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Mindset & Money | Income Versus Wealth

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Hosted by
Mike Ayala

On this episode of Investing for Freedom, Mike discusses the difference between income and wealth building. Mike explains three ways in which you can invest your spare capital to truly create wealth and urges you to start thinking about what you can do to accelerate your earned income and build other streams of income.

“If you truly want to start building wealth and get out of the rat race, the only way to do it is to start building some passive income. And the best way to do that is to increase your earned income, and invest that into cash-flowing assets, real estate, business, stock market.”

HIGHLIGHTS:

0:00 – Intro
1:52 – The only way to create wealth in life is to be truly creating money and to do that you have to leverage something more than your own personal time
3:42 – If the income you’re making is not getting you past your living expenses then you’re not building wealth
4:42 – There are three different areas where you can invest your additional capital to create wealth – real estate, businesses, or the stock market
6:41 – Mike urges you to start thinking about how to create passive income
7:21 – If is helpful to start to accelerate you’re earned income / build other streams of income so you have more investing power
10:41 – You’re never going to get wealthy by trading time for money
12:27 – You can contact Mike through text – (480) 531-7519
12:39 – The only way to build wealth is by building passive income. The best way to do that is to increase your earned income and invest that into cash-flowing assets

FULL TRANSCRIPTION:

Thank you for joining me on The Investing for Freedom Podcast. Today, I’m going to talk to you about income versus wealth building. And I’m probably going to keep this episode pretty short today, but I just want to challenge your thinking, get you thinking, just kind of get you considering over the next week, two weeks. You know, where are you going to build wealth? How are you going to build wealth? And some of you are probably already on the journey of building wealth and probably have a lot of this figured out. And some of you might not be so far along in, and that’s okay.

Here’s the thing I’ve had this conversation before, but I really believe in its simplest form. I mean, when you look at the cashflow quadrant, there’s employees, they’re self-employed, there’s big business owner and there’s investor. And I actually like to just kind of split this into two, I call it making money or creating money and then earning money. So when you look at the left side, that’s employees and self-employed, and when you look at the right side, it’s literally creating money. It’s making money.

I said this in an early episode, I haven’t said it for a while, but I love the concept. You know, we all say that I’m going to make X amount of dollars. Well, you’re not making anything, you’re earning X amount of dollars. So I think when we just really think about this from that perspective on the left side of the quadrant, you’re earning money on the right side of the quadrant you’re making or you’re creating money. And that’s where I think the wealth lies.

I really believe that the only way to truly create wealth in life is to move over to the side where you’re creating or you’re truly making money. And in order to do that, you have to leverage something more than your own personal time for the most part. You know, could you use your time to create some kind of software program that, you know, you sold for a lot of money and consider yourself wealthy? Sure. There’s probably other things that you could argue with me that you could just take your, you know, 40 hours a week and get wealthy off of it. But for the most part, it’s not going to happen.

So we really have to kind of shift and adjust our thinking and, you know, just start considering how do we take the money that we earn on the left side and turn it into wealth or create more money or make more money from it. And you literally have to take it and invest it either in people or other assets that produce at a scale that you could not do with your own time. So you know, all of us only have a certain amount of time in a week, in a day, whatever people who are successful and wealthy, they don’t have any more time than you do. So what did they do? They learn to leverage other people’s time, money, abilities, wealth etc.

So here’s the thing that I’ve been thinking about. If you make, let’s just say, hypothetically, you make, you know, a thousand dollars a week, so you make $52,000 a year or double that you make $2,000 a week, you make $104,000 a year. I don’t really care what the number is. If that number of income or earnings is not getting you you know, just past your living expenses, then you’re not building wealth. You’re literally just making enough income to cover your expenses. You’re not creating wealth. And that’s how I want to start thinking about this. I want to start creating additional money. You might call it passive. You might call it an investment. If you’re just making enough money to live on, there’s nothing left.

You know, some people would call it paying yourself first, or you know, there’s different things that we would think about in order to get to the point where we have enough money to invest. But I think it’s small thinking when we just start thinking about, you know, putting aside a hundred dollars a week or a hundred dollars a month or whatever the number is, that’s going to work to a point, but it’s not enough. You can’t just put away a hundred dollars into savings or, you know, take a hundred dollars out of your paycheck, and put it into a 401k. It’s not going to make you wealthy. It’s going to make you enough money to where you can live someday when you reach that golden age of retirement, that we’re all waiting for to where life’s going to be fancy and fun, and we’re going to start enjoying it. It just doesn’t sound fun to me guys. And if you’re listening to this podcast, it probably doesn’t sound that fun to you either.

So what I’ve been considering and thinking about is I really think that we can narrow this down to really three places that you can invest your additional capital to truly create wealth. And I think it’s either real estate it’s businesses or it’s the stock market. And, you know, there’s other avenues too. Obviously like Bitcoin and, you know, gold and that kind of stuff. But generally speaking, I think we could put it into those three categories, business, real estate, or the stock market, and let’s just lump Bitcoin and that kind of stuff into stocks and bonds for now. Because I don’t want to over-complicate it and get into like seven different categories. But real estate, business, and the stock market.

So what I really want you thinking about, and this is why I said, I’m going to keep the episode short. Most of us are probably not earning enough money on our W2 job to save the kind of money that we want to save or invest the kind of money that we want to invest in, you know, the stock market or whatever for 30, 40, 50 years to live the lifestyle that we want currently. So we have to like, literally start thinking about earning more income, or as I’ve been saying recently, how do we earn turn as much fake money. I’m just kind of dissecting when I say this phrase, earn as much fake money as possible and pour it into cash-flowing assets. This is really what I’m talking about. I’m just kind of slowing it down and dissecting it.

So when I say earn as much fake money as possible, that’s what we do when we go to work or, you know, we invest our time in our business. It’s what the guys in GoBundance would call vertical, our vertical income literally the type of income that you have to show up in order to make it. So if you stopped showing up for a month, would that revenue stream stop? And if it would, then that’s your vertical income. That’s the money that you earn, that is your earned income, all these sayings that, you know, different ways people say it, if you don’t go earn it, you don’t make it. That’s earned income, that’s vertical income. That’s it, it’s that simple.

What we want to start considering is passive income. That’s how we start building wealth. And again, I think we can do this in real estate. We can do it in business, or we can do it in the stock market. I’m not a huge fan of the stock market. I know a lot of people have done extremely well. I know people who have done extremely well, it’s just not the avenue that I’ve chosen.

You know, and some people invest in all three. It’s not for me. But I do think are cycles too though. So, you know, there’s times when the stock market’s up, there’s times when real estate’s up, there’s times when business is up, but you know, a lot of them are also correlated at different points in time too. So you just need to look at that and it’s not overly complicated. And so the thing I really want to challenge you with and just get you thinking about is what are you going to do to accelerate your earned income? There’s a lot of talk these days about side hustles, you know, building other streams of income. And I really want you to consider this for a minute just because somebody says they have a side hustle, or just because somebody says they have a passive stream of income doesn’t mean it’s passive and that’s okay.

If you’re going to build, you know, let’s just take a social selling, which I’m a fan of, by the way. I mean, I remember years ago, hearing Robert Kiyosaki talk about multi-level marketing, which is the same thing as you know, social selling, essentially. It got me a little tongue twister there. It’s the same thing as social selling essentially. I like that. I like that. But let’s be real. Just like a business can be passive, you’re not going to start a business for the most part and have it passive from day one. You’re probably going to have to start the business, go build the team out. And eventually in a year, two years, five years, ten years, whatever, you’ve built a big enough business in a big enough team that it literally could be passive. If you didn’t show up, it’s passive, it’s horizontal income because you don’t have to go there. If you took six months off and it continues to run or actually is better when you come back, then that’s truly passive. It’s truly horizontal. If you have to show up every day, it’s vertical, it’s earned income. It doesn’t matter really where it falls on the tax front, you can take distributions, but I don’t want to get too in the weeds on that. It’s either passive or horizontal or it’s vertical and earned.

And so yeah, you could build out a business over time and make it a passive business. You could literally go buy a business that has an operator in it, and maybe they just want capital. Maybe they want to take some money off the table, but they want to continue to, this actually happens. You guys might say, that’s not, you know, that’s not a thing. I don’t know how to do that. This actually happens. Sometimes a business owner gets to a point where they’re like, they like actually love their business. They love their job, but in order to take it where they want to take it, they need a capital influx. And so you could literally come along and be the influx and, and they continue to run it. And it’s passive. I actually know some people that have done this.

Same thing with real estate, you know, real estate can be passive, but really a lot of times it’s not. A lot of times people put a lot of time and energy into their real estate portfolio and that’s fine. There’s nothing wrong with that. I just want to just kind of debunk the thought around, you know, passive versus active in the fact that you buy a business, or you buy real estate, that all of a sudden you got all this passive income and at the same thing with like social selling, it’s not always bad passive, and that’s fine. Usually, if you put in the work and the time, time, and the energy, you can get a lot of these things to passive. But if you’re putting, you know, 5 or 10 hours a week in your side hustle, it’s not necessarily passive investing. And again, there’s nothing wrong with that. But what I’m really talking about here is how do we earn more income? And that could be through social selling. It could be through a side business, it could be through a coaching platform or building courses or whatever. But it doesn’t necessarily have to be passive, but how do we increase our income? How do we increase our earned income so that we can then take it and invest it in real estate, invest in more businesses, invest it in the stock market so we can truly increase our wealth. That’s the only way you’re going to get more wealth. We’re never going to get wealthy by trading our time for money, unless your time is worth $5,000 or $10,000 an hour, which I don’t know very many people that it is. You’re not going to get wealthy. Just by trading your time for money. Unless you live like a really meager lifestyle. The average $50,000 to $60,000 salary will never get you to wealth.

So what are you really talking about, Mike? What are we seeing here? I just want to challenge your thinking about what is wealth and how do we build it. It’s not going to be through, I think a lot of times we get frustrated because we hate our jobs. We hate our careers, etc., etc. And I think we’re looking at this wrong. We just have to figure out how to make some more money, create more streams of income, and then figure out how to invest it properly in the right places so that we can create the wealth. That’s what really has is frustrated. And so I’m going to leave you with that. How can you really create wealth? And I know there’s some other ways, so, you know, if you want to just, you know, DM me on Instagram or whatever, and just tell me other ways that you can make wealth. I’m cool having a conversation about it, but generally speaking, we’ve got to figure out how to make more money and then invest it in real estate business or the stock market. And you might say, well, Mike, I don’t have time to invest in a business. I don’t have time to invest in real estate. I don’t have time to invest it in the stock market. Well, that’s why you hire wealth advisors in the stock market world. And that’s also why you, you know, if you’re an accredited investor, you can invest in, you know, we’ve got an MHP fund or if you know, you’re an accredited investor, you can invest in an HVAC business with us. There’s a lot of opportunity out there, and actually there’s a lot of opportunity to for non-accredited investors.

So just because you don’t want to start a side business doesn’t mean you can’t start investing in, I mean, all of us know that we can invest in the stock market, but a lot of us don’t know we can invest in real estate and business. So if you’re interested in more information around that you can go ahead and text me at (480) 531-7519. I actually answer the text there and we can have a conversation about this, but if you truly want to start building wealth and you want to get out of the rat race, the only way to do it is to start building some passive income. And the best way to do that is increase your earned income, make as much fake money as you can. And invest that into cash-flowing assets, real estate, business, stock market. Hope that helps, hope that gets you thinking. And yeah, like I said, I just wanted to really, you know, get you pondering that. A lot of times we overcomplicate a lot of this stuff, but there’s not much more to it. Make more money and invest it in cash-flowing assets. That’s how you build wealth.

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