Building Your Money Machine

1. Financial Freedom is Your Birthright: Design a Life of Choice, Not Survival

Financial freedom is about living a life built on choice instead of survival.

Unlock your potential. Financial freedom transcends mere wealth accumulation; it's about breaking free from limiting beliefs and habits that cause financial struggle. It empowers you to make informed decisions, pursue passions, deepen relationships, and make a lasting impact, transforming your life from one of obligation to one of choice. The author's personal journey, from seeing his father's financial stress to his own wake-up call from his son's drawing, highlights this shift from chasing profits to prioritizing presence and purpose.

Beyond traditional retirement. The traditional retirement model, built on pensions and later 401(k)s, often leads to a reduced lifestyle in later years. This "save, reduce, spend, and pray" mentality is a race against time, hoping money outlasts life. Instead, financial freedom allows you to maintain or even elevate your lifestyle, ensuring your best years are enjoyed well before and into your golden years, unburdened by financial worries.

A moral imperative. Achieving financial freedom is not just a personal aspiration but a moral imperative. It provides security and resilience against life's uncertainties like medical emergencies or job loss. By empowering yourself, you create a ripple effect, enabling you to support causes, help others, and leave a legacy of financial responsibility and generosity for future generations.

2. Conquer Your Money Stories, Excuses, and Fears to Unlock Wealth

If we don’t deal with the stuff in our minds, we’ll never deal with the stuff in the bank accounts.

Mindset matters most. Financial struggles are often symptoms of underlying money stories, beliefs, and excuses, not actual money issues. These narratives, often "caught, not taught" from observing others or media, shape our money identity and behaviors, creating a "Money Setpoint" that limits our potential. Separating factual observations from personal interpretations is crucial to rewriting these stories and unlocking true wealth.

Overcome common excuses. Many people remain stuck due to pervasive excuses that prevent action. The author identifies six key excuses:

• "Plenty of time" or "Too late now": Time is your greatest lever; the Wealth Creation Curve shows initial "flatline" followed by "acceleration." Starting early or starting now is always beneficial.
• "Need to make a lot of money": Wealth is about consistent behavior, not just amount. Small, regular investments compound significantly over time.
• "Need to get out of debt first": A balanced approach is needed, simultaneously managing debt and building wealth.
• "Advisor takes care of it": You must be the captain of your financial ship; advisors are servants to your vision.
• "Not good enough or smart enough": Limiting beliefs are not facts; anyone can learn. The author's recovery from a Ponzi scheme loss exemplifies learning from mistakes.
• "Complicated, not good with numbers": Basic math is sufficient; the financial industry often overcomplicates to foster dependence.

Address the "Lack Stack of Fear." Fear often paralyzes financial decisions, stemming from a "Lack Stack of Fear." This framework helps replace fear with understanding and courage by addressing:

• Clarity: Define what you want and why.
• Information: Gather knowledge to make informed decisions.
• Commitment: Determine what you're willing to do to achieve your goals.
• Action: Take small, consistent steps forward.
• Support: Surround yourself with a belief community.
• Backup Plan: Develop contingencies for obstacles.

3. Define Your Affluent Future First: Build Your Life from the Lifestyle In

Let the dreams inform the path.

Vision fuels action. Many people drift through life without a clear vision, trapped by societal expectations. Creating a detailed "Affluence Vision" is essential, not just a financial plan. This vision, crafted from the "lifestyle in" rather than "income out," ensures your financial decisions serve the future you truly desire, providing the emotional fuel for discipline and drive.

Layer your aspirations. Instead of an overwhelming single question, break down your vision into manageable "domains" of life. For each domain—Family and Relationships, Career and Business, Health and Wellness, Financial Security, Lifestyle, and Contribution and Legacy—ask three core questions:

• What is your ideal scenario?
• What does it mean to you?
• What words come to mind?
  This detailed exploration helps connect aspirations to your heart and soul, making the vision emotionally compelling.

Clarify purpose and commitment. The "Want, Don't Want" exercise further clarifies desires and aversions, setting boundaries for your ideal lifestyle. Crucially, define your "Money's Purpose" – giving money a higher purpose beyond mere accumulation provides the force to break through obstacles and ensures success feels fulfilling. Finally, create a "Contract with Your Future Self," a 10-year vision statement written in the present tense, summarizing your "Affluence Vision One-Sheet" with actionable milestones for 10 years, 5 years, and 12 months.

4. Understand Your Financial Reality to Bridge the Gap to Freedom

Your current truth is the springboard to a new financial future.

Gain awareness, not guilt. To take control of your financial future, you must first honestly evaluate your current financial reality. This process is about gaining awareness, not judgment, and serves as the springboard for change. It answers three critical questions:

• Where does my money come from, and where does it go (net cash flow)?
• What do I own, and what do I owe (net worth)?
• What do I have available to help me grow (investable net worth)?

Analyze income and expenses. Start by listing all income sources, noting their stability (consistent, seasonal, sporadic). Then, meticulously track expenses, categorizing them as "needs" (survival) or "wants" (niceties). This reveals unconscious spending habits, like the story of Ethan's friend buying a $5,000 watch, which cost his future self $400,000 due to lost compounding. Every dollar saved from wants can be invested, emphasizing conscious, intentional money decisions.

Assess assets and liabilities. Differentiate between assets that appreciate and generate cash flow (stocks, income-producing real estate) versus depreciating consumables or even your primary residence, which, while valuable, doesn't directly fund your lifestyle. Calculate your "Net Worth" (Assets - Liabilities) and, more importantly, your "Investable Net Worth" (income-producing assets minus debt). This "Affluence Cash Flow Matrix" highlights how income and assets are "Producers," while expenses and liabilities are "Eroders," driving the wealth-building cycle. Finally, calculate your "Financial Gap" by determining your desired annual lifestyle costs, multiplying by 25 (using the 4% Rule as a guideline), and subtracting your current investable net worth.

5. Prioritize Every Dollar: The Wealth Priority Ladder is Your Recipe for Riches

Every dollar you make or bring in needs to have a specific job description and role in your financial journey.

Give every dollar a job. Just as a company needs clear roles for its employees, every dollar you earn needs a specific "job description" within your "Cash Resource Plan." The "Wealth Priority Ladder" provides a step-by-step recipe for allocating your money, ensuring each dollar works towards building your Money Machine and achieving financial freedom. Following this recipe in the correct order is crucial for predictable results.

Build an unshakable foundation. The first phase focuses on establishing financial stability and security:

• Step 1: Comfort Fund. Build a liquid fund of at least $1,500 or one month's expenses to cover unexpected costs and prevent bad debt.
• Step 2A: Eliminate Destructive Debt. Prioritize paying off high-interest consumer debt (e.g., credit cards) using either the Debt Avalanche (highest interest first) or Debt Snowball (smallest balance first) method.
• Step 2B: Peace of Mind Fund. Accumulate 9 to 18 months of living expenses in a high-yield, fully insured, liquid cash account. This fund's job is safety and sanity, not high returns. Steps 2A and 2B should be pursued simultaneously, splitting available funds based on personal priorities.

Grow wealth and enjoy affluence. Once the foundation is solid, the ladder shifts to wealth creation and enjoyment:

• Step 3: Invest and Grow. Allocate 15-30% of income to investments, prioritizing "free money" (401k match, ESPP), then tax-advantaged accounts (Roth IRA, maxed 401k, HSA, Backdoor Roth), followed by traditional brokerage accounts, and finally, later-stage real estate or alternative investments. This step also allows for saving for large purchases.
• Step 4: Pay Down Property. Accelerate mortgage payments, understanding that the tax deduction often pales in comparison to investment returns.
• Step 5: Fund Kids' College. This is optional; prioritize your own financial certainty first, as your kids have more options for college funding than you do for retirement.
• Step 6: Enjoy Your Affluence. This final stage is where your Affluence Vision is fully funded, allowing for generous living, impact, contribution, and generational change, driven by your Money Machine.

6. Reclaim Your Time: Build Leveraged Income with The Five Incomes Framework

Disconnect your efforts from your results.

Leveraged, not passive. True wealth building isn't about "passive income" but "leveraged income," where you maximize earnings while minimizing direct time and effort. The goal is to build a Money Machine that generates income independently of your active work, allowing you to reclaim your time and focus on what truly matters. The author's cancer diagnosis highlighted the power of this framework, enabling him to shut down businesses and focus on healing while his Money Machine covered his lifestyle.

The Five Incomes Framework:

1. Active Income: Direct exchange of time/effort for money (e.g., salary, hourly wages, solopreneur work). Necessary initially but not scalable for long-term freedom.
2. Business Income: Serving a larger audience with a team, leveraging processes and people. Less dependent on your direct time, but you remain involved as a leader.
3. Asset-Based Income: Acquiring assets like real estate or equipment that generate rent or fees. Requires involvement but significantly less time investment than active or business income.
4. Residual Income: Income from intellectual property (e.g., royalties from books, licensing deals) or network marketing. Time is invested upfront, with ongoing payments for its use.
5. Portfolio Income: Highest level of leverage, investing in paper assets (stocks, bonds, ETFs, index funds). Minimal time commitment for potentially significant earnings, managed by a team of advisors as the portfolio grows.

Shift your income sources. The objective is to build your Money Machine from assets accumulated in the top three levels (Asset-Based, Residual, and Portfolio Income). The ultimate goal is to have enough income from these leveraged sources to cover a minimum of 80% of your desired lifestyle needs, providing true financial independence and the ability to live life by design, not survival.

7. Grow Your Money Machine: Harness Compounding and Invest Consistently

Your direction is more important than your speed.

Compounding is magic. The "Wealth Creation Curve" illustrates how consistent, diligent investing, even in small amounts, leads to exponential growth over time. Initially, progress may feel like a "Wealth Flatline," but eventually, the power of compounding takes over, where your earnings start earning on themselves, creating significant "money velocity and momentum." This is how 79% of millionaires, who started from scratch, built their wealth.

Unlock growth with the Rule of 72. The "Rule of 72" is a simple formula to estimate how long it takes for an investment to double. Divide 72 by the annual interest rate to get the approximate number of years. For example, an 8% annual return doubles your money in about 9 years (72 ÷ 8 = 9). This highlights the importance of starting early and being patient, as compounding works its magic over the long term.

Invest smart, not just hard. To apply these principles:

• Start early: Maximize time for compounding.
• Invest consistently: Regular contributions, even small ones, build substantial wealth. Automate this to remove friction.
• Long-term view: Focus on sustained growth, understanding market fluctuations are normal.
• Reinvest earnings: Let your money make more money.
• Be patient: Avoid impulsive decisions based on short-term market swings.

Understand investment types. Differentiate between:

• Savings: For short-term needs (high-yield savings, CDs).
• Gambling: High-risk speculation with no strategy (e.g., meme stocks like GameStop).
• Trading: A high-stress job involving short-term buying/selling.
• Investing: Long-term strategy to grow wealth through assets like:
  • Bonds: Lending money for interest, lower risk/return.
  • Stocks: Ownership in companies, higher risk/return. Start with diversified options.
  • Mutual Funds: Actively managed basket of stocks, higher fees.
  • ETFs & Index Funds: Passively managed, track indexes (e.g., S&P 500), lower fees, diversified. Ideal starting point.
  • Target-Date Index Funds: Automatically adjust risk based on a future date, great for beginners.
  • Real Estate: Long-term asset, but requires significant capital, illiquid, and can be complex; best for later stages of wealth building.
  • Alternative Investments: Commodities, hedge funds; generally riskier and less liquid, requiring specialized knowledge.

8. Protect Your Wealth: Safeguard Against "Dream Killers" and Optimize Taxes

Build a moat of protection around what you earn and your ability to enjoy it.

Preserve your legacy. Creating wealth is only half the battle; keeping it is the other. Statistics show that a significant portion of wealth is lost by the second and third generations. Protecting your Money Machine from various risks is crucial for long-term financial stability and legacy. The author's story of his grandmother being sued for $500,000 due to a car accident highlights how unforeseen risks can strike.

Address the "Dirty Dozen Dream Killers." These are common risks that can erode wealth:

• Accident: Vehicle, slip-and-fall, equipment malfunction.
• Health and Disability: High medical costs, loss of earning ability (long-term disability insurance is crucial).
• Family Members: Legal exposure from actions of minor children or other family.
• Divorce: Significant financial and emotional costs.
• No Cushion: Lack of emergency funds for unexpected expenses.
• Debt: Destructive consumer debt that robs from the future.
• Infringement and Theft: Intellectual property theft or being accused of infringement.
• Litigation: General legal risks from business operations or external claims.
• Business Partnerships: Risks from partner's actions, values shifting, or business divorce.
• Professional Mistakes: Errors and omissions in professional services.
• Employee Related: Accidents, wrongful termination, harassment claims.
• Product Liability: Injuries or harm caused by your product.

Master tax management. Taxes can be one of the biggest destroyers of wealth, potentially taking 50% or more of your income. While unavoidable, overpaying is not. Key strategies include:

• Understand deductions and credits: Deductions reduce taxable income; credits reduce tax owed dollar-for-dollar.
• Keep accurate records: Essential for effective tax management.
• Seek professional advice: Proactive tax advisors (CPAs) help minimize liabilities and plan strategically.
• Consider tax implications of investments: Utilize tax-advantaged accounts (401k, IRA, Roth IRA, HSA) and long-term capital gains rates.
• Implement tax-loss harvesting: Strategically sell losing investments to offset gains.

Four-step protection framework.

1. Understand and Eliminate Risks: Identify weak spots like excessive debt, lack of diversification, and tax liabilities.
2. Anticipate and Mitigate Potential Issues: Stress-test your financial plan against various scenarios (recession, large expenses) and maintain a robust Peace of Mind Fund.
3. Plan and Structure Your Finances: Develop a comprehensive financial plan, including estate planning, and build a strong financial team (fiduciary financial advisor, tax advisor, legal advisor).
4. Insure Against Unforeseen Events: Classify, rank, and insure risks with appropriate policies (auto, homeowners, health, umbrella, long-term disability, identity theft, and term life insurance). Avoid complex, high-fee permanent life insurance policies.

9. Cultivate Generational Wealth: Prioritize Skill Sets Before Assets

Never pass on assets before passing on skill sets!

The $180 million lesson. The tragic story of a family losing $175 million in five years after the patriarch's death underscores a critical truth: simply passing on assets without equipping heirs with the necessary financial skills is a recipe for disaster. The author firmly believes that if heirs are not good stewards, assets should go where they will serve best, even to charities.

Bring heirs into the journey. To ensure your Money Machine lives on for generations, involve your heirs early and consistently in your financial journey. This means:

• Early financial conversations: Start discussing money and its value from a young age, like the author did with his son, Jeremy, by giving him a "commission" instead of an allowance.
• Matching contributions: Encourage saving and investing by matching their efforts for significant purchases or initial investments.
• Demonstrate impact: Show them the power of compounding and the destructive nature of debt through real-world examples.

Develop critical skill sets. Beyond reading this book, focus on cultivating specific skills in your heirs:

• Financial literacy: Budgeting, saving, investing, risk management, and understanding the long-term impact of decisions.
• Emotional intelligence: Managing emotions around money to avoid impulsive decisions driven by fear or greed.
• General business acumen: Skills to create income streams, optimize investments, and navigate the business world.
• Risk management: Identifying, assessing, and mitigating risks associated with assets.
• Communication and relationship building: Engaging with financial professionals, negotiating, and fostering family collaboration.
• Adaptability and continuous learning: Staying updated on market trends and new opportunities.
• Legacy planning and wealth transfer: Understanding wills, trusts, and how to preserve wealth for future generations.

By imparting these essential skills, you empower your beneficiaries to not only manage but also grow the wealth you leave, making them responsible stewards of your financial legacy.

10. Live a Life That Outlives You: Embrace The Legacy Factor

Always strive to live a life that outlives you!

Beyond money, a life of impact. The ultimate purpose of building a Money Machine and achieving financial freedom is to live a life that is fully expressed, contributes to the greater good, and creates a positive impact on the world. This is the "Legacy Factor," a framework for closing the gap between who you are today and who you are capable of being, driven by three critical outcomes: being highly valued, creating a lasting impact, and having resolute integrity.

The Three Pillars of The Legacy Factor:

1. Embody: What Do You Stand For? This pillar is about moving from participant to trailblazer, understanding your unique identity, and living by unshakable values with bold courage. The story of Michelangelo's David, carved from "poor quality" marble, and the author's father, who risked his life because "it was the right thing to do," exemplify how embodying core values creates an inflection point that changes lives and builds a heritage. It's about finding the courage to take risks and knowing there's always more within you.
2. Elevate: How Do You Inspire and Influence? Once you embody your values, the focus shifts to continuous growth and giving back. Elevation means expanding your limits, escalating your skills, improving your ability to serve, and practicing meaningful generosity. Companies like Patagonia demonstrate how businesses can elevate beyond profit to make a positive social and environmental impact. This pillar is about growing as individuals and leaders, inspiring others, and actively participating in the world through mentorship and community engagement.
3. Execute: How Do You Take Purposeful Action? This final pillar is about creating an enduring presence through consistent, purposeful action. It involves having an effective plan for all aspects of your life, anticipating opportunities and challenges, and preparing to step into your full potential. The author's cancer battle, where his Money Machine allowed him to fight without financial worry, illustrates the power of preparation. It's about muting the inner voices of doubt and taking bold steps, like Justin Herald's "Attitude Gear" success, to achieve meaningful goals.

Savor the "coffee" of life. The "coffee cups and coffee" analogy reminds us that the "coffee" (our experiences and enjoyment) is what truly matters, while the "cups" (job, money, position, societal expectations) are merely tools. The happiest people focus on savoring life's rich brew, not just acquiring the fanciest cups. By embracing the Legacy Factor, you use your time, talent, and treasures wisely, creating a lasting impact that extends far beyond your own life, sowing seeds of hope and prosperity for future generations.

Last updated: September 15, 2025