Money Factory

Everyone should have their money making more money for them.

You should be building a money factory.

When you are young (less than 40-50) most of that 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 your economic energy should move into income generating vehicles — earning income from real estate, financial products and the sale of goods and services.

In your later years the focus becomes ensuring your next generation’s well-being — moving capital into collateralized and protected vehicles that offer yield.

The Wealth Systems Approach

The strategy I use is a multi-engine wealth system.

The premise is simple:

• earn income from multiple sources

• take on risk in order to grow the capital (not just squeeze yield out of it)

  • risk we mitigate with structures, terms, hedges, etc.. depending on the scenario but can never eliminate

• use the different wealth engines to amplify each other

That last point is important.

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 tax professional and CPA, 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 real estate developer and a financier

• Being a data engineer and a data provider

• Being a fitness trainer and a supplement reseller

Artfully aligning the elements of your life allow for incredible leverage.

This leverage creates amplified outcomes, and the ability to achieve more with less.

How To Begin

You start by starting. It is that simple.

You buy a single share of a dividend paying stock.. and suddenly you’ve activated your first passive income engine. If that idea is interesting, read on here:

Creating yield is the start. Then reinvest your dividends + purchase additional shares when you have liquidity events that make it possible. Suddenly you have several positions contributing 4x distributions each.

Once you own a handful of monthly dividend payers, and a dozen traditional quarterly payers.. you can look forward to upward of 10 checks in the mail each month.

Then you keep going…

The other option (pun intended) are options.

Options can be an incredibly rewarding wealth engine to consider building for yourself once you understand the dynamics better - when you write or sell options you can create current income.

A multi-engine wealth system is a sophisticated and effective approach to building and preserving wealth. It's a dynamic strategy that leverages multiple income streams and calculated risk-taking to accelerate capital growth, while employing various risk mitigation techniques to safeguard assets.

The true power of a multi-engine wealth system lies in the synergy between its components. For instance:

• Income from one engine can be used to fuel another: Profits from a business can be reinvested in real estate, or rental income can fund a startup investment.

• Risk mitigation strategies can free up capital for riskier ventures: Knowing you have a safety net through asset protection can make you more comfortable taking calculated risks.

• Diversification creates a feedback loop: As one engine performs well, it can offset potential losses in another, allowing you to stay invested for the long term.

Diversifying income sources creates resilience and stability. It means you're not solely reliant on one source, which can be vulnerable to market fluctuations or unexpected events. Some examples of the different income streams include:

• Active Income: Salaries, consulting fees, or business profits

• Passive Income: Real estate rentals, dividends from stocks, royalties, or income from online businesses

• Portfolio Income: Capital gains from investments

Here are a few potential engines you can layer into your wealth system after you evaluate the risks and your unique advantages:

1. Real Estate Rentals

   Acquiring residential or commercial properties and renting them out provides a steady stream of passive income, potential for appreciation, and tax benefits.

2. Dividend Stocks

   Investing in established companies that consistently pay dividends offers both income and the potential for capital appreciation.

3. Private Lending

   Lending money to individuals or businesses at higher interest rates than traditional banks can generate substantial income, though it also carries more risk.

4. Online Businesses

   Creating and scaling e-commerce stores, digital products (courses, software, etc.), or content platforms (blogs, YouTube channels) can generate income through advertising, subscriptions, or sales.

5. Business Ownership

   Starting or investing in a traditional brick-and-mortar business or a franchise can provide income, equity growth, and the potential for a lucrative exit.

6. Royalties

   Creating intellectual property, such as books, music, or inventions, and licensing them for use can provide ongoing passive income through royalties.

7. Angel Investing

   Investing in early-stage startups can lead to significant returns if the companies succeed, though it's a high-risk, high-reward strategy.

By employing a multi-engine wealth system, you create a robust and adaptable financial ecosystem that's not only capable of generating significant wealth but also protecting and preserving it over time.

Time to start building!

Let me know if I can help.

👋 Thank you for reading Wealth Systems. I started this in November 2023 to share the systems, technology, and mindsets that I encountered on Wall Street.

💡The BIG IDEA is share practical knowledge that can be applied toward the development and refinement of wealth building systems.

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