The New Path to Financial Freedom

Hey Empire Builders,

We have talked about this simple rule of investing: Make more money than you spend and invest the difference wisely. 

Today we're going to talk about how to become an investor, how to have a strategic impact on where you place your money and the return that you can expect to generate.

Today in 10 minutes or less:

- It's NOT net worth

- Our proprietary Financial Freedom Formula

- How to give your dollars ALL the jobs!

- Curiosity without constraints

How to Measure Financial Success

What is the purpose of all savings? Is it growth? Safety? A good rate of return? All of those things matter, but the real purpose of all long-term savings is income. And it’s not simply to increase net worth. 

When you sit down with a traditional financial adviser, their assessment of your financial situation is always measured by your Net Worth.

But remember why we’ve saving in the first place: we're saving for a future stream of income. This is the scoreboard that we want to use. For example, you might want $10,000 of monthly income when you walk away from trading your time for dollars.

Net worth can represent if you’re being responsible with your money, but it's a very poor indicator of how much income your assets can generate. 

A better measurement for whether we’re winning or not is to measure CASHFLOW.

For example, would you rather have $1 million of net worth, but it can only generate $40,000 a year of income? 

Or would you rather have $500,000 of net worth but that $500,000 generates $50,000 a year of income? 

We want the greater Cashflow of $50,000, right?

So Net Worth isn't really the best measurement of success; it's how much income or Cashflow your assets produce that matters. 

And part of becoming an investor is knowing what winning looks like.

If you focus on net worth, the asset base that you must have is so crazy large that inevitably you're going to lose the game of finance. This is why savers are losers, as Robert Kiyosaki said. 

If we shift our attention to how assets produce income, we start to play a game we can measure and win.

Let’s say that you have $10,000 per month in expenses. Then $10,000 is your target for monthly income. And if you've built up a portfolio that's capable of generating $2,500 a month in cashflow, then we know we're 25% of the way to our target! If we just continue on the same path, eventually we're going to hit our target and exceed it. 

In short, my friends, Financial Freedom is when your monthly passive Cashflow is greater than your monthly expenses. This is how we want to measure our success.

The Financial Freedom Formula: The Core 4 & the 4 Pillars

How do we focus on assets that will help us reach our target Cashflow as efficiently as possible? 

I’m going to share our proprietary formula of how to focus our dollars, our efforts, our attention on picking the right investments to meet our goals. 

We all know there are thousands of investment options, from cryptocurrency to the latest, greatest stock investing tips, to mutual fund allocation, to real estate and on and on. So we need a way to determine, is this investment or strategy going to work or not?

To be an ideal investment to achieve Financial Freedom in 10 years or less, there are 2 things within that investment that have to increase, and there are 2 things within that investment that have to decrease. 

We call these the Core 4.

Increase:

1. Your level of control. 

2. Your return on investment. You have to get a high rate of return.

Now, if you go out into the marketplace and say, “I want a greater rate of return,” what are you going to be told to expect? We’re taught that if you want a higher return, you have to be willing to accept more risk.

However, in the Core 4, you actually decrease your risk while you increase your rate of return. 

Decrease:

1. Risk

2. Taxes

The greatest destroyer of your wealth is taxes. If you're told to defer your taxes, you're deferring your greatest liability inside of your financial plan. 

Let's think about a mutual fund. Most traditional financial advisors ask about your risk tolerance and then put you in a mutual fund. 

Let’s score a mutual fund out of 4 possible points based on the Core 4. 

1. Control = 0 points. You just get whatever return the market gives with no control over it.

2. Rate of return = 0 points. The average rate of return over 30 years is 2-5%.

3. Risk = 0 points. You take ALL the risk to get a low rate of return.

4. Taxes = 0 points. You're either being taxed on it today, or you're deferring your tax in an IRA. But no tax breaks.

Most people are getting 0 out of 4 with the Core 4 by investing in mutual or index funds. 

Now, let’s consider real estate, where we can get 4 out of 4 with the Core 4.

1. Control = 1 point. If we do real estate right, we actually have a lot of choices and control. 

2. Rate of return = 1 point. If real estate is done right, it can generate an adequate rate of return to become Financially Free in 10 years or less. 

3. Risk = 1 point. We’ll discuss this more, but real estate done correctly actually reduces your risk.

4. Taxes = 1 point. Real estate has many tax advantages built right in. 

The 4 Pillars

Next, let’s look at the 4 Pillars. And this is where most people are surprised. How do you get a higher rate of return and actually take less risk in doing it? I'll compare a mutual fund and real estate again as an example.

For any investment, there are 4 four ways that you can earn a rate of return. We call these the 4 Pillars. Most people only get 1 of the 4 available. 

The 4 Pillars: The 4 Ways You Can Earn a Return

1. Appreciation

2. Cashflow

3. Tax benefits

4. Leverage

Let’s rate a mutual fund. 

1. Appreciation = 1 point. Hopefully. If we buy a mutual fund, we buy a portfolio of stocks. If we hold it long enough, we hope that we can sell it at a higher value than we bought it for. 

2. Cashflow = 0 points. There is no cashflow from mutual funds. If you take money out, you devalue the portfolio. It cannot go up in value and produce income at the same time.

3. Tax benefits = 0 points. No tax benefits. You're either paying taxes now or you're deferring taxes and paying them later.

4. Leverage = 0 points. There’s no ability to use leverage. 

Score: 1 out of 4 for the 4 Pillars. 

Look at a simple example for real estate. Let's say the property that we buy is valued at $100,000. 

1. Appreciation = 1 point. Over time, we know it's going to go up in value. Now, we don't control that. And if this is the only way you're making a rate of return, it may take 30 years to appreciate enough to have enough net worth to get the income that you want. So if appreciation is the only return you get, it's a long-term game. But, it’s NOT your only return… 

2. Cashflow = 1 point. Can the value of your real estate go up and generate a positive income on a monthly basis? Absolutely. That’s the kind of real estate we want.

3. Tax benefits = 1 point. Is it possible that even though I'm making money, I can tell the IRS that I don't owe any taxes because of deductions? Absolutely. 

4. Leverage = 1 point. And is it possible I can come in with just $20,000 and own and control the entire property worth $100,000? Absolutely. This is how it actually reduces our risk!

Score: 4 out of 4 for the 4 Pillars.

But what if our Cashflow goes away for a couple months? Maybe a tenant skips town. 

It happens. We're still earning a return in 3 other ways. We're still increasing the value of our portfolio even though we've lost some money in the short run.

My friends, having multiple sources of return within the same investment is how we increase our overall return and how we decrease our risk. That is the 4 Pillars. We want to make sure our assets are getting us all 4 Pillars.

When I learned about this, I wanted to know ALL the assets that have all 4 Pillars. And here's the thing--there are only 3 assets with all 4 Pillars!

1. Real estate

2. A business that you own and run (not through owning stock in a business)

3. High cash value, overfunded life insurance

We already went through real estate, and the same benefits exist with these life insurance policies, as you'll learn about in the next newsletter. If I buy stock in Amazon, then Jeff Bezos, the owner of Amazon, is getting all 4 pillars, but I'm only getting 1 out of the 4 pillars through appreciation. You need to own and control a business.

So, my friends, these are the 3 assets you should focus your effort and attention on to build your Passive Income Machine.

Velocity

The “V” in the Financial Freedom Formula is for Velocity. We want to focus our money on the Core 4 and the 4 Pillars. But we also want to turn those assets and move them as quickly as possible, to generate Financial Freedom as quickly as possible. 

Let's say you put money into an overfunded, high cash value life insurance policy.

• Once your money is in that policy, it'll start appreciating. 

• It'll generate a stream of income through cashflow, or dividends. 

• It's tax-advantaged. It's actually tax-free. 

• And you can use leverage. You can use your policy as a line of credit and leverage the value of your money to acquire another asset (real estate). The very same dollar is working in multiple assets at the same time!

Your money is now earning 4 separate rates of return! AND with real estate, your dollar starts earning 4 separate rates of return in addition to the returns that it's earning in the policy!

• Appreciation

• Cashflow

• Tax-advantaged

• Leverage

And I want you to consider, what if the dollars that you were putting aside for the future could start earning 8 separate returns with the very same dollar?

Rather than parking your money in a 401(k) where it's only earning appreciation, you can put your money in a vault, earn 4 separate rates of return in the vault, then leverage the value of the vault, buy a piece of real estate, AND earn 4 separate returns in the real estate. 

This is the power of the Financial Freedom Formula. This is the power of the Passive Income Machine. And it’s the greatest way to combat inflation.

Imagine YOUR Possibilities

My friends, what could be possible for YOU if you started to deploy the Financial Freedom Formula? 

Let me share a quick story about Sean and Haley Beckman. They came into our community in 2019. They were stuck financially. Their money was diversified in a traditional financial plan. We showed them everything I've been showing you today, and they took action.

They started their first vault and within 48 days, they had their first cash-flowing property. They built their Passive Income Machine and went from 1 cash-flowing property to 20 property over 36 months. And now, they have multiple options. In fact, Sean walked away from his career in order to pursue a life that he loves.

The Power of FOCUS

Now that you know the Financial Freedom Formula, you’ll want every single dollar to go into the right system. Why would we keep a dollar in a system that we don't have any control over and that doesn’t work? 

People ask me all the time, “What about the company-sponsored match? That's free money.” Well, that “free” money is actually costing you everything you want. It's keeping you from Financial Freedom in 10 years or less. 

And what about diversification? Warren Buffett says diversification is actually just protection against ignorance. It makes very little sense for those who know what they're doing. So if you're willing to become an Empire Builder, an investor, and take control over your future, then you need to FOCUS on what works. 

The objective is to build your Passive Income Machine. The more you FOCUS, the faster your machine goes.
Empire Builder Armando Zamora said Financial Freedom has allowed him to live a life of “curiosity without constraints.” What can it do for you?

So my friends, you now have the methodology and the formula to become an investor. Please join me next time to learn how the vault fits into this system and how it serves as the foundation to everything you're building.

RISE UP, so that you can LIVE FREE.

Ryan D. Lee | CashFlow Tactics