Show Me the Money: 3 Steps to Foundational Wealth

Hayes Drumwright
Oct 23, 2023
7 min read

I have been talking with many of you recently about finances. I know it is really something we didn't get a lot of training from our parents. At best maybe they told us it is good to save and at worst maybe they used the money we tried to make to pay bills or "help the family."

I would like to give you a few specific examples of things you can do while getting those first couple paychecks that can lead to growing some real wealth.

Step 1: Two Accounts Please

Most any job you are going to get in this day and age is going to have direct deposit. I would like you to consider doing something rather simple. I would like you to have two bank accounts. You can do this in various ways, but to keep it simple let's just open a savings and checking account. Why two accounts? Well, I know many of you are torn between helping your families and supporting yourself. This concept of you as an individual versus you as a person in the family unit may be new and I would like you to consider having them be two separate entities. To reinforce this, we will have two accounts. Both can be used for you as an individual but only one can be used to help others.

When you start getting paychecks and set up your direct deposit I would ask that you set up 60% of the deposit to go to your savings account and 40% to go to your checking account. Remember both accounts can be used for you so don’t over stress about the percentage split but try and do it as close to these numbers as you can.

We will define the accounts this way. Your savings account is where we lay a foundation for your future. In the same way your educational goals have you at their center so does this savings account. With this account we will create possibilities for real wealth and consistently helping others. Your checking account is also for you, but we will view it more as disposable income to pay bills. We can also use it to help others be that friends or family if needed. The only rule I will ask you to abide by is that you may not pull money out of savings to spend on others. There is a time where that will be allowed, but it isn't now as it is just starting out. If you break this rule to use it to spend on others, your ability to take care of people you love will be extremely limited as time goes on. If you can be disciplined and build this account over time, I will show you how to get ahead and at a later date take care of everyone you care about.

Step 2: Challenging the Clock

When it comes to building your accounts, I would ask that you take one bet over the next 3-4 years. When you think it is the right time, I would love for you to take a bet on the most important person in your life: yourself. I would like you to pick from one of these 3 options or get a little crazy and try them all. :-)

Option 1:

Provide a service to someone and charge them for it. This is probably the easiest option. How could this work? How about offering to tutor someone for $60 for 45 minutes. If it goes well, maybe you sell them in a package of 5 and make almost $300 in under 4 hours. If tutoring isn't your thing, maybe you are an expert at something and offer to give lessons (music, sports, etc.) for about the same rates.

Option 2:

When you have an extra $300-500 bucks in your checking account I would like you to try to double it. How do you do that? Be creative. For instance, when I was in college, I remember watching a friend make t-shirts and sell them in his dorm. I think they cost $8 to make and he sold them for $15-20. I have seen the same done with hats. I have also seen someone see a need in their environment like a product that was already made and desired by friends so they just stocked up on it and got people to pay them double for just because it was convenient. This is called reselling and is probably the easiest because you don't have to make anything. I actually started an entire company doing nothing but reselling with just $100 and built it to over $4M in sales in the first year. We were selling very expensive technology gear to corporations, but there was very little risk to me because I didn't have to actually make anything. I just hooked up a good product with a company that needed it. Whatever your idea to double a small amount of money is, give it a try. I promise you will learn something very valuable.

Option 3:

Go out on a limb and take a job that isn't based on an hourly wage. Hourly wages limit what we can make versus something like being a waiter or sales that works off tips or commissions. These types of jobs are not based on a clock meaning you are not limited on how much you can make by how many hours you work. Yes, it can be a little nerve wracking having to take a job where you have to talk to people and charm them a bit, but I promise you have done much harder things in life.

Doing Some Simple Math

The lesson to learn in this step is that while minimum wage jobs are easy to find, they are tied to a clock for $20/hr or less. Let's look at an example of how something as simple as option 1 can be scaled to build real wealth. Let's say word gets out that you are a great tutor and you have some bright friends. What if you gathered 3 of them and took the role of scheduling sessions for them. You offer to pay them $30 an hour and you charge $60 the clients and hour. So, if we schedule each of them for 4 hours a week each, we would have a total of 12 hours to bill generating $720! We would owe our fearless tutors $360 of that. This would be making you $1,440 a month profit and you actually aren't even doing any of the work. You are just doing marketing (probably just word of mouth) and the scheduling. Not bad right? How do I know this is possible? I worked for my swim coach in college doing swim lessons for little kids along with 20 of my teammates for $20 an hour. He had us each working 30-hour weeks for the entire summer and he charged people $60/hr for the lessons! That's right, he made $800/hr off us generating $24,000 in profit for him. He made over $250,000 per summer and we were happy because minimum wage at the time was $8/hr. I am not saying you need to scale this to be what my coach did. I just want you to see you don't have to make money the way everyone else does. Working smart beats working hard almost every time.

Step 3: When Your Money Works for You

Let's fast forward to when your saving account hits $40,0000. (hopefully in 4-6 years). I know that seems like a lot of money but if you save $7-8K a year you will have it. You should be able to make close to that by just working 3-5 months a year if you don't end up spending it on others. ;-)

Let's say with this money we buy a condo to live in with 2 other roommates. The 3-bedroom condo cost $600,000 and we use a first-time buyer program to put $30,000 down and purchase it. Even at today’s horribly high interest rates, that would give you a monthly mortgage payment of $4,000. Yikes! Seems really high right. Well, let's do some simple math. If you didn't have your own place, your rent would probably be half or $2,000 a month. But lucky you, we have two roommates in your condo. They are each paying you $1,800 giving you a total income from them of $3,600 a month! This lowers the amount you need to pay down to $400 a month. You have to love that. But wait there's more. :-)

When you get a full-time job you will likely be making $100,000 a year and paying at least 30% of that in taxes so that your take home pay (after taxes) would be $70,000 a year. Well, when you have a mortgage you are allowed to "write off" the interest against your taxes, saving you considerable money that goes back into your pocket (think nice tax refund). You cannot get that write off when you rent. That money is just benefiting your landlord and giving you no value.

The Best Part

The best part of getting this condo is not the write off or even that you are living in this home for almost no rent. It is that this home is an asset. With any luck it is an asset that goes up in value over time. When this happens, you are generating real wealth. In fact, in California it would not be insane to think that over a 7-10 year period that home doubles in price. I bought my first condo for $495,000 (three bedrooms) and sold it a decade later for $990,000.

That is almost half a million dollars I made because I did Step 1 of this blog post. I saved $8-10K a year and got my savings account to $40K then bought a condo. I used the $500K gain from selling the condo to buy a $2M house which is now (5 years later) worth $4.2M. Creating wealth isn't just about your job and monthly paycheck. It is about investing wisely. All I ask now is that you create that savings account and start investing in the most important person in your life, yourself. That is an investment I guarantee will pay off.

In Closing: But What About My Family

To support others effectively you need to be on stable footing. If you are unstable, a tiny issue can come up leaving you unable to help anyone else. Please reread that because it is so important and counter to how we were raised.

You creating a strong financial future for yourself is not selfish. It is truly your only option to be consistently selfless in the future.

For instance, if you save and could buy that condo therefore reducing your rent to $400 a month instead of having it be $2,000, you could give the $1,600 a month to your family. Would that be a smart investment that helped to free them from the hourly wage trap many of our families are stuck in? Probably not. But by creating firm financial footing for yourself you could EASILY do it and not need to worry that giving them that money each and every month would be something that puts you at risk. You could even decide to save that money in an account just for them to someday buy them a house. You get to decide which option you like better and trust me; having financial options on how you want to serve those you love is an amazing feeling.