The 5 Money Milestones That Give You Financial Freedom

Everything that you've been told about money is totally wrong. People think that you have to have a house, a car, a white picket fence, maybe a full 401k, a $55 million dollar net worth before you, $55, and these are just expectations that are created by society. The problem is, none of us have actually been given a plan on what to do next. When we're at school, we know that we have to go to kindergarten and then first grade and then second grade. You finish up elementary school and then you finish up junior high and then you finish up high school. You know exactly where you're going, but no one has ever done that for money. And because of that, we just see whatever's in the headlines, we just see what our neighbor does and we feel like we want the things that they want. We just want a pulporeal of things overall. Now the most important thing that you can do is to lay out and have a plan for yourself. And I got a chance to do it all the wrong way and then figure out how to build it the right way. Hey, if you don't know me, my name is Sharon Trubatso. Thank you for being on the channel. I got a chance to build two billion dollar companies, both in the real estate business, one privately traded, one publicly traded on the NASDAQ. I was an investment banker at Goldman Sachs. I've invested in a hundred plus companies that I make die hard and I have a Ducks fan. And today I'm the CEO of Acquisition.com where I work with my friends and partners, Alex and Leyla Hermosi. And today I want to show you the five milestones that actually will get you to amazing financial freedom. And now it's time to announce to a number one. It's making sure your active income is greater than your monthly expenses. Well, what does that mean? Your active income is where you spend the time working in a job where you're trading time for money. And you want to make sure that the first thing that you do is your active income is greater than your monthly expenses. If you can't actually have work that pays for your lifestyle, then everything else is kind of meaningless, right? And so the thing that we need to do is to figure out what is my active income and does it pay for my monthly expenses. The big question here is, well, Sharon, what if my monthly expenses and my active income don't match up right now? Well, that means that we need to do something so that your active income gets boosted in some way. Well, how do you do something like that? Well, let me give you an example. When I was in college, my roommate had this perfect plan. And all he wanted was he wanted to live in downtown Chicago. He wanted to drive a brand new Honda Accord and he wanted to live in a door man building in downtown Chicago. That was his dream. And he realized at that point that he needed to make $65,000 to actually afford that lifestyle. This is giving away how old I am, right? Now, lo and behold, when we graduated from college, what do you think he made? $65,000. And he was happy. He got a brand new Silver Honda Accord. He had a door man building in downtown Chicago and he had a job that he liked. Well, something unfortunate happened. And that is that his sister got sick. And because of her sickness, she had to move in with him. She was not able to work. She needed medical expenses. And he was now the sole provider for his sister. And he didn't really know what to do because the bills were adding up and he was unable to keep up overall. So he realized that he needed to up his skills. He needed to up his talents. He needed to have something more to offer the marketplace because his original dream of making $65,000, driving up Honda Accord and living in downtown Chicago was not the answer because he had to take care of his sister. And his expenses were now $120,000, just three, four months into him having done this. By the way, how do you actually take your income from $65,000 to $120,000 in three months? Well, he did a bunch of research and he realized that if he got a project management certificate, a PMP, then it would give him an opportunity to have a whole new slew of jobs. And so from 5 to 9 for 90 days, he paid I think $1,800 for this course. He took a certification program and he got a PMP, a project management professional certificate. And right after he did that, he was able to apply. And he got a new job within six months of graduating from college, just making $65,000 a year. He was able to get $125,000 a year job and take care of his sister. Now why do I say that to you? Because what he wanted to do in Milestone 1 was to ensure that his active income from his job was greater than the expenses that he was feeling. And that was Milestone 1. He was not worried about a $55 million net worth before he was $35. He was not worried about buying a land bowl. He was not worried about rental properties or 401Ks. He just wanted to make sure that his active income was greater than his monthly expenses. And by the way, if you can just get your active income greater than your monthly expenses, you're already 90% of the way there. Because now you have a baseline to work with. You have the stability. You have the day-to-day security. You have purpose. You have meaning as to what you're doing and how it's actually giving you the lifestyle that you want. That's Milestone 1 is where your active income is greater than your monthly expenses. Now if that is the case, then what is Milestone 2? And Milestone 2 is actually a lot easier to put together than you think. And that is building a money distribution system. So what is a money distribution system? Well, most of us when we get our paychecks, maybe a commission check or our distribution check or a salary check, it just all comes into our checking account. And then we run our entire lives from this one simple checking account, which is okay. However, if you don't have a distribution system for your money, then you don't really know where things go. So establishing a distribution system is really important. And that is Milestone 2 because it allows you to figure out where you can start to channel your money. Now, I called this the quarterback and it's aptly named from the NFL because what is the job of a quarterback? The job of a quarterback is to distribute the ball. And so the main part of the distribution system is to ensure money comes into one place and it gets distributed to the right things, the right vehicles that you want to build from an economic perspective in your life. The first thing is when the money comes into your checking account, automatically the amount of money that you do have for your monthly expenses should go into your monthly expenses like the spending account. And then you should pay your credit card out of that account because now that gives you accountability that you're not all working from the same co-mingled pool, this shows you the discipline of making sure you can run with a fixed budget of monthly expenses. The second is if you are in a position where taxes are not taken out at source, this also gives you a time to put some money aside for taxes. Now, if you have a salary and the W2 job and you're taxis having a bit being withheld at source, that's totally okay. But then anything that is a surplus is then left over. Now you know that you have a surplus that you can do something with. Having this distribution system starts to give you a sense of where the money goes. Now let me give you the why I think every single person should do this and that is this is the pro tip by the way. In most of our lives, we have to put our bank accounts. That is the, you know, away from which we get paid, our ACH, our bank information, routing information that goes on our tax return, that goes on our direct deposit at work, that goes in, you know, when you give it to your internet provider to pay a bill that goes to all of these places. And because it goes to all of these places, you have no idea if they're fishing scams or financial security issues or if there's leaks in your account numbers. Well, the reason you have this quarterback account is that the quarterback doesn't really hold any money. And because of that, even if that account number gets leaked in some way, it's okay because all the distribution happens elsewhere. So if you didn't do anything else, just ensure that you have a two account system where all the money comes into your quarterback and the quarterback gets to deploy it into the right other vehicles in your life. Not alone will give you protection overall from the cyber security in this process. So milestone number two, establish a money distribution system. All of us should be able to do that right away. And once you do that, you're already in milestone number two. All right. What is milestone number three? And that is asset location. You may have heard the phrase asset allocation. And that is, hey, how do I have stocks and bonds and mutual funds? And how do I allocate my assets with some magic formula? Well, before you do any magic formula, you want to think about asset location. And that is where do your assets sit. Now, you may say, sure on all, I don't have assets. Now, you do have assets. Every dollar is an asset. Every paycheck is an asset. Every savings account is an asset. But where the asset sit is really important. Let me give you an example. And just the basic way of thinking about assets is the location is what is taxable and what is tax deferred or tax efficient. And what do I mean by that? So in the United States, we have these tax deferred accounts. So the tax advantage account, they're called the 401(k)s, the IRAs, the retirement accounts, et cetera. Well, the benefit of having a tax advantage account is that when the money is in the tax advantage account, unless you pull it out for some reason, it grows tax free. And that's a good thing. Because now, you know that the money that you're keeping for a while, you can actually grow that and leave it in a tax advantage account and it grows tax free because taxes are the number one drag on wealth creation. And so there are some things that you have to keep that better off, more optimized to keep in your tax advantage account. There's some things that you're better off keeping in your taxable account. For example, if you have option with your employer as a 401(k), now that's an asset, a location vehicle. So if your employee gives you an access to a 401(k), you should consider that. Especially if your employer has a match, meaning the employer will say, hey, if you put 3% we will match that completely. So if you had a $100 paycheck and you put $3 away, they will just give you another $3 right into your 401k. Now, in a lot of ways, that's free money into ways. Number one, it gets deployed into your tax savings account or tax advantage account. And second, they're just giving you that money. They're actually helping you with retirement. So the location of that asset is really important. So it gives us a chance to say, well, at this time, am I better off putting that in my 401k so that it grows tax-free and I can get matched? Or am I better off just getting it in my taxable account where I pay the taxes and then do whatever else? I want to look at it, right? The same thing is if you're self-employed, you may get a CEP IRA or a Roth IRA or an individual IRA. Now it gives you a chance to say, well, do I actually want to invest in these retirement accounts? I know that there is some people that would rather not invest in retirement accounts. And that's fine. But at least now, they have talked through the idea of should I have an asset allocation strategy or should I have an asset location strategy? The other idea for asset location is our family did this when we were starting out many years ago. We created a donor-advised fund. What is a donor-advised fund? It is a simple family foundation to make charitable contributions. And that is also tax-efficient. So any money is given to a donor-advised fund. It's instantly taxed out to both for you and it works just like a private foundation. But without all the paperwork hassles of a private foundation. Now I was able to start to teach my kids how to actually invest in this. And so when they put money in this donor-advised fund, we didn't have a lot of paperwork, but they were still able to take the tax deduction that day. So the question here becomes, which monies are going to go into a tax advantage vehicle? And which monies are going to go into a taxable vehicle? This also gets the point where from an asset location perspective, you get a chance to choose where you want to live. For example, if you are living and working in the gig economy, meaning you have a remote or a hybrid job. And you don't actually have to be in the office day to day. Or you're working in the gig economy where you're a coach, or a consultant, or an agency owner, and it doesn't matter where you live. Well, if it doesn't matter where you live, and you really care about managing your money, it is probably worth the consideration for you to consider which state you live in. So I live in this great state of California. And what does that mean? I pay an extra 13% in taxes that you probably don't have to pay. Now, in return for that 13%, we have 73 degree weather. Now, you may not have 72 degree weather and no humidity. But you may say, well, I don't want that. I want to live in Nevada. I want to live in Florida. I want to live in Texas. Elon Musk is moved to Texas. And that's totally OK. Because now you get a significant delta back in your taxes because there's no state taxes in those locations. And you benefit from that. Again, asset location. It is where the assets are held, both domiciled from a location perspective physically or which type of accounts that they're held. So you can make a strategy around those. And once you put that in place, there's no active management associated with that after that. You automatically get the benefit, which is insane value overall. I think this is one of the most underrated money milestones out there because you only have to make a few decisions, a few times in your lifetime. And once you set it up and put it in place, it automatically runs giving you the massive advantage for the future. So milestone number three is asset location. Where do your assets actually live and how do they work for you? All right. Here's milestone number four. And that is cash management. Well, what is cash management? Which is, should I just take my money, leave it in my bank account, and just log into it every day, click refresh, and see that it's there? Well, no. Because every dollar needs a job. My money coach is Russ Morgan and Joey Murey have the same way. They said, hey, Sean, let's assume you walk into work every day and you have 100 employees. And you see all of them with their feet kicked up on the desk and completely goofing off. How would you feel? And I was like, well, I would be pretty mad. Well, yeah. Because just like every team member has a job, every dollar should have a job. And the key part of that is we are not taught about cash management in any way. Because all the weird taught is open a bank account and put your money in your checking or savings account. Well, the checking or savings account in a general commercial bank right now, the largest banks that you know, beg America, chase, Wells Fargo, what have you, is I don't know, 0.1% maybe on a good day. And so they actually take your money and lend it out to other people and you make nothing on your money overall. So making your money work for you because every dollar needs a job is important. So the least, if you do nothing else, you have to at least think about finding a high yield savings account. They call it a HYSA, a high yield savings account, which gives you somewhere in the 3 to 4% range with FDIC insurance on your cash, for the exact same benefits, that way you get paid for your cash overall. Now, the reason I'm recommending this is because if not anything else, you at least try to keep pace with inflation. Inflation is a silent tax on your money and most people don't see it or feel it and that is very, very difficult. And so if not anything else, just getting your money in a high yield savings account is a valuable thing because it at least keeps pace with inflation. Now, there are some other ideas that I will give you when it comes to cash management. One of the things that I've used for my children is a CD ladder. It's, if you want to keep your money at a Wells Fargo back in America, what have you? I will explain what a CD ladder is. A CD is a certificate of deposit. What they do is they, you go to the bank and say I want to invest in a CD. They say, well, this is a three month CD or a six month CD or nine month CD. And if you leave your money in here, it's illiquid for that time period, by the way. If you leave your money in here, they give you a certain rate of return. And the problem is you just can't pull any money out during that time. So if you invested in a CD at 3% for three months, for that three month period, that money is locked up. You can't pull that money out. So I was thinking, well, what would be in most pragmatic way to still get the return that I want with these CDs, but give myself enough liquidity in the process? So I thought this idea called a CD ladder. It actually comes from the bond world called a bond ladder. And I applied it to the CD world. And that is instead of putting all your money in one CD ladder, you stagger it. You put it in a ladder. So I put maybe 20% of my money in three months, 20% of my money in six months, 20% of my money in nine months, 20% of my money in 12 months, and then 20% of my money in like 15 months. So what happens is I still get the full kind of impact of the longer time horizon and a higher interest rate. But every three months, I have an option for liquidity. And that's great because I never have to feel like I'm stuck and have to deal with the lack of liquidity and then be bummed that I'm not getting the interest rate that I want. I will tell you what I do personally. I like having more liquidity and control over my money. And so I use a cash management portfolio. I'll give you the actual securities that I use. You should talk to your financial advisor because it's the right thing to do. I want to tell you what I do because I want to be fully transparent with you. I do a combination of four ETFs or four exchange-stated funds that you can buy in your charge while or your Robinhood or what have you, where I keep all my cash. And because every dollar needs a job. And those are SCHO, SCHD, TIP, and SGOV. Well, what are they? SCHO is a short term, is a fund for short term treasury securities, so you somewhere get it a 3% to 5%. And then SCHD is a fund of dividend paying stocks in the US. So I get some dividend paying stocks. And I also get a little bit of equity growth. The third is TIP, which is a Treasury inflation protected security. And what that does is it allows me to beat inflation, because I know that inflation is a silent tax on your money. And the fourth is SGOV, which is a short term treasury facility, which gives me access to cash, but still gives me a return. And that combination, that little portfolio-- I do a 25% and all of it. You can do some combination of it or talk to AI to give you a better combination. Talk to your financial advisor to see if that's the right one for you. But I'm telling you exactly what I do, because it's sitting in my checking account at Bank of America. Now it's actually working for me. Once you start getting your cash management working, you'll start to realize that, hey, I have my active income greater than my monthly expenses, milestone one. I have a money distribution system, so I know where my money is going to go. And I have some surplus so I can put it in cash management. Number two. Number three, I figure out what asset location. Am I going to live in Texas or am I going to live in California? Am I going to put it in my IRA and 401(k) and I'm just putting my taxable account? You know where the money goes location-wise, so it can work well for you. And the last and the fourth milestone is getting your cash management right. And when you get your cash management right, you start to see your liquidity work for you, so you feel significantly better that when you wake up in the morning, every dollar has a job. Now and only now, are you ready for milestone number five? Which is investing, or you get your money to work for your money. Now, a lot of people just want to say, hey, can you give me a great investment idea? Can you give me a great stock dip? Can you, should I buy a real estate? Well, all of those are interesting, but all of those break down and people make bad investments because they don't have the other four milestones dialed in in their lives. They don't have, they've not gone through elementary school, junior high and high school before they've gotten to college. And then they take on risky investments because they don't have the overall financial discipline for actually making investments. And the interesting part is, milestone one, two, three, and four can all be achieved very quickly. You can do all of this probably right now in a weekend. But once you have those, you have the discipline, you have the infrastructure to do more things with it. And it's not just, well, should I spend $2,000 by in crypto, or should I buy a hot stock, like Tesla or SpaceX? And now you may say, well, Sharan, okay, you gave me all of this. I really wanted this investing part. What do I invest in? Well, I don't know what you should invest in. I don't know what is the right thing for you. I don't know how old you are. I don't know what your goals are. But I will tell you this. I will tell you what I am teaching my children and what I am doing myself. In the Western world, there's two asset classes. And asset classes, you stay broad investment vehicle. There's two asset classes that actually drive the vast majority of wealth creation. And those are companies and real estate. All right. Now, if not anything else, if I'm just getting started, what I want to do is I want to invest in as many companies as possible. And I want to invest in as much real estate as possible. The problem that most people think is like, well, Sharan, I don't have a company. You know, I have a really great job. I make some money. I invest in my 401k. But it doesn't feel like it's growing. If you had a company, you would have equity in that business. Well, if you don't have equity in that business, well, you might as well have equity in someone else's business. And having equity in someone else's business is really good because you let them wake up in the morning and do all the work and be accountable to Wall Street and be accountable to their board. And you just have one piece of it because they have to deliver for you. And that is just investing in a broad-based index. That is the stock market. Now, I'll tell you what my son does. Every time my son reads a book, instead of saying, hey, Kudos, good job. We give him $50. And he takes that $50. He goes on the Robinhood app. And he actually buys a small piece of VOO. VOO is the Vanguard index that allows you to invest in the entire S&P 500. Right? So he owns a small piece of every company in the S&P 500. Now we talked about the Golden Starways, which is like the two things, the two categories that have the best chance of giving you massive wealth creation. One is company second is real estate. Well, most people will say, well, Sharan, I don't have the time to even buy my own house or I don't have the time or the money or the capital or the liquidity to invest in a rental property or something like that. How do I invest in real estate? It's really difficult for me to do. Well, that's why even my son, who's 14 or even me, invest in a real estate fund. So the investment ticker that we use is V and Q, which is the Vanguard real estate ETF. And that gives you access to the North American real estate market. So as real estate grows, you get the benefit of that overall as well. So it's, I call this process the TGA, a tiny income generating asset, TGA, tiny income generating asset. And I'm teaching my son that once he starts to think about investing in companies or investing in real estate, there's one thing that really works and that is equity. Investing is all about trying to invest in equity so that you become an owner. You want to own something and that owning something only happens in milestone number five. Once you get that working for you, you have all the milestones working and now you really have a really great operating system for how you think about your financial growth. So wherever you are in this milestone process, you know, you can pinpoint and say, hey, I'm in milestone number one, I can easily get, I'm in milestone number one, which is active and committed to monthly expenses. I'm milestone number two, which is the money distribution system. I'm milestone number three, which is the asset location, where do my money go? I'm milestone number four. Every dollar needs a job, which is cash management. And then I'm milestone number five, which is I start to invest and I started based on the golden share, which is a two categories of companies and real estate. The reason I'm sharing all this with you while driving towards this morning is that these are real money milestones to aim for. It's just doing random baby steps like saving $1,000 or cutting up your credit cards doesn't change your life in any way. What you want is you want to have meaningful growth in your life and you need a meaningful milestone. So that's why I came up with these milestones for myself and I've sharing it with my family and I'm sharing it with you. But if you did this, you can buy one. It's not about having the $55 million network. If you did this, you can get there. The five money milestones are how you make sure that time that you spend and infrastructure that you build turns into massive wealth for you.