Wealth Formula by Buck Joffrey

Last summer I learned how to swim for the first time. I was an athletic kid but somehow missed that window in my life when it was ok to not know how. After all, when you are two or three years old, not knowing how to swim is par for the course–but not when you are a teenager! By that time, it became too embarrassing to go to a swim class–especially when you have a huge ego like mine anchoring you down in the water. The funny thing is that, despite not being able to swim, I really was not afraid of the water. You might even say that I had an irrational LACK of fear when it came to water. I went snorkeling all the time and loved being in the ocean. Talk about a sitting duck for an undercurrent! Now, I am 44 years old and I am at that stage in my life where I am trying to make up for some of the things that I didn’t do when I was younger. So, last summer, I decided that enough was enough. I needed to get this swimming monkey off my back. After expressing my frustrations to my friend Zed Williamson, he fortuitously sent me a video of Tim Ferris talking about the Total Immersion technique created by Terry Laughlin, a legendary swim teacher. Tim, too, had struggled with swimming and despite having tried harder than me with multiple coaches and even Olympians, had failed miserably. That is, until he found Terry. Terry taught Tim Ferris to swim and Tim Ferris seemed like he was a tougher case than me. So, it became clear to me that I needed Terry to teach me how to swim. I headed out to upstate New York for 2 days of intensive training with him. Remarkably, In just 3 half day sessions over two days, Terry taught me how to swim. The way he did it was masterful. It was like Mr. Miyagi training the Karate Kid. Terry was a master who dissected out the intricacies of swimming to its basic components and that made it possible for him to teach his art to even the most hopeless of cases–Tim Ferris and me for example. I was so excited about my new skills that I asked Terry if he knew a coach in Santa Barbara that could continue to help develop my skills. As it turned out, he was planning to spend the winter in Santa Barbara anyway which was great for me. He was planning to come out in November. I couldn’t wait to work with him and also have him teach my daughters the Total Immersion Technique. So, last month (October 2017), I emailed Terry to check in when he was coming to town. There had been a change of plans. Unfortunately, Terry had been fighting aggressive prostate cancer for some time and it had spread to his bone marrow. My last email correspondence with him was October 9th. He still seemed very optimistic. Sadly, I learned this week from Tim Ferris’ updates that Terry passed away just 11 days after that email he sent me. Tim had recorded an interview with him just two weeks before his passing and it is the most current episode on his podcast. I encourage you to check it out. This was an amazing guy and I feel lucky to have gotten to know him. Terry was a true teacher and a master. Swimming was his art but his methodology and philosophy could be applied to just about any field–even money and investing. In some ways, I’m trying to emulate Terry. I’m trying to take something that is seemingly complex as growing financial wealth and trying to “master” it. I’m ahead of many people but I still have a great deal to learn. I’m also doing my best to teach you what I know because that is my mission. Listen, I know there are A LOT of highly educated people out there who haven’t a clue about money and investing but, like me with swimming, feel embarrassed to admit it. Ego is a terrible thing–can make you drown and it can make you broke. So, if you are one of those people who feels like they ought to know more than they should at this point in their life about money–I’ve got great news. You don’t need to get in the pool with a bunch of youngsters and admit your weaknesses. Just listen to my podcast! In fact, this week’s episode of Wealth Formula Podcast is about something that VERY FEW people in the general public even know is possible–investing in real assets like real estate with your retirement account. Don’t miss this episode. Start putting your money to work for you!

How our brains have evolved over time is a funny thing. The same things that make us wildly successful in life have the potential to make us miserable. This is the cruel paradox of the high achieving, high paid professional. We are strivers and we have very high expectations of ourselves. That’s not a bad thing at all. I would be lying to you if I told you that I am any different. The problem is that expectations CAN make you miserable. In fact, some say the key to happiness in life is low expectations! I guess I can see that. BUT, I am not going to convince you, the high achieving professional, or me to set our expectations lower. Nor should we–we type A personalities were designed to conquer, to be tribal leaders, to push the limits for the betterment of humanity. Without people like us…we’d still be in the stone ages:) But…on the other hand, we must tame the beast within—we must identify that our expectations are dynamic. They constantly change as we continue on our journey through life. Just because you’ve taken down a 2000 pound buffalo doesn’t mean that the hunt is over. NO! You’re going to move on to the next hunt. That’s the way you role. Those are your expectations. And that’s ok as long as you don’t confuse expectations with destination. What’s your destination? Your destination is where you can find fulfillment–holistic wealth as I refer to it. We type A’s sometimes have a lot of trouble it and some of us could use a helping hand to get there. Fortunately, there are some out there built to help guide us–to be our sherpa’s towards the pinnacle of wealth–self actualization and happiness. One such sherpa, is my guest on this week’s Wealth Formula Podcast. Her name is Dr. Colleen Crowley (www.drcolleencrowley.com) and she specializes in helping high achieving, high paid professionals find true happiness. So, If happiness is important to you, don’t miss this week’s episode of Wealth Episode Podcast.

Why do I advocate investing in real things like real estate and precious metals instead of stocks, bonds, and mutual funds? Because I understand them and they are, for the most part, predictable. I understand that, when I buy an apartment building, people have to pay me rent. That property might go up and down in value but as long as I’ve got a pretty good margin of safety, the rent and income that I receive on a monthly or yearly basis is pretty predictable. Apartment buildings are also a pretty good hedge against inflation. Rents go up in an inflationary environment and so does the value of my property. Similarly, gold is an excellent hedge against inflation. In the Roman times of Christ, an ounce of gold bought you a toga and a nice pair of sandals. Today, an ounce of gold will buy you a nice suit and a pair of shoes. Does that mean that I NEVER invest outside of the cash flowing real asset paradigm? I wouldn’t say never. Again, the reason I like real assets is that I understand them and they are, to a great degree, predictable from my perspective. But that’s my perspective and someone else may have another perspective that allows them to have a competitive advantage in a different type of investment paradigm. I don’t begrudge anyone who uses the advantages they have to their own advantage. In fact, when I take a step back at my broader investment philosophy it is this, “invest in things where the cards are stacked in your favor”. By the way, that’s why I love life settlements! () Now I’ve never felt that the cards were stacked in my favor when it came to the equity markets. In fact, I really don’t believe they are stacked in any retail investor’s favor. We are all gamblers at the casino and the casino always wins. UNLESS–you have an “unfair advantage”. I remember watching a documentary a few years back about the MIT blackjack team–basically a bunch of math whizzes who went to Vegas undercover and cleaned house by counting cards and using other computer generated algorithms to win. I’m not a gambler. But if I could count cards like the MIT Blackjack team I’d be at the casino because, again, the cards would be stacked in my favor. So how does this pertain to you? You’ll find out in this week’s Wealth Formula Podcast where I interview Howard Getson, the founder of an artificial intelligence based hedge fund called Capitalogix. This might be just enough to finally convince you to pull out of the markets!

The wealthy think differently than most of us– Here’s the challenge–In order to be wealthy, you must think like the wealthy! “But Buck, if I don’t know how they think how can I do that?” Well, I’ll tell you. You see my job on Wealth Formula is to infiltrate the world of the wealthy. Think of me as a spy like 007 stealing secrets from the wealthy and passing them on to you. That’s what I love to do. Now here’s something that I have noticed. The wealthy set their wealth thermostats higher than the middle class or even high paid professionals. What’s a wealth thermostat? Well, tell me what kind of yearly income makes someone rich. Is it $250,000 per year? Is it $5 million per year? $100 million per year? If I ask 10 of you, you will give me 10 different answers of what you THINK is rich. Now, your answer to this question is a strong indicator of your wealth thermostat. I call this a thermostat because our minds have a funny way of making our thoughts into reality. If you think of a certain amount of money and think it’s too much then it is. YOU WILL ALWAYS HAVE THE AMOUNT OF MONEY THAT YOU THINK IS NORMAL FOR YOU. The funny thing is that the thermostat also helps you from going below a certain level of wealth. Look Donald Trump—that’s an extreme case. He was in serious dire straights in the early 90s. He was several billion dollars in debt (and not all good debt either.) But, talk about a guy with an off the charts wealth thermostat—this guy is now 3.5 billion in the black. My point–If you want to be wealthy, you have to think like the wealthy. Financial wealth comes mostly from mindset. This week’s guest on Wealth Formula Podcast is another great example of the wealth thermostat at work. His name is Rod Khleif. Rod went from rags to riches then went back to rags for a while. In this week’s interview he’ll talk about that journey and what helped him, once again, return to the joy of riches as a successful real estate investor. Don’t miss this episode!

In 1943, psychologist Abraham Maslow published a paper called “A Theory of Human Motivation.” In this paper he described, what has come known as, Maslow’s Hierarchy of Needs. Basically its a pyramid structure describing different human motivation drivers. At the bottom of this pyramid lies physiological needs–food, water, etc. The next level up is safety and security. In other words, you need a roof over your head. The pyramid continues upwards to its pinnacle, self-actualization–the ability to focus on one’s mission in life. I call this true wealth. After all, it’s tough to focus on your mission in life when you are trying to put food on the table AND trying to keep your family safe from wild animals and infectious disease. Trouble finding one’s mission in life is a first world problem. Now–let’s apply these principles to investing. In tough financial times, where should you focus your investments? Maybe low income housing makes sense? The problem is that low income housing is often very difficult to manage. I can tell you from personal experience with the first apartment building I ever bought–low income housing usually looks better on paper. Understand that I am not made to be a slum lord. My father made millions of dollars throughout his life collecting rents with a baseball bat in one hand but I did not get that gene. Now, if you can find people who are really good operators in this space, there is a lot of money to be made and you can actually do a lot of good for the communities. One of the few operators in the low income housing space that I trust is Mike Ayala. Mike and his colleagues are killing it in the mobile home park space. So, if you want to learn more about how Maslow Level 2 investing can help your portfolio, make sure to tune in to this week’s episode of Wealth Formula Podcast.

I cannot tell a lie–in my first business I made a small fortune sucking fat from places where people didn’t want it and putting it back where they wanted more! I told Robert Kiyosaki about that last April and that’s how he remembered who I was the rest of the cruise. My wife hates it when I talk about this past life but it’s true. Personally, I liked what I was doing for the first couple years. Listen, cosmetic surgery gets a bad wrap sometimes. To me–I was helping people get over their hangups. It let them NOT obsess about their looks and MOST of the time it really improved the quality of their lives by giving them confidence. But after a while, it started feeling like a job that I had to do. That’s when I phased out and moved on to the next thing. These days my time is devoted to you and, from some of the kind feedback you have given me, I believe that I am really making an impact on some of your lives. The cool thing about that is that all I am doing is sharing stuff with you that I love talking about and learning. This is the best gig I’ve ever had! Maybe not the most profitable but its certainly been the most fun. You know…I don’t know anyone who loves what they do that doesn’t feel like they are, somehow, making some kind of difference. Now what about your investments? Do you care if they make an impact? I do. I feel good knowing that I am able to grow my wealth and, at the same time, make a difference in the world. That’s why I love funds like American Homeowner Preservation (AHPFunding.com) – Jorge Newberry’s fund that buys failing mortgages at pennies on the dollar and keeps people in their homes by renting it back to them while, at the same time, making investors a great return. My guest today has another feel good business. This time, it’s a crowdfunding platform called impacthousing.com that buys apartment buildings that are underperforming in rough neighborhoods and turns them into places that anyone would live. They even provide programs to feed kids and help them stay healthy. This is my kind of business folks. Make sure to tune in to this week’s Wealth Formula Podcast to learn how your money can make an impact and make a profit at the same time!

“Can you explain what internet is?” That’s the question Katie Couric asked her colleagues on the Today Show in 1994 as an equally confused Bryant Gumbel looked on. Now don’t you wish you knew what the internet was back then? Don’t you wish you had enough foresight to see this seismic shift in not only technology but in our world? If you knew what you know now, what would you have done? Of course the easy answer is “buy google or buy amazon!” But that’s not what I mean. If you knew what you know now, my guess is that you would learn everything you could about this new technology and how you could get a piece of the action. That is where we are with blockchain technology. “Block-what?” you ask in your best Bryant Gumbel voice. Exactly. Few people understand blockchain but I AM CONVINCED that blockchain technology will become as ubiquitous as the “app”. Most people are familiar with blockchain mostly by a currency built on that platform called bitcoin. However, currency is just the tip of the iceberg with blockchain. Blockchain technology will fundamentally change the way we do business, make transactions, and interface with the world. And with regard to currency, it can’t be stopped. Why? Because cryptocurrency lies at the confluence of a very unique place that brings libertarians clamoring for privacy, computer geeks, and anti-Wall Street/anti-central bank people all in one place. That is powerful. Now listen, I know some of you out there are saying, “Buck, I can’t see it, touch it, or feel it so why should I care? After all, I should be focussing on tangible assets, right.” You’re right, but I’m not talking about investing in it. I’m asking you to recognize it for what is–the future. Furthermore, cryptocurrencies are no less real than the American Dollar. In fact, bitcoins are limited in number, transacted directly from one person to another, and have a decentralized ledger that makes it virtually impossible to hack. On the other hand, the US dollar can (and is) printed at will, often requires a third party to facilitate transactions and can easily be hacked or counterfeited. In fact, I will go as far as to say that cryptocurrency shares more features with gold than it does the US dollar. Now I can’t explain this all to you. First of all, I am no bitcoin or blockchain expert. However, I do know enough at this point to be absolutely convinced that blockchain technology and some kind of cryptocurrency will be commonplace in our daily lives a decade from now—probably even sooner. With that in mind, this week’s Wealth Formula Podcast will try to help you get up to speed on this stuff. In fact, I guarantee that by the end of the podcast you will know more than 99 percent of people out there about this brave new world of blockchain. Of course I’m not qualified to teach on this topic. That’s why I got one of the world’s pioneers in blockchain technology, Reeve Collins, to do it for me. Don’t miss this episode!

Robert Kiyosaki opened my eyes to the notion of passive multiple income streams 9 years ago and it changed my life. Of course, my dad had been talking about “cash flow investing” since I was born but for some reason I was too dense to figure out what he meant. In the context of Kiyosaki, multiple streams of income has generally been interpreted as investing in real estate. After Rich Dad Poor Dad was published in 1997, a generation of real estate groupies was born! You couldn’t help but get excited. You get a few houses or apartment buildings cash flowing, and before you know it, you are financially free, right? For those of you out there actively trying to make this happen, it is a little bit harder than it sounds, isn’t it? For one, finding properties that cash flow and won’t end up costing you money in the end is actually a lot of work and takes some level of expertise. That’s why we have the Wealth Formula Accredited Investor Club– to help facilitate opportunities and to help you deploy your capital. Beyond finding deals, however, there is also the challenge of not having enough capital to deploy to get you to your financial goals in a time frame that you might find acceptable. A good cash on cash rate of return on real estate is 10-12 percent. Let’s break that down. You save $100K and deploy it in an opportunity that yields 12 percent cash on cash. In exchange for your $100K, you get $1K per month. If you are a $100K level investor, that extra $1K per month is probably not going to be enough to free you of your golden handcuffs. You’re going to need a lot more capital over time. OR–you could find something that makes you A LOT MORE return on investment than owning real estate. You could invest in a business. Truth be told, I own four cash flowing businesses that account for the majority of my income. I certainly do own plenty of real estate and other assets, but the businesses I own are the assets that throw off the most income by far. To be clear, I consider my businesses cash flowing assets just like my real estate–multiple streams of income does not mean it all has to come from rental homes, or owning notes. Of course, owning businesses is far more volatile and risky than owning apartment building as a general rule. The key to making this strategy work, in my humble opinion, is to have a portfolio of assets with different risk/reward profiles that includes high cash flowing businesses. The problem for most people is that they do not have enough time or the expertise to start a business. There is also an initial capital cost to start or purchase a business that, if you fall flat on your face as an entrepreneur, could result in a painful financial outcome. So, as your Wealth Formula sherpa, I’ve been on the lookout for ways that you too might be able to participate in business ownership with relatively low financial risk and I think I may have found one. I know a handful of people who have done really well on Amazon over the years so I wanted to present this option to you–one that I might be looking into myself at some point with my eight year old daughter. To discuss the Amazon option, I invited Dylan Frost on this week’s Wealth Formula Podcast. Dylan is behind thewholesaleformula.com and will tell you how to create streams of income on amazon that you can automate. Make sure to check it out! Buck

I have said on a number of occasions that Wealth Formula Podcast is NOT a Real Estate Show. So why do we talk so much about real estate? Well, for people who want to grow their wealth, there simply is no other asset class with a better track record and more upside than real estate. The Wealth Formula Principles for Wealth Creation are: Invest in tangible things, not paper. Invest in cash flowing assets preferentially.< Invest in things you can understand. Complexity is a tool used by Wall Street to siphon away your profits. Utilize the concepts of velocity (ie. Re-invest quickly) and leverage to increase and amplify your returns. Invest in financial education. If you are reading this, you are already working on principle #5. You can easily put in to play principles #1-4 by investing in real estate. On the other hand, if you are investing in gold, it is hard to cash flow and it is hard to use leverage. That doesn’t mean you shouldn’t invest in anything that does not follow these five principles. As long as you know the rules, by all means, break them. I break them all the time. I own gold. I own life settlements. There’s a reason for them all. But the majority of my investments outside of my businesses are in real estate. And, if you want my opinion, that’s what anyone wanting to build wealth over time should have as their PRIMARY investment focus. Of course, it is very important to learn about real estate if you are going to use it as a primary investment vehicle and we certainly talk about it on this show. That said, who better to learn more from about real estate, than the Real Estate Guys themselves! Of course the Real Estate Guys are also known as Robert Helms and Russell Gray—a couple of good friends of mine. Robert was on the show a while back ago talking about a luxury resort in Ambergris Caye, Belize that many of you, through investor club, know about and may even be invested in already. Russ is the other half of that dynamic duo and is our guest on Wealth Formula Podcast this week. Make sure you tune in to learn why Russ thinks you should be investing in real estate now!

I have arrived to Southern California and I am now writing to you from my new office which, for the first time in Wealth Formula Podcast History, is NOT a part of my home. This time away from the show has given me some time to reflect. I do have a lot to say to you myself and sometimes the interview format does not allow me to do that. So, I have made a decision that I will do more podcasts in a format where you can hear from me a bit more. During these episodes, I hope to share with you some of my thoughts not only on financial matters but on mindset. One of the biggest barriers to financial and holistic wealth is mindset. Our mindset, in turn is influenced heavily by what we believe. In this episode of Wealth Formula podcast, I talk to you about how our educational system and conventional wisdom may have created artificial “truths” in our lives and how that might actually be destructive to the way we deal with money. Let me know what you think of the show!