This is why I was Poor

What's going on everyone? Alex here, CEO of Gymlers Prestige Labs and Allan and a number of other portfolio companies that we have. We did 120 plus million. So, what I want to do is show you some of the lessons that we have learned along the way. So, uh volatility and risk. So, I had a conversation with um somebody on my team and it was such a good conversation I wish I had recorded it. And so, this is going to be my attempt u to break this down for you. So this is if you are an entrepreneur and you have a sales team, you can send this to your sales team. If you are kind of still in the selling mode, this will apply to you. And if you're an employee and you're looking at making more money and you want to become wealthy, this will also apply to you, too. All right, so the employing question came to me. They requested like a 15-minute time, which I knew was something important because it doesn't happen very often. And so I was kind of looking forward. I was like, "Hey, what's up, man? " And what was interesting in the first, you know, four to five minutes of the call, you know, the person was just like, I just really want to pick your brain on like the direction of my life. And I was like, well, that's a really big amorphous topic. Like, what problem are we solving? Right? Which is always, if you ever talk to me, it's usually like, what problem are we solving, right? Because then we can start tackling it. Um, and I don't think they knew what the problem that they were solving was because what it was is in reality, they had family members who were saying, "Hey, you shouldn't you shouldn't be in this job. You need something that's more secure. " All right? And so as I dug deeper into this conversation, there were so many nuggets that came out of it that I think I've wrote them all down on a list and I'm going to try and hit as many if I can. All right. And so the first thing was this person in particular is on our sales team. We have a lot of, you know, 20 plus salespeople. And they uh their family said, "You should get out of sales. You need something that is less risky. " All right? And so the first thing I asked was, "Do these people who are giving you this advice make more money than you? " And he said, "No. " And I was like, "Rule number one, do not listen to people poorer than you about advice on money. " So for everyone who has family or friends or parents who make less money than you or make the same amount of money than you at a at an older age, uh, don't listen to them. All right? Listen to people who make far far more money. I don't even think you should listen to millionaires. Listen to billionaires. I think that's great advice from Grant Cardone. Listen to billionaires. So number one. Number two, they had a misunderstanding of volatility and risk. All right, this is a classic poor person thing. All right, so I'm going to break this down for you

with an example. Let's say I own an insurance company, okay? And I know statistically that every nine years there's going to be a super catastrophe. hurricane Katrina, Hurricane Maria, something that's going to destroy everything and I'm going to lose a buttload. Okay. Now, that means that one out of nine years I'm going to get destroyed, but the other eight years I'm probably going to make a lot of money. Right. So, the question is, is my insurance business risky? The answer is no. And I'm going to make the assumptions that I have a sound business model and I have margins and all that stuff. But the reality is that my insurance business is not risky. It is volatile. Those are not the same things. All right? And so if you flatten out the curve over the nine years and look at the growth that's going to occur in my business based on those metrics, I will be far better off than something that might be less volatile, less up and down, but not grow as quickly. All right. Sales is an example of a highly volatile profession that still is low risk. And let me

explain why. Who do you think is the most secure in the company? somebody who generates revenue or someone who costs overhead. Someone who generates revenue. So sales people are by definition people who generate revenue which means they are the lowest risk um in a company. Now for them they may have more volatility from paycheck to paycheck but in general people in sales generate make more money than people who are not in sales. All right? And if you're good at sales, even more so, which this individual is, right? And so with the concept of volatility versus risk, I said, what you should do if you want to decrease the volatility in your life and get the upside benefit of your position is you need to decrease your expenses to your salary. All right? So his salary, and I said, now your salary is what you need to assume you're is all you're going to make. Now, I'm not saying live on your salary. I'm saying you should be saving off of your salary. Now, think about this. Let's say this individual is living on is has a salary of let's say $40,000 a year. All right? Now, if I can get them to live on 25K, right, a year, then that delta can be invested in the S& P 500 and within 20 years they're top 1%. Crazy, I know. And if you split where you live with other people and you really try and live down, you can do that faster, right? But the reality is that this isn't all the person's going to make. But you should plan like it is because then what happens is all of this becomes gravy. And even if you have a bad month, which there's no salesperson in our company that would not make any sales. It does it doesn't even make sense, right? But even if you had a bad month, they still this person would still feel like they're making progress towards their wealth, freedom, and independence goals. All right? But the reality is that they would probably make, you know, another 100K per year on top of that. But now they've set up their lifestyle such that their expense to income ratio is so favorable that they can save so much of their money and they get to their goal faster which is the next point which is wealth and I've said this before and I will say it again is not a number and this is one of the things that I had to tease out in this conversation. Wealth is a ratio. It's a ratio between how much you spend versus how much you make. It's inflow versus outflow. not I need to make X to be free. Now, if you want to have a crazy lifestyle, I have another video about uh about what living like the ultra wealthy is, but the reality is it's a not that fun, not definitely not fulfilling. And I'll tell you what is way more fulfilling, having the freedom and the peace of mind, which is actually what people want, knowing that you're going to be set up for life. And the way to do that is to have a strong income to expense ratio. And so this individual, if he's making 140,000 and he lives on 25, he's making nine times more or whatever the math is there. Whatever six times more, he's making six times more than he's spending. That's a great income to expense ratio. His wealth is going to build very, very quickly, right? And with that, that extra money will more than cover his $25,000 a year, right? Like the 140 that he or sorry, the one uh 115 that he's saving in this example, right? every year in pure cash he's already saving four and a half years of income every year. Now let alone the fact that if he's just gaining at 10% right S& P is nine but like just for math sake let's just say 10 that he's going to be generating himself compounding growth with which means that in two years he'll be at 230 right he would technically be able to retire on his current income. Think about that. Right now, if you want to spend more, then fine. But literally, there's a 24-month way of saving your way to wealth. Right now, would I want to retire in $230,000? No. But if you worked for a decade, by the end of that period of time, he'd have two, you know, 2 point something, right? And at that point, then he could he can totally just retire. And not only that, if he keeps his expense ratio at 25,000, maybe even bumps himself to 40 or $50,000 a year, which for most people is a really comfortable living. you know, as long as you're not doing anything crazy, right? And if you do it that way, life will be better. Now, the next point that uh that came up was he was like, "Okay, well, I've got some debt. Um, so what should I do? " He's like, "So, I've got student loan debt. I've got credit card debt. That's about I can't remember. I think it was 20 grand, right, between both of those. " And I was like, "Okay, your student loans have super super low interest. So, let's not worry about those. Let's worry about your credit card because the credit card has 16% compounding. " And so if you think about that, it's like a negative investment, right? You've got something that's compounding against you versus something that's compounding for you. So the way to guarantee a 16% compounding rate of return is to de is to take away the drags that are at negative 16%. All right? So if you're in this situation, the first thing you do is you pay off your credit card debt. All right? Number one. After that, you're going to have your student loans and then your investments. The reality is the student loans, the interest because the way the government is setting them, you know, have set them up. It's basically just it's the cost of you learning this however long ago. I think it's horribly uh unethical that they do student loans. I think I'm so wildly against student loans in general. In what world would someone ever give an 18-year-old access to $200,000 who has no skills whatsoever to then get something that has no return more than what their current earning potential is? It makes no sense. And if you if you can't even bankrupt your way out of it, it is purely a scheme by banks to make more money purely. It makes you a slave to the bank for the rest of your life. But there's no interest on it. And so I'm not going to think about that for right now. All right. So credit card loans first and then you stack into investments. Now, me personally, I just don't like having any debt. And so if you want to, it's a personal choice. It doesn't even make mathematical sense. It makes emotional sense. Um you can pay off the student loans and then everything else gets plowed into the S& P 500. Reason I say that is because Warren Buffett the advice that he's given the people who are managing his will is that he just wants everything put in the S& P 500. Smartest investor of all time. That's what he's doing. So I think it is worthwhile advice and very easy to follow. All right, next one. And you do this every month. It's called dollar cost averaging. So that even when it goes down and goes up, you're going to participate at all times. So when it's overpriced, you're still buying. And when it's underpriced, you're still buying. Don't try and time it. I have another video about trying to time the market. You're going to lose. So just dollar cost average in and then get rid of any of the anxiety around getting a good deal. So he's like, "Okay, I want to make uh you know, I want to know how I can grow. " All

right, so this is for anyone who's in any company. The closer you can tie yourself to an acquisition channel, the more valuable are to the company because you're driving revenue, right? And so what I explained to him was I said, "Listen, you've gone through all my trainings. You know you know the different ways of getting clients. pick a channel that we're not currently using and in your off time try and figure that channel out and we pay more for leads or for sales that come that don't that someone goes and brings out brings in on their own compared to stuff that comes in from our marketing right I was like so you're going to get disproportionately paid for those off the bat and then as soon as you figure out that system I said come to me and say hey Alex I figured out the system I figured out this process is getting us more clients I want to build a team and I think that I can show five other guys how to do this and generate revenue and I just would like a piece of all of their um of their sales and I would say absolutely and so if he does this he would be able to two or threeex his income as a result of that right and so that is a way of figuring out how to provide more value now the next thing was I think this came up from the family too was going off on your own right now obviously as the owner of the business you would think that my incentive is to keep everyone And over time, my my incentive has shifted. My incentive is I want to be the best human I possibly can be. And if that means that this it's time for that person to go and spread their wings, then that's fine. And I encourage them and I wish them the absolute best. And I mean that genuinely because I never want to be the person who holds someone back from accomplishing their dreams. That being said, understanding risk is important. So many many many people many many of my salespeople make more than many entrepreneurs do. In fact, I probably look up the stats. I think the average small business owner makes like $78,000 a year. All right. So if my salespeople make 150 or $200,000 a year and if he does all this thing, he could make five times what the average small business owner makes. Five times. And that's income, right? That's what's important. And so sometimes you can see the ure and this is a classic employee mistake is you look at all the revenue and you say, "Oh, that must be the owners. That must be Alex's. " Um, and every business owner who's watching this is laughing to themselves because they know that is so far from the truth. It is is hilarious. Um, but people still make that logical fallacy. And so for perspective, if you are a $200,000 a year salesperson, you own in my mind a million- dollar business. Because if you're running a 20% net margin after everything that and the thing is it's not just profit in the business, but it's net free cash flow. It's the amount of money that you as an owner can take out after reinvesting in the business, right? And so if you have a you if you're a salesperson and you're making 200,000 a year, it's the same as you owning a million dollar business. And so many times and in this instance, depending on your skill set, you may not want to deal with HR and finance and and figuring out fulfillment and generating leads on your own and all the other aspects that come with owning a business, legal and all the other crap, right? And so I'm not saying don't be an entrepreneur. Obviously I'm an entrepreneur. But I'm saying understand adequately understand the risk. And I think that if I adequately understand the risk, and I'm being very honest with everyone here, I don't know if I would have become an entrepreneur. I really don't know because I'm pretty riskaverse, believe it or not. And I think I've told you I had a really good paying job before I uh before I quit. And it was because I was so miserable that I decided to do something else. But I did not have the terrible entrepreneur story of like I was always bad at school and I knew I had to do my own like I didn't have that at all. I was good at school. I got a good job and I just I was miserable so I did something else. Anyways, next point. Ah, last one. Okay, so I'll give you another saying to work off of. Track

don't slack. All right, easy to remember. And so one of the easiest things that you can do to increase your net worth is start by tracking it. All right, this is one of the easiest things. So right now, every week I get a I get an email that has every single one of my assets, bank accounts, all of my portfolios, and it has one number at the bottom. And so I know every week how I'm doing and whether I'm going up and up. Now, you might be like, well, man, isn't the market volatile? Sure, but I also have other investments, too, etc. But the point is, especially the earlier on you are, you can decrease that cycle. Now, you could do that every quarter. I'm just I tend to be obsessive about it and I like looking at it because I like making progress. If right now you are the sole provider in your household or you're a solo business owner or an entrepreneur or even, you know, you have a seven or eight figure business, right? But you haven't like your actual net worth hasn't surpassed, you know, a million, five million. Tracking every day the cumulative amount of your bank accounts is one of the single greatest things that I ever did. Ever like ever, ever. And so it became this habit that first thing in the morning I would open up my my Chase app. I would and the nice thing is if you have one of the big commercial banks, you can they give you dashboards. You can pull all your accounts in together. So if you have, you know, two business accounts and then you have a savings and a checking personal and then you maybe have like a portfolio, all of that stuff you can have in one place. So it's actually pretty cool. But anyways, I had an Excel sheet that had all my assets on them, all my bank accounts, all my investments and everything. And I would take five minutes in the morning and I would update it and every single and I did it daily. So I saw every single day and I could just scroll over time and watch my bottom number continue to go up. And here's what's magical about this is that when you look at your bank accounts every day, you start to get a pulse on the flow of money. You start to get a feeling for, oh yeah, Tuesdays is when this goes out. Oh yeah, on the first of the week of the month, this is when this goes out. But then what happens is all of a sudden you're like, hey, I went down by 200 bucks. Let me examine. Let me investigate. And you look in there and you're like, "Holy crap, I've been using the software for however long. Cancel. " Right? And so as soon as you start doing this, you'll start decreasing. You'll plug the holes. you'll decrease the uh the outflows of money in your life because you're tracking and not slacking. So, as long as you're not a slacker, become a tracker. Track your net worth. All right? And so, for this individual, the action plan that I made for him so that he could create the wealth that he wanted was this kind of recap for you. All right? Number one, track don't slack. You have to track your net worth if you wanted to improve. So, how can you even track like how can you prove something if you don't even know what it is? Track don't slack. Now, your debt should also be on there. So, if he's paying down debt, his net worth will go up because right now he's got $20,000 in debt. So, his net worth is negative 20,000 compared to his cash, right? So, boom, tracked on Slack. Next, pay off high interest credit cards or high interest loan debt first. Next, dollar cost average all of the money that you make in excess of your expenses into the S& P. Mind you, this is not investment advice. I'll probably post a legal disclaimer under the video. Do whatever the hell you want. Investment has risks. There's no guaranteed returns. Life is risky. You know, no one comes out alive. Okay, back to the main point. So, dollar cost average under the S& P and actively decrease your expenses as much as humanly possible. If you have a salary with variable compensation on top of it, try and save off of living off your salary. And if that sounds crazy, cool. Don't be ordinary. Be extraordinary. Do things different because the average person literally retires with nothing. Don't be like that. You can be different. And the thing is all of these things that we aspire for, which I made this other video about, right? All these things we aspire for, private jets, exotic cars, pen houses, uh, expensive clothing, fancy restaurants, I can tell you firsthand, they're not what they're cracked up to be. I like BJs and Chili's more than I like Ruth Chris. I really like the cheap my cheap jorts more than any of the fancy pants that are fancy pants. Um, I can tell you that when I lived in a $1,200 a month apartment um in in Albuquerque, New Mexico, which is a really nice place, um, I was happy as could be. It my happiness has in no way changed having the place that I have now. I regret the exotic car that I have and private jets are wildly expensive and you can get anywhere you want on Spirit for way less. All right, so decrease your expenses. All right, and um, in terms of increasing the income, tie yourself to an acquisition channel. Try and find a new way of acquiring customers that the business that you're currently in is not doing. Do that and then build a team underneath of you that can do the thing that you just learned how to do. All right? Because then you will be closer to what I call a rain maker. And rain makers are always paid the most in every business. And understand that when you do that, if you even getting to $200,000 a year, you own a million- dollar business. It's the same thing, right? Except you have way less risk. Uh because if you want a million- dollar business, you can work your ass off two months in a row and become poorer. Whereas if you work your ass off for two months in a row in a business, you're going to get richer. All right? And that's the difference between being an entrepreneur and employee is that a lot of people don't adequately um monitor the risk. All right? And finally, understand the difference between volatility and risk overall. Something that goes up and down a lot is not necessarily risky. It's just volatile. And if you can understand that words matter and how you describe things matter and understanding the definition of words, you can put better concepts and frameworks around your thought process and make better quality decisions. So anyways, I hope you found this valuable. Um, this was a great conversation. I wish I had recorded it. Uh, but hopefully you got the nuggets uh from that you can apply to your own life and business. Um, keep being awesome. Leave a comment and um, I'll catch you guys in the next vid. Bye.