Earner Vs. Owner: 3 Foundations of a Long-Term Wealth System

Trading Time for Money: A Very Bad Trade

Quick question – what is the value of your time?

Is it increasing in value? Or decreasing in value?

If you answered, “increasing,” then you’re correct. In simple economic terms, the laws of supply and demand dictate that the less of something you have, the more valuable that thing becomes.

Every second that passes is one less second that you have. You have a constantly decreasing supply of time. Which means that your time is always going up in value. We call this a “deflationary asset.”

On the flipside, what is the value of the fiat currency you’re trading your time for?

Money is an “inflationary asset.” It is consistently losing value.

To put that in practical terms that most of you will get, when you put your money in a long-term savings account at a bank with the intent of letting it simply sit and grow, you are trading a deflationary asset (time) for an inflationary asset” (money). You’re trading one of the only things in your possession that consistently appreciates in value… for something that will be less valuable every year that you hold onto it.

If you own a business, and that business makes you money (a lot or a little – doesn’t really matter)… and you don’t have a wealth “system” that allows you to turn that money into long-term opportunities for PASSIVE income, this article is going to be immeasurably valuable.

Let’s talk the basics of a 3-part wealth system.

Pumps – Getting Money Into the System

Your financial life can be segmented into 3 distinct parts – Pumps, Buckets, and Moats. We’re going to walk you through each part.

A “Pump” is an asset that produces a stream of income for you. These feed your entire financial framework. It’s impossible to direct the flow of money, if that flow doesn’t exist. Ideally you will have multiple Pumps.

This doesn’t necessarily need to be a business… although, if you’re reading this, chances are pretty good that it’s at least one of your Pumps.

(IMPORTANT: A job is NOT a Pump. It’s an exchange of time for money, not an asset… and we’ve already pointed out how that is a poor foundation for building wealth.)

A good Pump does 3 things:

1. Create VALUE ( a lot of people stop creating at this stage)

2. Convert VALUE into REVENUE

3. Generate surplus (something to be protected and guarded)

Any surplus created should be taken and sown back into more Pumps (like investing in your business growth for example), not merely stockpiled and hoarded.

Buckets – Storing the Goods

Let’s suppose you have 2-3 Pumps working for you to get money flowing to you. What you do with that money next is of critical importance if you want to jump up the levels of wealth. This is where “Buckets” come in.

A Bucket is where you will stash and manage the revenue being generated by your Pumps.

And, no… we are not talking about putting it in any old bank and just sitting on it. We want a “mechanism” that is capable of taking whatever you put into it and multiplying it.

A bucket should:

1. Stores your capital (Real Estate, Marketable Securities, Stocks, Real Estate Backed Fund – shades of risk exposure)
2. Pays a yield
3. Increases in value over time

A good bucket will hit 2 of the 3, but a GREAT bucket will check off all 3.

A prime example of this would be a rental income property. You can park your fiat in the property, it gives you back a monthly return, and the property will increase in value over time.

Bottom line: An excellent Bucket allows you to build upon and protect what you have over TIME, continuing to grow your net worth passively.

Moats – Mitigating Risk

Now we’ve reached the high level of this framework, the “Moats.” Essentially these are designed to keep your risk exposure locked down tight to maintain that competitive edge.

A Moat is a stable type of asset that isn’t going ANYWHERE.

It allows protection from fiat inflation while also providing the ultimate form of liquidity for you.

A Moat should:

1. Give you a short term advantage that turns into a long-term defensible position
2. Protect you from the downside of inflation

A few prime examples of this would be a whole life cash value insurance policy, owning a house that’s been paid in full, and having a portion of your portfolio be cash/liquid.

Bottom line: Your Moats allow for zero risk exposure and protection against fiat inflation while staying liquid.

Spend, Store, and Multiply

When we talk about the different levels of wealth, the end goal is to go from being an earner to an owner. You want to be able to “disappear” for 50 years and return richer. That’s the ideal outcome in business long term.

Remember, wealth is a broad spectrum and there are shades in the middle. 

How you construct your wealth management system is actually more important than you might realize.

There are three things you can actually do with your money to prevent yourself from booming then falling back to the ground…

You can spend it..

You can store it..

Or you can multiply it.

We’re just human and by definition we’re wired for self preservation. But a little bit of forethought and planning can move you out of a preservation mindset and into a thriving and abundance framework that will outlive you.