Are you struggling to manage your money like the rich? If so, you’re not alone! In this episode, we’ll hear from Tom Ferry and Toby Mathis, Esq., to help you learn the proper way to manage your money for success. From investing basics to budgeting for the long term, these tips will help you get your financial life under control.
Tom Ferry is the #1 ranked Real Estate Educator by Swanepoel Power 200 and the best-selling author of “Life! By Design” and “Mindset, Model and Marketing!”
Toby Mathis, Esq. is a partner here at Anderson Business Advisors with years of knowledge and has helped countless clients navigate the complex world of taxation and asset protection allowing them to secure their financial goals. We will teach you how to budget, invest, and live a prosperous life with a well-thought-out plan. This video is a must-watch if you want to learn how to manage your money and reach your financial goals properly!
Resources:
Learn How to Manage Your Money with Tom Ferry
Free Strategy Session with Tom Ferry
Full Episode Transcript:
Toby: My name is Toby Mathis. Today, we are going over how to properly manage your money like the rich. I’m going to have Tom Ferry on. Tom, you can unmute yourself and show your brightened smiley face. There you are.
Tom: Hey, Toby. Thanks for having me, man.
Toby: This is going to be fun. Those of you guys who don’t know Tom Ferry, one of the most successful coaches on the planet. I don’t say coaches like he’s not LeBron James’ coach. Everybody needs a coach. But in the real estate field, there’s nobody better than Tom.
He works with some of the most successful real estate agents and other businesses. I know you branch out a little bit, but I always think of you as a real estate agent guy. You’re showing people how they become absolutely successful and masters at their craft. I wanted him to come on and teach a concept. I’ve seen him do it before on properly managing your money like the rich because I happen to agree with just about everything he says.
We thought, hey, you know what? Let’s bring this to our group. I know we only have an hour, so we’re going to dive right on in. I’m always excited to have Tom on because Tom’s like my other brother. I don’t know. Somehow, I don’t know how, but I’m pretty sure we’re related.
Tom: Toby, I think it’s the gray beard and the glasses, I think. It could be that. I’ll just jump in. But first of all, I want to just say hi everybody, and Toby as always, man. For the people watching, I have been studying Toby and learning everything I can from him. It’s just who I am.
If you read the wonderful book by Dr. Carol Dweck, the book’s called the Growth Mindset. If you haven’t read it, I strongly encourage you to read the book. It’s not a motivational book in any way, shape, or form. It’s having the ability to understand why some people just simply will never change, will never take action, will hear all the best information, and do nothing with it, where this other group of us just has this insatiable appetite to grow, to learn, and we’re willing to take risks and try new things.
You can argue there’s no right or wrong in that, but so many people that I’ve worked with over the last 33 years come to me and they say, Tom, I want to be more successful. I want to sell more houses. I want to scale my business. I want to build my brand. I want to be a modernist as a real estate professional. I want to be able to avoid the common mistakes. How do I manage the Zillows of the world, the iBuyers, the changing economies, and interest rates? Keep me on the forefront.
I think we all know, you know, the answers are everywhere. But if you are in a fixed mindset, if you are stuck in I’m not willing to change, I’m not willing to try, you’re going to be poor. You’re going to be in trouble. The people that are the wealthiest people I’ve met, and I have been blessed as Toby being one of them, to very carefully curate starting from 19 years old, the rooms I wanted to sit in, the people I wanted to get exposure to.
I wanted to understand, how is it that she has an amazing marriage, a wonderful relationship, has 500 apartment doors, and seems to do whatever she wants to do? Why does this one over here who came from family money and doesn’t even understand the family business, doesn’t understand anything that’s going on, had every opportunity on the planet, and just seems to blow it at every turn? I wanted to know why that was always happening.
Toby, just for people to have little context from me, I was raised in Southern California. My parents got divorced when I was six, and my earliest childhood memories of money, which by the way, all of you should explore that. What were your earliest childhood memories of money? I had two. When my parents separated, my dad was an entrepreneur, and he’s out starting a business. My mom had to go to work.
For the first time in my young life, I can remember not enough cookies in the cookie jar. I had to start making the beanie weenies and helping out. I was the number two kid out of four. There just was never enough. Every pair of jeans I got were my older brother Matthew’s hand-me-downs because he was getting too tall.
Even though we all know that entrepreneurial father over here, crazy ambitious, starting a new business, and everyone knows he’d started a business, you don’t make any money for the first 10 years. For the first 10 years of his ascension till the time I’m 16, by the time I’m 16, I got very accustomed to hand-me-down clothes, to not having the things that most kids had.
We were able to eat. We weren’t impoverished, but I lived from 16, 17, 18, 19 in this world of, over here, I’m living in this very modest, lower middle income house with my mom and my sibs, just going to school, not really learning anything, and eventually getting a mohawk and getting in trouble. Then over here on the weekends, I’d go stay at my dad’s house.
He was in Newport Beach, California with an ocean view driving a Rolls Royce and a Mercedes. I was like, something’s wrong here. Something isn’t adding up. All it did for me was just create a lot of confusion.
The book I recommended is called the Growth Mindset by Dr. Carol Dweck. I strongly recommend it. Stanford professor, brilliant woman. I think all of us can relate to that in some way, shape, or form that there was a lot of confusion for me in the early days of my life when it came to creating wealth and making money.
Around 19 years old, I was working at a grocery store from midnight to nine. I had a mohawk. The only time they would let me work was from midnight to nine. I was always a hard worker, always optimistic and fired up. But I remember looking down the aisle and seeing guys that I was working with that were old. They were 30, and we were all making $12 an hour.
I remember saying to myself then, that’s not my path. I’m not judging the guys that were doing it. They’re all wonderful people. They were terrific. One of the guys gave me one of his motorcycles, so I had transportation. God bless the guy. But I knew that wasn’t for me. I knew there was more out there.
I was that kid that when an airplane went through the air, I was one of them saying, where are they going? What do they do for a living? How do they get to go on that airplane? I wonder if they’re going to Hawaii or something. Those are the thoughts that were always going through my head.
No one gave me any answers until I was about 20. At 20, I went into sales. I started getting exposed to people like Earl Nightingale, Tony Robbins, Think and Grow Rich, and all these incredible works of art. That was really the beginning for me, where I started to realize the answers are everywhere. The question was, was I willing to do the work?
Fast forward a decade later, and I’m 30, I crossed over a million dollars in net worth, I started buying real estate, and I started making investments. I started doing all the things that any young entrepreneur who’s had a little bit of exposure would do. But all the while, as Toby mentioned, I was helping real estate professionals as a business coach—guiding, directing, helping them write their strategy, develop their marketing plans, helping them hire, fire, train, and develop people on their teams and their brokerages.
The thing that I started to observe was, there were a lot of people that were really focused on their top line revenue. They didn’t really focus on their bottom line. They grossed a lot of money, but they never had a lot of money. I thought that was interesting because my first ambition, of course, was to help them get as much top line revenue as they could. I could probably take the blame for some of that. I was helping them grow, grow, grow, grow, grow, and wasn’t really cognizant of, okay, what’s their real net?
I was shocked that when I would ask them, most of them weren’t even paying attention to it. But then that led me down the path of, hey, let’s unpack, are you a corporation or not? When you get a check, what happens? Does it go to your name or somebody else’s name?
I started to really get into the next two or three years, what are the ones that have a ton of money doing? What are the ones that have some money? What are they doing? And what are the people that always seem to have no money? What are they doing?
That’s really—this video that I shot maybe five or six years ago that went super viral—just the lessons that I learned and just observing after that point, 30,000 hours of private coaching sessions. It wasn’t just about strategy anymore. I was like, I don’t care what your gross is, what’s your net? How much money are you saving? How many apartment buildings are you buying? What investments are you making?
I got really into that because I realized I can help people make money. That’s the easy part. But if they had no money at the end of it, if they couldn’t pay their taxes, or they weren’t protecting themselves, which is why I got so involved with Toby to help protect themselves, I wasn’t doing them the best service. Probably like many of you, we’re still on that journey today. I’m still helping people.
I had a client that I just took on recently that Toby made $17 million in one line item from his business and from that, made $568,000. I’m like, Houston, there’s a problem here. Either you don’t want ordinary income and don’t want to pay any taxes. I went through every one of the line items. I said, can we adjust the commission splits?
What are the adjustments we’re going to make? Otherwise, the work and stress involved in $17 million in top line revenue for $568,000 wasn’t worth it. I actually made the argument that if he was unwilling to make the change, we should drop the $17 million in revenue and just go focus on the other businesses where he’s got high margins, high profit, and less stress. That’s the kind of stuff that I’m into.
With that said, I want to show you guys the same thing that 15 million people have seen on YouTube, and I’ve shared it multiple times at multiple events. Maybe it’ll create the awakening in you that it has in so many other people that have seen this. I hope when I show it to you, it just looks like common sense.
Toby, that’s where you and I can really have some fun and unpack some of the lessons that I’ve learned. If you guys don’t know Toby well, Toby is doing all the right stuff. He’s an entrepreneur, but he focuses the same way I do, which is taking the money you’re making and creating more passive income. Put yourself in a position where you don’t have to work anymore, but getting ahead of myself. If we’re not connected in some way on social, I would say, connect with me on whatever your favorite platform is.
This is basically what I shared one day at an event. Again, I am blessed because of the work that I do. I do get to meet a lot of remarkable people. I recently moved to Dallas. Toby, I think I mentioned it to you about four years ago. Now at this point in my career and my life, it’s about where I live and who I’m surrounding myself with.
It was always that way, but it was harder when I was younger and didn’t have a lot going on and didn’t have a lot to contribute to others. Today, selecting the place where I live was really important. I didn’t want to be in a neighborhood surrounded by a bunch of people with young kids.
I’ve got a 24-year-old and a 22-year-old. I wanted an empty nester lifestyle. I wanted to be in a high rise and just the building that I’m in. The co-owner of the Clippers is inside there, the guy that started Heritage Auctions is inside there. There are eight billionaires in my building. Two of them I saw this morning when I’m taking my little puppy outside to go to the bathroom in the morning.
There’s so much information. I’m just obsessed with, what is it that these men and women do? Even today, what is it that they’re doing? How are they operating? Here’s what we know. If you look at the US, it’s basically 5% of the population is what they would call generational wealth. Generational wealth, meaning they’ve amassed enough that their kids and probably their grandkids will be just fine unless they screw it up.
You can go to the top 1%, but we know the top 1% of earners is only $450,000. It’s not a lot of money when you talk about the top 1% of earners. I’m talking about the top 1% of net worth. The top 1%, if we had it on that list would be transformational wealth, the billions and billions, and billions, and billions, and billions of dollars. But I think all of us right now watching can relate to what it would mean to be in the top 5%.
That number is about $50 million dollars in net worth, which $50 million is a lot. But when you think about some of the people we’ve gotten exposed to, $50 million is tiny. When you look at the graph, it goes like this. Hey, they’re worth a little bit, and then it goes like this, jump straight up.
Toby: Warren Buffett. He was 59 when he hit his first billion. Now it’s 90 billion. He makes most of his money since he’s retired. It’s the way I look at it.
Tom: Exactly. I actually personally coach one of the CEOs of one of his businesses. He gets access to Warren and to Greg Abel, who’s now the heir apparent, and quarterly meetings with Greg. That’s an excellent example, but it’s almost too extreme sometimes for people. It’s so unrelatable to think the way Warren Buffett operates, but there are lessons inside that and certainly one I’ll share today.
The next one when you’re looking at this is 15%. The top 15% in the US are deemed wealthy, primarily because they paid their home off, they bought a house, maybe two, and they’ve got about a $3 million net worth. I say to every one of my clients, that should be the starting place. The starting place should be to pay off your home.
We talked about buy, borrow, and die as a strategy. But in this case, my advice is to pay off your home. Maybe pay off a second one. Maybe buy a duplex or something, pay that off, get some cash flow, and all the easy stuff. 401(k)s, basically invest and wait. If you do those basic strategies, you could be in the top 15%. Anybody could do that with a little bit of discipline.
What I observed in just all my hours of coaching is, it didn’t sometimes matter how much money people made. I still saw 80% of the people I was talking to, basically were on a path to end up flat broke. They were going to end up having made all this money, bought all this garbage, shit, dumb, emotional purchases for decades, decades, and decades, and never did the fundamentals that create wealth.
When I started to look at it and started deep diving into how you manage your money, the first thing I saw was there were three types of money managers. Eighty percent of the people I talked to got a check like a commission check, a dividend check, whatever their money was coming in, and it went to a personal account. There was no LLC, there was no S-corp, no C-corp, no corporate structure at all. This is like Toby 101. That is the biggest no-no on the planet.
I’m shocked. Even just last week, I was doing an event in New Jersey. Somebody raised their hand and said, well, yeah, but in our state, you can’t be an independent contractor and have a corporation. Then somebody else stood up and said, no, actually you can. I’m like, the fact that there’s even confusion about it and somebody’s got a fixed mindset, it can’t be done instead of saying, hey, why don’t I call someone to figure out if I can do that? Let me reach out to a CPA. Let me call a tax accountant.
I was shocked at 80% of the people. Some of them are making $500,000 in commissions, $800,000 in commissions, and all of it was coming to them. They had no write-offs in most cases.
What we know from people like Toby is, the people that don’t have a corporate structure in place are infinitely more likely to be audited by the IRS every single day. Not only are they not getting all the tax advantages, because they earn good money, they’re also putting themselves at risk every single day unnecessarily because an LLC costs $899 or some ridiculous thing like that.
Again, we have 15,000 clients. I have 237 business coaches. I want to stress as I was analyzing, this wasn’t just me, this is across 29 different countries. Things get different when you’re talking about Australia, New Zealand, all throughout Europe, Canada, Mexico. I’m really talking US-specific here.
The next one was, at least in this case, they listen to Toby. They got an LLC, maybe two. When a check came in, the first thing I said to them is if you’re an independent contractor, meaning you’re not an employee, you’re not a full-time employee, you’re not getting taxes and all that stuff taken right out of your account, the first thing is you got to put aside money for taxes because if you got $10,000, you don’t have $10,000. You got state, federal, and everything else.
I say, put aside at least 35% of that. Maybe go to 40% if you live in New York or California just to be safe, and just watch. People go, oh, yeah, but see the ones that were really smart were already doing it. They were like, well, of course, I just put money aside over there because that dollar isn’t all mine, 40¢ of it goes over there. I don’t want it in my account, I want to put it over inside that account, I want to pay my taxes quarterly, get that out of the way, never get behind, and always do the right thing.
Then a percentage went to their business account to make sure they were operating their business, usually call it 25%–30% depending upon what they had in place—assistant, staff, et cetera. Then the balance went to their home account. What was interesting for me was, watching people do this, I was like, well, they’re infinitely better than that, but is there another way? Is there more to this?
I’d ask this person, how many investment properties do you own? I’m thinking about doing it, I’m just saving up cash right now. I’m like, okay, that’s fair. Have you put some money in the market? My spouse has a job, and she’s got a 401(k), so we’re doing some savings there. We put some money into the stock market, but I don’t really like it. It makes me nervous or worse. Now, occasionally, I’ve been buying crypto and I’m like, oh, shit, please sell.
I bought crypto, too, but I knew it was […]. Are you with me? There just wasn’t enough behind it to make any sense to me. To the moon Dogecoin. But my kids had fun with it. You know how I knew it was crazy? When my 18-year-old son created his own coin. That’s when I knew, I’m like, okay, this is nuts.
Toby: And then people went out and bought it, probably.
Tom: Absolutely. He sold it to a bunch of his friends. One of my employees bought a bunch and then sold. My son called me and said, I forgot that I’m supposed to have money inside the account to make it an actual currency. Eighteen, lessons learned.
My point to you is this. I’m not razzing if you were long on crypto. I still own crypto, but it’s 0.0001% of my net worth. I want to be socially relevant, that’s why I did it, just to be very clear. But I knew there was another way.
Today, I work with one of my clients, Brian. I won’t say his last name in fairness to him. A very successful real estate broker, works for a company called Sotheby’s, has a net worth of almost $30 million. When I looked at people like him versus people that were in this category, I was like, okay.
I know crypto and Bitcoin are different. I’m totally with you on that. His looked a little more like this. As I started to observe the people that were more systematic, more disciplined, more organized, they had set up processes in place so when they got a check, it just bing, bing, bing, bing, bing, bing, bing, bing. Things just started happening.
The first thing, obviously, is they’ve got a corporation. Money goes to their tax account, always. You never want to get in trouble over there. Cost of doing business, cost of living in the greatest country on the planet, pay your taxes. Percentage would go into running their business. From the home account, it all got dispersed.
Again, do you notice my thing in yellow there? These are samples, not a plan. This is not my recommended plan. I’m just giving you the example like, hey, I got to have some money in a cash account because I always want to have cash.
I did a 529(b), and I watched a lot of other people do a 529(b). Toby, you and I said recently, boy, I wish I would have just bought my son’s duplexes anywhere in the country instead because whatever, but we did the 529(b). Then you put money in the market stocks, bonds, you buy more real estate, you do some retirement accounts. The point was, it was so obvious to me the difference between someone that had the best of intentions, they’re out making money.
Remember, all these men and women are making money. They’re selling houses, they’re being productive, and their real estate, mortgage, title insurance, some stock, some other small businesses that were working with a truck driving company in Australia. They were all good entrepreneurs. They had figured out how to solve problems for their customers and generate money. The problem was, it was what they did with the money when they got it.
I have a feeling, a lot of you out there, you’ve figured out how to be great at what you do, how to serve your customers, how to make a difference, how to bring them value. You’re creating the money. The thing that I observed was, I look at my industry and I say, 80% of the people, if they stay in the business and end up with nothing, it breaks my heart.
I’ve been talking about a bunch, shared a bunch, saying to them here, here’s your minimum, call Toby, get yourself set up, get your trust done, and do all the things that we know to do. But at the minimum, you start here. What’s fun is I say, look, the next level is you go sit down with your bank, and you say, every time I deposit this much money over here, I want you just to equally divide it this way.
Whether you’re doing it on your phone, or some of the stuff that can be automatically done at all kinds of different banks. I know not all banks do it automatically. I know the deal. You either have a bank that does or you don’t. If you don’t, you have to do it yourself. If you do, it’s all done for you. The point is simply this. They have a plan and a process.
What’s fascinating for me today is because I’ve been able to carefully curate so many amazing people—Toby, when we were talking last, I mentioned that my stepmother, Fiona Ferry, moved from Honolulu to Los Angeles when she was 18½ years old. She didn’t go to college. She was this cute, half Russian, half Polynesian rock star who just says, I don’t want to be in the islands anymore.
She moves to LA. I think she was a waitress at first, and then she goes into the title insurance business. She becomes a title rep, she starts to meet a bunch of people, and then she meets this guy Billy. Billy, who’s now fondly referred to as his Uncle Billy, said, I read this great book called How to Buy Real Estate For No Money Down. Remember that book, Toby, from a million years ago?
She says, how many of you bought sets? He said, I bought about 700 so far. He stopped buying real estate around 1986–1987. Today he owns 3000 doors between Santa Barbara and San Diego. If you know anything about those marketplaces, it’s more money than most of us could ever imagine.
Here’s what’s great. My stepmom, instead of saying, okay, I’m going to figure out not just how to be the greatest title salesperson on the planet to go out and deliver value, make money, and serve my customers, but I’m going to live on next to nothing, and I’m just going to buy real estate.
She’s one of my closest friends. Today she’s 78 years old, and she’ll be at my son’s graduation in a couple of days. She’s not a stepmom. She’s mom mom, a dear friend, and a mentor to me, someone that I call on all the time to say, what do you recommend? How did you do this? I’m looking at this deal. Give me some insight. I’ve got a lot of those people in my life, and I hope you do too.
My point to you is, she just figured out a long time ago, it doesn’t matter how much money you make. The only thing that matters is, what is your plan and what are you doing with it? You’ve heard that 8 million times before, but I thought I would summarize something I did recently for a bunch of my clients, at about 3000 people in the room in Vegas. They know a lot of the things that I do because I’m very open about, hey, I’ve invested in 125 startups. I had three sales in the last week, but I also had five fall apart in the last month. I’m winning more than I’m losing.
They know that I do apartment syndications. They know that I bought 700 doors just in the last 12 months, but they knew I was buying on my own prior to that and figured out you can go further with partners and friends. Having a little bit of a lot is way better than having a few and owning it all yourself. I’m very vocal about this with my clients.
They asked me basically a question, hey, what are the wealthiest people you spend time with? My buddy who’s the former CEO of American Airlines. He lives in my building. I see him just about every day in the gym, my stepmom, or uncle Billy, see the zoning, or my friend who started a little company called realtor.com and sold that recently for $1,000,000,005.
The guy that started Zillow, if you’re familiar with that company, friends of mine. When you spend enough time with all these men and women, you really see the clues. The first one that I would challenge everybody on is this. Have you defined what it means to be wealthy? Not just your number, but what does it really mean for you?
The thing that I tell people all the time is, rather than just write down a number, I’m a little more fixated on how much cash flow you want. How much cash flow do you want? How much cash flow do you want? The second thing is, what’s the lifestyle that you desire? What’s the lifestyle that you desire? That to me is the game.
I say, going one step further, the bigger issue is for a lot of us, we’ve had to have figured out, how do I shift my identity from someone that is feeling like I’m not worthy of it to someone that I can actually go out and create it? I’m always blown away by the number of people that come to me and literally say to me, Tom, you don’t understand, my parents got divorced, or my parents made a lot of money and then they lost it all. I just have this glass ceiling in my mind that if I just make this much, I can just be okay. And if I make too much, I just see too many people losing it all.
We all have this story in our head about wealth and wealth creation. What I would just challenge you on is, what’s your story? Like I mentioned earlier, there’s a wonderful book called Affirmations of Wealth. It’s not affirmations like I’m the best, that kind of stuff. The very beginning of the book is actually 36 questions that help you unpack your current beliefs and your current psychology, specifically about wealth and wealth creation.
I remember going through the exercise of what were your earliest childhood memories. I remember just thinking, there’s never enough. If you’ve always got that thought in your background, in your psyche, in your DNA, you’re probably not going to be the person that’s going to make the sacrifices you need to make, go out and make the extra phone calls, do the things you have to do go create wealth, and take the risks because you’re always afraid that there’s not enough.
I would just challenge you. What is your identity about? The book is called Affirmations of Wealth by a guy named John Alexandrov. I don’t know if the book is still in print. It was a long time ago when I read it. But probably like all of you, I’ve read all the books you can imagine, Rich Dad, Poor Dad, Think and Grow Rich, right on down the line just trying to figure out, what’s going to work for me?
This is the big one. The thing that I would stress for all of you is you have to carefully curate wealthy people around you. I used to call it your financial fortress. I’ve had the same two attorneys for almost 25 years. One’s the junior attorney who helps me with contracts and paperwork, and one’s more of an M&A attorney and the guy that I want on my side if somebody’s coming after me for any reason, good or bad.
I’ve had the same tax strategist now for 22 years, (1) because he’s phenomenal at what he does, but (2) he’s calling me about every 30–45 days to say, hey, this is what’s coming up, here are the changes, this is what you need to be aware of, here are the next three moves. He’s not a passive tax accountant waiting for me to say, here’s my taxes, now figure out how we can do this. He’s actively helping me with my program.
I’ve got about 27 people that are just fantastic entrepreneurs that, at any given time, Toby being one of them, I can just call and say, I’m looking at this 125-unit building, it looks like this, feels like this, sounds like this, here are some of the details. I don’t know. My gut is, what am I missing in this contract? Just having people like that in your life.
My number may seem big. You remember, I started doing this when I was 30. I’m 52 now. I’ve had a lot of time to curate. These aren’t all people that I can just call on a dime. But as an example, I recently acquired a third of a new startup company. I was really fired up about this business.
I met with the founder, liked the business so much. I said, hey, I’d like to buy a third of it, I’m going to take half that, I’m going to syndicate it to five or six people that can be super influential to help you grow your business. There were two guys I called immediately, two guys that I’ve invested in 18 or 19 businesses with. Both of them said, love the business, too small for me, call me when it’s ready on the next. I’m like, but I’m giving you a chance to get in early. They both said no to me.
I said, are you going to say no to me like I shouldn’t do the deal? Or are you telling me, no, it’s just too small for you? They’re like, no, you should absolutely do the deal. We get it. When you get to a Series B, call us. That’s when it will make more sense for us. Having people like that in your life, but the only way you get there is you have to get in the right rooms.
You could argue this room right here is a Zoom room, but I think about like an interview. All of you should listen to the interviews. The second one that Kevin Hart did with Joe Rogan, and it’s the one he’s wearing the light blue sweater because I think he’s done a couple of interviews. And I’m a huge Kevin Hart fan, not just as a comedian, but just the way he operates his life, at least from what we can see as a consumer of who he is. He talked about the way he was raised in Philadelphia and how he grew up.
He said it wasn’t easy. Nobody taught us how to think about money. Creating wealth is the typical story that we’ve all experienced. Probably, all of us have had it in some way, shape, or form. He said, as he started to ascend his career, and he started making more and more money, he started realizing that he didn’t know what he was doing. He was making every wrong move.
He had an epiphany. I got to get some advisors around me that can help me do all this stuff. He actually posted something recently where he said, making money on your own isn’t fun. You got to make money with your friends. You got to get the people that you love around you so you can all go enjoy the journey together, which I agree with that 1000%.
He talked about being at the Super Bowl. This was a while back when Tom Brady was still with the New England Patriots. He said, we were in a suite. I was with all my friends, my posse. He said, I’d look out up door and I see Robert Kraft walking by. He said, man, that guy owns the New England Patriots. That guy’s a billionaire, right? He said, the game was over at this point. I’m just going to go follow him. His buddy was like, no, no, man, you can’t do that, you can’t do that. He’s like, no, no, I’m just going to go check it out.
He walks over. He said, I knocked on the door. Somebody opens the door. He goes, I look inside. Jeff Bezos is inside there, Tom Brady’s already inside there, Robert Kraft’s inside there. He said, all these just uber successful people. He said, hey, I’m Kevin Hart. They asked me to come in. Obviously, he’s lying his ass off.
He gets inside this room. He goes, I’m standing there. My buddy’s behind me like, we shouldn’t be inside here, this is not our room, man. This isn’t for us. We’re just comedians, this isn’t our jam. He’s like, no, no, man. If I get in the right rooms, I’m going to meet the right people. I’m going to have the right opportunities.
Toby, he literally says in the interview, I see Jeff Bezos. The guy’s the richest guy on the planet at this moment. He said, I walked up to him. He says, Jeff Bezos, I’m Kevin Hart. I’m a comedian. It’s nice to meet you. I don’t have any questions for you, but man, I just want to shake your hand. I just want to say I admire you. I admire what you’ve done. Jeff Bezos was like, man, I’ve seen your work, you’re really funny. He’s like, if you ever need to talk to me sometime, here’s my number, give me a call.
Most people would watch the person go by and not do anything. Maybe you’d walk outside and take a look. Oh, my God, was that Kim Kardashian? What’s going on here? Most people wouldn’t knock on the door. Most people certainly wouldn’t say, hey, I was invited to get in where they weren’t supposed to. Most people just wouldn’t do it.
I’m challenging you. Who you’re spending all your time with? Who are your advisors? For me, when I show you everything else, it’s obvious willingness to sacrifice. You know that.
My step mom’s best advice to me when I started this business 20 years ago was, Thomas, you won’t make any money for 10 years. I was like, that’s not exactly a thought I want running through my head. But Toby, I understood what she meant. I understood that you had to be willing to sacrifice and do the hard work, to travel as much as I travel, to sacrifice time away from my family for the first 10 years to build up a brand in the marketplace that was credible enough to get the accolades that my team has received. We all know that, but this is where I think all of you are thinking about.
I know, maybe it’s hard for you to see this because maybe you’re watching this on your phone. But when you look at the most successful people that I know, they all play the long game. Toby, you’re on this list. They all buy real estate. They all do multifamily, warehouses, hotels, shopping centers.
Some buy single family residences, but not so much because when that one person doesn’t pay their rent, it’s an issue. But when it’s a 4-plex, a 20-plex, or a 200-plex, you’re going to have one person not pay their rent, and it’s not really a factor, all of them are obsessed with acquiring cash flowing businesses that they don’t have to run.
Sometimes that is a business that you’re just able to invest in, not a public equity. That’s different. I mean me investing in buying 30% of this company that’s already spitting off cash flow. I can help leverage it and grow it, but I don’t have to run it. I don’t have to be involved in the day–to-day operations.
The third one, of course, is investing in stocks, but only stocks that pay dividends. Otherwise, the appreciation is great, but I want the cash flow, or I want my account to grow faster because of the dividends. Of course, the fourth one is yes, many of them invest in startups, buying real estate, multifamily.
Again, I want to stress to you guys, I can go super deep and tactical with you. When I’m standing in front of somebody and they say, I can’t afford to buy an investment property, I say, let me ask you a question. How much equity do you have in your house? They go, oh, my God, my equity has gone up through the roof.
I’m like, why don’t you take some of the cash out and go buy another property? Why don’t you take the cash out and go buy new construction that’s going to go up faster? Keep this one as an investment property. Congratulations, you’re in the game.
If you can’t do that, could you invest in a REIT, which means I’m buying into a public asset that is holding a lot of real estate, and now I’m getting the dividends and I’m getting the tax advantages through the REIT, or can you do a syndication? There are thousands of people around the country that do syndication deals on multifamily, on warehouses, on shopping centers, on hotels, where again, you’re riding next to somebody else. They’re going to take a 2 and 20 on it, of course, but they’re doing all the work, you’re putting your money in, you get the taxes, appreciation, all the advantages.
There are a lot of different ways. What I would tell you is, knowing what I know now, I would have done that way earlier. Toby, what I was doing was just acquiring duplexes because it felt the most affordable thing for me. Anything under four units because of the traditional financing you can get.
I would challenge every one of you, especially if you’re playing the long game, you can’t go wrong with real estate. But then, think about all the businesses in your town. I always start with, where can I have the most influence? Where could I move the needle? How could my insight, intellect, not time is the key, help this business owner do better? Could I spend an hour or two with them every week, giving them insight, guiding them, and own a piece of the business and get a dividend, but none of you need another job? That doesn’t make any sense.
I’m shocked by how many people say, hey, you can have five or six side hustles. I’m like, why would you have five or six side hustles? Why don’t you figure out where you can really have impact versus continually trading time for money? Investing in stocks that pay dividends, of course. Investing in startups, I would warn all of you because I’ve invested in a lot of them, you got to be really comfortable with basically 8 out of 10 failing. If you can’t stomach eight 8 of 10 failing, I would not get into the startup world.
Toby, you know my wife whom you met at the events, the startup world drives her insane. She is old fashioned Italian, let’s buy more real estate, let’s put more money in bonds, or let’s do more of that stuff. Very safe. But when the startup stuff hits, you get big lifts, but you have to be comfortable losing 8 out of 10 to win big over here, which just most people don’t have the stomach for.
Toby: I’m just going to throw this out there because they did a study on this. It was 1 out of 13, and you’ll be profitable. When you’re messing around with startups, you’re going to lose on the vast majority of them. But if you’re successful and 1 out of 13, you’ll actually make money.
Tom: I’ll give you guys an example. My former brother-in-law called me and he said, hey, I’m going to invest in this company. I was like, hey, didn’t I tell you that if you have X amount of dollars, and my advice was invest in 10 or 15 companies with that same $150,000? He’s like, no, no, I’m really excited about this. It’s a marijuana transportation company up in Calgary.
I was like, I saw that same pitch deck, and I pass on it because it’s just too easily replicated. They don’t have first mover advantage and all the reasons why. I have eight questions that I asked every single startup that usually by two or three, I’ve already said no to. If you want, I’ll share the eight questions. You could share them with everybody.
The long story short is, he does the investment. It’s the only $150,000 he has to invest. He didn’t buy real estate. Instead, he puts into this company, nine months later, it’s gone. He lost all $150,000. Don’t do that. I’d much prefer you start in order. Buy more real estate.
The last one you guys are all doing, it’s why you guys are here, and it’s why I’m such a fan of Toby, which is they invest in themselves. I know there are 10 more things. Toby, look at that list. What did I miss?
Toby: I think you’re hitting it. If I’m looking at it from an investment standpoint, I think you’re hitting everything right on the head. I would probably start with dividend stock because it’s the cheapest. It produces results immediately. For $100, you could buy a great company that’s paying, it has great cash flow, and you start paying attention to those types of companies once you start investing in them. And then on the real estate.
The only other thing is I might say, there was this old concept of the two mountains. In our younger years, our ego is on the first mountain, being great at what we do, being great at our profession. Then once you achieve that, you go on to the second mountain, and you start going into this. I want to give something back and create something that lasts beyond me. That would be the only thing that I would add probably as a six with an asterisk on it, to find out what brings you that satisfaction.
Again, using cliche statements. But when people say money can’t buy happiness, it’s because you haven’t given enough away. That’s the truth. There’s a giving component that I think works magic with wealthy people, which I think is probably why a guy like Jeff Bezos and everybody gets excited when somebody asks them something. It’s a chance for them to give something back.
Tom: Yes. I love that you said that. I’m going to add it into number six on this list. There were actually 10 on my original list, and that wasn’t on there. You know that whether it’s Breast Cancer Research Foundation, because my wife’s had breast cancer twice, an organization called CASA (Child Advocate Services), kids that are basically in the system that need an advocate, we built an orphanage over in Ghana because my son at fourth grade had a pen pal partner who was essentially living under a tree with one little box, where they had access to a computer and a bunch of my family friends. We all got together, raised a bunch of money, and poured ourselves, so that there’s no doubt that that has to be on the list.
All right. Before someone talks about protection, someone just said, I’m a CASA volunteer. Thank you, God bless you, I love you. Thank you, thank you, thank you. Toby, I got the eight questions. Can I read the eight questions that I asked every startup?
Toby: Absolutely. Yup.
Tom: You guys want these. I’m just going to read them, so get ready to take some notes. Remember, I’m willing to meet with just about anybody because you never know who’s going to have the next killer idea. You never know who’s going to be the right person, but maybe have the wrong product at this time.
They might be the right person, but they might have the wrong product, so I want to meet with them and go, man, I love you. This guy’s got it going on, but that’s a stupid idea. I don’t say that, but actually, I probably would. What I’m trying to do is cultivate the relationship so the next time around, that entrepreneur calls me again. Does that make sense?
Here are my eight questions. Number one, I say, explain the problem you’re trying to solve, but I’m a six-year-old. I force them to take usually a very tactical SaaS-based, internet-based software company, or I’m an investor in a wine and bourbon spirits company, and my buddy was like, no problem. I’m trying to bring joy, happiness, and alcohol to people. I was like, got it. But if they can’t explain the problem they’re trying to solve, that’s not a company I want to invest in. Businesses are basically formed to solve problems for a profit. That’s what they do.
Question number two, I ask, how large is the TAM? And who’s currently doing the most revenue? How large is the total addressable market? How big is the market? How much money is being spent in this area?
This recent company told me that I bought a third of, is a recruiting business for residential real estate brokerages and teams. There’s a lot of money being spent in this space, but it’s all being done in an old archaic way. It’s probably conservatively a $250 million TAM. That’s how much money is being spent.
Then I ask number three, is your model different from others? If so, how? Then I say, please describe the differentiating factors. What happens is at this point, if they can’t tell me, hey, look, our bobblehead is different because it costs us 50% less because we get it this way versus that way, or these wipes or these chips are dramatically better because of the way they feel. If they can’t give me the differences, then I have to ask myself, is the addressable market big enough for me just to invest in another company that does the same stuff as everybody else, that there’s no differentiation? Sometimes the answer is yes because I keep going deeper on the questions.
Number four, I ask, just explain to me simply, how do you make money? I invest in a lot of SaaS companies (Software as a Service or even Service as a Service). When they say things like this, we charge a platform fee, and we make profit on the platform fee, then we get a success fee when we produce results, and we get something there too. That, to me, I’m like, big enough addressable market, we could scale that like crazy. You know what I mean? I’m in, let’s go.
I recently passed on starting an airline with a buddy of mine who used to be the CEO of American Airlines because I said, explain how you make money. His answer confused me and scared me. Even though he said, look, I’m going to do it with a guy that you know who’s very famous in this space. I said, it doesn’t work for me. I don’t understand it. Are you with me? I don’t invest in things I don’t understand. I don’t invest in things that are too complicated for my simple brain.
Number five, I always ask, who’s on the cap table? Who’s already invested in the business? How much have you raised? What’s your burn? What’s the forecast to break even? When will you be profitable? That’s all under question number five.
Who’s on the cap table? Who else has invested in this business? How much have you raised? What’s the burn? How much is it costing you to operate the business every month and not making a profit?
I invested in a company recently. The founder, he and his buddy started a little company called Zillow. He’s got a track record. He raised $127 million, essentially, on a napkin.
He said, we won’t make a profit for two years, but let me show you exactly how we’re going to get there and not lose in the two years while we’re building up this new identity. I thought, wait a minute, I don’t think Zillow made any money for eight years, and that worked out okay. So I invested even though I knew we were going to lose money every month.
Number six, tell me about your management team, and then tell me about all the key players. If it’s software, tell me about your engineers, tell me about your project managers, tell me about your chief product officer, tell me about your BI person. Tell me about everybody inside the organization.
Usually what scares me when it’s too early is they say, well, it’s me, me, me, and me. That usually scares me. That’s when I’m like, okay, we might have an overachiever, we might have a control freak, we might have somebody that hasn’t figured out how to scale themselves. If they can’t figure out how to scale themselves, I’m not investing in that company. I’m looking for the person that knows how to get people around them to do all the right things and grow together as a unit.
Then I ask a very specific question if it’s in my space like, have you pitched, and I named the three biggest VC groups in most of these places that I play? If they don’t know who they are or haven’t been able to get into them, it also gives me some insight. Those are my questions.
I’ve done about 1200 pitches and invested in 125 companies. About 1 out of 10, I say yes to. That’s over a 10-year period, and it’s absolutely paid off.
Toby: It’s interesting. I used to sit in a business group, and they would do the shark tanks. They would give away $50,000 to the group that they tied into the local university here at UNLV. We had the Innovation Center and stuff. It was fun just to sit there.
People that didn’t get funded would sit there like, oh, this is it. No, that’s not it. You’re just not ready yet. I would say this. I actually took two guys in. We actually had the Vegas Tech fund […]. I went to people that I knew, and I said, what are you looking for? And then I made sure that we address those points when we did the marketing plan. It was like, oh, we want to see a five-year exit, we want to see this type of number. I was like, okay, guess what the numbers then. You’re going to target that.
Tom: Yeah, you and I have the same mindset. When I do those meetings, when I say no, it’s a soft no. The humanity in me is like, hey, but Toby, what I want you to think about, or hey, let me introduce you to this person. You have a really good product, but it’s not a company. Let me introduce you to a company that can bolt you in. When you’re ready, they can be the natural acquisition. I do that a lot for people. That’s just the karma. Just do good, do good, do good, and good things happen.
Toby: I think you’ll learn. One thing I would say that is consistent with the folks that I deal with that are, let’s say above the $10 million range, or we’ll use your example. You said the top 15%, 3 million and above, which I think is probably about right. As an aside, it’s not who you think either. They’ve done studies on millionaires.
Top three categories, engineers, accountants, and teachers. It’s not who you think. A lot of these folks that are very successful, it’s not who you think. But what they are is they’re voracious givers, and they’re voracious learners.
While you’re doing this—tell me if I’m wrong, Tom—you’re thinking selfishly all the time of the information you’re learning, how it applies to other things you already have going on or things that you’re doing in your business, and you learn while somebody is pitching you.
Tom: 1000%. It goes back to that book. A lot of people are talking about Andrew Huberman right now, who I’m a huge fan of. He’s also a Stanford professor. I was listening to a podcast he was doing recently. Of course, he’s referencing the reason why most people will just simply fail is they’ve got a fixed mindset. The other Stanford professor is Dr. Carol Dweck.
You and I listened through similar. I listened through, can I help this person? While I’m simultaneously thinking, what am I learning from this person? What is this person sharing? What insights do they have about the industry, the market, the world, the thing that we’re studying right now? Whatever it is. I’m just constantly absorbing new insights. As you know with me, in our last podcast, I’m interviewing you. I probably took 10 pages of notes.
Toby: I’ll just relate this to my world because we do a lot of the tax stuff. I don’t do all tax things. When we’re talking to somebody with really high net worth, it’s funny because they said, the Trump version or my version? It goes like, what I’ll tell the bank that I’m worth, or what I think I’m actually worth? He goes, because it was $50 million or $150 million.
It wasn’t something I could do. But because I had spoken, and it was another guy on a podcast, I was like, but I know exactly who deals with this issue. I was able to pick up the phone and quickly make a referral. I think that there’s a lot of that, people that love to keep me within their family.
As you’re going out, and you’re learning all these different people who are really great at different things, it’s just constantly expanding your Rolodex. If you don’t think that’s important, then you’re not paying attention because your Rolodex, even if it’s electronic, or even if it’s just up here is very, very valuable. I think that’s true. We like to keep things within our communities.
Tom: It’s interesting too. Many of you probably know the name Jim Kwik. If you don’t know him, he’s the brain guy. He’s Mr. Memory. Literally, you can give 1000 words, he will read it twice, and then repeat it verbatim.
He said to me all the time, how do you when you get somebody’s name and information you put inside your phone? What do you do? I said, oh, I would go Toby Mathis, tax strategist, wealthy guy, accountant, insider. Literally, that would be your name and my phone.
Anytime I’m searching for things, all of those people with any one of those keywords show up. He said, that’s exactly how I want you to do it. I probably got it from him. I probably read one of his books and just made that shift, and I hope everybody would do the same.
All right, I did see somebody that said, hey, Tom and Toby, look at a startup out of Philadelphia called Sapient Industries.
Toby: Energy uses insights of commercial real estate, clean energy, waste, and buildings to accelerate the carbon commitments. That’s interesting, anything to save money.
Tom: Right. Anything with real estate, I’m always going to be far more interested. Thank you. I was actually just in Philly.
All right. Hey, Toby. I know we shared a bunch here. I just want to say thank you again for all that you guys do. I know you guys, like myself, do a lot of events. You do a lot of training. I hope that for the person watching right now that I delivered some insights and value, or I just validated what you knew. Sometimes just having what you knew validated is the key.
My advice to you, though, is now it’s about putting your butt on the line. It’s about actually doing something. I’m a big fan of no more than three goals per quarter. Sometimes no more than three goals for the year versus trying to have a list of 50 things. If you walked into my apartment in Dallas, on the window looking out to North Dallas out to SMU, my wife and I both have, here’s the three most important goals.
We’re paying off this line of credit that we used to buy a bunch of real estate. Almost done with that one, so we want to get it done by the end of the quarter. How much money do we want to invest this quarter? Then a bunch of relationship-related goals. For us right now, just inside this quarter, those are the three most important things. Get that on your bathroom mirror.
The second thing I would tell you is, if you don’t add some accountability, I use my children, especially when they were younger. I would say, if daddy can go out and do A, B, C, 1, 2, 3 in this quarter, what would you guys want in return? Boy, you have no idea when you offer an Xbox to a 10-year-old and 12-year-old, how much they will bring up what you needed to do to make it happen.
If you don’t have kids, then I say, go to your church. Go to the group that you want the most influence with, the group that you want to contribute the most to. It could be a soup kitchen, your church. It could be something.
I had a client. She was the former number one agent in the world for Century 21. She hit a certain level and just got bored, had enough real estate. She did all the right things, but still was young and had this enormous pace of business, never was married, no kids. She’s living in San Jose, went to church every Saturday and Sunday.
I said, why don’t you do something for the church? That was it, just a question. Why don’t you do something for the church? She said, there was a vacant lot that we’re using as a parking lot next to her church. She figured out who the owner was, made him an offer, the person accepted the offer.
She went to church on Sunday and said, pastor, I just want to make an announcement. I just bought the vacant lot next to us. I’m building a YMCA there for the children of San Jose, and I’m donating it to the church. Six thousand people, one of these mega churches, 93 real estate agents left immediately because she’s going to get every referral you could imagine. That wasn’t her intention.
What she said to me was, I was just bored in my business. What you did as you got me to think about putting my ass on the line again, stepping up and doing something big. It took her three years, I was there, we cut the ribbon. She donates this YMCA to the church.
She made more money in those three years than she had ever made in a three year period of her career, and the market wasn’t on her side. It was because she just put her butt on the line and said, this is what I’m going to do.
Toby: This is the only thing I’m going to add because you’ve nailed it. It’s reaping and sowing. She didn’t even realize it that she was sowing some goodness out there. It was old Andrew Carnegie, the richest man on the road. He wrote something called The Gospel of Wealth. He says, millionaires are the trustees of the poor. Some people are just really bad at making money, so you have to help them.
Here’s the funny punchline. When you help them, you make more. It’s almost like a universal rule. I keep seeing this. There was somebody else that built a volleyball stadium and all this other stuff. He just can’t get out of his own way. The business is just spiking at him. I just see that over and over again.
One thing is that giving side over and over again. When you see wealthy people, you see that sometimes it’s connive like, yeah, okay, I can get a huge tax benefit at it and things like that. But that’s not the reason they’re doing it. If they’re doing it for the right reasons, they can’t get out of their own way.
You see that when you look at families, the Rockefellers versus the Vanderbilts. If you ever just want to do a case study of the Rothschilds, you need to start looking at these. The Hershey Foundation, look at that thing. It’s $13 billion, or IKEA is owned by a charity. When you start looking at what makes these folks tick, you can see that that is a component in almost every one of them.
Tom: Yeah. You know, Rolex is a nonprofit.
Toby: I did not know that.
Tom: Yeah, that was another […] I heard recently. I spent a lot of time in Jacksonville, Wyoming. The wealthiest Americans basically donated all of that land. I think they donated all the land, and they created a bunch of new tax codes. They definitely did that. There was some intentionality aligned.
Toby: Mar-a-Lago had conservation easements that got Trump about $12 million of deductions or something silly.
Tom: I know we got to wrap, but I want to say thank you. On the last podcast, we talked about asset protection. One of my houses was actually in my personal name, so that has been solved. Thank you. You gave me that insight.
For the people that are listening, I interviewed Toby on my podcast. We’re talking about, basically, all the mistakes to avoid. Again, I’m taking 10 pages of notes, but one of these you said was, don’t ever have any assets in your own name. I wrote down, is that house in my name?
I called my […]. He said, yeah, but there’s not a lot of advantage to it. I said, except there’s a lot of equity. If I ever got sued that that would be the asset they would go after? He’s like, no, just do it anyway. Just put it in an LLC. So thank you.
Toby: I appreciate that. If anybody likes the asset protection stuff, we’ll put up a link so you can come and do the Tax and Asset Protection course.
Tom: Strongly recommended.
Toby: This was true. We just wanted to bring value to you guys and give you something cool. We’re going to put this as a recording. We’re going to let it live on the YouTube channel. Thank you, Tom. If somebody does want to get ahold of you, how do they get ahold of you?
Tom: Follow me on Instagram and send me a DM there. That’s the place where I’m probably the most. I’m active on everything, but Instagram seems to have most of my attention right now, so @tomferry on Instagram. Connect with me there, send me a DM. It’s always me responding. I respond in emojis. I misspell things, then you’ll know it’s me.
All right. Toby, thank you so much for the opportunity. Thank you everybody out there. Put your butt on the line, do something big. I love give, give, give. Spot on. Thank you so much. I appreciate the opportunity.
Toby: Thank you, Tom. Share it with somebody you love.
