Graham Cochrane (00:05.824)
Most people think you have to save a million dollars before you can feel financially free. But what if that's not true? What if you could experience the same level of freedom right now without waiting decades or even needing a seven figure nest egg? I want to show you today a simple way to think about money and business that flipped everything for me. Once you understand this, you'll realize you might already be closer to millionaire status than you think.
Graham Cochrane (00:49.368)
So for the purposes of this episode, we're gonna use the term millionaire and we're gonna talk about having $1 million in a nest egg. I understand that being a millionaire is no longer what it once was in terms of what a million dollars will buy you today. So if a million dollars is not your thing, just bump up the number to whatever your thing is and the concept will still apply, okay? But for simplicity's sake, for math's sake,
And for the fact that most people by definition are not millionaires already, I think we can all agree that being a millionaire is still something worth pursuing and the concept will work either way, okay? So let's talk about what most people think being a millionaire is. There's what most people think it is, what by definition it's supposed to be, and then I'm gonna give you a third option, door number three that I think is even better. What most people...
think being a millionaire is when you ask them is that you make a million dollars a year. That is not what being a millionaire is for two reasons. One, you can be a millionaire without having an income at all, right? Being a millionaire has nothing to do with your income, what's coming in. It's a status of your assets. So we'll get to that in a second. So you don't even need to have a job. There's retired people that don't work. They don't get paid.
that are millionaires, they don't make a million dollars a year, but they're millionaires, because it has nothing to do with income. All right, so keep that in mind. Two, there are people that make a million dollars a year and they spend a million dollars a year and maybe that's what you want to do and maybe you'll be like, Graham, I'm happy with that, like, I don't care, but they have no net worth. Meaning, if that income faucet is turned off, the business dries up.
or they lose their high paying job or the economy changes, they got nothing. They're still at zero. They're still at zero. And that's why income is misleading. It's not how much you make, it's what you do with what you make. So being a millionaire is not making a million dollars a year. Number two, technical definition of a millionaire is a net worth millionaire. Meaning your assets minus your liabilities, what you own minus what you
Graham Cochrane (03:07.47)
O equals at least $1 million. So for example, if you have a $500,000 house and you only owe $250,000 on it with a mortgage, well, there's 250,000 remaining dollars in equities. That's part of your net worth. And then if you had a 401k or a retirement account or something like that, that has $750,000 saved up in it, and it's invested in stocks, bonds, mutual funds, whatever.
That $750,000 in your retirement account and the $250,000 of equity in your home, put it together, you my friend are a net worth millionaire. Now, that may not sound exciting for a variety of reasons, but it don't matter what it sounds like, it's what it is, friend. You are by definition a millionaire and that is interestingly enough what most millionaires are like in America. They own a home with some substantial equity in it or it's paid for.
and they have a retirement account with hundreds of thousands of dollars or more in it. Now there are other ways to amass a million dollars of net worth. You can own rental real estate, you can own commercial property, you could just have a million dollars in cash under your mattress. That works too. But a definition of a millionaire typically is a net worth millionaire. Now here's the problem with that definition.
A, most people don't have a million dollars saved up. B, it takes time to save a million dollars. Now there are ways to save it faster, AKA start a business. That's how I made my first million was, I was in my 30s, I think I was 35 when I crossed over the millionaire status mark. It's because I had a business. It's not because I have a high paying job. It's not because I was a great investor.
Like the money came through my business. Now.
Graham Cochrane (05:06.946)
Here's the problem. If you're starting your business or you're a couple years in and you're like, grandma, I haven't saved a million dollars, but I wanna be a millionaire. Let's unpack really what a million dollars does for you because here's the bad news, good news. Bad news, having a million dollar net worth doesn't actually do a ton for you. Hey, as Myron Golden would say, it beats a stick in the eye. So.
these are rich people problems, these are good problems to have, but we can be honest, you and me, we can be honest, right? We're trying to build our wealth, we're trying to build our life, so we're not average. You and me are not average, we're not gonna be complaining about rich people conversations, we are the rich people, and if you're not rich yet, you will be if you do what I say. I want you to succeed, I want you to grow beyond where you are right now. So let's talk about this, let's be honest and candid with each other.
When you save up a million dollars, what does it do for you? If you're smart, you don't just start spending it. Like people think, oh, I wanna have a million dollars when I retire. If you retire with a million dollars and start spending it, bro, it'll be gone before you know it. The trick is to implement what's called the 4 % rule. Now the 4 % rule is rough math based off of this study called the Trinity study years ago where they ran,
all these Monte Carlo simulations, all these projections of in any given economy, stock market status, how long will your money last? How can we have a nest egg of money that we saved up? Now we retire and we start to peel off a little bit each year to pay us a salary, because you you don't have an income anymore and have that pot of money never run out. And they discovered that if you peeled off 4 % on average every year, you will
not run out of money in whether it's 85 to 95 % of cases. If you study the Trinity study, you can tell me the exact numbers. It's more detailed than that and you shouldn't set it and forget it every year, but it's become very common in personal finance circles to reference the 4 % rule because it's relatively close. Maybe it's less, maybe it's three, three and a half, maybe it's more, five and a It just depends on what you're invested in, what market, what year you should probably adjust.
Graham Cochrane (07:25.866)
year to year based off of all kinds of things, depends on what inflation is doing, blah, blah, blah. But it gives you a really simple benchmark of how much money that nest egg can spit off for you safely every year in perpetuity and you never run out of money. It's like creating your own pension. Right? Like if you work for the military or the government and you retire and they'll we'll pay you $70,000 for the rest of your life. How do you get
guaranteed $70,000 for the rest of your life. Well, if we don't have a pension, we create our own by saving up a lot of money and peeling off a little bit, 4 % rule. So math, if you have a million dollars in your retirement account or wherever invested in something growing, hopefully closer to seven, eight, nine, 10%, like the stock market, like an index fund, you could peel off 4 % of that every year safely and never run out of money and it could adjust for inflation, which means,
you could pull off $60,000 a year, which hey, it's not bad. That's something to get paid 60 grand a year every year for doing nothing. I'll take it. But you ain't running around like a rock star, right? But hey, it's something. So let's use that math. Again, 60,000 a year is what a million dollar nest egg can supply reasonably every year in perpetuity. That's the safe withdrawal rate, as they call it.
So math, $1 million saved up equals $60,000 a year in income, which, let's just talk about monthly income, because that's more relevant, helpful than annual. That's $5,000 a month.
Graham Cochrane (09:06.958)
Now, that might be depressing, actually, if you think about it. And it should depress you. Like, think about that. You work hard, you save for decades to have a million dollars set aside, and all it's gonna give you in retirement is $5,000 a month. Now, of course, if you saved up $2 million, well then now that'll give you $10,000 a month, which is $120,000 a year. That's a great life. But that's $2 million. So you work hard to save up $2 million.
just to get 10,000 a month, right? It's depressing. But your wheel should be turning. Because my brain goes, why wait two decades, three decades, four decades to save up a million dollars just so you can have $5,000 a month when you could create your own digital asset that pays you $5,000 a month right now? You ever think about that? If all a million dollars does,
for you is give you $5,000 a month of income passively. Well, aren't there faster, better ways to create $5,000 a month passively that you actually have more control over than just trusting the stock market or your rental real estate portfolio? Yeah, yeah, you do. It's called building an online business. And this is what blow my mind is there's this whole fire movement.
Financial independence retire early movement, which has been so popular since the Great Recession and the concept is simple like live off of 30 to 50 percent of your income and save the majority of your income so live extremely frugally for five to twelve years so you can sock up a million dollars really fast instead of waiting to your 60 you can do it in your 30s and Then now you can live off this $5,000 a month and you've retired early
Well, there's two problems with that. One is...
Graham Cochrane (11:09.934)
Three problems. One is you gotta live extremely frugally for 12 years. In your healthiest, most exciting years of your life, which makes no sense. I'm all about frugality, but living off of 30%, 50 % of your income in your youngest years, when you're newlyweds, when you're having kids, like that's impossibly hard. And to do it, you either have to have a really high income, which isn't true for all people. Like guys like me, I didn't have a high income. I was a musician. I made $30,000 a year.
So I had to start a business because I had no other options, right? I wasn't a lawyer, I wasn't an engineer. So it's extremely sad for a decade of your life, a prime decade of your life. Two, all it gets you is $5,000 a month when you retire. Now that's something, and that's impressive to have done that in your 30s as opposed to waiting until your 60s, but it's only $5,000 a month if you save a million dollars in 10 years or five years. And then two, what are you gonna do now?
Now you're in your late 30s or mid 30s or you're 40, you've got some base level income coming in, is great. Well, now you still want to do something because you're still young. You're not going to to sit around for 40, 50 years waiting to die. So you're probably going to guess what? Start a business or a side hustle or your passion or whatever you want it to do. And guess what? You don't have to wait 10 years to start that passion, that side hustle, that business. You can.
Start it today. In fact, if you started it today, it would grow to something bigger, better and help more people sooner rather than waiting 10 years till you're retired, whatever that means, just to start a business. It's nonsensical. It makes no sense. All of these people who retire early, you read about them on CNBC Make It. I know because I had some articles on CNBC Make It and I was a part of that world for a while and you read all these articles. Most of those people who retired early,
start a YouTube channel. That's crazy. Talking about how to retire early. You could start a YouTube channel today. You don't have to wait till you're retired to do that. Did you know that? So that whole movement makes no sense. What does make sense is starting your business today. And if you have a business, thinking about it as Myron Goldin would say, becoming a virtual millionaire.
Graham Cochrane (13:27.788)
Because what is a virtual millionaire? Well, if a million dollars gets you $5,000 a month in recurring passive income, well, the moment you have $5,000 a month in passive income in your business, you basically have an asset digitally that's the equivalent of a million dollars. You may not have a million dollars cash that you could liquidate right now, so it's not the same technically, but functionally, lifestyle-wise, it's exactly the same. And you can argue it's safer.
You control it, not fear in the economy, fear in the markets. Right? You can grow it. You're not limited to just whatever pot of money is in there. You get rewarded for your effort. You can do it forever. It's diversified. You can create other ways to create $5,000 a month. does like...
There's so much more about it that I love than just having a pot of money sitting in an investment account. Now, I'm not against having a pot of money invested. I'm all about, once you make money, diversify it.
Concentrate your work to make money, diversify your money so that it sticks around. Why have money invested in stocks, private equity, personal real estate, rental real estate?
I've invested in startups that are like companies haven't even literally started selling yet, but I'm like an early investor into companies, right? There's lots of things I do.
Graham Cochrane (15:02.286)
But there's nothing as powerful as starting a business. So here's the deal. If you have a digital course, or you have a YouTube channel that pays you because you're monetized, or you have a coaching program, or any of these things that take you one to four or five hours a week to maintain, bro, you can make $5,000 a month doing that, you're a millionaire. Literally.
Because think about this, people say, well, Graham, that's not 100 % passive. Well, you're right. And you could build a 100 % $5,000 a month passive income. It is absolutely possible. You would probably need to run ads to a webinar that sells a course. And then you'd have to net $5,000 after your ad cost. But if you did that, that's a simple business model where if you had a killer ad to a killer webinar that's, or like a master class, something that's pre-recorded,
that's really good, that adds value and then makes an offer for your course or whatever, well the course could be $997 or $500 or whatever. Let's say it's a $1,000 course and you spend $1,000 in ads every month, well then you need to sell six of those a month. You spend $1,000 in ads, you get a bunch of clicks, you sell six of your $1,000 thing, you net $5,000 a month. There you go, $5,000 a month passive income.
This is so doable, it's silly. Literally passive. But I like content creation. I like organic content. You can run ads too. The reason why is it's more future proof. You become an expert. You build authority on the internet. You get featured inside of chat GPT because they're scrolling your content. All of a sudden, now you have more opportunities to use. So where the ad game is a great game, but you're kind of locked into that.
create content, you can then build your own audience and you can monetize in a bunch of different ways. Now, content takes a little bit of work, but if you get good at this, I spend 60 minutes a week, max, for my content. Now I have an assistant that helps me with some of the other stuff, but even if it took you two hours a week, which is all it would take you, if you're prepared and you get good at riffing on your content and you do simple editing, you use a tool like riverside.fm.
Graham Cochrane (17:28.302)
which makes editing a breeze and publishing and makes all your clips for you. There's no reason why you can't create one good long form piece of video content on YouTube and micro content from it for Instagram or TikTok or whatever in two hours a week. I do it in one hour a week, but I have help. You can do it in two hours a week. And then have a simple email funnel that leads to a webinar that sells your thing. You can run ads to it as well.
Or you do a live webinar once a week or once a month, or you do a live challenge once a month or a paid masterclass once a month, and you sell a group coaching program. And let's say your offer requires a weekly coaching call. Well, that's one, maybe two hours a week. See how we're in the two to four hours a week range? And you could be making easily $5,000 a month, but probably closer to $20,000 a month with that model, working four to five hours a week. Now, Graham, that's not 100 % passive.
I agree. You know who else is not 100 % passive? Retired people. The person with a million dollar nest egg technically could be 100 % passive. Absolutely, they could withdraw the $5,000 a month in theory in perpetuity. I get it. But you know what humans don't like to do? Nothing. We lose our minds. We sit around and do nothing. That's why retired people get bored and they do stuff. And hopefully they do fun stuff.
But you know what a lot of retired people do? They volunteer. They help out. They check their investments for an hour a week. They talk to some people. They fiddle with things throughout the week. So imagine you're retired. You don't have to work. Would you mind fiddling with something two to five hours a week to maintain your retired status? Would you mind volunteering a couple hours a week and then checking your investments?
No. So you're gonna do something two to five hours a week anyway. You're gonna do something probably 20 hours a week. So why not just maintain a low maintenance, high income business?
Graham Cochrane (19:39.321)
See how this is basically the same? The idea here is that the reason you wanted a million dollars in the first place was cash flow. It really, maybe the status, maybe to say you're a millionaire, but that doesn't put food on the table. The cash flow puts food on the table. The $5,000 a month, the $60,000 a year. You don't need to wait for that to create the cash flow. You can create the $5,000 a month cash flow or the $20,000 a month cash flow, whatever you want or need, you can create that today.
This whole show, this whole YouTube channel, everything I create is designed to help you do that. This is what literally what I help people do. I help people make $100,000 a month businesses, but you don't even need that. That's just balling. You don't need that. again, think of assets differently. I'm not saying don't buy stocks or don't buy real estate. Yes, to all of it, but create your wealth through a digital asset. Build a YouTube channel.
Build digital courses and coaching programs.
Write your book. Create royalties off of that book.
monetize your channel. Do you see what I'm saying? Like create digital assets that pay you every single month. That way you can create this million dollar cash flow and income stream in a few weeks, not decades. Like literally in 30 days from now, if I gave you the challenge, you could probably create $5,000 a month in 30 days from now if you really tried hard. And no offense if you've tried and it hasn't worked, you're just probably wasting time on things that don't matter like posting to social media. That's not gonna make you money. Go make an offer.
Graham Cochrane (21:18.968)
Go create a funnel, go create a webinar, go run an ad to it, ask your friends, invite them to an event, make an offer, like do a live virtual event, make an offer. Like you could make $5,000 in the next 30 days if you really applied yourself. It's easier than never before.
So I just want to redefine some things for you. This is either really encouraging to you or really annoying to you. If it's annoying to you, it's because you're missing the point. No offense, but you're missing the point. The point is you control your destiny. The point is cashflow is just at your fingertips. As your business makes more money than you need, yes, dump excess into investments. Like I never bet on myself. I think I'm great, I guess.
But I don't bet on myself. I take profit out of my business every month and I buy other assets. I diversify. But just understand that that's not the goal. The goal is to build cash flow today and you can do that faster, cheaper and easier than ever because of online business. Once your online business covers your bills with cash flow, you're free, bro. You've reached financial freedom because you don't need to be,
My business only requires five hours a week of me.
Graham Cochrane (22:44.098)
Like if, I don't know how else to paint a picture of freedom than that. I don't need millions of dollars in the bank or some number to be financially free. Because then what would that mean? I could stop doing a job I don't like and go do something I do like. I already do stuff I like. It's called my business, right? So if your business covers your bills and you like what you do and you're spending five to 10 to 20 hours a week of max doing it, you win the game.
You're a millionaire, you're a multimillionaire. And then if you're smart, you live relatively frugally, not extremely frugally, but relatively frugally off that money, and you start stacking assets over here. So you win today in your business and in the future in case you ever wanna stop your business or pivot your business or the economy shifts in your business. Oh, no big deal, I own real estate, I own stocks, I own private equity, I own this. See how beautiful this is? So the 4 % rule for entrepreneurs is simple.
How much do you want per month cashflow? Is it $10,000 a month? Great.
then create an asset, create an online business that pays you $10,000 a month. You can do that by just following everything I teach here. When you're doing that, that's 10 times 12 is $120,000. That divided by 4 % is what?
$2 million. You basically have $2 million of a virtual nest egg paying you $120,000 a year. It's just the reverse 4 % rule and that's the way I think about it as an entrepreneur. I hope this made sense. I hope this got your wheels spinning today. Don't chase the million dollar dream. Just go build it, definitely, but don't worry, don't wait. Just redefine what success means to you. It's all about cash flow.
Graham Cochrane (24:36.77)
However you like to get cash flow. Some of my friends do that through real estate and I do have real estate that pays me. But I like to do it through online business. I like to monetize my knowledge, I like to monetize my expertise and there's a million ways to do it. But create cash flow however you do it. Focus on cash flow. Net worth doesn't matter. Your net worth will increase as your cash flow increases. But cash flow first, net worth second. Become a virtual millionaire today.
You don't have to wait my friend. Let me know in a comment below if you're watching on YouTube what part of this was a light bulb for you. And let me know how close you are to being a virtual millionaire in terms of your cash flow. Remember once you hit 5k a month consistently, you are a virtual millionaire my friend. Have an amazing rest of your week and I'll see you on another episode real soon.
