A Lot of Money Advice is Just Wrong
A lot of the advice I hear about money is terrible.
It usually comes from a good place, but if followed, it will add incredible headwinds to your wealth journey. The worst part is all the tailwinds you’d miss, too. Fortune building winds at your back that you will never benefit from.
Here’s a common one:
“When you are young most of your money should be in capital appreciation vehicles — things you think will gain value significantly over the coming decades.
As you move into your prime years transition into income generating vehicles — earning income from real estate, financial products and the sale of goods and services.”
Why is that bad?
Because it doesn’t go far enough!
It doesn’t recognize the incredible power of compound interest and the need to activate as many wealth engines as you can efficiently operate.
The idea is get as many spigots flowing as possible.
Find buckets (places to store your money) that you feel confident will get bigger overtime. I’m betting on bitcoin mainly with the rest of our family office’s money in direct private company investing (VC without the fund middlemen, expenses and noise). Over the last year I’ve been selling off our dividend paying positions in the stock market.
I think our money will grow faster in other places than the stock market, bond market or real estate.
The strategy I use is a multi-engine wealth system. The premise is simple:
build wealth engines → earn income from multiple sources
take on risk in order to grow the engines (not just squeeze yield out of them)
use the different wealth engines to amplify each other
That last point is the whole ballgame. It’s the secret of the elite.
Wealthy individuals typically own a diverse portfolio of assets, including real estate, service companies, shares in conglomerates, and other investments. This diversification allows us to channel risk and creates opportunities for cost amortization, meaning spread out expenses over time and across various entities.
When your wealth system expands you will own or have significant stakes in service companies, such as law firms, consulting firms and management companies. These companies then provide services to other entities within your portfolio at a cost, allowing for expense allocation and potential tax deductions.
Working with your CPA and lawyers, this layering allows for strategic cost allocation, income shifting, and tax optimization. For example, a service company might charge a management fee to a real estate holding, effectively transferring income from one entity to another with potential tax advantages. By amortizing costs across different organization a well built wealth system can reduce taxable income and potentially lower overall tax liability.
Beyond profit and tax optimization you can have one wealth engine (example: a portfolio of dividend paying stocks) benefit another of your wealth engines (use those shares as collateral for a real estate deal).
Along the same axis you can own a baskets of stocks that pay a dividend and then amplify your income by executing Options strategies (writing calls, writing straddles, etc…) in parallel.
There are more examples of this intelligent use of alignment, such as:
Being a web developer and a marketing operations consultant
Being an accountant and a financial advisor
Being a consultant and a public speaker
Being a merchandiser reseller and a YouTuber
Being a software engineer and an online course creator
Being an artist and an art gallery owner
Being a real estate developer and a financier
Being a data engineer and a data provider
Being a fitness trainer and a supplement reseller
Being a blockchain developer and a cryptocurrency consultant
I’m pretty sure I made the last one up, but I have been 8 of those “synergistic job pairings” earlier in my life.
I am currently engaged in 5 of those at the time of this writing.
Artfully aligning the elements of your life allow for incredible leverage. This leverage creates amplified outcomes, and the ability to achieve more with less.
This strategy maximizes your existing skills and knowledge. The different streams work together, often boosting each other. It reduces reliance on a single source, increasing financial security.
Oh, and it typically leads to greater overall income than pursuing each stream independently.
Ready for another wealth making mistake pretending to be good advice?
"Always pay off your debt before investing."
Think carefully about this.
While high-interest debt can certainly hinder your financial progress, this advice is too absolute. If you have access to a 401(k) with employer matching contributions, it's usually wise to contribute enough to get the full match, even if you have some debt. That match is essentially free money.
The real pain comes from delay.
Delaying investing for years while you pay off relatively low-interest debt can mean missing out on compound growth.
Dumb.
In fact, you should use leverage to increase your exposure to your ideas. The literal opposite of this advice above. Obviously you don’t risk everything on some binary coin flip, or an options trade with a week left on the clock…
But you must consider the financial impact of borrowing money for 5% and earning a 7% “supposedly risk free” return from the market for the last 20-years.
Now remember the Japanese Yen Carry trade. The elite have been borrowing money for FREE — sometimes being PAID to take money — and then they went and took that 7% down (after levering it 20x more).
See how small you are playing, friend?
"Rent is just throwing money away; buy a house as soon as possible."
One of my favorites.
Homeownership comes with significant costs beyond the mortgage payment, including property taxes, insurance, maintenance, and potential repairs. It's a long-term commitment that might not be suitable for everyone's lifestyle or financial situation.
If you don’t pay your taxes… the government takes your land and home. That means you are a glorified renter.
Actual renting provides flexibility and can sometimes be more cost-effective, especially in certain housing markets. Like anything in the coast, near water or near.. well anything in America, for instance.
"Save 10% of your income for retirement."
First, that’s not NEARLY enough.
Second → saving is letting fiat inflation kill your purchasing power.. your wealth. No, you MUST save 6-months of operating expenses and then savagely deploy the rest.
A penny saved in the bank account won’t be worth a penny for long.
"Invest in what you know."
Do you have any idea how stupid you are?
That’s the point. It isn’t knowable. You must keep growing. You must expand your circle of competence. That means investing into the periphery, that is where capital appreciation can actually happen.
The only place real money is made is the frontier where wilderness meets civilization.
This one your gut may disagree with, but listen to me. While familiarity with a company or industry might seem like an advantage, it can also lead to bias and overconfidence.
I measure everything five times on the frontier. Back home you eyeball it. That’s dangerous.
It's also important to diversify your investments across different sectors and asset classes, rather than concentrating solely on familiar companies… even though I don’t love diversification, either.
"Follow the 50/30/20 budget rule."
Induces financial cancer.
See the point?
These people mean well but they have to sell advice because they can’t use their own advice to make money.
Picture unrelated.
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