“Success is not final, failure is not fatal: it is the courage to continue that counts.” – Winston Churchill
Most people do transactional business and don’t develop wealth.
There’s a huge difference between those two ideals.
When I worked in the medical field, I saw a lot of high-income physicians and professionals.
Some of these people have a million-dollar income, but they don’t build long term wealth.
Instead, they buy fancy cars and fancy homes and go on big trips.
There was a pressure for doctors to live above their means.
Today, we’re going to talk about that.
We’re also going to get into other habits that will impede you from building wealth.
Let’s get into it!
1. Don’t Spend, Invest!
I watched a really great documentary recently.
It’s called Broke, which is a 30 for 30 ESPN documentary.
It claims that 85% NBA and NFL players go broke within three to five years of retiring.
From millions of dollars to broke.
That’s crazy!
They’re spending money on a lot of luxury items.
They’re getting into bad investments.
They’re surrounded by people who take advantage of them.
The crux of the issue is that they think the money will never stop coming.
Warren Buffett says unless you learn how to make money while you sleep, you’ll work until you die.
I don’t want to work till I die!
If you don’t either, you need to start investing in assets that will help build your wealthy future.
Gary Keller has a great book The Millionaire Real Estate Investor.
He says he used to meet with a mentor once a month and talk about how their net worths had changed.
They did this because your net worth number is very different from your income number.
You can make a lot of money and not generate wealth.
I was making over $250,000 a year in my old job, but I didn’t generate wealth until I started getting into larger deals.
And not even just real estate!
Real estate is not just flipping houses.
Even in single family properties, people can get wealthy in 10 to 20 years.
But that’s a long time to wait.
You’re also counting on appreciation.
There’s not a lot of cash flow when compared to other deals types with cash flow.
If you want to grow your wealth, you need to find the deal that works best for your future.
2. Passive Investing and Building Equity
In the second multifamily deal we did, we raised $8 million for 130 units in Atlanta
I raised capital as a part of the team.
Once we closed, I received an $89,000 check.
After that, I made around $400,000 on the back end.
I made money as the deal did.
Not only was I a general partner; I was also a passive investor.
If you’re putting money into a deal, a scaling effect happens.
You’re building equity.
There are many benefits to building equity.
If you’re building equity, you don’t have to pay taxes on every part of your income.
When you do something like flipping houses—sure, there are tax benefits.
But it’s also another job.
If you own rental houses, it’s another job.
When I was in sales, I had to keep selling more and more in order to increase my income.
The problem with doing that kind of transaction is that the transaction sizes typically go down.
In my case, the cost of medical devices would fluctuate over time.
So, in order to make up for that, I’d need more sales.
When you own equity, you’re hedging inflation.
We all know things cost more these days.
According to the current CPI, Goods and services are generally about 25% more than they did in 2020.2
However, actual costs are up about 50-100%.
If you’re not hedging inflation, you’re getting in the way of your own wealth.
3. Don’t Forget Taxes
The problem with transactions is that you pay a tax every single time you sell.
If I make a million dollars on a flip in Los Angeles, you could be paying up to 50% of that in taxes.
Even if you make millions of dollars, that’s still a lot!
You’re giving a lot of your wealth back.
In equity, you have what’s called a carried interest.
A carried interest is something you can tag your tax on over time.
Typically, investments have tax benefits.
At the very least, you can defer them further and further out.
When in doubt, think of Gary Keller’s advice.
Sit down with someone and ask how each other’s net worth is growing.
My net worth grew about 25x in just four years.
I focus on it all the time.
I also focus on larger deals and transactions.
Now, I did start more on the active side, but have been transitioning to passive investing.
Even as a passive investor, if you have money, you should figure out how to invest it.
Look at your net worth.
Remember that your net worth is how many assets you own or control minus any sort of debts you have on them.
Keep track of that number.
Look at investments that excite you.
Be wary of any possible risks.
When you do that, you will be leagues ahead of most people, who often spend their wealth away.
Now I want to hear from you!
How are you taking action to protect your wealth?
Let us know in the comments.
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
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Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.
Works Cited
1. Carlson, Kyle, Joshua Kim, Annamaria Lusardi, and Colin F. Camerer. “Bankruptcy Rates among NFL Players with Short-Lived Income Spikes.” NBER, April 13, 2015. https://www.nber.org/papers/w21085.
2. “Current US Inflation Rates: 2000-2025.” US Inflation Calculator, May 13, 2025. https://www.usinflationcalculator.com/inflation/current-inflation-rates/.
