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In the podcast:
01:08 – The horrors under the hood of some businesses. People often come to James with businesses – and lives – that need a lot of work.
03:18 – Why so many entrepreneurs are broke. The actual lives of many people tell a very different story from Instagram.
07:42 – Myths and landmines around building wealth. Discover the truth about money problems, and the kind of approach to wealth building you want to avoid.
11:03 – Ripples and risk-taking. If you take action now, Salena says you may not need to work in five years.
12:25 – When high net worth doesn’t feel like wealth. It looks good on paper – so why don’t you feel rich?
14:57 – Beware of the tendency to compare. If you ignore what other people make, do you really need a $10 million business?
17:33 – Recognizing the struggle. A noisy marketplace can be confusing to those seeking real wealth.
Let James help you fund the life you want with a business you love
You can make a lot of money and not be rich. James and return guest, wealth coach Salena Kulkarni, tackle that counterintuitive idea in this episode.
The horrors under the hood of some businesses
In their previous talk on this podcast, James and Salena discussed the velocity of money. They talked about why sooner is better to begin wealth building. And they shared more effective ways of growing your money than sticking it in the bank.
Now James wants to touch on something he sees a lot as a coach. When he peers under the lid of many business, he’s looking at teams and systems, which are often a mess. He examines sales and marketing, where good communication is frequently lacking. He looks at business model and strategy.
“Pay yourself first.”
Lastly, James checks out personal optimization, which covers health and whether people are simply having a good life. What he finds here is the overwhelming majority are so busy being entrepreneurs that the last thing they do is look after themselves financially. And he remembers what his grandfather taught him, which is, pay yourself first.
James took that to heart and has done a lot in the way of wealth building – buying and selling cars, properties and businesses, or building and selling assets.
He once purchased 200 domains and sold them for a profit. Nine years later, he still sells domains for thousands, most of them dot coms.
And speaking of dot coms, you’ll find Salena on her own website, inkosiwealth.com.
Why so many entrepreneurs are broke
Now why, James asks Salena, are so many entrepreneurs, some pulling in seven figures, as good as broke?
Broke is probably not the word she’d use, says Salena. But she does almost feel that with high income comes a level of responsibility, to convert at least a piece of that into something that will endure beyond when the income stops.
And where many people flounder is, they’re great at producing income, but they equate the income with wealth, whereas you actually need to convert that money in some way for it to become wealth. So if their income were to stop tomorrow, there’d be a problem.
Many times, too, as income grows, people inflate their lifestyle. That isn’t a judgment, says Salena. But there’s often the idea that they’ve earned it, or an expectation from other people to expand the way they live. There’s a world of pain, she says, in keeping up with the Joneses.
So there’s a huge difference between being good at making money, and then being good at converting it into wealth. They are two totally different disciplines.
The lavish lifestyles you’ll see on Instagram are often a far cry from reality, says James. And people can lose track of why they make their money. Is it to be significant, or is it the natural payoff of helping other people be successful? And do they know there are factory workers and electricians who could stop working and live out the rest of their lives with a reserve, even enough to pass on a legacy?
Myths and landmines around wealth-building
If this episode is an awakening for someone listening, what can they do?
The first thing, says Salena, is to recognize if you’ve been confusing income with wealth.
And what she would say as well is, as your income and your wealth grows, there’s often a misconception that money problems disappear. It’s actually like parenting – you think things will get easier as they grow up, but the flavors of the problems just change. She knows this from having worked with a lot of ultra high net worth individuals.
Salena has run an event on the invisible landmines of wealth building, and one of the principles they talked about was the challenge, especially for entrepreneurs, of always moving the goalpost. You set up this goal of where you want to go, and then as you approach it, you undermine your entire wealth with the aspiration for more.
There are people worth hundreds of millions who decided it wasn’t enough. They had to be billionaires, and so they risked what they had and needed for what they didn’t have and didn’t need. That’s where many people blow things up.
When high net worth doesn’t feel like wealth
Salena speaks to a lot of people who are high net worth, but don’t feel rich. And the reason is that all their energy goes into building capital. They think if they have $10 million or $20 million, they’re set. But what they are carrying are what Salena calls big, fat, lazy pandas, that produce no income. That’s not life-altering wealth.
“Are things owning you?”
That’s when you don’t own things, they own you, says James. They drain you. And the problem is that the industry celebrates revenue. Almost without exception, anyone James coaches who makes a million dollars a year wants to make 10 million. He even made an episode on it, suggesting that $10 million isn’t really the goal to have. Wealth isn’t your revenue, or your total asset value. It’s a combination of things.
Salena is big on leverage and passive income investments, your money working for you. And she takes a maximum five-year outlook with her clients. Because, she says, if you can take a small fraction of your wealth and put it into investments, which work much harder than mainstream investing, it’s game over. It could be game over in six months, let alone five years.
But it’s really about taking a good, long look at what you have and asking yourself the question, do I feel wealthy? She and James both know business owners making more than 10 million per annum, and they just can’t get off the hamster wheel. If they stepped off, they’d have nothing to fall back onto.
Beware of the tendency to compare
A critical point, says James, is do not fall into the comparison trap. Some people ask him if he wants a $10 million business. And he actually doesn’t, because he’s seen what it involves for most people.
He doesn’t want the layers of staff and big cogs and expensive challenges and problems. He doesn’t want to work more than 15 hours a week. So, when you’re okay with not playing the comparison game, that can help you a lot.
James recalls Salena saying in episode 878 that Bill Gates had a problem. He couldn’t spend his money fast enough. And James could guarantee someone listening would have thought, I can help him with that.
Wanting money for nothing is a problem, he says. As soon as you can be responsible for your own wealth, that’s when you grow up financially.
“Let’s judge ourselves against ourselves.”
And stop measuring people by their revenue or their Instagram. From today on, let’s judge ourselves against ourselves. That’s what Salena’s Inkosi wealth formula is, it’s a percentage by which you can work out how effective you are at deploying your own money into making more money.
Recognizing the struggle
It’s worth mentioning, says Salena, there are some business owners in a bit of pain. They’ve tried to build wealth outside their business, but haven’t quite got the formula right.
For those people, what she’s reading between the lines is the idea of wealth, of passive income, is more of an insurance policy. And that is smart thinking. Because if you can build an income stream outside of your business that is sustainable, predictable, it might not set the world on fire. But if you know that that’s going to cover your baseline living costs, that is life-altering wealth.
“In a very noisy marketplace of wealth-building, it’s confusing.”
So these business owners are at the opposite end from those who might flaunt a sizable income. They’re genuinely trying to figure out wealth-building. And unfortunately, in a very noisy marketplace, it’s confusing.
That’s where Salena comes into the picture, says James. So if someone’s listened and is inspired, whether they’re the struggling entrepreneur or the high flier who’s come to their senses, where can they get in touch?
Email is easiest, says Salena: [email protected]
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