The Wealth Mentor with Jackson Millan

Greg Wilkes (00:01):

The construction industry can be a tough business to crack from cash flow problems, struggling to find skilled labour and not making enough money for your efforts. leaves many business owners feeling frustrated and burnt out. But when you get the business strategy right, it’s an industry that can be highly satisfying and financially rewarding. I’m here to give you the resources to be able to create a construction business that gives you more time, more freedom, and more money. This is the Develop Your Construction Business podcast, and I’m your host, Greg Wilkes.

Greg Wilkes (00:39):

Welcome everyone to the podcast. Great to have you back. It’s the start of a new year and I’m sure a lot of you are really excited about what 2023 is going to bring. I’ve got a special guest on my podcast today that’s traveled a few virtual thousand miles all the way from Australia, and that is Jackson Millan. Great to have you here, Jackson.

 

Jackson Millan (00:59):

Pleasure to be here. Looking forward to getting stuck in and delivering some value.

 

Greg Wilkes (01:03):

Yes, really appreciate it, mate. I thought this podcast would be great as a start to the new year because everyone’s thinking about what they’re going to achieve. As business owners, one of the big things we want to achieve is more money in the business, more profits, and ultimately we are trying to achieve that. The reason we’re going into business is we want to create better lifestyles for ourselves and our families, different things like that. That’s often the reason why we do that. I thought you’d be a really good guest to come on, because I’ve listened to some of your stuff before which I think is really applicable, to talk about how business owners can achieve that lifestyle that they’re really looking for and that freedom in business that they want to achieve. Jackson, first of all, you could give us a little bit of an introduction to my listeners as to who you are and what your background is.

 

Jackson Millan (01:51):

Love to mate. I’m Jackson Milan, I’m also known as the Wealth Mentor. I’ve been working in this space of wealth for business owners for a bit over 15 years now. I got started in this space because I wanted to help people like my parents. My parents were both tradies. Mum was a hairdresser. My dad had a number of different trade businesses around home services, home renovation waterproofing, tiling. The common thread that I observed through my childhood is they were incredibly hard workers and they always gave me the same advice e.g “Jackson, if you want to be successful in this world, you’ve got to work hard for it.” They work their asses off mate. Sixteen hour days, seven days a week for as long as I could remember. But they never had much to show for it. It really early on showed me that just because you work hard, doesn’t necessarily mean you were going to be successful or that you were going to be financially free. This really came to a head for me because I went out into the world to learn how to be a financial advisor so I could kind of be a catalyst for change and help people like my parents. I very quickly became disheartened with the industry because it was all about either helping people who were already wealthy or selling commission-based products to people like my parents who quite frankly didn’t need them and weren’t going to put them in a better position. So before I hung up my hat and threw the towel in, I asked myself; “Well, okay, if you were going to do this differently, how would you do it?” From that point I decided to start calling myself a Wealth Coach. I focused on building an educational framework that laid the foundations for people like my parents who were never taught any better. Since then I’ve been able to help my clients build over 2 billion dollars in combined wealth and I’ve built a multimillion dollar business in the process and been able to create financial freedom at 33. Now, I don’t tell you that guys to brag, because I know there’s a lot of taboos around money, I tell you that to start breaking down these taboos, so we can start bringing this conversation to the table and be transparent about this so we can take the power that a lot of these taboos have over us, and start using that as a superpower to supercharge our trajectory to financial freedom. Hopefully we’ll dive into that a little bit today.

 

Greg Wilkes (03:52):

Yes, that sounds awesome, Jackson. I think it’s really good that you are on. Like you said, your parents were tradies and you’ve got experience of some of the pain that that comes with that, of being a tradie, working really hard, but not seeing those financial rewards. I hear this all the time with people that might come to me at the beginning for mentoring because they’re so frustrated. They’re putting all their time and effort in and not getting paid for it. Or they find that subcontractors and workers are getting paid more than them <laugh> and they think, “what’s going on?” It’s wrong, isn’t it, with all the risk that they’re taking, something’s not right. I guess you got to see a little bit of that firsthand when you were growing up, did that form any stories in your mind about wealth creation?

 

Jackson Millan (04:36):

It really did mate. I saw that my dad’s business particularly was feast and famine. Mom’s business was a lot more predictable given it being a hairdressing salon. But dad was very much a typical tradie and it was always feast and famine. There were times that he was oversubscribed and like many tradies, when they’re oversubscribed they can throw out pretty significant fees because they don’t wan to to get the work that’s thrown at them when they’re already got the book stacked. If they people say yes, they get a big hefty premium for getting that job across the line. But on the flip side, when the diary’s empty, then they become desperate. They’re like Oliver Twist begging for work and sometimes discounting and cutting their margins just so they’re busy. But just because they’re busy doesn’t mean they’re productive. The problem here was that people like my dad and many tradies that we’ve worked with when it comes to designing their financial operating system, they’re emotionally invested in their business. Meaning that the decisions that they make in their business are largely tied to their emotional state on the day. That’s not a good way to run a business. A lot of the work that we do, and the biggest mistake that I saw my dad make is, he never got out that. His business was the destination. It was the be all and end all of his existence because it’s what he lived and breathed. Whereas business, no matter what it is, is a vehicle, it is designed to get you to a destination and that destination is financial freedom. Let’s face it mate, like I’m sure you speak to your clients all the time, the two things they probably want more than anything is freedom and flexibility. Am I right?

 

Greg Wilkes (06:02):

Yes. Time, freedom and money is what we we’re always talking about.

 

Jackson Millan (06:06):

Exactly. How many of those have it before they work with you mate?

 

Greg Wilkes (06:10):

<laugh> Well that’s the problem, isn’t it? That’s the goal for everyone. But yes, not many at all. I mean I guess people aren’t coming into coaching if they’ve got time, freedom and money because they’ve already achieved it <laugh> so I’m only talking to people that haven’t got that. But yes, it’s rare.

 

Jackson Millan (06:26):

The problem is mate that because most people, they live and breathe their business, they haven’t actually defined the means to an end. They say, “Oh, I’ll worry about that financial freedom stuff once I get to a million pounds/ or once I get to 5 million pounds / or once I get to whatever this future goal is” right? And that day never comes. For that reason they end up creating this subconscious prison that is their business, that keeps them tied to a job, gets keeps them working 60 hours a week for pitence. Now this really came to a head for me mate. When my dad got diagnosed with pancreatic cancer at 66, like his lifelong dream was to work hard, squirrel away every last red scent, be able to buy a farm and be able to live his days on a beautiful property and be able to immerse himself in the fruits of his labour. He was meant to retire at 65. At 66 he was diagnosed with pancreatic cancer. He was given weeks to leave and he died. On his deathbed, he regretted a lot of things. The one thing that he regretted is how hard he bloody worked. He said, “Jackson, every single person in this world has two lives, and your second life starts when you realise that you only have one.” That was eyeopener for me. It was heartbreaking because obviously I lost my best friend, but it was a gift because he was able to allow me the opportunity to learn from his mistakes. That’s when I adopted the motto, “Live for today and plan for tomorrow.” The biggest issue that I see, particularly in the building space is because many people who are in trades, the common theme is that they’re ambitious, but they’re also impatient. Like waiting for stuff mate <laugh>, I’m sure you’ve found that right?

 

Greg Wilkes (08:01):

Hundred percent. Yes <laugh> I’m a bit like that anyway, I want everything now <laugh>

 

Jackson Millan (08:06):

Me too mate. This is probably why I get along with them so well. But the idea here is that the traditional retirement trap is that you work for 40 years, you retire at 65 and then you enjoy 20 if you like. It doesn’t f**** motivate me. That sounds like a sh** up time. Particularly when you’re a tradie (I’m lucky I get to sit in a seat a desk all day) but as a tradie, you wreck your body over those 40 years. You’re going to get to a point where you can’t even enjoy the fruits of your labour. So it is critical for you to try and work out a way to create financial freedom in some capacity before you’re old and grey now. This is where a lot of our philosophy comes into play of living for today and planning for tomorrow.

 

Greg Wilkes (08:48):

I love that motto. I think that’s a a really good phrase. It makes so much sense. What I think was really interesting is you describing your business like a vehicle to get to where you want to go. I think so many people think the business is their life <laugh>, it’s what it’s what they do every day. They get so consumed in that business and can’t see beyond it. But actually viewing it as a vehicle that you are going somewhere, you’ve got something else in mind that you’re actually driving towards and you’ve got a bit of direction towards, I think is a great way of thinking about it. Expanding on that, if we’re in a vehicle and we are going to a destination, where does it start, that wealth journey? Does it start at that destination?

 

Jackson Millan (09:33):

Yes. We’ve got a system that we teach our clients that we call the Wealth Mastery Machine. Unpacking that for a moment: If you had to describe a machine, Greg, how would you describe it? What does a machine do?

 

Greg Wilkes (09:47):

A machine? I guess it gives you the same results every time, duplicates something.

 

Jackson Millan (09:55):

Bang on. How many people do you know that could describe their personal finances or their business finances as a machine?

 

Greg Wilkes (10:01):

Yes, no one, not even me.

 

Jackson Millan (10:04):

<laugh> No one right. <laugh>. Exactly. We’re going to work on that. But the idea here is that for most people, they’ve never been taught a system to turn their finances into a machine that produces a regular, repeated, consistent result. They’re just flying by the seat of their pants. And quite frankly, as a seven figure, potentially a multi seven figure trade business, it’s more money than you’ve ever dealt with in your entire life that’s flowing through your bank account each and every single day. It’s like that same principle where people win the lottery and they blow it, they end up in a worse position. You basically are giving someone a loaded gun and you are doing that self-imposed. So the point here is you need to learn to not only be a great trades person, like when you went to technical college to learn your trade, you need to learn the language of money so you can be in the driver’s seat for you financially.

 

Jackson Millan (10:51):

There’s a couple of parts to this. The first part is learning how to properly define what financial freedom means for you and your family. We go to an extreme with this, with our clients, that we get them to map out all of their lifestyle and financial goals over 20 years. And the reason for this (because it sounds a bit crazy) is that, money is not the outcome, it’s just gives us the freedom of flexibility to pursue those goals. If we can get that level of clarity, we can then reverse engineer those goals backwards. I can for every single client link a profit goal, a personal income target that allows them to achieve every single one of their goals, lifestyle and financial without any sacrifice or compromise. How much more motivated are you when you can link the outcome that you want and the activity that you need to do to get there. It’s just a no brainer right? But most people just don’t know how to do that.

 

Greg Wilkes (11:42):

That’s really interesting.

 

Jackson Millan (11:43):

In your experience mate, how many of your clients actually goal set intentionally on a regular basis outside of the business do you think, mate?

 

Greg Wilkes (11:51):

Well this is really interesting because funny enough, we just did a goal setting workshop for the year and I guess this is my mistake that I did with my clients, but we were basically setting the goal for the year, but then we then tied that to their long-term vision. What’s interesting (which is something I didn’t do, which you’ve just highlighted) was we were tying the long term vision to a number but not really thinking about what you just said, the actual lifestyle and what we’re trying to create, which I guess is a bit more powerful, isn’t it <laugh> than the numbers.

 

Jackson Millan (12:25):

Yes, that’s where the intrinsic investment lies. If those things are truly important to us, and what’s interesting is that when we go through this with our clients initially, there’s a lot of superficial goals that come up, right? Like, “Oh yeah, I want to have a Porsche in two different colors. I want to go and fly to the bar and a private jet” etc. Do you really? Do you really want those things? Now for the vast majority of people (and if you want those things, that’s fine) but we need to kick the tires on it a little bit. For the vast majority of people, they don’t want those things when they really par it down. They want a nice house, they want it paid off. Somewhere that’s a place they’re proud of, that they can entertain their family and their friends. They can raise their kids. They want to have a great lifestyle with nice holidays and a comfortable existence. They want to send their kids to a good school, get them to set up for the future, potentially help them get onto the property ladder and they want to create enough passive income that gives them the freedom and flexibility to choose what they do with their time. But they’ll probably never retire. And potentially they want to give back. Sums it up pretty well right?

 

Greg Wilkes (13:25):

I think you’ve hit the nail on the head there. Yes that’s really interesting. Something it just reminded me of actually, I remember going to (I either went to it or I listened to it) a Tony Robbins seminar a while back and he was talking about we say these things e.g we want the two Porsches in different colours etc but do we actually want them? What he was talking about was, rather than going for that, potentially just having an experience out for a day in the Porsche or, having 10 days a year if you wanted to drive in the Porsche, but not necessarily having to spend 200 grand on buying one. You can still have those experiences without having that as a goal.

 

Jackson Millan (14:03):

Sure. It’s really interesting the smart ways that we can manufacture the same level of significance and achievement in a much cheaper sense. What we often do is, without these frameworks in place like that, we all go out and make silly mistakes. The amount of clients that I’ve had that are trading because they’ve had a stressful month or quarter, they go out and buy a new four wheel drive or they go buy a a jet ski or they go on a holiday to Bali! If you’re in the UK you probably fly to Spain or Portugal, a little bit more romantic than Bali, but you get the idea, right? It’s because we don’t have the safety nets to protect ourselves from our need to be self-regulated. We all have a need to self-regulate, we all have to have that release valve. Otherwise we implode. But we want to make sure that we do it in a healthy way that is not financially catastrophic, because it often is.

 

Greg Wilkes (14:57):

Yes. That makes complete sense. I guess we all do that. It’s a bit of therapy isn’t it, sometimes, when you have a bit of a spend up <laugh> Especially construction because sometimes it can be such a stressful business in many ways. Being a business owner is stressful, dealing with people and dealing with clients and especially dealing with the amount of money that’s going through our hands. I think it can be very easy as a coping mechanism to go and buy yourself something to either tell yourself that you’re doing all right or to scratch that impulse <laugh> that you want something.

 

Greg Wilkes (15:33):

As a mentor, how would you coach someone around that, if they’ve got those tendencies to want to go and do that?

 

Jackson Millan (15:42):

What’s really interesting here, Greg, is that people tend to focus on the strategies and tactics if they focus on finance at all. It’s the superficial stuff that I think is going to make the biggest difference. The problem is they never upgrade the operating system. They haven’t even thought the operating system exists. So what we do with our clients is we take them to an exercise where we go through and unpack their money memories. It’s the most significant financial moments throughout the entire course of their life. As Winston Churchill famously said, “Those who do fail to learn from history are bound to repeat it.” Now we see that’s why most people are on this vicious rollercoaster ride, this carousel of financial behaviours that keep repeating themselves. It’s because they haven’t identified the triggers and the reasons for those things continuing to rear their ugly head.

 

Jackson Millan (16:24):

The next thing we do is I’ve developed seven spender types. I wrote about it in my first bestselling book. We apply those spender types to each individual and there might be a blend. Once we understand those spender types, we understand those intrinsic strengths and weaknesses, we can start playing to the strengths and buffering against the weaknesses instead of trying to keep up with the Joneses and going against the grain, which is unsustainable. Then what we do is we start using behavioural finance principles in order to create what we call ‘asymmetrical risk versus return’. Instead of the ideal behaviours being the outlier, the exception to the rule, we need to start creating financial systems that ensure that the action that we want is presupposed. It might sound a little bit woo woo and a little bit far-fetched, but the idea here is that we’re all really busy and much like in a business that can’t run with our systems, like I’m sure none of your clients could run a project unless they had a project management plan, unless they’ve had an estimate, unless they’ve gone through some sort of tendering process, whether they’re doing time schedules.

So, why don’t you have the equivalent systems when it comes to managing your finances and your wealth?

 

Greg Wilkes (17:41):

I think that’s a really, really valuable point. Touching on something you said there, the mentoring that you do for your clients, it seems to be very much around mindset as well as strategies. Is that the first thing that you dive into, how you deal with someone’s mindset first?

 

Jackson Millan (18:04):

Correct. It’s the cornerstone of everything because the biggest limiting factor in your life and your business will always be you. Unless we are expanding that invisible ceiling, then we’re always going to hit our head up against it. The other part to that is that I personally believe that mindset forms the most significant part of your financial foundation. Another bit of an analogy here in terms of the building space, like imagine that we’d built the foundations for a single story house and then we then decided that we wanted to build a five story apartment. It’s not going support it. It’s exactly the same for the way that you go about creating financial freedom. The mindset that you needed to get from zero to 100,000 pounds in your business or zero to a hundred thousand pounds in wealth, is very different to get from a hundred thousand to a million or a million ten million (pounds). We need to continually lift that invisible ceiling. I think most of us, particularly us blokes, we go “Oh, we should be allright!” We take it for granted. We don’t want to stay where we land. We want to make sure that we’ve got the strategy to support it.

 

Jackson Millan (19:08):

The second part to this, Greg, is Create. We need to have a mechanism for creating wealth to systematically turn business profit into personal wealth. The biggest challenge I see when people have successful businesses, good businesses, is that they “reinvest the profits” <laugh>. If those of you listening to this as an audio, you wouldn’t have seen the inverted commas here. Reinvesting your profits is the sh*** excuse for mismanagement of money that I’ve ever heard.

 

Greg Wilkes (19:38):

Yes…

 

Jackson Millan (19:39):

How many of your clients tell you that they’re reinvesting their profits Greg?

 

Greg Wilkes (19:42):

I hear this is all the time, “how profitable have we been this year? Oh, we haven’t been profitable. We’ve reinvested it all” <laugh> we hear it over and over again.

 

Jackson Millan (19:51):

<laugh> Exactly. You got to stop using it. The best businesses in the world self-fund their growth. They have the capacity to have the ability to grow their business and have a really healthy profit. Now it’s my philosophy that you need to have a profitable construction business because it’s a high stakes, high risk business. Particularly in this economic environment that we’re in globally. The first indicator of economic hardship and recessions is construction and development samples. Guys, you’re the first to go. You’re on the front line literally. It is your job, it is your duty to ensure that you are financially stable enough to navigate those tough economic times, because unfortunately, you’re the first to go. It’s your responsibility, it’s your fiduciary duty to make sure that you run your business in a way that is profitable, that has really good liquidity with liquidity and that you can build the working capital to navigate the storm. The hard part about construction is that you’ve got all these fixed commitments and when your income goes off a cliff, your expenses don’t just go away immediately. They take time. Like could take a quarter, could take two depending on the size of your business. If you don’t have the working capital, you are f****.

 

Greg Wilkes (21:17):

It’s interesting you say that because we often talk about (I don’t what it’s been like in Australia) but through the last few years in the UK it’s really been an absolute boom in construction. When we came out of Covid, yes there’s a little period that was obviously tight in Covid, but then all that pent up demand it boomed, and people we were working with and just hearing it in general, were making a fortune <laugh>. But what we were saying is you’ve got to put some aside as a bit of a buffer for a potential downturn, which may well be happening in 2023. I mean there’s talk of it, but to be honest, it’s still stacked anyway. But you have got to be prepared for that, haven’t you? I think you’re right.

 

Jackson Millan (21:53):

For sure. The same things happened here, mate. We work with a lot of tradies and construction businesses in Australia and New Zealand and also in the US and Europe. The common theme here is that there is an abundance of work. There’s this pent up demand, because there’s not enough people to deliver the services. However, we’ve got this pressure on materials. Material prices are going up at a rate of knots because of the supply chain issues that have come from Covid and with the geopolitical issues. And because of employment, skill trades is becoming increasingly difficult to come by, therefore your cost of wages is going to exponentially increase. Unless you understand those things, they become a universal tax on you and your business, which erodes your profits and what was potentially profitable activity, and profitable work and profitable projects, may very quickly turn into unprofitable, unless you understand those numbers. We’ve got to keep that finger on the pulse because the stakes are very high. The aim here guys, is that you should be able to grow your business and build wealth at the same time.

 

Greg Wilkes (22:57):

Yes, okay. Summarising that so far, what you’ve said; mindset comes first, then it’s about ensuring profitability by staying on top of your numbers and not just reinvesting profits, making sure that your business is able to sustain profitability and reinvestment. The business pays for all. Is that the first couple of things?

 

Jackson Millan (23:20):

That’s the main part, correct. The idea here is that we need to put profit first. We can’t wait for profit at the end. We need to use a behavioural principle known as Parkinson’s Law because Parkinson’s Law governs all of us as human beings. Parkinson’s Law states that as a human being, you use the means that you have available. So the more means you have, the more means you use. The analogy I like to use is tube of toothpaste. Now Greg, when you’ve got a brand new tube of toothpaste, how do you use it?

 

Greg Wilkes (23:47):

Yes, just squeeze it out <laugh>, however much you need.

 

Jackson Millan (23:52):

You’re pretty liberal with it, right? But what about when we get to the end of the tube of toothpaste? How does your behaviour change?

 

Greg Wilkes (23:57):

Yes, that’s it. You’re scrunching it up and folding it out <laugh> squeeze every last drop.

 

Jackson Millan (24:02):

Exactly. Every last drop, even till you get that little tiny bead of toothpaste so you don’t have to go to the store. Exact same thing happens with your money. The problem is that for most business owners, their formula for profit is revenue minus expenses equals profit. Profit is last. Because it’s logical. Even our accountants call it the bottom line. How we flip this on its head is it is revenue minus profit equals expenses. We presuppose profit and we adjust our expenses according to making sure that that profit always exists. When we do it that way, that means that we can always be distributing, we can always be focusing on wealth creation and we are running a lean and optimal business operation because otherwise we suffer from what we call cashflow creep. The revenue goes up, but the expenses increase proportionately or in some cases exponentially to revenue growth, and that erodes our profit and that’s not the situation we want to be in.

 

Greg Wilkes (24:59):

Yes, I like that. This is the similar principles to profit first, isn’t it? Mike….

 

Jackson Millan (25:08):

Michael Michalowicz.

 

Greg Wilkes (25:10):

That’s it. I never get the surname right. I think that’s an absolutely fantastic philosophy of how to run business. It flips its on its head a little bit, doesn’t it? Which I think so many won’t do. What’s really good about that is, I think especially in construction, as we said, there’s so much money running through the books that if you don’t put that profit away first, it’s going to get spent <laugh> it’s going to go!

 

Jackson Millan (25:32):

Exactly. I think the next biggest issue here is we need to stop treating the business like an ATM. We need to pay ourselves a fixed income that is equal to the lifestyle that we want to live and stop doing the ad hoc drawings. Like, don’t use the company card to go and pull money out to go to the chicken shop. You know what I mean? It’s those little things that add up. Most people don’t burn their cash on huge big expenses. It is the little, seemingly insignificant expenses that add up over the course of the year where they get to the end of the year, they go, “Oh sh**, how much do I draw?” We want to have a fixed income, which ensures that you actually value yourself for the effort that you put in. That then allows us to make sure that we are growing our business congruently to the value that we place on ourselves and the role that we play in growing our business. We do a lot of work around personal cash flow structure with our clients. We often find is that by setting up these structures, we can improve profit in the business by about 15%-20% and we can increase household surplus by 20%-25% because most people have money slipping through their fingers because a lack of structure.

 

Greg Wilkes (26:46):

Yes, that’s interesting. I was going to come onto this end. You solved the business side of it and how to run a business in the right way, but obviously it comes down to personally as well. Do you put the similar systems in place for personal budgeting and things like that?

 

Jackson Millan (27:04):

We do, yes. It’s a process of reverse engineering through all of these stages. We get that 20 year roadmap, we reverse engineer that into our income target. We then work out what (we call through a personal profit and lost) what household costs, paying their mortgage, sending the kids to school, putting food on the table, spending on the weekend, holidays, all of the expenses. Then we can work at, how much income do we need to earn to live that lifestyle and have enough surplus to allocate to investments. That gives us an income target. Then, what does the business need to do to allow us to earn that income? Then from that profit, what do we do need to do in revenue and how do we need to spend it? Then we can go back to KPIs and it makes it so much easier that we can link all of the activity to the outcomes that we want. What gets in the way of going to do the work when you’re that intrinsically motivated?

 

Greg Wilkes (27:56):

Yes, a hundred percent. You’ve got a clear roadmap then of how you’re going to reach it. I think that’s really vital.

 

Greg Wilkes (28:02):

Thinking of a long-term goal for someone then….if someone wanted to retire let’s say they’re 20 years away from retirement. That figure that they’re going to need to retire on, is that purely linked to the lifestyle they want? Or how, how do you generally work it out for a figure that they’re gunning for?

 

Jackson Millan (28:26):

There’s a really simple methodology to do this, but there’s also a more detailed and accurate way. The simple way is a formula that we call the F3 Formula, and you guys can write this down and crunch this number. Basically it’s your financial freedom figure divided by five and multiplied by 100. For example, for me to live a really comfortable lifestyle, I need to produce $200,000 a year in passive income. So using that formula, I need $4 million of investment assets outside of my home in order to allow me to produce $200,000 a year in perpetuity.

 

Greg Wilkes (29:02):

Right.

 

Jackson Millan (29:02):

That’s a really simple back of the envelope.

 

Greg Wilkes (29:04):

Yes, okay, so to clear this up: $4 million, and that is in cash or property or, not your own property, you said?

 

Jackson Millan (29:11):

Correct. That’d be investment assets and the assumption of that, the five, the division by five assumes that I can get a 5% net return on my asset base. Let’s work that out. If we go and invest in say, a diversified index fund, that produces between 8% and 10% a year. That gives me a good allowance for tax, leaving me with 5% so I don’t have to erode my capital.

 

Greg Wilkes (29:36):

Got it. And that 5% will equal you $200,000 a year. Okay, well that’s nice and straightforward for everyone.

 

Jackson Millan (29:42):

Pretty simple.

 

Greg Wilkes (29:46):

Yes. Then it’s a case of working out how long it’s going to take you to get that amount. Is there more complex formulas for that? <laugh>?

 

Jackson Millan (29:52):

There is. Correct. We’ve got some really cool tools that we give to our clients that allow them to do a proper financial forecast with a lot more detail. I consider all of the plus, minuses that go in over the course of that timeframe. We’ve got to realise that your lifestyle and your income and expenses are not going to be linear every year. Some years are going to be more expensive than others, some you are going to earn more than others. We’ve got to be mindful of that and be able to work out that roadmap. But the simple things to consider when we’re working towards, “Okay, here’s where I am right now, here’s where I want to go.” There are three levers that we can pull to bridge that gap when it comes to wealth creation. One is – how much can you afford to contribute to wealth creation? So basically it’s your surplus. Once we’ve lived our lifestyle, how much have we got left over to commit to towards investment assets? Two – what is our assumption of the rate of return or in other words, the risk that we are prepared to take on those investments. For example, if we keep it all in cash, we might make 1% or 2%, or if we invest it all in the next cryptocurrency, we could make a bajillion percent, but we could lose it all right? So where do we fit on that spectrum of risk? And then thirdly, how long are you prepared to wait? We’ve got to realise that compounding takes time and therefore we need to be mindful that if you need to retire in a year’s time, compounding not going to do you any favours. It’s going to be largely based on your contributions because even the interest, the return that you make, it’s going to be pretty insignificant. Further, on the flip side, if you’ve got 30 years to go, then the contribution is probably not going to be that significant. It’s actually the return compounded over that period of time that’s going to have the biggest difference. There’s some calculators that we can provide to your listeners and we’ll include some links in the show notes that’ll help them crunch the numbers on this and start bridging that gap. Most people have what we call a ‘Come to Jesus mother Group’ they go, “Oh Jesus, that’s a big gap.” But prior to that, they are all walking blind, right? Once we can quantify it, no matter how scary it is, we can now start working about how do we bridge it and put ourselves in a better position to get where we want to go.

 

Greg Wilkes (32:03):

Yes. I think that’s really good. I really appreciate that you are going drop those tools in for us Jackson, I think that will really help the listeners with that. I think it’s a really important subject to discuss and have on the podcast because unfortunately, I don’t if it works the same in Australia, but with self-employed builders and trades often they’re not paying into a pension properly. Even if you do pay into a pension, sometimes it’s not really going to give you the lifestyle that you want. I know different ones, they might save up a few hundred thousand and think they’re doing all right in life, but actually how long does that really last you when you retire? It’s not long at all is it with the way things are going. That’s really valuable.

 

Greg Wilkes (32:46):

Just thinking about someone who’s listening to this and maybe they haven’t really built up any income at the moment, the business is doing okay, what would the first steps for them be? How would they get started in all this?

 

Jackson Millan (33:01):

Yes, I think the big part to realise is that that language and money is universal. It’s why we work with clients all around the world because when you understand these fundamentals, you can apply them everywhere. Funnily enough, I’ve worked with clients from pretty much all aspects of the world, all parts of the world in different financial systems and they’re very, very similar. I’m sure there’s different nuances in terms of tax and strategies and whatnot, but we can navigate those relatively easily once we understand those fundamentals. The common thread for business owners globally, is that we often put our wealth on the back burner to grow our business, because business is the best wealth creation asset that you can ever have. You’ve only got to go and look at every rich list in the world, and the vast majority of people are there because of their business or a business they have inherited. You’re in the right place, you’re playing on the right field. However, what you need to do is you need to make sure that your business is and turns into an asset. Let’s face it, there’s not many construction and trade businesses that are sold for a profit. So, you can position your business for sale, there’s a lot of work involved in that. But what you need to do is you need to turn that cash flow that you get from the business into assets, otherwise you are not going to retire financially free. What we need to do is we need to start something. The analogy I like to use here, Greg, is that we need to build what we call money muscle memory. The idea here is that, let’s say we’re going to go to the gym and let’s say in 2023 I decided I was going to become an Olympic weightlifter. I’m not going to go to the squat rack and put 300 kilos on the bar and try and squat it. If I even lift the bar at all, I’m probably going to hurt myself, right? So what you do is you start with the bar, you get the form right, you get some confidence up, you build some core and then you start adding some weights. Then you build that up over time. We apply this analogy to finance. Most people feel like they’re falling behind, they feel like they need to take too big of a leap initially, or they feel like they’re too far behind and they end up doing nothing. Take one step, the first step is always the hardest and then we build on it over time. The best thing you can do is get the start. It could be 500 pounds a month, could be less. We’ve got some clients that are investing a couple of hundred pounds a month. Can you tell me that you’re going to miss that amount of money? It might hurt a little bit to start off with, but I guarantee you in a few months time you’re going to get used to it and then we create a mechanism to increase it and then we’d snowball it. That’s the best place to start.

 

Greg Wilkes (35:35):

I like that. Yes, that was a good book by Warren Buffet as well “Snowball”<laugh> that’s one of the richest men of the world, its exactly how to do it. It does start building momentum, doesn’t it, once you get started and on that role. That’s really useful.

 

Greg Wilkes (35:49):

So Jackson, if my listeners wanted to learn a little bit more about what you teach, I know you’ve written some best selling books (we can drop the links into below on how to get hold of you) but where would they get started in learning a little bit about you and what you’ve got to offer?

 

Jackson Millan (36:08):

Yes, one of the things that’s really important is that everyone is so unique in terms of where they are on their wealth journey and there is this risk that we try keeping up with the Jonses, right? Like you look over at what your mates are doing or your family are doing, you’re like, “Oh, maybe I should do that” and it’s probably not the right thing. What we created is a 40 point financial performance score card. It’s basically the top 40 things that get in the way of most business donors creating financial freedom. The scary thing is the average score is about 18/40. Now, I don’t care if you scores 5 or 35. Once again, it’s about knowing what is the next right thing that you could be focusing on, and that’s gonna help open your eyes to that. If you guys jump onto wealthhealthcheck.com.au that is wealthhealthcheck.com.au, you’ll get the 40 point performance scorecard, you’ll get all of my books for free, you’ll also get calculators and forecasting tools that’ll help you apply what you learn from the scorecard to your situation and start getting some runs on the board. Then from there, there’s a whole heap of our details in there if you want to reach out. As you said, we work with clients around the whole world to help teach you the language of money so you can make better decisions for yourself. It’s my opinion, no one’s ever going to love your money like you do, so you better learn how to love it better yourself.

 

Greg Wilkes (37:17):

<laugh> That’s brilliant. Thanks Jackson. I really encourage my listeners to do that. It’s not going to hurt you to take the scorecard and if anything, if it just opens your eyes to the position you’re at the moment, it’s of value, isn’t it? We don’t want to bury our heads in the sand and leave it too long. Jackson, thank you so much for all the value you’ve offered today and thank you so much for the value that you are going offer after with the scorecard and the books etc that you’ve said to the listeners. Really appreciate your time today, mate.

 

Jackson Millan (37:45):

My absolute pleasure mate.

 

Greg Wilkes (37:46):

Can I just ask a quick favour? If you are getting some value out of our podcast, I’d really appreciate it if you could just quickly go online, make sure you subscribe and leave us a review on the platform that you’re listening on. That really helps our rankings and just helps other construction business owners find out about the show so they can improve their businesses too. So let me just say thanks in advance.

 

Greg Wilkes (38:12):

If you’d like to work with me to fast track your construction business growth, then reach out on www.developcoaching.co.uk.