How to Build “Long Term” Wealth Using Your “Right Now” Income

How do you build long term wealth?

This is where we get to talk about the long game: how to build wealth. I will go ahead and define “wealth” as the absence of any “need” – specifically with regard to money. When you begin building wealth, the following things happen: 

1) you no longer work because you need to, you want to 

If compensation wasn’t necessary, what would you spend your time doing? For me, the answer is simple: exactly what I am doing right now. Of course, it wasn’t always this way — I had to spend plenty of time doing what I didn’t want to do to earn the right to do what I wanted to do…

I think that this phrase is cute: 

“Do what you love and you’ll never work another day in your life” 

…but ultimately untrue. Why do I think that? Because everyone I know who has been successful has fallen in love with the game — but that doesn’t mean they enjoyed every single moment of it! You can love basketball, but not “enjoy” the workouts that condition you to play the game well. You can love serving clients in your chosen line of work, but not enjoy the betrayal of someone you helped succeed asking for a refund. There are going to be moments where, fortunately, WORK IS REQUIRED. 

I say “fortunately” because the most immature people I know are those to whom everything has been handed to… work refines and produces great qualities in a person. That doesn’t mean you have to always enjoy it! 

2) if you do nothing at all, you get more rich

To me, being “rich” means you have a lot of money. Being “wealthy” means you get more and more money just by doing nothing. One of the talks I give is titled “Three Types of Money,” and they are as follows: income, assets, and time. Income is what you earn. Assets are what you purchase with the income that you earn… and those assets pay you money that you don’t earn – so that you can capitalize on the greatest prize we all have, our time. 

If the next 12 months go by and I do nothing — I have a few things that are going to pay me money: the businesses that I own, the houses and rental properties that I own, and my portfolio of small business investments. Notice the common thread here is “own.” To become wealthy, you must transition from a “worker” mentality to an “ownership” mentality. That’s what we’re going to talk about in this chapter. 

YOUR PAST CANNOT HURT YOU

The first lie to dismantle is that wealthy people were born that way or “given something” the rest of us weren’t given. Actually, believe it or not, most wealthy people are self-made (meaning, they started from zero). It’s going to be impossible for you to build wealth if you believe it’s about luck or privilege. 

You can build a surplus. You can have an abundance of time, and (more importantly) money. You can create optionality and freedom not only for yourself, but the people you are connected to. It’s a matter of what you do and how you make decisions. Most people will never be wealthy because they make decisions the wrong way — they don’t learn the proper tools necessary to build surplus. The point of this article is to help you avoid that fate. To grasp the power of the following strategies, you just have to agree that money doesn’t care who you are or where you’ve come from. Remove the emotion from it, and let’s put on our strategy cap for a second. 

THE CYCLE OF WEALTH

This roadmap to how to build wealth will be invaluable along your journey. I’m going to give you all of the steps in order now, and then we will tackle them individually. 

1. Control cash flow
2. Create an end goal for every dollar
3. Practice delayed gratification 
4. Utilize a proven plan/system

Let’s tackle them one by one, then we’ll get into one of my favorite topics in the area of wealth: assets and liabilities (and how to use BOTH to create a fortune!). 

CONTROLLING CASH FLOW

This is the basis of all wealth. You must at some point create some money to turn that money into more money. I don’t believe it always “takes money to make money,” but I do believe it takes money to build wealth! That’s simply because, without a little, you can’t multiply it into a lot. Zero times 100,000 = zero. The entire entrepreneurship blog is about creating cash flow, so we don’t need to spend much time on it. The moral of the story here is this: always tend to your cash flow. You want that well deep and ideally you want multiple streams if you can swing it. 

HINT: focus on one until it’s stable, then build another.

CREATE AN END GOAL FOR EVERY DOLLAR!

I’ve seen this about 18 million times: 

• Person gets good at “making it” 
• Person develops hubris thinking they will always be good at “making it”
• Person wastes 90% of the money they make for a very long time 
• One day person gets sick or the market irreversibly shifts
• Person would give anything to go back and practice wisdom! 

I’ll never forget a coaching call I had with one of my mentors. There is a 90% chance you would know who this person is because almost every business owner in the world knows who this is. They are very famous and we invested a LOT of money for his private consulting. This man is responsible for BILLIONS of dollars in sales. 

He became famous in the 70s and 80s and at this point is a true legend. I’m giving you the backstory so you understand why I was so shocked by one of our first phone calls. We were talking about our real estate business, how we are moving the cash flows from these extremely high yield, high profit businesses, into lower yield, safe capital storage businesses. 

He was very complimentary, which was nice to hear… but then he began to talk about his one regret in business. In the 80s and 90s he was pulling in millions per day from his portfolio of businesses, and his main regret is that he did not invest that money into long term assets. The reason I’ll never forget it is because I was speechless! Now, he is in no way, shape, or form “hurting” for business, but you could tell that he had regret about his lack of wisdom around how he used the money he had made. 

Here are some facts and figures for you: 

• I will make more money next year than I did this year
• I will make more money the year after next than I will next year
• I will make more money next decade than I did this decade
• I will make more money the decade after next than I will next decade
• ALL GUARANTEED

How can I say that this is guaranteed? Because I have created an end goal and assigned it to each dollar that I make, and that end goal is simply this: GROW. I’ll talk more about this in a minute… but for now what we need to do is the following: 

1) Create cash 

2) Lock in your lifestyle/living expenses 

3) Create surplus and invest that surplus into assets that go UP in value 

Chris does this better than anyone I know. At the time of this writing, he owns two 8-figure businesses and one 7-figure business with me… we both get paid very well (in the millions, each, personally), and his living expenses are locked at $15,000 per month. You might think that’s insane! Actually, it kind of is insane, but the point is profound: his surplus (which is a LOT), is compounding in safe asset vehicles that get more valuable each year. 

PRACTICE DELAYED GRATIFICATION 

Here’s the thing I’ve drilled into not only my team’s brains, but also our clients: pay now or pay later… either now, or later (your choice), a payment will be extracted. Personally, I’d rather get it out of the way. Now, “getting it out of the way” in this sense might be “settling” for two cars instead of three. Don’t get your standards from my lifestyle, get your standards from your own goals and your current level of living. 

You should already have 3-6 months of cash reserves for your business, as discussed earlier in the book, but now we want to build personal reserves. We want to create “cash equivalents” by using our surplus to pay down notes and debts that aren’t serving us. We want to be wise now that we have enough to thrive a little bit. The strong temptation is going to be to go out, dump all the money in things that are fun, and forget that life is long (not short). 

What I mean by that last sentence is that you need to prepare for the “long haul.” Too many people stay in this zone of “you only live once” and they stay stuck in the perpetual college dorm room. Life is long and you don’t want to be working the whole time because you have to (see the first bullet point for the definition of wealth). I was talking to a buddy at the gym last week, it was a Saturday morning and we were training legs. 

I told him I saw a boat at the lake that was just gorgeous. I had a picture of it and showed it to him. He asked me why I haven’t bought a boat yet. Oddly enough, I had to think about it. This particular boat was a 40 foot yacht and it was just stunning. I could buy six or seven of them in cash right now. I would never do that, because leverage is too convenient, but the point is: I have the money. So why haven’t I? Although it took me a few seconds to remember, remember I did! My world right now is defined by being wise with my surplus. 

The lifestyle my family enjoys is great. We don’t need anything. Could we spend more? Absolutely! But we don’t need it, and frankly I am content at the moment with our level of living — so I’m practicing delayed gratification, investing in cash producing real estate, and paying off my house (it’s a HELOC so I still retain access to the cash via a line of credit. We are already set for life, but still being wise. This is where you need to get to… and surprise! Believe it or not, it’s easier when you aren’t swimming around in surplus. 

What I mean by this is… it is easier to build an environment than it is to build discipline. I don’t want to have more than $20K cash on hand ever! I don't like having surplus. 

If I don't want to spend $150K on a car, I have two ways of doing that. I can either exert my will against the want of the car and fight with myself or I can maneuver my environment where I don’t have $150K to spend. 

It is easier to be wise when I’m not swimming around in surplus, thinking I have so much money I have to get rid of. I distribute my money into different places, so that I can’t think about… what am I going to spend $2 million on today?

You might be reading this thinking, “well yea if I made that much money, I’d practice delayed gratification too!” But to be completely transparent, it gets more difficult to practice wisdom the further up the wealth ladder you go. Practice the principles in this article and blog and you’ll be well on your way, and likely you will even surpass me! That’s actually the greatest compliment to the content here that I could hope for… that one day I will get your message saying you earn more than I do and have built more influence than I have from implementing this material! 

And finally…

UTILIZE A PROVEN PLAN

What plan? Let’s build it out… the caveat here is that I am not a financial adviser as I have actual money and don’t get paid teaching people what to do with their money — I get paid implementing with my own money. So take this with a grain of salt, knowing that I’m not “licensed” to teach this — I am just very good at implementing these things in my own life/business. 

ASSETS VS LIABILITIES

You either have assets or liabilities. This applies to you personally, as well as professionally in your business. Assets give, and liabilities take. Understanding this principle and applying it to the decisions you make will help you in making the right decisions. The key to planning is understanding how the pieces all fit together and building brick by brick as you go. Earlier, we talked about three kinds of wealth: income, assets and time. If we dive deeper into ‘income,’ we find two variables to it: 

1. Cash
2. Cash equivalents

A cash equivalent is just what it sounds like: technically “not” cash, but just like cash. Think about credit, lines of credit, and credit cards. If we dive into assets, we find two variables to it: 

1. Value
2. Equity 

What most people don’t truly understand is that inside of your assets there is a “cash equivalent” component, if you set it up right. Now we have hours of training around this topic so I am not going to fully break it down here — but if you want to dive deeper, specifically into the topics of WEALTH, check out my book “The Consultant Next Door.” For the purposes of this quick breakdown, I want to explain exactly how our clients are able to turn “right now” income into “long term” income by swapping cash for assets.

In the book, I talk about your cash on hand targets and proper goals to set for the “reserves” in your business… but, what happens when you surpass those targets? For instance, if I only really need $200,000 in cash on hand, because that’s what will hold me over in the event of a correction or a famine — and I find myself with $320,000 in the cash accounts… what do you do? 

You swap the currency! We also do this personally — myself, Chris, people on our team who earn great money — you can take any surplus and swap it into a new currency called an “asset” and still keep access to a portion of that cash via cash equivalents. 

Let’s say personally your cash reserves target is $20,000. Every time you get cash above the line, you swap it into an asset (we like single family real estate for many reasons which I won’t get into here). As soon as your account hits $45,000 or $60,000 or whatever, you invest the “surplus” into an asset… and it works like this: 

• $50,000 in accounts with a $20,000 minimum
• $30,000 into a down-payment for a piece of real estate
• Property value = $150,000 and pays you $1500/month 
• That $30,000 can be pulled back out at a later date (via leverage or sale)
• The money grows to offset inflation, produces income, and gains in value 

We have a real estate company that can help source, fix, rent, and manage your real estate portfolio as you grow. Reach out to us and we can chat about that — but for now, I am just giving you the process of how to go from a “producer” to an “owner” over time. 

The beauty of this model is over time, eventually, your “need” to work goes away. There are two factors to turning your “right now” income into “long term” wealth: 

1. YIELD
2. TIME

You need time, it’s just part of the equation. If you pair a good yield, with a substantial amount of time, you will create LONG TERM wealth in your life.

Over time, as you can see from this graph, your need to “work to make money” is gone. You will begin earning from what you own instead of what you do.

In order to GET THERE, you need to do the things now that earn you money and then, practice wisdom with that money.

KINDS & CRITERIA OF ASSET BUILDING

There are levels of asset building. Earlier, I mostly talked about physical, tangible, cash-producing assets like real estate – but there are also assets in your business that you can (and should) build. In fact, asset building STARTS with your business, which is technically an “asset” for your active income. 

Active assets generate active income. Passive assets generate passive income.

For a consulting business, you really only need three assets to make it soar: 

• Marketing/Sales Systems to consistently feed you with new prospects and new business (i.e. active income) 
• People to support the business and deliver on your promises 
• Processes and procedures to make the work your people do productive, consistent, and leveraged 

Most of our clients start needing people once they’re past the $20-30k revenue per month mark. The reason is because if you want to keep growing, you either need to invest in a team or you’re going to be working 80 hours a week. Burnout is a serious problem that can easily be avoided using the right assets.

This brings up an interesting point: I don’t believe in the “grind-grind-grind” until you die or “sell” approach. It’s silly. If you love what you’re doing and you WANT to work 80 hour weeks, that is fine. However, it should be an “option” not a “requirement.” 

Building assets in your business gives you the opportunity to buy your time back. If you have assets that are going out and doing part of the work for you, you can spend that time investing into other areas that will produce growth.

n the early days of Traffic and Funnels, we had to use ALL of our energy producing. Just to get to $100,000 in a month required a LOT of work! Today, we have assets (people, processes, and tangible assets) that allow us – at times – to earn $100,000 per day without having to work that hard. 

ACTIVE INCOME VS PASSIVE INCOME

There are two kinds of income that you can collect: active (you worked for it) and passive (you did NOT work for it). I hear several prominent business leaders say that “passive income isn’t real” and for them, that might be true because they don’t know how to build it — but the truth is passive income ABSOLUTELY exists and you CAN build a substantial amount of it if you are wise. Most entrepreneurs never get to passive income, they stay stuck in the “active cycle.” They have no plan to take their cash and turn it into passive income. 

In fact, the reason this is top of mind for me, is I just had a conversation with someone (a friend who runs a great company) who has several MILLION dollars in his bank account. He lives in California, so obviously his cost of living is higher, but the reason he has millions in the bank is not because of his cost of living — it’s because he doesn’t know what to do with it!

He has to work 70+ hours per week inside his business, so while he’s making good money, his “RETURN ON EFFORT” is not very good. He is in bondage, required to keep grinding if he wants to maintain his lifestyle. If he wanted to travel the world for 30 days or go to a third world country and build an orphanage his income and business would stop.  

Why do people get stuck in this cycle? Simply because they either lack the knowledge or they lack the mentors to GIVE them the knowledge — you cannot build a plan by yourself if you lack the information or experience to do so. For our businesses, we spent several years with several millions in the bank, but that was before we learned how to build assets. Now we put millions into assets and those assets pay us millions, a portion of which we put back into more assets… and the cycle now is passive, not active!

Later on I’m going to post a blog to talk about principles for success like goal setting, optimization, normalization, and mindset. One of the topics I’ll cover in a minute is “floors and ceilings,” but for the purposes of this chapter I will leave you with the following: 

Don’t Go Backwards.

The whole point, when it comes to long term assets and wealth building, is to “lock in” your current level of income for life. Then, as soon as you hit a new level of income, lock that level in. So forth, and so on, until you reach a point where growth is no longer attractive to you. 

• Keep enough in your accounts for a rainy day or emergency 
• Invest the surplus into cash-producing assets that grow in value 
• Rinse, repeat, and increase as you go

This is the only formula you truly need for building BIG TIME wealth over the long haul. Be very careful to not just “increase your lifestyle” every time you hit a new level. Most people, after leveling up, level up their lifestyle first. The difference is, for Chris and I, our first step is LOCKING IN that level with our assets and passive income. Only then will we increase our lifestyle (because done in this order, the assets pay for the increase, NOT your active income!). 

Our favorite passive assets at the moment are real estate (single family, for a plethora of reasons that you can inquire about, but we don’t have time in this book), whole life policies (again, for many reasons, but none are appropriate to dive into here), and funds (certain REITs and SEC funds, which we can advise you in when it is appropriate). 

Our favorite active assets to install into your businesses are growth/acquisition systems (such as marketing webinars, video-sales letters, and email campaigns), PEOPLE (huge investment but huge rewards), and back end processes (such as fulfillment systems and operating procedures). These active assets are things we can consult and build out with you as a client of Traffic and Funnels. When you are ready, let us know! 

To your success,

-Taylor Welch