“Investing for capital gains for retirement is like filling up a bottle of water as much as possible and then taking little sips, hoping you die of something else before you succumb to thirst.”
Buck Joffrey, MD Wealth Formula Podcast
Have you ever considered the difference between types of millionaires?
During the real estate boom ten years ago, it seemed like new millionaires were being made every day. With the crash in 2008, these new (net-worth) millionaires were completely wiped out.
So, what happened?
Being a millionaire means you’re financially secure, right?
Wrong.
It all depends on what type of millionaire you are.
Are You a Net-Worth Millionaire or a Cash-Flow Millionaire?
The technical definition of “millionaire” is a person with a net worth greater than $1 million.
Net worth represents a person’s assets, minus their liabilities.
What you consider as an asset or liability can be tricky. For example, before the financial crisis, many “millionaires” were counting their homes and cars (liabilities) as assets.
When the stock market crashed, it became apparent that real estate and cars were not productive assets; as liabilities, they wiped out net-worth millionaires.
How Do Cash-Flow Millionaires Survive Financial Crises?
Cash-flow millionaires receive their income from cash-producing assets.
During the recession, they bought up liabilities (real estate and cars) from net-worth millionaires for dirt cheap prices, and got richer. The market doesn’t affect their wealth because their income doesn’t rely on it.
Net-worth millionaires who clung to their real estate, hoping for appreciation, ultimately lost nearly all of their wealth.
In an article by Jason Hull , he put forth the following argument for not including non-productive real estate, such as your home, in your calculation of net-worth:
“I often hear people describing their net worth in a conversation like this: ‘I have a $200,000 house, and $800,000 in investments, so I have a net worth of a million dollars.’ The problem with this description is that your house cannot independently generate income …
Basically, owning a home free and clear eliminates the need for you to have a housing expense—save, of course, for property taxes, insurance, and home maintenance costs.
If you were to sell your house, then you’d need to use the money that you generated to create a stream of income to pay for your subsequent living arrangements, whether that’s buying another house, renting one, or moving into assisted living.”
(Source)
All this begs the question: What is the true measure of wealth?
Fitting into the “millionaire” box doesn’t always make a person wealthy; it’s the source of a person’s income that determines wealth. The question is: are you ready to find out the difference?
A truly wealthy person is:
- Resistant to recession & economic downturn
- Not reliant on the broader markets
Become A Cash-Flow Millionaire
Learn how to invest your money in independent opportunities that produce real cash and don’t rely on the stock market or whim of our economy.
Taking control and working towards financial freedom is what we’re passionate about. Won’t you join us?