these high return and you don’t get it. That’s the one thing. So it’s always about building that net worth and then finally living on just a teeny bit of that net worth so that you don’t run out of money before you die. This is also why many insurance companies will teach you cancel your life insurance, right?
They’ll say Cancel your life insurance. Just buy term insurance, invest the rest, cancel it when you’re older because you’ll have enough assets to take care of your family and everything else. Do you realize that any asset you die with is taxable? Life insurance? Think about it. If you have a 401k that you die with it when it passes on to your family, guess what? It’s taxed, right? It passes on to them. Now that you do, they start to have things like stretch IRAs, but even that, they’re talking about getting rid of or putting limitations on. So even that’s debatable, but even then, that’s a taxable account. So you’re passing on something that’s not even tax free. You’re passing on something to your heirs that they’ll have to get taxed on anyways, so that’s not what we’re talking about here. So it’s how do we really create something that builds wealth and even builds multi-generational wealth, something that goes beyond you, right?
Something that’s not just helping you have a great life today, which is of course what you should have versus sacrificing, deferring suffering in the meantime so that hopefully someday you have something. Instead, how can you enjoy your life now and still be able to pass on and create a multi-generational legacy for your family where they’re better off than you were and not in a place of being spoiled but actually having more money. So let me show you this kind of illustration right now. So this is how I see it, right? This is a cause and effect relationship. Everybody’s telling you the opposite. They always start at the top showing you net worth. You’ll see there’s net worth, cashflow, human capital, right, or value that’s offered. So everybody always tells you, build up that net worth and then you could pull off some cashflow. Not a lot, but just enough.
3% of whatever your retirement accounts are, right? So you don’t run out of money and then you can finally live your life. We teach the opposite. We teach that you have your life right now and you don’t have to sacrifice and suffer in whatever might be. Now, I’m not saying you don’t have discipline. Of course, if you’re a discipline saver, that’s great, but discipline saver, that generates cashflow, right? It generates cashflow. Now then that cashflow builds net worth. That’s the cause and effect. In fact, if you look at it, that’s really the truth of how it is. Retirement planners, financial advisors and planners, they’re always telling you, just build up that net worth and then enjoy life. We’re talking about how can you live a rich life now? How can you actually live a rich life now? Generate that cashflow by creating more value. Increase your income by adding value, whether you’re a business owner and you’re trying to find ways to be better through systems and through people and processes as well as through your own value and how you’re able to do that better for people.
Or even if you’re an intrapreneur versus an entrepreneur, you’re an intrapreneur where you work inside of a company as an employee and you are working to actually help add value. Again, the more value you can add, the more money you make. This is a key thing that’s always missed, especially in financial planning. They’re always telling you, of course, just say whatever you can, whatever scraps you can get together, throw it into their investments where they get paid, they get paid cashflow year after year while you just wait and suffer and save. That’s what they teach. This is the opposite. You actually use your life, your human capital, your human value to create more cashflow. What is cashflow? Cashflow is the difference between your income and your expenses. So cashflow, although it’s been synonymous with income, and that’s a big part of it. I’m talking about cashflow from a Robert Kiyosaki sense, which is income minus expenses.
What are you left over every single month after you’ve paid your bills? That is cashflow. That is the only true way to really build net worth without trying to gamble. Yes, there’s ways you could buy real estate and it could appreciate you can increase your net worth without increasing cashflow. There are things like that you could even be breaking even paycheck to paycheck. But if you have debts that you’re paying at least principal and interest payments on, guess what? You could build net worth because you build equity. That’s really the key thing here is that as you have that extra income, you get to choose what to do it. This is why I say cashflow creates more options and then with more options, you have more choices and freedom to be able to do what you want with it. Imagine if all of a sudden in your life you got an extra $2,003,000 a month coming in right now that’s after taxes.
In case you’re wondering, this is just money coming in that you now have in your life that you didn’t have yesterday. How would your life change? How would you feel differently about your situation? Would you feel a little bit more relaxed? I know a lot of you will say, oh, I can breathe easier. I can just relax. I can finally actually enjoy a little bit of my life. Maybe I could take a day off work here and there and actually enjoy time with my family. Maybe I can even take that vacation and not worry about it. Imagine if you could take a vacation and not worry about not just the cost of vacation, but not worrying about how you’re losing money by not working, whether you’re a business owner or you’re an employee. The worries are the same. I’ve seen so many business owners saying, if I’m not working, I’m not making money because they’re self-employed or they’re more just small business owners, but they don’t have a real business system where it operates independently of them.
This is actually where I’m getting my business more and more to that place. And money ripples. At first, it was just a solepreneur thing, kind of a side hustle. It wasn’t side hustle. It was more just a thing that I did regardless of the money. Right now I’ve started to build a business. I’m saying how can I build it to where it’s scalable and even to a point where it doesn’t even have to have Chris Miles as much in it, right? Where it’s not as person focused, it’s more of a company. It’s more of a team approach. It’s something that can continue beyond me. Even if I were to die today, by the way, no plans on plan to live, but those kinds of things, that’s the kind of thing that I look at. So as a business owner, I know you’ve got stresses, so having that extra two or $3,000 a month could make a big difference in your life.
And maybe you might say, well, Chris, I make 25,000, 30,000 a month. Maybe I make a million a year, 2 million a year. Okay, great. Who doesn’t like more cashflow? Even if it’s not two or 3000 a month? What if it was an extra 5,000, 10,000 a month? Would that make a difference in your life? Yeah, of course it would, right? That’s the power of cashflow. Now, if your net worth, all of a sudden you looked on paper and you found out your net worth increased by a million dollars, but your cashflow didn’t change, do you think you’d really feel much better? Of course not. It’s just a number, right? This is why I tell people you have a retirement account. Now, you might get excited if you, all of a sudden there’s another million dollars in retirement account. You might even show it off to a few people, but at the end of the day, the truth, you’re going to say, yeah, but so what?
The only reason you get excited is if it led to more cashflow in your life. Again, reverse your thinking. Do not think that you have to build income and assets or build assets, all these assets to then always generate cashflow, even though that’s true to some level. Don’t get caught in that trap. It’s not where you have to get lucky and you have to win the lottery or something has to happen or somebody has to die for you to finally have some money. Do not count on that focus first and foremost on you as the creator and producer in your life. How can you generate more income and even be a wise steward of your money, tracking your expense and everything else so that you have more cashflow, more profit in your life every single month? If you’re a business owner, you want profit in the business and you want profit at home, then that profit will naturally increase your net worth.
Net worth will have to increase What happens. So see here we have income and expenses. The difference between the two gives you cashflow. Now, the difference between that cashflow can either go one of two places, either one, it builds as an asset, right? So for example, you have an extra save a thousand dollars a month, or does that money go? Could it go to a savings account? Yes. That then increases your asset of a savings account, assets, anything you own where liability is anything that you tend to owe. This is something like your or your mortgages. So it’s like, say for example, you have an extra thousand dollars a month, you might say, you know what? I’m going to pay that towards a credit card and pay that down. Well, great, as you pay down that credit card, it increases your asset because your net worth is your assets minus your liabilities, the things that you own versus the things that you owe.
That’s the net worth. And I know I’m overly simplifying this. There’s going to be some account under CPA A going to say, well, that’s not exactly true. My number fact checking says this. I get it. I’m oversimplifying this, but look at it like you have extra cashflow. Either you increase an asset by putting that as some kind of savings or buying an asset or two, you’re paying down a loan that increases net worth. Now, if you have negative cashflow, what if you have more expenses than income, right? So now you’re negative cashflow, you don’t have enough money. You’re going to do one of two things. Either pull from the asset, you’re going to pull out a savings to be able to pay for that thing, which means your net worth drops or you run up a credit card or something like that to use a line of credit, maybe a home equity line of credit or a credit card.
You run that balance up, which of course, that also lowers your net worth. So that’s the key. Income minus expenses equals cashflow. That’s your profit assets minus liabilities equals your net worth. If you want to increase your net worth, increase your cashflow, and here’s the cool thing, if you do it right, you use that cashflow, you increase your cashflow and use that to ideally, yes, you could pay down some liabilities, but at the end of the day, you can only pay down debt so far where it’s not productive and you also buy assets and even better cash cashflowing assets. So you’re not just buying an asset, but it’s an asset of cash flows. This is why we talk about real estate investing, right? Because you buy a real estate property, it can cashflow, and yes, it can also appreciate, it can actually increase your net worth and increase your cashflow, and then when you take that cashflow, use it to also increase your net worth some more.
So you create this acceleration, this becomes this income avalanche. Now, I know it doesn’t always have to be a rental property. It could be simply as just lending your money out to real estate investors, right? Lend your money out to them. You get paid a certain return. So if you have that extra, I’m being overly simplistic thousand dollars a month that that’s 12,000 a year. Now, I know there’s not a lot of investments, you can invest 12,000, but just bear with me, that 12,000 a year, if it makes 10%, that’s another 1200 a year of cashflow or $100 a month of cashflow, use that to then go and reinvest again into cash flowing real asset backed investments. I say that because I don’t want people to go buy things like go buy a whole bunch of different digital coins and things like that, that yeah, you might make money, but you probably won’t.
You might make money here, but you might not. And again, this still doesn’t get to the point that does not generate income for you. I like income producing assets, real assets that are backed by something real, not digital currencies, not even by stocks, even though that could produce dividends, right? There are a little bit of those there, but even then that could be, it’s kind of hard to rely upon it. For example, I just had a couple that talked to me recently and they were talking about their stocks that they had, they bought, so they inherited some Verizon stock and at t stock from 1997, but overall, guess what? It only made them roughly about 35% since then. 35%. Think about that. Now, the wife, she was using this as contrast because she was the one that inherited it. Her father told her, listen, don’t spend it.
Just do what I do, set it and forget it. Let it sit there and accumulate and grow. So she did. Her sister, however, also inherited the same stock. It’s split between the two of them. She inherited that stock, but she actually went and bought land and started doing some other things in real estate investing. And what’s interesting is my client here, she said, Chris, here’s the big difference. Even though we’re doing it now, they have been investing for the last four or five years now into more real estate and things like that. She’s like, even though we’re doing that now, how much farther ahead would we have been back in the late nineties? We instead started buying assets like that my sister did, where they’ve made literally millions. And she’s like, it wasn’t like they did a lot. They just made the right decisions by buying these right assets.
And so she’s now, those stocks aren’t worth hundreds of thousands of dollars. Now it’s worth millions of dollars because they put it in that instead. That’s the difference, guys, is that you want real income producing assets. And again, they bought just assets. Some of ’em weren’t your income producing. Imagine what would happen if instead you bought income producing assets. What would that have done after 27 years? And I already know what this couple’s done. I mean, they’ve already gone up. They’ve gotten almost to the point they could quit. They got a little bit to go still, but probably in the next five years or so, they would have enough money to be able to retire. That means they would be able to do it in roughly nine or 10 years from the time that they worked with us as opposed to if they had that even 27 years ago, what would their life be like today?
I mean, it would be hard to imagine, I’m sure for them, especially if you do it the right way. This is my point guys, is that you want to improve your cashflow. This is why you want to track your money and be a wise steward of your money and either use that to pay down liabilities, especially those non-productive debts and things like that. Or you actually go and buy cashflowing assets that then increase your net worth, and then that net worth of course continues as you start to build and grow those assets, you reinvest those to buy more cashflow in producing assets. That is the real secret here, and that is what I want try to show you with this wealth wheel. So you’ll see at this top of this wealth wheel, we have principles right now, principles are just like what I taught you, understanding the principles of cashflow.
What are cashflow versus net worth? How does that all flow and work through, and how do you flow it through? So those principles understand the principles of abundance too, because you could be in scarcity, make money and still be broke. So there’s a lot of principles involved here for prosperity or wealth that you have to understand now as you’re improving that cashflow, you’re growing that. That’s where that max ROI, infinite banking policy comes in. Many people will ask, Hey Chris, I’ve got 10,000 bucks, 20,000 bucks, 50,000 bucks, whatever I’ve saved up. What should I invest in? I’ll say, well, nothing yet. You don’t have enough. And even if you did have enough, still, one of the ways you can actually speed up this wheel’s acceleration a little bit more is having these max Allright infinite banking policies as a great place to store money and store cash.
But two, as you’ve heard me talk about before, it also gives you ability to double dip. You can actually earn money in two places at once, earning a little extra interest because this interest is tax free protected from lawsuits and creditors because you don’t need anybody to wipe out your money right when you’re trying to build it. And then three, it also has the ability to get that leverage where you can borrow the money, yes, pay interest from the insurance company because they have a collateralized amount of credit, but then even though you’re borrowing that money as you’re using this to buy cashflow, producing assets using the cashflow to pay back towards that line of credit, paying down the interest and earning a net positive return of interest, meaning that they’re paying you interest the whole time because you didn’t pull the money out, you left it in there while you used their money, and you were able to make more in compounding interest than you paid them in simple interest.
Doing those things then allows you to have more cash to then invest in these passive income investments that then keeps flowing through again and again and again. That is the income avalanche I talk about. That’s how you compound income versus just compounding interest. Financial advisors and financial institutions that want to be paid forever will tell you to set and forget it, put it into their places where they’ll compound their own income off of you by charging you that money. If you say, no, they don’t charge me, yes they do. They pay you less as a result of that. You really think that the return that they’re paying you, right there is a gross return that they get paid nothing. They do it for free. Of course, you’re paying them. They make money off of you, off of the assets under management. They’re telling you to compound interest because that’s in their best interest, not in your best interest.
Screw the whole compounding interest crap because you don’t even know if you’ll be alive to enjoy the compounding interest. Compound your income now. What can you do right now to build that growth? And yes, even if you only have 10, 20, $50,000 and you’re not quite ready, I recommend you have at least a hundred thousand before you start investing. But if you’ve got at least that you can start there, and by the way, if you’re a business owner, these principles work faster. You have a greater ability to do this faster because you can create more profit in your business, which creates more profit at home, and then that also increases the ability to buy cashflow, income producing assets that then allows you to have massive income and get you to the point where you work because you want to, not because you have to. This is how the big picture works.
This is what, again, that you’ve got to erase that old mentality of compounding interest, which just pays the financial advisor more than it’ll pay you. Stop it. Stop letting your money do all the work for them to pay them, get your money to work harder for you today, and giving you that freedom now because you just don’t never know what’s going to happen in your life. I never know if I’m going to be around long term. You don’t know that either, but you can make a decision today to make a difference in your life right now. That is my challenge to you guys, is get rid of that mentality of compounding interests, because we all know that really hasn’t worked for people. We all know that people have been saving for years, saving for decades, and they’re living a very meager life, right? They’re just trying to eke out a living in retirement, and they need social security because it was never enough.
They can never save enough in cruddy mutual funds that really don’t pay you that much anyways when you could be actually investing in real assets that produce real income right now. That’s the difference, guys. Obviously, if we can help you reach out to us@moneyripples.com, but my challenge to you is this is stop focusing on compounding interest and instead ask yourself, how can I get this money, these assets, to start producing income for me so I don’t have to always produce income for my family? That’s the key guys. Make it one phone prosperous week. We’ll see you later.