Today on Thought Leader Thursday, Matt is joined by Garrett Gunderson, an entrepreneur, financial advocate, and founder of Wealth Factory. Learn why most retirement plans make Garrett cringe, how he plans to help one million entrepreneurs achieve economic independence, a few profound steps you can take to start your wealth journey in the right direction, and much more!
What You Will Learn About Garrett Gunderson and the Wealth Factory:
- How Garrett’s great-grandfather inspired him to create Wealth Factory
- Garrett’s favorite people to work with
- The worst myths of finances exposed
- How a “scarcity mindset” might be holding you back
- Why making good money doesn’t have to follow the “high risk = high return” model
- Why most retirement plans make Garrett cringe
- The best of Garrett’s 15 major reasons why retirement plans are problematic
- What to do if you have a problematic retirement plan
- A few simple, profound steps you can take to start your wealth journey in the right direction
- The percentage of your paycheck you should be setting aside
- The results you can expect if you focus on cash flow first
- How Garrett plans to help one million entrepreneurs achieve economic independence
- How to get his book for free
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Matt Theriault: This is Thought Leader Thursday. Today, I’m joined by an entrepreneur, financial advocate, and founder of Wealth Factory. He brings energy and excitement to debunking the many widely accepted myths and fabrications that undermine the prosperity and joy of millions of business owners. I’m very excited to have him on the show today, as it fits what we talk about on a weekly basis. So, please help me welcome to the show Mr. Garrett Gunderson. Garrett, welcome to the show.
Garrett Gunderson: What’s up man? Imagine if the intro is “I bring energy and excitement” and I was just as monotone and boring as could be. You’d be like “Oh, man, he lied!”
Matt: Right. That’s funny though. No, it’s good though, because I think this sometimes is a subject where it needs a little bit of excitement brought-
Garrett: It does, man. I mean, it’s something we all know we need to face but not many of us want to face, because most of the time finance means separating ourselves from our money, cutting back, scrimping, being over-reliant on the stock market, retirement plans … all the kind of stuff that hasn’t really led to wealth, but it’s still been a predominant part of the conversation, unfortunately.
Matt: We just started a weekly episode called “Tax Hacker Tuesday.” And it was kind of an experiment, because it’s taxes. Who gets excited about taxes, right?
Matt: And it’s been one of the most popular shows, so I think the audience has been prepped for you and I think this is going to be fantastic.
Garrett: I know a lot about tax, even though I’m not a CPA or a tax attorney, because there’s really about no other expense we have in our life as significant as tax, and 93% of people pay more than they’re supposed to. They tip the government unnecessarily, and it’s the ignorance tax that costs us. So once you’re in the know … and I built a really simple framework, two things to avoid, three things to do, just so people keep more of what they make.
Matt: Awesome. So I want to get into that for sure. We’re going to get into all of that. Let me ask you though, what were you doing just prior to becoming a financial advocate and running Wealth Factory?
Garrett: I was a college student at the time. I had won $5000 for being Young Entrepreneur of the Year, and I wanted to invest it. My mom wouldn’t sign off as a custodian, so when I finally turned 18, I invested it in the very first thing someone told me was an investment. Fortunately, I was only putting $70 a month away from it, and then I had an econometrics class in college and realized, “Wait, there’s no chance this is going to do what it’s supposed to.” Start asking more questions, and then ironically got offered an internship, which was really just “Hey, bring your family and friends to us so we can peddle them life insurance and mutual funds.”
But when I was 19, I got started that way and then when I was 22, I saw a family office for the first time for people worth $50,000,000 or more, and then decided that’s what I wanted to build for entrepreneurs; people that normally wouldn’t have access to that. That was ambitious. It took me a whole hell of a lot longer than I originally thought it was going to.
Matt: Mm-hmm (affirmative). Okay, well that just kind of answered the next question. I was going to ask you what was it that inspired you to go in and build Wealth Factory? And maybe you can start by… back up just a little bit and explain what Wealth Factory is.
Garrett: I think what really inspired me to do Wealth Factory was my great-grandfather came over from Italy in 1913, because of corrupt government and excessive tax, and it was crippling his fishing business. So, he ended up leaving his family behind for seven years, getting on a train in the United States to become a goat herder in Utah, of all places, and then became a coal miner just to save up enough money to get his family to come over and meet his daughter for the first time, because he left when his wife was pregnant. That’s where the passion comes from, because I think when people don’t have … you could work so hard, you could work your ass off, and have the wrong financial philosophy and still have it be devastating, or cause bankruptcy, or separation from your family. And so I’m not really concerned about this old money, highly affluent, inherited type of wealth people, because they get pretty good financial advice and everybody’s trying to work with them.
I want to work with guys like my great-grandfather. Bold entrepreneurs that went out and tried to do something and started from scratch, and they just need the resources and support. And they gotta have people stop pillaging them of their money into faulty plans. So, Wealth Factory was really born of understanding my great-grandfather never had that opportunity or insight. And it was my grandfather that asked me for financial help when his sister got put into the hospital and all their money was in one account. And that’s when I truly became a financial planner and sold the product better, because I found out how to protect two thirds of it. I ended up protecting all of it when it was all said and done. And it felt damn good because they had spent a whole generation building that wealth, and because of one misstep, that they didn’t have it protected when she got put into a hospital and was potentially going to go to a nursing home, it was all at risk. So I was like, “Wait, I can actually change people’s financial future for generations to come, and really help them emphasize legacy because most people don’t.”
Matt: We’re off to a good start; I’m really excited what’s going to come next, because I think we’re of the same mindset. And sometimes when you talk to people about finances, you can get polarizing opinions. But, this is good. Right? So what are the widely accepted myths and fabrications that are undermining people’s prosperity? The ones that you enjoy exposing and debunking the most?
Garrett: Well, I think the biggest one is that people believe there’s a finite pie, which is really born of a scarcity mindset and a scarcity thought process, where their perspective is “There’s not enough out there. It’s a zero sum game, so everything’s win-lose.” People in that mindset believe that profit is evidence of deception or coercion, or something wrong. They feel like money’s bad. And the reality is, it’s an abundant world. Even if there’s a finite amount of resources, there’s human ingenuity and innovation, and there’s all these different ways that we can accomplish things. And we all value things differently. So my belief is: “Look, money can exchange hands multiple times. The more times it exchanges, it’s from value creation, the more wealthy we all become.”
So it’s not a finite pie, because there’s all these other ways to do things and that we all have got a lot more wealth today because of our predecessors and the previous generations, because we build upon ideas. We learn things more efficiently. We inherit certain things that give us a headstart … that people who are poor today would have been the upper middle class 200 years ago. So, I think that the biggest thing is that no one shrinks their way to wealth. And if we could get really clear that it’s a production based economy, where value creation is the king, and that we deliver that value through serving others and solving problems, it changes our mindset to one of much more abundance and everything else in the book is secondary to that major concept.
I go through why it doesn’t take money to make money. Sure, you can have your money make money, but it takes mental capital and knowledge, or relationship capital and people, and that value exchange to make money. Or, there’s some people that believe that high risk equals high return. Actually, we lower our risk with knowledge. We lower our risk with our investor DNA, and understanding what we’re investing in. And risk isn’t in the investment, it’s in the investor. So I want people to become better investors.
So, I guess I could overwhelm everyone with these … excitement of these myths out there, but once someone sees the myth, they can avoid it. A myth is not an obvious lie, it’s a subtle lie, and when we look at the world through the myth, we see evidence that supports that. Sometimes, that comes from well-meaning well-intentioned family friends, preachers, teachers, and all the sudden, we adopt their world view or their view of money, and because we want to be good people but we have the wrong philosophy, we tend to lower our standard of value and wealth based upon who we’ve associated a lot of times in our life.
Matt: Right. I can’t find one thing there that I can disagree with, so … good stuff.
Matt: What is one piece … and there’s a lot of things in my world, in the real estate world, that really get under my skin when I see people out there peddling certain types of advice that just makes me cringe. I was like, “Please, don’t follow that.” What is one piece of advice you see out there that just kind of makes you cringe?
Garrett: Retirement plans. I think retirement plans are problematic for about … I’ve identified 15 major reasons why they’re problematic, but I’ll nail a few of them. Number one, imagine I come to you today, Matt, and I’m like “Hey, why don’t we get into a partnership? Here’s the deal. If you want to leave the partnership early, I’m going to charge you an extra 10%. I get a higher percentage. When you go to exit this partnership, I’ll tell you my percentage based upon my economic circumstance, which is bound to change, because I’m 20 trillion dollars in debt right now.” So, when you enter those plans, they’re government plans and the government becomes your partner. And they’re not actually tax deductions, they’re tax deferrals. You eventually have to pay taxes when you pull the money out.
There’s a lot of undisclosed fees that are barely beginning to be exposed in the last couple years, like 12B-1 fees with the funds, or legal and admin fees, and all these kind of things really hurt the performance. And there’s limited ability of where you can invest the money, and you’re stocking it away until at least 59 and a half, and the government might change those rules. And, if you’re successful, hopefully you’ll be in a higher tax bracket in the future. Let alone if the government raises taxes, which … the average top tax bracket is 61.7%. That’s a lot higher than we’re at today, so what if you defer your taxes into a future where you have A, more money, or B, the government raises the taxes, or C, you have less tax deductions, and you don’t have as much access to your money between now and then. I feel like everybody’s in store for at least 20 big opportunities in their lifetime. What if your money is all stocked away and sucked up in a retirement plan, and even worse, what if you put real estate in it?
Now, you took a capital gain asset and made it ordinary outcome. You eliminate the depreciation if it’s a commercial property. You can’t cost segregate it to accelerate the depreciation and get more tax advantage. You can’t 10-31 it anymore, because even if you do, it doesn’t matter because it’s stuck inside of … you’ll eventually have to pay ordinary income, which is probably going to be a lot higher than long term capital gains as it is today. And those are just a few of my issues with it.
Matt: I like it. I’ve looked at retirement plans as you’re retiring your money before you get to retire yourself. Right?
Garrett: And look, here’s why retirement plans are so effective as far as people putting money into them. I mean, if we’re a financial institution Matt, what do we want from people?
Matt: As a financial institution?
Garrett: Yeah. Bank, mutual fund, …
Matt: What do we want from the banks? Or we’re the bank?
Garrett: If we’re the bank, what do we want from people?
Matt: I want them to give me my money. I mean, their money.
Garrett: How often do we want their money?
Matt: I want it all the time.
Garrett: How long do we want to hold onto it for?
Garrett: And if they come to take a withdrawal, how much do we want to give them back?
Matt: As little as possible.
Garrett: Okay, so that’s exactly why 401ks, RSPs, Keoghs, simple steps suck is because now you’re automatically putting money away. Institutions love it. They get to invest your money, or they get to feed off your money and the government’s money. You’re discouraged to take any money out of it, because there’s penalties, and when you go to take it out, you still have to pay tax, which means you’re probably going to leave in there. It is a brilliant plan for them, and when they tell you it takes money to make money, it didn’t take any of their money to make money. It took your money to make money, so it’s just a completely different set of rules. And so that’s why I don’t really like those plans.
Matt: You got it. Yeah, yeah. I didn’t like them either before we talked, but now I’m liking them even less.
Garrett: Yeah, and I mean for those people that are now very upset with me because they have these plans, hey, I acknowledge it’s good that you put away money, that you’re trying to do the right things. Meaning there are things you can do. You can move to self-directed plans, which mean that you have a better universe to invest in. You can do a 72-T distribution, which means you can start taking money out before 59 and a half without penalty. You can learn about other exit strategies, like if you’re a real estate investor, which hopefully you are, watching this, maybe when you sell some real estate you can donate to a charitable trust, create a tax deduction that offsets some of the money that comes out of your retirement plan. And then when you sell the property, you pay zero tax on the property but you get to take an income off of the full gift while you’re alive, and the charity just keeps at least 10% of the gift by the time you die.
There are strategies; there are solutions. So don’t be mad, just be informed and probably stop contributing today and start allocating those dollars somewhere else.
Matt: You said, “Don’t be mad.” It’s funny, because of all of the YouTube videos I have, there’s one that has the most views and it’s caused the most dissension between the viewers, is “What they’re not telling you about your 401k.” And people just really hold onto these myths and they get so angry if you tell them anything to the contrary that they’ve been told.
Garrett: I got in an argument. I was in Steamboat speaking, and we were talking about defined benefit plans, which are even worse than other pension plans. This really successful individual has put money … he goes, “That’s all going to be tax free.” I’m like, “Oh, actually it’s not when you pull it out. It’s all going to be taxable.” He’s like, “No, you’re wrong.” I’m like, “Cool man, I didn’t realize you’re a financial person. That’s awesome. Tell me how you get it out tax free.” He goes, “Well, you put it in …” and then he just starts, and I’m like, “Dude, retirement plans are like strippers. It may look really nice, but it’s not someone that you’re taking home to marry. Upfront, it is nice. You get to put it in pre-tax. Long term, you have to pay tax on the back end. So, your money is going to be cheating on you. That’s the bottom line.”
Matt: Right. Great metaphor.
Garrett: I don’t know if it’s a great metaphor, but I appreciate the sentiment.
Matt: I get it.
Garrett: It’s memorable at least, right?
Matt: Very clear. So we talked about what people need to know. So what do people need to do to get their wealth journey headed in the right direction?
Garrett: A couple steps that are simple, yet profound. First off, any time you take personal income, set up a separate account. It could be a savings, or a money market account, a checking account for all I care. But every time you pay yourself, take a percentage off the top. My recommendation is 18%. That might seem like a lot, and it’s not business income or business revenue, it’s personal income, and set it aside. So, you automate your savings, number one. Number two: when you have at least six months of liquidity, then you can deliberately allocate your investing money. Most people jump the shark and they aren’t automatically saving, they’re automatically investing instead of automatically saving. Automatically save first, deliberately invest second. Then, focus on cash flow first. Get to a point of economic independence where you have enough recurring revenue from investment income or entrepreneurial income to cover your lifestyle expenses. When you can do that with your assets, rather than your active income, you have enough permission and freedom to swing for the fences in everything else.
And rather than being like the rest of the population, where they’re trying to save 10% of their income and earn 10% on it, you can now save 100% of your income and you don’t even have to get that high of a return to have exponential growth, because it’s no longer required to live off of your income. Your assets are producing your lifestyle. That is the biggest game changer in finance. And most of financial planning is this great financial experiment of accumulation, compound interest, setting money aside, locking it away, neglecting cash flow, and 30 years is your best case scenario. You can get economic independence somewhere between three years and seven years. Seven years if you’re deep in debt and a bit of a train wreck, three years if you’re already pretty frugal and maybe have a couple assets to work with.
There’s a guy, Dale Clark, he got there in 362 days with less than a six figure income, less than six figures of net worth, simply by spending 20 hours a week, which takes some time, to buy enough real estate to cover that. But once he got there, he created his own business and he’s making ten times more than he did as an airplane engineer designing airplane engines. And he’s a lot freaking happier. So, cash flow. Cash flow. Don’t just accumulate. Accumulation is the enemy. It is the disease. It is the slowest, dangerous track that you can take in the world of finance. Go cash flow first.
Matt: This is just amazing. About three years ago, I interviewed Robert Kiyosaki.
Matt: His book has started it for so many people. I asked him, “The principles that you have, they are so clear. And I’ve built my entire business off of your principles of focusing on the cash flow first, and then let the cash flow build your piles of money later. Don’t focus on the piles to build the cash flow.” Just exactly what you just said, and I’ve been talking about this for … we’re on the ninth year of our podcast.
Matt: I was like “Why don’t more people promote this?” I don’t know anybody else out there. And now I do! So I’m really excited. There’s someone else out there, because it’s been a lonely world and I’ve had a lot of battles and arguments with people.
Garrett: I just created a product for The Rich Dad Company. We filmed it, it’s in editing right now. It’s not released. I’ve done this podcast a few times. That book saved my ass because I was going down The Millionaire Next Door book in high school, which I was just going to be … a mindset to pinch pennies ’til I got blisters on my fingers. But hey, if you’ve seen Christmas Carol, Ebenezer Scrooge was a miserable miser. So just never spending money isn’t the key.
The key is get assets to produce cash flow, and then enjoy life along the way and be okay spending on yourself when you’re not borrowing. Too many people borrow to consume, and it destroys their wealth. Banks don’t borrow to consume. If they do, they go out of business. Banks don’t put money in a retirement plan. Banks work on cash flow. They think about mitigating risk, they ask for down payments, taxes, credit scores, appraisals, private mortgage insurance, and they want to get as much cash flow as possible from you. Start thinking more like a bank. Not in creating false accounts, but in cash flow.
Matt: Got it. Yeah, my audience is going to love you dude. This was a great place for you to be actually.
Matt: Thank you for what you’ve shared. And you’ve written two books, right? “Killing Sacred Cows,” and “What Would the Rockefellers Do?”
Garrett: And I have another book that’s coming out right now called “Five Day Weekend.”
Matt: “Five Day Weekend.”
Garrett: That’s going to be all over stores and airports and everywhere. We got 20,000 copies in distribution out the gate, so that’s the next book. I also wrote a book called “Portal to Genius” that I co-authored. So, I’ve written a few, but my big ones were “What Would the Rockefellers Do?” And “Killing Sacred Cows.”
Matt: And embarrassingly a little bit, I have both of those books in my audible library in the queue, and they’ve been there for a really long time.
Garrett: Maybe I motivated you today though.
Matt: Oh yeah, no, they’re going right up to the top of the list.
Garrett: I got stacks of books I haven’t got to that I know are going to be good, but there’s only so much time in the day, and I got two kids. So, if I get a book in per month, I’m pretty happy.
Matt: Okay, awesome. We need to hang out. So yeah, if you want to grab Garrett’s books, it’s “Killing Sacred Cows,” “What Would the Rockefellers Do?” … he’s got the new one coming out, the “Five Day Weekend” which sounds very exciting. If someone wanted to get in touch with you sooner than that, or directly, learn more about what you do, what would be the best way for them to do that?
Garrett: Wealthfactory.com podcast. I’ll give them the books on me. They don’t have to go buy them. They can learn the tax framework that I mentioned. We’ll give them a bunch of cool things to build a relationship because I want one million entrepreneurs to economic independence. I’m not going to be able to do that one on one, so I’m out there just giving people resources. My key is just make sure you do something with it. Wealthfactory.com podcast. Or, if they want to get an immediate download of the book, they can text 44222 Wealthier in the subject line, and they can get “What Would the Rockefellers Do?” And start reading it now.
Matt: Got it, what was the subject line again for the text?
Matt: Got it, all right. Blurred together, so I’m just making sure it’s clear. Super. All right Garrett, well it’s been a pleasure. Thank you. Let’s do this again.
Garrett: Hey, that was fun. I’d be glad to man, I really enjoyed it. It was fun.
Matt: Super. All right, that’s it here at the Epic Real Estate Investing show. I’ll see you next week for another episode of Thought Leader Thursday. Take care.