https://www.youtube.com/watch?v=CRMT2yubBxc

1 00:00:00.000 --\> 00:01:00.000 if i'm an entrepreneur and i'm growing
my business month over month over month when should i one start taking
money out and two when should i start actively investing these are some
of the questions i get most frequently uh with the entrepreneurs that i
speak with who you know depending on where they're at they might have uh
you know five hundred thousand a million two million dollars in the bank
and they're like i'm not really sure what i should do and so what i
wanted to do was walk you through the thought process that i had around
investing uh to give you a little bit of some frameworks to think
through that helped me make the system making process a lot easier so
first off i'm a big believer in continuing to take dividends out of a
business as it continues to grow and that's because you want to decrease
your downside risk right because for some reason and the statistics are
very likely that the business will not succeed in the long term you know
90 whatever it is 90 or 95 of businesses fell within five years and so
uh it's it's much better in my opinion to consistently take money out of
the business as you're growing it because there's a very high likelihood
that it will not uh stick around a and b many entrepreneurs have this
idea that they're going to sell their business for

2 00:01:00.000 --\> 00:02:00.000 some magical number sometime in the
future when in reality only one percent of businesses ever sell and so
if that is the case again well i would rather not stack the chips on a
91 to one bet it does happen but the likelihood is low and so i would
like to take chips off the table table on a regular basis so that is the
first part which is making sure that we're taking money out but the
second question is okay well now that i have this money this 500 this
million this whatever what should i do with it right and so one of the
big things is i just like to think about this through the lens of
opportunity cost which is if i'm currently making let's say uh 500 000 a
year right from my business in in net free cash flow that's owner
earnings what i get to take out of the business after reinvesting in in
the growth and competitive advantage that we need to continue to
maintain to to grow right so if i have 500 000 of net free cash flow
that's coming to me and let's say i've got a million dollars saved up if
i were to if i were to passively invest that i should get about 10 ish a
year right that's just going to be investing through uh indexes like the
s p 500 etc right if i'm doing that then the

3 00:02:00.000 --\> 00:03:00.000 advantage of actively investing might
be the marginal difference but it might be an extra five or ten percent
so that would be a 50 to 100 increase because 10 to 15 is a 50 increase
right but if i look at it in terms of real terms uh just purely on how
much my net worth is going to increase which is the length that we have
to look at this through which is the opportunity cost if i were to spend
half of my time thinking about actively investing because it will take
up half your your mind space i promise you because i've done this
mistake before i made this mistake before then what happens is your
active income will fall at a disproportionate rate compared to what uh
your money is making you so let me i'll walk you through a numbers
example so let's say you've got that million dollars and you can get ten
percent a year which is a hundred grand on 100 passable right but the
additional fifty percent or a hundred thousand dollars a year uh fifty
two hundred thousand dollars here which would be five to ten percent of
that million right you could get through actively investing well if
you're currently making 500 000 a year from your business do you think
it would be reasonable to take half or 25 of your time to go chase that
when you

4 00:03:00.000 --\> 00:04:00.000 can probably get your income from 500
to 750 000 in the next year 500 to a million and so for me that was
always the opportunity cost of actively investing which until my wealth
became so large that i felt like it was the opportunity cost of the
money that i should be making by paying more attention to my money was
going to outpace my income which is still almost not there and so for me
that is why as for entrepreneurs it's my belief that a you should be
ripping out cash on a regular basis because that's downside risk
protection it's not your upside it is downside protection it's the fact
that what if my business does not succeed as much as i'm a big believer
in being optimistic you also have to face reality and confront facts
which is the likelihood that this particular business that you're on
i've had 13 businesses that i've started up to this point and now i own
eight more the likelihood that the business that you start is going to
be the one that you finish with is extremely extremely extremely low
right extremely low and the likely that you're going to sell that
business for a big number is extremely extremely extremely low and so
you take this money out and you put it into the s p or you put it into

5 00:04:00.000 --\> 00:05:00.000 an index because it is passive and you
can put it there and the idea is that you never have to think about it
again now the amount of money that you should keep in cash uh in in my
belief is you should have about six months two years worth of normal
living that's saved up in cash and that's just so that you can sleep
well at night and that's it the other thing is that when you invest that
into indexes why not you can always take a loan against those assets if
you wanted to start something big so it's not like it's illiquid uh when
it's there you can take loans against those assets at 60 or 70 percent
uh loan to value meaning if you have a million dollars in assets uh in
the s p most banks will give you 60 70 percent of that or at least 50
right depending on the stocks and in your history with them etc that
will give you basically for free right they'll give you that one percent
or two percent uh money that you can go and reinvest in starting another
business or buy a piece of real estate or whatever right and so for
entrepreneurs it is my belief that you should be investing most of your
time and energy or almost 100 of your time and energy and growing your
income growing the main vehicle you have but extracting the money and
putting it

6 00:05:00.000 --\> 00:06:00.000 into a low brain vehicle that's not
active that's passive that's truly passive not real estate flipping
that's not passive right truly passive if you're in crypto right or you
have some speculative stuff that you that you want to get into it's
probably taking up way more of your attention than it should be and it's
actually going to make your main income suffer which means your net
worth will grow more slowly than it otherwise would so it's all about
the opportunity cost of your attention all right now i'm going to put
this special note out here for employees if the the primary objective of
the employee in my opinion is to increase how much your income is and so
all of yours and this goes for entrepreneurs too the the initial parts
of your investment should be growing to increase your skills because
that increases your basis that increases your basic income that you can
continue to yield from the marketplace based on your skill set and so
this is where i think people step you know they step up over dollars to
pick up pennies if you were saving you know 500 a month there's nothing
wrong with that but i would be actively investing that 500 or 1000 or
2000 a month in the beginning into making my skills more valuable
because i know that if i do that in two years i might quadruple my
income

7 00:06:00.000 --\> 00:07:00.000 because that's the thing is that your
ability to earn is one of the greatest investments that's not just a
billionaire saying it really is like you get like if you develop the
skill of selling which might take you two years you can go from making
sixty thousand dollars a year to two hundred and fifty thousand dollars
a year or five hundred thousand dollars a year which puts you in the top
one percent just by earning that one skill and so if you can develop
that skill it is worth the investment and most investments in
self-improvement are so disproportionately low that it is worth the
investment even if there are courses that you only get a handful of
things from you are still as yourself an asset more valuable at the end
of the day you are the source you're the source of where all the money
comes from so it's like when people don't invest in themselves it makes
no sense to me i've spent every dollar i possibly could gaining access
uh getting mentorship getting coaching getting programs buying courses
buying books and and doing that stuff because i'm the source right if i
can improve me as the machine that generates all the flow of income then
the rest of the stuff becomes easy right and so first and foremost you
have

8 00:07:00.000 --\> 00:08:00.000 to invest in that after you have an
excess of that then start pulling the dividends out of the business that
you have and investing those things that are passive not active and then
at the point where your net worth from your investable assets what 10 of
that net worth growth would be is an excess of what you make per year
then at that point it makes sense to start shifting your perspective
towards managing wealth and growing wealth rather than growing income
now like i said two employees number one is increase your skill basis
meaning continue to invest in gaining skills so that you can be more
valuable with the company the way you do that is by tying yourself to
revenue streams that means you find ways to generate the company more
money period and that could be through a variety of ways if you were you
know in your your customer success or customer service or film it then
it's gonna be how can i send as many customers as possible how can i
retain these customers how can i track these metrics and show uh to the
people who are deciding my compensation how i'm directly making the
company more money right and how losing me would cost my company a lot
more than what it would cost them to keep right if i'm on the front end
side so it's going to be sales it's going to be marketing to be
acquisition based

9 00:08:00.000 --\> 00:09:00.000 how can i show them what how i can
become more valuable how can i close twice as many deals how can i you
know close at a higher percentage how can i get more lead flow by
working my pipeline better how can i generate leads on my own
independent from the leads that they're generating for me right all of
those things are things um that you can do to increase how much you make
right now like i said if you're an employee there's going to be a
certain cap most of the time on what you're earning and if that is the
case and you're rubbing against that cap you should keep your your basis
for living as low as humanly possible and plow as much of that money as
possible into a highly liquid asset again if you're in the situation
where your wealth right the net worth that you have is 10 of that amount
is still less than you make then all of your your attention should still
be going toward your primary net worth increaser which will be your
income and so if i can consolidate this video into a single statement
you should it's my opinion spend the majority of your time on the
vehicle that will increase your net worth the fastest and for most
people it is going to be increasing their income

10 00:09:00.000 --\> 00:10:00.000 until the point where they have saved
sufficient amount of assets that they put in passive highly liquid
things like s ps and indexes et cetera and at that point when the
potential to earn and increase your net worth is faster or greater
through the assets that you have at that point it makes sense to switch
your attention towards growing those assets because now the opportunity
cost is shifted away from where your income is generated versus where
your wealth is growing and so that is my uh at what point should you
start investing that is how i break it down first invest in you increase
your skill basis so that you can generate more income it is the highest
return genuinely i'm not saying that for jargon it is the highest return
that you can get the second is that you continue to put things in the
past truly passive not what people claim is passive that are really side
hustles but truly passive business so that you can continue to focus on
your main income generation and then when 10 of your net worth growth
exceeds your income capacity currently

11 00:10:00.000 --\> 00:11:00.000 at that point it makes sense for you
to shift your perspective into growing your wealth and rather than your
income so i hope you found this video valuable click subscribe and i'll
see you in the next vid bye
