781: Want Financial Freedom? Here’s How to Build Your Money Machine

0:01This episode is supported by What Should I Do With My Money? From Morgan Stanley. Okay, can we just talk about how money is legitimately one of the hardest topics to bring up. Like even when you think you have your stuff together, there's always this really weird awkwardness around it. That's why I am obsessed with this podcast. It actually makes money conversations feel approachable. I recently listened to an episode about affording multiple big life things at once, like a wedding, a house, an IVF, if they were all happening at the same time. And honestly, it hit home. So many people are wondering, can we actually have it all without sacrificing our sanity or our savings?

0:42What I love is that they bring in real experts who help break down these massive costs into actual doable steps. It's like having a money mentor in your ear who gets it. Search for What Should I Do With My Money in your podcast player. We'll also include a link in the show notes. Many thanks to What Should I Do With My Money and Morgan Stanley for their support. okay I have been on this ruthless pursuit to purge any clothes that I'm not actually wearing like if I haven't reached for it in months it's gotta go I am trying to be really intentional about what I bring into my closet right now which means I am only buying pieces that I know I will actually wear and use revolve just gets it though I'm literally wearing my brown autri sneakers from there right now and my new suede purse it fits my laptop in it so it's basically a fancy shoulder bag that works for everything.

1:32I love finding pieces like that. Things that look good, but also work hard for my actual life. Their holiday shop is live right now with all the good stuff. Sparkly party dresses, cozy sets, cute gifts, everything you need for whatever is on your calendar. And it's all in one place, which makes shopping feel way less overwhelming. Whether it's a weekend away, a big night out, or a holiday party, your dream wardrobe is just one click away. Head to revolve.com forward slash gold digger shop my edit and take 15 % off your first order with the code gold digger fast two-day shipping easy returns it's literally the only place you need to shop from that's revolve.com forward slash gold digger to shop my favorites and get 15 % off your first order with the code gold digger offer available for a limited time so happy shopping there's two journeys we all need to be on the earnings journey and the money journey They need to be parallel.

2:27And because our ability to earn is not the wealth that we have, it is the fuel to create the wealth we need. Hey, my name is Jenna Kutcher and I am obsessed with all things business, marketing numbers, and helping you to navigate both the messy and the magical seasons of this thing called life. I'm a small town mama who took a$300 camera, grew a successful photo biz, and now I work from home and run a seven figure online business. I teach you the tried and true secrets to building a career you adore. Shy away from the real talk? No way. Money, hardship, growth, loss, and marketing are all topics we discuss here.

3:03Think of this as your one-stop shop for happy hour with a gal pal mixed with business school. Pull up a seat, make sure you're cozy, and get ready to be challenged and encouraged while you learn. This is the Gold Digger Podcast. Recession, rising interest rates, gas prices, and more. costs just seem to keep going up right now. And all of this can make us feel really uncertain and maybe even scared about our future. But what would it look like if you had a roadmap that works no matter what is happening in the economy? What if you could build a money machine that makes each moment of your life the richest it can be?

3:37In a recent survey by Achieve, only a little more than one out of 10 people are living their definition of financial freedom. So if you feel like you aren't where you want to be, let me tell you, you are not alone. But it doesn't have to stay that way. Mel Abraham is a CPA, an author, an entrepreneur, and a speaker known for taking seemingly complex concepts and simplifying them through visual frameworks and easy processes. He's built, bought, and sold numerous multi-million dollar businesses for himself as well as his clients. And he's helped build thousands of businesses and has generated hundreds of millions of dollars ranging from large corporations to startups and small family-owned businesses.

4:18Mel believes that achieving financial freedom isn't about deprivation. It's about intentional decision-making and that it is your birthright. His brand new book, Building Your Money Machine, is out on June 11th. We've linked it for you in the show notes. Trust me, you're going to want a copy after listening to this episode. In our conversation, he lays down a comprehensive roadmap to financial freedom from establishing one's vision to creating a self-sustaining money machine. His goal is to help bring your dreams out of the darkness and make a plan to achieve those really big goals, not only to make more money, but to live a legacy and not just leave one.

4:54Without further ado, welcome my friend Mel to the Gold Digger podcast. It's all a little overwhelming, isn't it? Help desk software, payment processing, email marketing tools, blogging platforms, SEO tools, deal management tracking. Gold digger, take a deep breath because you don't need more tools to get more out of your business. You just need HubSpot. Their all-in-one customer platform is a dream come true for you and for every member of your team. With best-in-class campaigns and workflows to generate more leads for marketing, category-leading pipeline management to help sales close more deals, powerful AI chatbots, and a knowledge base to help service teams scale, HubSpot is built to deliver results and revenue faster to help your business grow.

5:44So dump the disconnected tools and the chaos that comes with them. Discover what HubSpot's all-on-one platform can do to streamline your business. Visit HubSpot.com to grow better today. HubSpot.com. Mel, my friend, you are someone who pretty firmly believes that we have a very broken retirement system. Let's talk about this controversial topic. Like, what do you mean by this? And what does it mean for us who are in the broken system right now? Oh, this is such a good question, because here's the deal. We got raised in an industrial age with industrial age thinking. And back then it worked. Here's what they did.

6:26Worked for a company for 20, 30, 40, 50 years. People worked for their whole life. And as a reward for doing that, they gave us a pension, a lifetime of income, basically. But then our lifetime started to extend out. So we got too expensive for them to carry it. And so what they did is they took that and said, we can't afford to do this. We're going to put in your lap and they gave us 401ks, they gave us IRAs, they gave us all these other things. What they didn't give us is a lifetime of income. And they didn't give us the understanding. They didn't give us the process. They didn't give us any of that.

7:06And even then, the way they started to frame it for us to say, OK, just save all your working years, put it away. Then when you get to that day that you choose to retire, and that's a whole nother discussion, then you sit back and say, reduce your lifestyle by 20 % and then spend and then pray that your life doesn't outlast the money. And I think it's a horrible way to go because you're just rolling the dice. Yes. Yeah. And so we're now saddled with, I think, the responsibility to create our own lifetime. Okay. We're going to talk about that today. Oh my gosh. Drew and I were literally just talking about, you know, all four of our parents were in the same job for decades.

7:53And it's just crazy because even now when I hire, I'm like, can somebody stay at a job for three years? Like, is that a thing? Right. And it is so fascinating, even just in one generation, how much has changed in the way that we look at work, the way that we want to work, the way, you know, that our purpose and our mission and all these things need to really matter for us to want to stay somewhere. And it's just interesting because we're working off of these old systems and these old rules that don't necessarily apply. And I think it's a very confusing thing, especially for people in my generation, because we're like, basically just we can't bank on anything at this point when it comes to what we can expect in our later years.

8:39And so one of the things that I love about you and Mel, you and I go way back, I mean, years and years and years is that you talk about this and you talk about this in your new book. You say financial freedom is the smallest piece of the freedom puzzle. And yet you wrote an entire book on this subject. So talk to me about that because we've had discussions about this offline, but now we're going to bring it online. Sweet. Yeah. Here's the thing. I do believe that financial freedom is a birthright. The challenge is that then at the same time, we're raised in an environment saying don't talk about money.

9:17Don't don't have these conversations. But if you look, new statistics just came out. American Psychological Association said 72 percent of people say they're stressed about money. Twenty two percent say it's extreme stress. But at the same time, don't talk about it. How do we solve that? Yeah. You have to talk about it. And to me, the book was the opening volley to say, let's have a real conversation about money. It doesn't have to be complex. It doesn't have to be convoluted. Let's make it simple. Let's put the power into everyone's hands to take control of a financial destiny that is of their own design, not what society puts on us, not what degrees or careers put on us, but a choosing that you get to choose and say, I'm going to craft it my way and I'm going to live it my way.

10:08And that's kind of where it all stemmed from was this idea of, I believe that not only is it a right, but I also believe it's a possibility. And if you look at stats on it, 80%, 79 % of millionaires are first generation. They didn't inherit it. They didn't win it. They didn't get it gifted to them. They created it. So I can go on eight out of 10. Odds are good on our side. Yeah. Yeah. I love that. You know, it's so funny. I, the other day I was with some family members and I am like, I love numbers. Even since I was a kid, I can literally tell you how much the new siding on our house costs when I was like 12 years old, because I was a kid asking those questions to my parents.

10:52Like I wanted to know numbers. I had to know numbers. It probably drove my parents crazy. And I love talking about numbers with people. And oftentimes I'll leave conversations and I'm like, should I have said that? Should I not have said that. But I think that so often it's like, we need to turn the lights on when it comes to finances. And I think for so many people, especially with those stats about stress and extreme stress, it's almost like the monster under the bed of like, well, we can't talk about it. I don't know enough about it. I don't even know where to begin with it. I have no one to go to for this.

11:25And so it's scary, right? And so tell me how you got into this whole financial world, this money business, like where did all of this come from for you? We can go, we'll go back a ways. So like I got fascinated with just entrepreneurship in general at age 11, primarily because I was sitting with my dad watching a movie with Janet Leigh and Tony Curtis about Harry Houdini's life. And I'm looking, I'm going, this, this guy is so cool. No boxes, no chains held him. and I studied them and I studied them and I got fascinated with magic and I would go in the summer months, I would literally take the bus.

12:06You wouldn't do this with your kids today, but take the bus to a magic shop down across the valley and I would spend the days there learning magic. And some guy comes in, I remember one day and says, is talking to the owner and he says something about doing a gig this weekend and he walks out and I said, what's a gig? and the owner says, oh, he does magic shows and gets paid. And I go, I can get paid to do this? So I went out and I created a half hour magic show that I decided to do for kids' birthday parties at 11 years old. And I started to get paid$50 for a half hour show. And I'm like going, this is cool.

12:44And the thing, the spark that it lit was the possibility of doing something you love and creating happiness or creating positivity in someone's life to change people's lives. And I thought, this is something that I want to do. And so going through that, now, bottom line is the other side of this is you got to know your market. I was doing magic shows as a clown. Kids are scared of clowns. So you got to know your market. All right. But the reality is that after that, I said, how do I do more of this? And so I went to school. I became an accountant, which really quickly I figured out was a boring job.

13:24But I said it gave me a skill set. So how do I build businesses? How do businesses work? But more importantly, how do we use businesses to fuel people's dreams, to create something that is beyond just the business, solve problems, but create a dream life? And that's where I started to get fascinated with the connection between the two and finances and money. But in the end, the biggest shift for me was at the hands of a six-year-old. And that was this, is that as I was building my business, my practice, my consulting, if you were, I became a single full-time dad of my son. And at five and a half years old, he's living with me, I'm doing the thing, I'm on the treadmill, running the miles.

14:14And he comes in one day and says, Daddy, Daddy, I drew a picture of you at school today. And so I kneel down and I look at this picture and it's me standing in front of two computer screens with a phone in each ear and one on the desk screen. And it was a mirror into my soul. And it was a way for him to look at me and say, Dad, I know you think we need the profits, but I need your presence. And that's when I started to say, there has to be a better way to do business. There has to be a better way to do money. And that's when my whole shift happened. Now, mind you, that was decades ago. He's 34 now.

14:53But it's the thing that was the catalyst to start investigating, you know, finding a different way instead of just that the well-worn path of expectation, just work hard. They'll get over it. No, the greatest gift I was given was to be a dad and to be a good dad. And I wanted to make sure that I did that for him because no matter how much money was in the bank, if I failed at that, then I failed. Wow. I think that there are so many people right now listening and they're like, I don't want to ask my kids to draw a picture of me right now. But the reality is, is that that is so true. How, if somebody is listening to this right now and they're like, you know, my kid or my, you know, imaginary child would draw something that I don't want to see.

15:42Like, how do we start to make steps out of this cultural norm or those cultural expectations to start building something that does give us ultimate freedom and not just financial freedom, but like true freedom of like flexibility? Yeah. Well, I think that there was a couple things. One is at that time, I got the typical advice, get work-life balance, work-life balance, work-life balance. And I said, but the challenge is that as I thought about it, I go, that's like saying I got a weight in one hand, a weight in the other hand, and they're playing tug-of-war and on average I'm balanced. It isn't balance we need.

16:22It's harmony we need. And harmony is built on intent. And so one of the things that I started to do, and I know that you do this, is that I became a hyper intentional with my time and the things I did. And so I made it everything a choice. Now, even with Jeremy at six years old, what I, the thing that I did with him is I created a calendar and there was red zones in the calendar that he knew were 100 % his. and it translates to money too. But in advance, he knew that all the red zones were his. And he also knew that any other color on the calendar, he could turn red if he wanted. So he knew he was a priority.

17:10He knew that intent, where I was going to be, how it was going to be done. And so that was one of the first things I did. The second thing was the realization that as long as my earnings are tied to my efforts, I will never be free. And I had to find a way to detach the earnings from the efforts. And that was the birth of this, the idea of the money machine is, is sitting back and say, especially because I was, I was an accountant, we sold ours. It's the worst business model in the world. Right. You know, so if I wasn't peddling that hours, then I wasn't making money and everything stopped and there had to be a way to change it.

17:55And there's still people that are doing it today. But I think that you have to find a way to separate earnings from efforts. And when you do, that's when you start to have more choice in life and the ability to be more intentional with the time. And I think that's where our freedom lies is in that what I call the money machine when we've separated it. Oh, my gosh. Yeah. Look, I've become kind of a systems nerd. And anything that gives me more space in my day, I'm all in. And a reliable connection is a huge part of that. Because when the internet lags or cuts out, everything pauses. And suddenly the simplest tasks take forever.

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19:12It's simple with no contracts and no added fees. Visit spectrum.com forward slash free for life to learn how you can get business internet free forever. Restrictions apply, services not available in all areas. Okay, I have been on this ruthless pursuit to purge any clothes that I'm not actually wearing. Like if I haven't reached for it in months, it's got to go. I am trying to be really intentional about what I bring into my closet right now, which means I am only buying pieces that I know I will actually wear and use. Revolve just gets it though. I'm literally wearing my brown Autry sneakers from there right now and my new suede purse.

19:50It fits my laptop in it. So it's basically a fancy shoulder bag that works for everything. I love finding pieces like that. Things that look good, but also work hard for my actual life. Their holiday shop is live right now with all the good stuff. Sparkly party dresses, cozy sets, cute gifts, everything you need for whatever is on your calendar. And it's all in one place, which makes shopping feel way less overwhelming. Whether it's a weekend away, a big night out, or a holiday party, your dream wardrobe is just one click away. Head to revolve.com forward slash gold digger, shop my edit, and take 15 % off your first order with the code gold digger.

20:28Fast two-day shipping, easy returns. it's literally the only place you need to shop from. That's revolve.com forward slash gold digger to shop by favorites and get 15 % off your first order with the code gold digger offer available for a limited time. So happy shopping. There's so much that you just said that I'm like, yep. I remember Mel, when we went through our pregnancy loss and I had to show up and shoot a wedding. And it was like this huge realization because I had hit six figures. I'd hit all these milestones that I was crazy proud of. And I mean, there were big deals. But at the same point, it hit me so hard then of like, if I don't show up, the money doesn't come.

21:10And I had built this magnificent, powerful, successful business. And yet, it didn't allow me to be a human. Like there were there was no space for you to have a human experience within that you were a machine in that way of like, if I need to be running in order for my business to run. And that day I like vowed, like I will figure out a different way. There has to be a different way because life is going to knock you to your knees at some point. And when you realize that you're either, you know, the only time to earn more is by working more. That is not freedom. It is not. You brought up this idea of the money machine.

21:51Let's talk about it. Everyone's ears perked up. Okay. Walk us through. What is this? How do you make one? How did you come up with this? So we're raised to get a job or we have to earn money. We know we have to earn money. And too often we think that the earning of the money itself will solve all the problems down the road. And it isn't. So there's two journeys we all need to be on. The earnings journey and the money journey. They need to be parallel. And because our ability to earn is not the wealth that we have. It is the fuel to create the wealth we need. And so when we start to earn, we need to use it to create something outside of the efforts to earn it.

22:38And that is the money machine. It is built on the pillars of things. People will call it passive income. I don't like the term passive because it insinuates set it and forget it. And I believe that our relationship with wealth and money is a relationship. and someone who's been married, Steph and I will be 13 years, you and you guys have been married for a while. It's like, if you took a passive approach to your relationship, it would wither and die. It's the same thing with money. So I like to look at it through the eyes of leveraged time. How much effort, how much time does it take to really create it?

23:15Well, if you look at, and I'll go through it quickly, but if you look at, there's five levels of income you can generate. at the first level, it's active. This is where we all start. One-on-one relationship, effort, and money in this is sole jobs, solopreneurs. That's it. You're running it, you're doing everything and you're generating it. There's no room for you in there. Then you elevate one level up. That's business income. That's when you start to bring in team or you start to bring in other people, you start using the money to buy your time back. And so you're now leveraging it, but you're not leveraging it as much.

23:55So those bottom two is where most people live. And it's where I make the majority of my money from my lifestyle right now. But I used it to build the top three. Your money machine is built on the top three. The next level up of leverage is something called asset-based income. It is acquiring something, an asset, a hard asset. It could be a property, real estate. It could be a piece of equipment, something that you can buy and rent and get paid for. There's effort at the beginning. There's some effort during the time, but it's far less effort than an active business. So now all of a sudden you're building these leveraged assets.

24:41Above that is residual income. And residual income is when you create something once and you get paid repeatedly. My book, for instance, courses in some cases, although they can be heavy lifting too, but licensing deals, downlines on network marketing, intellectual property rights, white labeling, all those things can create residual forms of income where you put a lot of effort in to create something. But now we put it out there and we start to get, we start collecting. I still collect royalty checks on my book that I wrote in 2015. So you get a chance to do that. And then the top lorong is what we call portfolio income.

25:25That's paper assets, that's stocks. That's what we typically think of investing, stocks, ETFs, index funds, bonds, annuities, those kinds of things. And the combination of the top three of asset, residual, and portfolio is where you build the money machine. And here's the power behind it. I make a living off the bottom two, active in business. It pays all our bills. We built a machine that can pay all our bills too, but it's reinvesting itself. So it keeps growing and growing. In 2019, you know, I was diagnosed with cancer. They found a five centimeter tumor, turned out to be seven and a half centimeter tumor in my bladder.

26:10And at that point, when they first found it, they said, we might have to remove the prostate. We might have to put a bag and tube in for the kidney. And if it's bad, you're going to lose your bladder. So life got turned upside down. We can talk about the emotions. I dealt with the emotions, the physicality, the medical, the psychological, all of it, but I didn't deal with the finances. And here's why. At the time I was making money in my active and business income. And I looked at my wife and I looked at my son. I said, we're shutting it all down because I can't, I need to fight this because, and I wasn't scared of the cancer.

26:45I was scared of missing out on the life I loved. That's the thing that pained me most. And I said, I'm going to be here. Plus I told Stephanie, she hadn't served enough of her sentence to get out that quickly. So we then took those top three and I talked to my wealth team. I said, turn the switch on and let it start sending the money to us. Now, the difference is this. I wasn't draining savings. I wasn't selling things. It was generating cash flow and still growing just at a slower rate as if it was a money machine. And I said, let it pay for our lifestyle. We didn't sell stuff. We cancer changes your life, but it didn't change us financially.

27:26And as I came out of the cancer, I was able to tell them, let's shut that back down. Let's keep it growing and turn back on the act of the business income and get back in the game. And so what it did is because I can't imagine what it would have been like to work during the day to make a living and fight for my life during the night. And it just it just wasn't possible to fight it the way I wanted to, the way I needed to. And and this gave me choice. It gave me options and it gave me the possibility to sit back and say, I don't care what doctors I got to go to. I don't care what lengths I have to go to.