Associates,

In this issue, we are continuing our discussion of building a financial foundation. Today's message is absolutely crucial. DO NOT MISS IT. Get ready to have your mind expanded with the ideas and mindset of the Rich and Wealthy.

Newsletter Update: Good news, we have reached 81 subscribers! We have never been so close to 100. Let's make a deal: if you learn just one thing from today's report, share it with one friend who needs some financial education. Deal? Ok Deal.

HELPFUL LINKS

Understanding Wealth

What is your concept of wealth?

If you are like me, as a child you were taught:

"Work for money! "Save Money!" "Cash is King!"

This has been the narrative for the past several generations.

And there are certainly shreds of truth in this narrative that are worth holding on to:

Living on less than you make (financial discipline)
Storing resources for a rainy day (thinking ahead)
The value of liquidity (being ready to act on opportunities quickly)

But here is something I want you to understand:

A Big Bag of Money ≠ Wealth.

What?? Isn't a $1,000,000.00 bank account balance the ultimate sign of wealth?

No, it's not.

Why?

For the same reason that:

A Big Bag of Apple Seeds ≠ An Orchard.

This is one of the most paradigm-shifting concepts that I can teach you:

"Money is seed. We can either eat it or plant it." - Hans Johnson

This is the precise reason that we discussed ND1 in Last Week's Newsletter.

Money mastery begins with a ratio-based system.

This effectively categorizes our money for various purposes: giving, planting, and eating.

When you implement the 10-10-10-70 ratio, you are embodying the principle of "being faithful in little." Every cent has a purpose, and with ND1, that purpose is realized.

This is one of those fortunate coincidences where the simplest strategy also happens to be the most effective.

But here is the thing. If we left the conversation of building a financial foundation without discussing assets, your financial house would quickly crumble.

You only have 24 hours in a day, and you can only work so many of those to earn income.

You need leverage.

This comes in several forms, but for the purpose of this discussion, I will discuss the leverage that income-producing assets provide.

But first, what is an asset?

Understanding Assets:

For most of my life, I had no idea what an asset was. I thought it was some cool word that movie stars said in spy flicks. ("We're seizing your assets!").

I had heard of liabilities as well, but even there the concept wasn't 100% clear.

It wasn't till I read Rich Dad, Poor Dad by Robert Kiyosaki that I learned this simple definition:

An asset puts money in your pocket, whether you work or not.
A liability takes money out of your pocket, whether you work or not.

What does this mean? What does it look like?

Kiyosaki splendidly explains these and other concepts with a simple diagram of a financial statement, that looks something like this:

Now that you have seen a financial statement, here is a diagram of an asset:

Here is a rough diagram of a liability:

Hear me on this:

Wealthy people do not work to earn money and lock it away in a savings account.

Wealthy people work to build, buy, or otherwise acquire assets.

This is such a foundational concept. Few ideas (if any) matter more than this one in the discussion of building a solid financial foundation.

Take ownership of this concept and make it your mission to acquire assets, and you will prosper.

But wait, there's more.

Hear ye, hear ye!

A warning!

Not all assets are created equal.

This understanding and the following diagram illustrate what separates the poor from the middle class, and the middle class from the rich.

**The Money Quadrant** **(TWF, Hans Johnson)**

This will change the way you see for the rest of your life. Everything that you can buy with cash or debt falls into one of these 4 quadrants:

C = Consumer
These are things you buy and use up—groceries, gadgets, clothes. This would be the equivalent of eating your seed. The wealthy do not use debt to buy these assets.)
DA = Depreciating Assets
These are the brand-new cars, boats, vacation homes, etc. They look nice and make you feel rich, but the reality is they actually lose value over time. this is one of the worst assets you can use debt to purchase. wealthy people do not do this, they pay cash or wait to have substantial cash flow from assets to be able to afford them.
AA = Appreciating Assets
Appreciating assets may go up in value over time. The value is determined by the market, you won't know if you made money until you sell. Examples: some real estate properties, a house, a growth stock with no dividend, or precious metals, depending on your strategy.
CFA = Cash Flow Assets
The holy grail of wealth-building. These assets can appreciate with time, but the secret sauce of CFAs is that they also rake in income each month. Think cash-flowing rental properties, dividend-paying stocks, or well-established and automated businesses.

This is how the rich get richer, and the poor get poorer, and the middle class continue to be middle class:

Poor people stay in the C quadrant, living hand to mouth, and consuming everything that they have.
Middle-class people also stick around the C quadrant but use their money and debt to acquire assets from the DA quadrant, and sometimes the AA quadrant. They experience their own iteration of living hand to mouth, all in a brand new Cadillac with an average car payment of $737 per month. (Yes, that is the average in the USA as of A4 2024.)
Rich people play a different game: they are heavy in the CFA and AA quadrants, and stay away from the C and DA quadrants.

Wealthy people became rich and get richer because they focus on acquiring cash flow assets. Additionally, they wisely acquire a ratio of appreciating assets.

I repeat:

Wealthy people use their skills, money, and whatever shrewd leverage they can to acquire as many good assets (CFAs and select AAs) as humanly possible.

There is a verse that talks about this, actually:

"One person pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth." Proverbs 13:7

Wealthy people don't try to hide their bad choices with expensive depreciating assets... they delay gratification and work to actually be rich.

If you are like me...

You don't want to try and pretend to be wealthy...

You want to BE wealthy!

So, where do we go from here?

Start Planting Your Orchard

Here’s what I want you to do starting NOW:

1. Invest in your financial education.
Most people spend money on Netflix, Amazon Prime, and Hulu, but do not spend any dime to grow their financial IQ. This is why you are poor. Be an anomaly and invest in your Financial Education. You must feed your mind to cultivate a different money mindset. Start here:

My #1 Wealth Book Recommendation.

2. Follow ND1 Immediately.
If you did not read last week's newsletter, reschedule your next appointment and go read it now. It goes into more depth on ND1 and how to implement it. Here is a link:

How to Master Your Money

3. Download and Use the Cashflow Matrix Template
This will help you learn to follow ND1 and will teach you to be a good financial steward who tracks every dollar and every cent. Learn to be faithful in little. Tutorial Included. Grab it Here: Cash Flow Matrix Template

If you follow these steps, I can guarantee that your financial foundation will be majorly shored up.

More to come.

-Jonathan

P.S.

How did you like today's newsletter? Hit "Reply" and let me know! I'd love to hear from you.

P.P.S.

If you found this information even 1% beneficial to you, would you do me a favor and send it to someone who needs some financial help? Let's get these simple finance concepts into the minds of as many young hustlers as possible!

I have learned a lot about finances, how to buy my first home, mortgages, savings, and growing my assets. I have also learned a lot about the importance of having a group of men by your side whenever you need them!

BECOME AN ASSOCIATE

Riley Vernon - Associate Community Member

Pouring the Footer: Paradigm Shifting Financial Principles