The Biggest Lie You Are Told About Building Wealth | Ep 177

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We’ve been sold a story: save 10% of your paycheck, invest it in the market, and one day you’ll retire rich. But is that really how wealth is built? In this episode, Steve breaks down the math behind that promise—and explains why the numbers don’t add up like you think they do. 

From compounding myths to misleading online advice about laundromats, rental properties, and passive income, this is a no-filter look at what actually creates real wealth. Steve shares what he’s seen working with business owners behind the scenes—and makes the case for why buying, building, and selling businesses is the most powerful (and overlooked) path to financial freedom. 

Disclaimer:   
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Transcript

This is straight up advice for people who are looking to achieve financial freedom and build true wealth. All right, I'm not a finfluencer, okay? There are so many talking heads out there that are leading people astray, and it's driving me crazy. Okay, check this out.

There are five real ways to build wealth, okay? Number one is you inherit it. Number two, you work for a Fortune 500 company, you're a top executive, and you make millions of dollars a year. Number three, you own an asset management company. Number four, you save your way there. You invest your way there. And number five is you buy a business.

Okay, there's some other ways maybe, but these are the five main ways. Follow along with me. All right, let's talk about number four and number five. First number four, you save your way. Did you know in the United States, the average savings rate is 3.5%? So let's make some assumptions here. Let's assume you're super disciplined, and you're not like the average. You're above average, and you're able to save 10% of your pay, okay?

Now, here are a few crazy things. In the United States, and this is insane for me to even say this, because I don't wanna be offensive to other people in parts of the world where you're not making this much, but it sounds terrible because we're so blessed in so many different ways in the U.S. If you make $100,000 in the United States though, you're not rich, you're not rich. You have your mortgage, you have your car payment, you have insurance, you have groceries, you have all these costs, and these costs are constantly climbing. And sure, you can live a pretty comfortable life, but it's gonna be hard, okay?

But let's just assume you make $100,000, and you can save 10% of that, $10,000 a year, all right? Let's also assume you can put that in an investment vehicle and you can earn eight to 9%, all right, on average. And let's assume that the market will actually return that. And let's also assume there's not gonna be any market disruptions along the way that just wipes out your portfolio, and you won't have any disruptions in your own life that's gonna cause any major financial setbacks.

So many assumptions, right? Isn't this fun? So let's just assume everything goes well, and you're able to save $10,000 every single year, and it compounds, right? So you can take advantage of the eighth wonder of the world that financial advisors talk about, compounding interest, which is true, okay? I'm not poo-pooing that, it's true.

But you may say, okay, well, Steve, theoretically, I'm gonna make 100,000, then my pay's gonna go up. Okay, yeah, I get that, but let's just keep things really simple, all right? So you save $10,000 a year, you make 100 grand, all right, and it compounds over the next 30 years.

Do the math, I mean, it's crazy. I don't know the exact number, but I ran it through some present value calculator and future value calculator, and essentially, you'll have around like 1.5 million, all right, so maybe like 1.63248, whatever. I don't care about the details here, just follow along with the bigger story.

You're thinking, okay, I have $1.5 million after 30 years, that's good, I can retire on 1.5 million, but here's the problem. This is the biggest lie that's told to people, and it's not that all financial advisors or financial people are bad, or the finfluencers out there on YouTube are trying to do you harm. Oftentimes, you're just misguided, and maybe they're telling you the truth, but here's the caveat you need to understand.

That $1.5 million in 30 years is the future value of money. Bring it back to the present value of money, and it's like a fraction of that. It's like 600 grand or whatever it is, right? You can run the actual numbers, and if I'm off by plus or minus 100 grand, I don't care, but you get the point.

The whole point is they communicate in future value, so they say, oh, yeah, you'll have $3 million if you put away X amount of dollars, and you're like, yeah, $3 million, but in 30 years, $3 million is what the person at McDonald's may be making as a salary with inflation and with the erosion of purchasing power. So who knows?

I mean, it's like, think about 30 years ago in the United States. What did a million dollars get you back then versus now? Like in my area, in the Denver metro area, sad to say, a million dollar home is like, ah, it's okay, but you may have some shag carpet. You may have to fix the kitchen and remodel some things. The landscaping may be terrible, and it's bad to say, but that's the world we live in.

A million dollars doesn't go as far as it used to, so think about in 30 years. Your 1.5 is not gonna get you where you need to be, and like I said, if you bring it back to present value, and let's say it's 600,000, you can't retire on 600,000 right now with the cost of living and everything else. It's crazy.

So we're tricked into believing, okay, save 10% of your salary, put it into an investment vehicle like 401k. You think you're not paying fees. You're actually paying fees. You think the management fees you're paying to your financial advisor, you're like, what's 1% among friends? Well, that adds up. It's like 25% of your returns over time.

Now, I'm using big, broad numbers. You can fact check me, whatever you wanna do. That's fine, but I want you to understand the point here. The point is that what you're being promised and what we're being told may work for a small fraction of the population, but let's face it. The majority of Americans are going to live check to check like they are right now. They're just gonna be grinding in this thought of retirement may not be as practical as you think it is.

Okay, so that's the fourth way to get rich is saving and investing your way there. Now we all know stories of the person who worked at Walmart. They were a janitor. They saved up all this money. And one day they had $3 million in stock and everybody was like super surprised by their portfolio. We've heard those stories. I know they exist out there, but that's not the majority of people. That's what I'm talking about, the majority of people.

There's always gonna be the one-off, right? That's survivorship bias or championship bias or whatever it is. You can find all these biases out there, confirmation bias where you're gonna find the stories to match your narrative. And that's the narrative that's being sold to us.

So what? You should be just depressed, crawl under a rock or just give up. No, I'm not saying don't save your money. I'm not saying to not put your money aside and invest it in the future. I do. I put my money every single time I get paid, I put a percentage of my money, at least 10% in an investment vehicle. That's what I do, that's me.

But here's what I am saying though, okay? So like, yes, do that. But also, if you wanna build true wealth, it's through owning a business. It's owning a business. That's why I'm so passionate about financial literacy. And when I was talking about those ways to build wealth, like real estate, you may be like, what about real estate? What about crypto? Yeah, like real estate, that's part of it.

You can own a portfolio of rental properties and call that a business. It's all lumped into that category. But when it comes to building true wealth, it's gonna be through a business because that's where people can compound their wealth very easily because you have profits from the business and then you have a multiple on the business if you ever go to sell it. That's why I'm so passionate about buying, building and selling a business.

But here's the problem, and this is something I wanna touch on here, is that there are so many people out there that are misguiding the public.

So check this out. I came across somebody not too long ago and they're talking about, yeah, my buddy's landscape business makes $500,000 a year. And you're like, wow, $500,000 a year doing landscaping. I should have started a landscape business, make 500 grand a year. And it's like, yeah, I've been in the landscape industry. I own my own business. I've consulted businesses. I have access to proprietary data on landscaping companies' financials. And I could tell you, you make $500,000 in profit. If you're lucky, what about taxes? What about the reinvestment in trucks, trailers, tractors, trenchers, et cetera?

And that $500,000, that doesn't include the money tied up in working capital, in your accounts receivable, in your retention on your projects, et cetera, right? So at the end of the day, that $500,000 in profit on their income statement is like maybe $150,000 in free cashflow. Maybe it's more, maybe it's less. But the point is, what we're being told out there doesn't always match reality. And that's where I wanna set the record straight.

Okay, here's another example. There's somebody on YouTube and they talk a lot about buying boring businesses. Great, great idea. And they'll say, look, you could buy a laundromat and the laundromat will make $30,000 in profit. And you think, that's great, passive income. I'll buy a laundromat. I'll put a bunch of washers and dryers in there. I'll step back, I'll put some surveillance cameras up and I'll make it a 24-7 joint where I make all this money. And then I'll go buy my next laundromat.

Now, I know where this person's going. The point that they're trying to make is start small, like with a laundromat, very doable, and then build your way up. So the overall message is great. And they have a lot more followers than me, okay? A lot more. So who am I to even say anything? But let me just bring some truth to this so you don't trick yourself. Because I've talked to people and they come to me and they're like, Steve, I got this great idea for my future. I'm just gonna do Airbnb or crypto or I'm gonna buy a laundromat or I'm going to buy some rental properties and I'm gonna make all this money.

So let me just speak some truth here real quick. Let's say you buy a laundromat and it makes $30,000 a year. And let's say you have $300,000 invested in washers and dryers. And let's say the average washer and dryer lasts for five years and then you gotta replace it. That means every five years, so $300,000 divided by five, every year you need to be budgeting $60,000 for capital expenditure replacements. Capital expenditures don't show up on your income statement. So they're not gonna show up in that profit number.

So that 30 grand doesn't account for the money you have to reinvest in keeping your washers and dryers functional. And maybe it's not 60 grand, maybe it's 20 grand. I think you get the point. The 30 grand in profit doesn't cover the cost of the machinery. And that's what you gotta account for. But it's not talked about. So you have 30,000 minus tax, minus your investment in CapEx and you may realize, oh my gosh, this is a terrible investment.

Okay, so maybe you can find a laundromat and maybe the numbers work. Great for you, okay? But I just want you to understand the whole point here. Here's another thing with real estate. I think we've all heard the people who are like, I'm gonna buy a rental property because somebody on YouTube said they own a rental property spins off $15,000 a month in money, in cash.

I have purchased apartment complexes, like a big complex. I've owned multiple rental properties. I can tell you the $15,000 you're talking about is the rental income that's coming in. Well, guess what? You have a mortgage to pay, unless you paid in cash. But then that $15,000, if you did pay in cash against the asset value, is gonna equate to a very tiny return. So it'd be dumb to buy something in cash and not use the leverage of debt.

But nonetheless, the $15,000 you're talking about is gross. It's gross proceeds. Then you pay your mortgage, then you pay for maintenance, and then you pay for this, and you pay for that, and you pay for this and that, and, and, and, and, and, and maybe you're lucky to walk away with $1,000 in positive cashflow out of the 15.

Now, I'm sure you're paying down the asset value, right? You're paying down the debt, and hopefully you're riding the wave of appreciation, right, in the real estate market. So you can make money off appreciation and somebody else servicing your debt. But the idea of making $15,000 passively and putting it in your pocket is probably not super realistic unless you're buying a very big property and you have a good amount of equity in the deal.

So this is the kind of stuff that's being taught to 20-year-olds and 30-year-olds and 40-year-olds and beyond out there in the world, and it's garbage. Okay, it's garbage. I work with a lot of entrepreneurs, a lot of CEOs, a lot of business owners, a lot of founders. I know what works, what doesn't. I don't know everything, okay? I'm not an expert. Some of these situations do work. I just don't want you to go down a path of thinking, all right, I'm gonna get rich by doing this.

And I know who you are because some of you reach out to me and you're like, Steve, I got a great idea. And I'm like, seriously, just learn the basics of money. Understand how to read an income statement, a balance sheet, a statement of cash flows. Learn how to build a valuation model. Learn these principles so you know how money works in a business. Then go get some real-world experience and then go buy, build, and sell a business.

Now, here's the other thing. It's pretty easy to buy a business. You could buy a business, and if you have the capital, you can overpay for a business. That's why I say it's easy to buy a business. What's harder to do is to understand how valuation works, buy a business at the right price, and then get into that business and actually operate it and know the strategies to fix the funnel, fix the offer, change the pricing, lead a team, deliver with excellence, provide an excellent customer experience. All these things, that's what it takes to run a great business.

So sometimes people are like, I'm gonna just buy a business or I'm gonna take over my friend's business or my dad's business. I'm like, oh my gosh, you have like zero experience. You don't even know how to read a P&L. That's like super dangerous. So put in the hard work and it will definitely pay off.

At BYFIQ, BoostingYourFinancialIQ.com, I just did something different. So I have the free financial pro course, right? 100 video lessons, it's always free. Just go there and take it if you wanna learn the fundamentals. But then I've realized there are a lot of people out there who wanna buy, build and sell a business or they're up and coming value creators and they wanna learn how to apply this stuff in the real world.

So what I'm gonna start doing is two lessons a month. That's what I'm gonna start with. And I'm gonna call it just weekly lessons. And I know it's every other week, bi-weekly, but it doesn't sound as cool and catchy as the lesson of the week. So essentially you'll go on there, there's a lesson of the week. I swap it out every two weeks, okay?

And in this lesson, the current lesson, by the time you listen to it, it may be something different because I'm gonna swap it out every two weeks. The first one, I'm evaluating a landscape business. They're doing about $6 million a year in revenue, I'm looking at their income. And then I'm looking at the four levers of profit and I'm gonna walk you through how to evaluate this, which levers to pull and how to make this all happen.

I'll also show you how to compute their breakeven point so you can communicate that to sales, set sales targets and just bring all this together in a real life setting because I want you to learn, like I said, how to generate wealth by buying, building and selling businesses.

And maybe you don't have the capital or the desire to buy a business, that's fine. Learn how to build a business. And you could be the founder or an entrepreneur or maybe you're just on the management team or maybe you have a piece of the pie, you have some equity in the business, that's fine. Or when it comes to selling a business, maybe you'll never have a business to sell, but nonetheless, you should learn how valuation works and how this all ties together.

So that's what I wanted to share with you. Go to byfiq.com, you can check out that lesson. Like I said, it's totally free. There's some options to add other things to it and to upgrade, but just start for free. Check out the lessons, start watching it. And if you do the lessons, you put in the work and you follow along, I'm gonna show you exactly how to buy, build and sell companies from a CFO's perspective. And I'm gonna give you the tools you need so you can apply this in the real world.

All right, that's my rant for you. What are your thoughts on this? Does this resonate with you? Do you agree? Do you disagree? I'd love to hear your thinking. So put your comments down below. If you're shy and you don't like to post your comments publicly, that's fine. You can always DM me on LinkedIn. So find me on LinkedIn, DM me, I'd love to hear from you. But that's what I have for you. So I look forward to catching you in the next episode. Take care, cheers.