The Affluent Entrepreneur Show

Create a Money Machine for Financial Freedom

June 19, 2023 Mel H Abraham, CPA, CVA, ASA Season 2 Episode 146
The Affluent Entrepreneur Show
Create a Money Machine for Financial Freedom
Show Notes Transcript Chapter Markers

As a business owner or entrepreneur, it's crucial to understand your business itself isn't the wealth; it's the generator of wealth—it's merely the vehicle that can help you achieve financial freedom.

To accomplish this goal, you need to create a money machine that generates a steady stream of income and grows your wealth over time.

In this exciting episode, I'm going to take you through some practical steps and frameworks that can help you build your very own money machine, paving the way to financial stability and success. Together, we'll explore strategies for optimizing your business processes, increasing profitability, and developing a sustainable income stream plan for the long term.

So, are you ready to take control of your financial destiny? Tune in to this episode, and let's get started on the path to financial freedom!

IN TODAY’S EPISODE, I DISCUSS: 

  • Why your business should focus on solutions and profits
  • Understanding The Affluence Cashflow Matrix
  • The role of assets in generating cash flow and increasing net worth

RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:

TAKE THE FINANCIAL FREEDOM QUIZ:
Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com 

OTHER RESOURCES:
Learn more about The Affluence Blueprint:
https://melabraham.com/book-mel/the-affluence-blueprint4/
7-Day Money Plan Workshop: https://www.TheMoneyPlanWorkshop.com
Affluent Entrepreneurs Private Facebook Group https://www.melabraham.com/group

CONNECT WITH ME:
Website: MelAbraham.com
YouTube: MelAbraham.com/tube
Instagram (@melabraham9): MelAbraham.com/ig
Facebook Group: MelAbraham.com/group/
TikTok: https://www.tiktok.com/@melhabraham

GET MY BOOK:
“The Entrepreneur's Solution The Modern Millionaire's Path to More Profit, Fans, & Freedom” – melabraham.com/book/

Go to AskMelNow.com to let me know how I can serve you and your financial journey

Mel Abraham  0:00  
I hate to break the news to you. But your business is not your wealth, and it isn't your financial freedom. But it might have something to do with it, if you use it right, and in this episode, the Affluent Entrepreneur Show, I'm gonna break that all down for you, I'm going to tell you exactly how to use your business to help you create the wealth you deserve, you desire and the financial freedom. That is your birth. I look forward to seeing Leo's This is the Affluent Entrepreneur Show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth. So you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect. So you can scale your business, scale your money, and scale your life, while creating a deeper impact and living with complete freedom. Because that's what it really means to be an affluent entrepreneur.

Mel Abraham  1:02  
Hey there, welcome to this episode of the Affluent Entrepreneur Show, this one's gonna be fun, because I might ruffle a little bit, a few feathers, but I've been known. And that's okay. So here's the thing. I work with a lot of entrepreneurs, a lot of folks that are trying to build businesses, and they see their businesses as their pathway to control and freedom. In fact, some of them actually started their business, because they assumed that that was going to give them more control and more freedom. They said, I'm getting out of my job. Now, you could also be an employee, saying that my job is going to give me financial freedom. Well, I can, and so can your business, if we understand how to use it properly. So I'll walk you through some frameworks. And once you start to understand and look at, what is it that starts to drive business, what is it that can create a money machine for you, that allows you to have a get to life instead of a how to life in other words, one where you get to choose a life of choice to choose what you want to do when you want to do it how you want to do versus having to do it, because you got a bill coming up at the end of lunch. All right. So that's where I want to kind of play and talk about this. And yeah, I'm not saying that it's going to be easy, but it is simple. When you start to understand the principles, we just got to work the process to make that happen. All right, so let's just jump to the iPad. And I'll make sure that those of you that are listening, you got hookups for the graphics, or go to the YouTube channel, you can see how we're building this out. Because I got a couple of frameworks that I want to I want to walk you through and talk about how do you build a money machine to give you the financial freedom that you deserve, and desire and do it the right way? Alright, so let's just jump, and let's see what happens because here's what's happening, people will come to their business or their job, and they're gonna put in effort in, they're gonna put stuff in, there's inputs going in, and they look at it. And they, they actually presume that by doing the work by building the business, I'm going to I'm going to be able to get that freedom. And that cash flow. The problem is, is that's actually not what it's about your job, your business is really about optimizing systems and processes and optimizing profits. When we talk about the work that you do, the primary focus is about impact, and solutions and profits. See, the business is not the well. The business is the creator of the wealth. It's the thing that is creating cash flow. That's that's what we need to understand is that most often, we look at the business as as the key component, though, of our wealth. And it's not, it's the generator of wealth. Now, is it possible that you could sell your business? Yeah, it is. And there's plenty of people that made a lot of money by selling a business. But when you look at the statistics of businesses that are sold, versus businesses are sold, or not able to be sold, then you're you're not, you're not in a situation where the probabilities are in your favor. And so I want the probabilities leaning in your favor. And the way to do it is say, I'm going to operate my business where I'm not solely focused on my ability to sell it to be the windfall. And if that doesn't go through, you got no windfall, and you've got no future. And hopefully, that starts to make sense. I want to make sure that we raise the probability the stakes into in your favor. So whether you sell or not, isn't going to matter. You're still going to find the path that you want. All right, because I think about businesses like mine. No one's buying my business. It's not sellable. It's not transferable that could I build it in a way that that could make it sellable and make it valid. Absolutely. Could I done it, I buy and sell businesses all the time. But the thing is that I built this in a way to provide a cash flow machine a high profitable cash flow machine, because then I'm using that cash to do something else. I didn't build this to, to sell it, I'm not building it to sell. The problem is that a lot of people, especially in the personal brand space, in the expert space in the thought, leader space in the authority space, how are we one consulting professional service, they're not building their businesses to sell, but they think that they might be able to sell it down the road, and it doesn't work. And then when they find they can't sell, they go, Well, I got nothing else. So here's how I want you to think about this. Your business is meant to create solutions, impact and profits. It's ride cashflow. And I want you to take on the affluent mindset, the affluence mindset of an affluent entrepreneur, because now we take the cash flow from the business, and we create a second element. And that is what I call the wealth machine or the money machine. See, the money machine is where we take the money from the business, and it actually is multiplied, we get that money to work for us. We put it into investments, we build a portfolio we get whether it's real estate, stocks, bonds, ETFs, indexes, alternative investments, we can put it into things that we create the second machine, called the money machine. Because now all of a sudden, that money machine is taking the money that we create in is going to do a couple things. One, it's optimizing assets, the accumulation of assets, I'm gonna go deeper on this in a moment. But it's also going to optimize our time because imagine this, you have a machine, that spinny that's creating cash that's allowing you to take cash out without your efforts. It's like a frickin ATL heads that you can go to and, and know that it's not draining because it's replenishing itself because that it's it's at a critical mass that continues to grow. What that does for us, it gives you your time back to have options to have choice to to have freedom to decide what you're going to do. So the money machine if the business is to about impact solutions and profits, the money machine is really about freedom, legacy and affluence. Okay, but here's the mistake, people don't realize is that you actually need both. Whether you're in a job or whether you got a business, we got to realize that the business or the job, or is the funders of the wealth machine, the money machine. And and so I want to break down something called the affluence cashflow matrix is going to walk you through exactly how that works. And why this is important. So important for you when we get this in place with with it connected to our either our business, or our income streams from our work. Now some things change. Okay, so so let's see how this starts to play out. Because this is effectively how you get a money machine that really works. And so what we're looking at is this idea, we've got to manage two things, your iOS, and your BS. All right now, we'll talk about the Bs in a second. But it's not the BS, you think, although we might have a lot of BS in our heads that we got to figure figure out also, that's for a different episode at different time, and everything but the AI S stands for income statements. Okay, this is the money that's coming in. All right. So it could be it could be from a job. But like the it could be from a business. So this is the money that's coming into our into our possession from the efforts that we put out this is this is typically one on one, or one to many where we're putting in efforts to get money back efforts to get money back. Okay, at some point, we want to put in less effort and get more money back. Then there's a second piece of that is that you got income, which you also have expenses, that's the money going out could be if it's a business, it could be your cost of operating. It could be your labor, your your wages, it could be supplies, anything if it's on the personal side, this all works for the personal side, just the same. It could be your your mortgage, your living expenses, your insurance, your your housing, your cars, your your internet, all that stuff. Bottom line is you have money coming in and you have money going out. There is a net and hopefully that net is positive. In other words, we have more money at the end of paying our monthly expenses than we do. Expense says so we have more money left over this is called profits or cash flow. Okay? Now the idea here is this is that I want to be able to, to drive up my income as much as possible.

Mel Abraham  10:16  
I want to drive down my expenses as much as possible, because that's going to drive up our profits as much as possible. Remember that the more cash that we have available to us to do things with, the faster we can accelerate our path to financial freedom, building the wealth that that that we want. And so I want to make sure that we're doing everything we can to scale and optimize our income. And I talked about that in the last couple of episodes, we'll hook them up up here about how do you get paid premium dollars? How do you how do you get paid more for what you know, those kinds of things. And I want to minimize the expenses, which means that you're going to want to look at things like needs and wants and outs. Now I'm not telling you to live on beans and rice. Now, depending on your situation, you might be in a situation where it's it's a struggle, because you overextend yourself, now we got to get you, we get you get you upgraded, and, and moving forward. But the bottom line is I just want you to have a finger on the pulse of the money going out the door, we don't unconsciously spent, I want you to be aware of it. So we check it, we try to minimize expenses as much as possible. And now all of a sudden, we're maximizing the profits. Now that's one side of the equation is, is the income and the expenses, there's this other side of the equation, the BS side of the equation? Well, the BS side has two things. subarea stands for balance sheet. It's not, it's not the BSU thought, but its balance sheet. Now the first part of the balance sheet is assets. Now I have a very different perspective of assets. It's not the traditional perspective. In this case, when we're talking about building a money, machine assets are assets that increase my net worth, where I have access to the value or increase my cash flow, the whole idea is to create a machine that's going to allow me to get access to cash so I can pay my bills and live without putting as much effort in. Okay, I'm going to give you an example of how this works, and how it worked in my life. When when we get to the end, and you understand the whole process. But what we want to do is accumulate assets, use the income to accumulate assets in a way that those assets are going to be able to generate cash flows, it could be in the terms of of stocks, bonds, trustees, real estate from you get rents from real estate, those kinds of things. Now, let me be clear what an asset isn't, because this is something that people will confuse, at least in this. In this environment, the way I'm talking about an asset isn't something that depreciates an asset isn't something that's consumable. And as an asset isn't something that I don't have access to the value or it doesn't generate cash flow. So for instance, my wife and I live in a beautiful, right on the water in Laguna Beach. It's an expensive home. Okay. But, and she doesn't like when I say this, but it's it's the truth in this definition. It's not an answer. Because I don't I don't access the value. I don't have additional cash flow. Yes. Does it increase our net worth? Yes? Could I get the cash flow? Yes, by selling it or renting it, but then I'm not enjoying it because I'm not living in it. So in the context of building and money machine, I don't count the house that I'm living in as an asset, just the same as I don't count the car as an asset unless I'm renting it. Or I'm trading vehicles. If it's a car sitting in the driveway sitting in a in a warehouse or sitting in the garage. It's an it's an asset, yes. But it doesn't help pay my bills. It doesn't help support my lifestyle. Now, the currency on it might be enjoyment, just like the houses, that's totally fine. But we're what I'm talking about is building a money machine that has the ability to pay your bills. And if something's sitting in the garage, it ain't paying your bills. All right, and the house ain't paying my bills. It's actually costing me but that's okay. Because the reason we got the house is not to build the machine is for the enjoyment of the of the lifestyle that we want. But that was a conscious choice. Okay. So assets are only those assets in this case, that will increase our cash flows to help pay our bills or increase our net worth in a way that we can get access to that value to pay our bills. It's meant to support a lifestyle. The second part of the of the Bs in the bank One sheet is liabilities, this is the stuff we all this is the stuff we owe. Okay, so this is loans could be anything from student loans, credit cards, mortgages, car loans, it could be obligations that you have personally, but this is the stuff we owe. When we take our assets, and then we take the liabilities off those assets, then we have something called net worth. So what we're trying to do on this side of the equation is I'm trying to literally increase my assets, decrease my liabilities, in fact, at some point, I want you to completely debt free, and increase our net worth. So if we look at this whole matrix, we've got income and assets at the top, we have expenses and liabilities at the bottom, I want to maximize my income and my assets, because these are what I call the producers of your wealth, income and assets are the producers of your wealth, I want to go down the bottom where the expenses and the liabilities are. And I want to reduce those as much as possible, because those are the rotors of our world. So I want to maximize the producers, I want to minimize the rotors, because here's how this works. Now you have the pieces of the machine, let's put the machine to work for you. Here's how the machine works, you're going to make money, you're going to spend money, and you're going to have profits and cash flow, that profits and cash flow is going to be used to buy assets. And when you buy assets, it increases your net worth. But those assets are creating cash flow, which then means that the assets are bringing in more income. So now you're bringing income from your work, and the assets are bringing income, and you're gonna bring that income back in to buy more assets. So what ends up happening is you're running a cycle of income coming in, buy assets to generate more income, and you're gonna take the income from those assets, to buy more assets to generate more income. And now what ends up happening is we get to a critical mass, this is when you find yourself in a place where you money will work harder for you than you ever did for it. Okay, this is the ultimate goal of, of what you're trying to achieve your wealth is in the money machine, your your freedom is in the money machine, it is not in your employment is not in your business. Now, it's the business part of the money machine. Yes, but it isn't the money machine. Hopefully this is starting to make sense and resonate with you. I think it's really important distinction for you to start to understand, let me land this plane for you. So you understand how this really plays out. Okay. Before I got diagnosed with cancer, I had a couple of businesses that were running, I was making money from my efforts and the work that I was doing, okay, and I was taking those profits out. And I was investing them into assets, those assets were generating income. And as they generated income, I just reinvested him into more acids. So the machine kept growing and growing and growing and growing. Well, when I got diagnosed with the cancer, I realized that I had to focus on my healing, which meant that I didn't have the time to dedicate to my work to the businesses at a level that would allow me to heal. So what we did is I shut the income down from the businesses. But because I had built enough assets on the asset side of the equation, I could take that income that was coming from the assets to live off of and not change my lifestyle. So your money machine is the key to safety. It is the key to freedom. It is the key to to living a richer lifestyle. But it takes discipline and it takes effort. And it takes deliberate work to make sure that you're doing the right things with each and every dollar to build the assets you need to give you the financial freedom. So this is the affluence cashflow matrix, income minus expenses, maximize the income, minimize the expenses, take that profit and use it to buy assets that are going to be able to generate income and use that income to buy more assets to generate more income. And now it's self perpetuates. You get money momentum, you get scale and you get cash flow. This is what's going to drive your financial freedom. So I hope that this starts to give you a different perspective of how to how do you take your income and use your income to truly end up with financial freedom. 

Mel Abraham  20:09  
And the only way to do it is to build the assets that generate cash flow, increase your net worth, where you have access to, and to do it in a way that is sustainable. So if something God forbid, happens, like, like, happened to me, you're okay, you just shut it down, and you have an ATM, that you're going to be able to generate cash flow from, okay? Or you decide, hey, I want to take a month off, and I just want to go to Tuscany for a month. You're okay, you're gonna have to keep running on the treadmill, or you decide that I'm done. I'm going to retire. I'm just going to travel the world to the next for whatever the seasons of life I have left. You're okay. Does it take time? Yes. Does it take effort? Absolutely. Is it complicated? Not at all. But you got to do the work. And here's the beautiful thing. You don't have to do the work alone. That's why we have the show. That's why I'm here. I want to help you out. I want to help you do what I've done. For my clients. I want to help you do what I've done for myself. And so stay with me on this journey. Because financial freedom is your birthright. Stay with me on this journey. Because with these principles, when you start to put them deliberately discipline into your life, you'll start to see shifts. And over time, all of a sudden, you'll sit back and say, how did we get here? You got here because every step of the way you were intentional, aware and conscious of what you're doing with every single dollar you had to maximize it to give you the freedom and the wealth that you desire. If you have questions if you need help, or if you're unsure, I want you to go to to ask Mel now, duck, I want you to send me your questions. You can do it in an audio, you can do it in video, you can do it in text, I'll bring them on, I'll make sure they get answered. You're no longer alone on this journey. Okay, and if it's a cool question, a good question. I might even bring you on life and coach you through it. Just you're not all right. The point is, is that I don't want you to feel confused. And I certainly don't want you to feel isolated or alone in your financial journey and finding your path to financial freedom. So in that process, stay in touch with me, let me know what's going on. Let me know I can help and I can't wait to see on the road to financial freedom and until we get a chance to see each other on another episode or on the road. As I always say always, always strive to live a life that I will choose. Thank you for listening to the affluent entrepreneur show with me your host Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com/group and I'll see you there.

Introduction
Business isn't key to wealth
The Affluence Mindset
How to get a money machine that really works
Balance sheet and income statement
What an asset is and how it works
Putting the money machine to work for you
The Affluence Cashflow Matrix
The importance of being intentional and disciplined