Financial Framework: What Wealth Actually Enables in Your Life
Episode Summary
When it comes to building the life of your dreams, hope is not a strategy. So today, we're kicking off a new series that will give you the tools you need to build a solid financial foundation from the ground up. In this episode, Allegra explains what wealth actually enables in our lives (hint: it's not just about being rich) and introduces the Factora Financial Framework—the basis for everything we teach in the Wealth Circle.
Episode Notes
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Transcript
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All right, welcome back to another episode of Coffee and Coin. We took a brief hiatus while I was having a baby. But I'm so excited to be back after taking some very precious time away to bond with my sweet baby girl, and get the hang of being a new mom, and a working mom, and a co mom, and a CEO of a startup mom, and all of those things.
So since I was last on the podcast, we have kicked off the fall 2022 Wealth Circle, which I can't believe it only has about a month left to go.
And there is truly nothing I love more than seeing a huge group of women come into the factory or community start sharing their financial numbers loudly and proudly. Regardless of where they are in their financial journey, I don't care if their net worth is negative, or over a few million because we've seen it all and we have it all in every cohort. The bigger picture is that they are here to transform their financial life to learn how to invest and become confident wealth builders.
So if you're new to our podcast, the wall circle is the bread and butter of what we do here at Factora. It's our live online course and community that teaches women how to competently invest in the stock market, real estate and business asset classes and create a financial plan so that they can reach their biggest life goals. Yes, life goals. That is what money affords you the ability to do what you want. That is why we all go and earn money so that we can transfer that money into things that we desire. So I created the Wealth Circle, because money wasn't something I understood very well or learned about growing up. And well, I was in the public education system until high school. And I never got a course about personal finance. And even at my private school, I didn't get anything more than one 45 minute session on how to balance a checkbook. And then I actually never even got a checkbook. So I know that so many women have had this experience to where they didn't learn about money in a formal way, in any sort of education curriculum. And they also didn't learn about it at home. But they observed it at home. Because again, money affords our life.
So we've all watched our parents and how they behave with money, how they talk about money, what money means to our family, and we grab on to those beliefs, or try to have the antithesis of what we saw. And we just end up with this hugely complicated relationship with money and it starts to feel intimidating and hard. And still so necessary because we spend it to live every day, right? We have to put the gas in our car, we have to put the roof over our head. So we go out and we get career so that we can earn income. But if we're just earning income to spend it as opposed to earning income to grow it, then we're really chipping ourselves because it's far more important at the end of the day to learn how to keep and grow your money than it is to spend it. We all kind of innately know how to do that. It's the investing and compounding of that hard earned income. That's far more important because once you learn how to do it, you can do it again and again and again. And we're always going to be wealth building because we're We're going to live lives where we can be. So that's what we do, at fact, Torah and in a wealth circle. And I love watching women learn how to do this, because when you build wealth, it creates so many more opportunities in your life. All right, so today, we are kicking off a six part series to help you understand exactly what it means to have a strong financial foundation, and how to build your wealth step by step. So I know being wealthy or being a millionaire can get a very bad rap. Because people associate it with being greedy and corrupt, and especially women, because obviously at Factoria, we are a women built and focused company, course and community.
There are a lot of women who come in thinking like I don't want to want too much money, because that makes me bad in some way. Well, I'm here to debunk that. Money is an inanimate object, it is not inherently good or bad, it is up to the individual who has that money, how they behave and handle it. So let me ask you this, when was the last time you stopped to think about what wealth actually enables in your life? So I obviously just shared that we buy things with our money, so we can have gas in the car and roof over our heads. Okay, but what does having money actually allow in your day to day world? At fact, hora, we think about money, enabling four major phases of life. So starting from the beginning, there's the survival phase, the stability phase, the flexibility phase, and then the freedom phase, right. And you've all heard the term financial freedom, I actually don't think anyone defines it in the same way. But the way we define it here, in fact, Hora is when you hit financial freedom, it means that you have the option to not work again, you can, but you don't have to, because you've built up your assets, so that they can afford your life instead of having to go to work and exchange your time for money in order to afford your life. So you can visualize those four phases, I just talked about, like a staircase going up in your financial journey. And obviously, survival is at the bottom, and we are working our way up towards freedom at the top. So let's talk about the survival phase. At its most basic level, money allows for survival for those basic needs, right. So when people go to work, they earn money, and they go and pay for their basic living expenses, the food, the shelter, the transportation. But in the survival level, if they don't make enough, or they don't prioritize how to keep any of that money, then they end up just surviving, because they don't have money leftover for additional needs or wants beyond those basic survival things. This is effectively the concept of living paycheck to paycheck. And I know a lot of people starting out me for sure, was in the survival phase for years. And interestingly, every time I earn more money, I just spent more money. So I kept myself in this survival phase, which meant I always had to go to work to just meet my basic needs. And I wasn't even doing all the things that I wanted to, to move out of the survival phase and take a step up towards financial stability, you have to start prioritizing, saving some of your money each month, instead of spending the entirety of your paycheck. Once you do this, you're going to be able to start or finish filling what's called an emergency fund, so that you have something on hand in case of emergencies come and they will you're able to pay off some high interest debt so that you're not tethered to something that is earning someone else money. And you can start saving up for short and midterm goals. So we love the stability phase because it gets us out of that paycheck to paycheck lifestyle, and helps us start preparing ourselves stabilizing ourselves for additional wealth building. Once you're able to do those things right, manage debt appropriately have an emergency fund at the Ready, and save and achieve your short term goals, you can start prioritizing a lot of money towards investing. And investing my friends, is the key to unlocking financial freedom. And it's critical to financial flexibility this phase because this is the point at which your investments are going to be making and generating you additional income.
Why is that so important? Because when we go to work as our only means of earning money, it means that our income is not diversified, it means we are depending on that job for the entirety of our financial safety. And that's never a good place to be, because it doesn't give us this flexibility we want. So when we're investing, it means we're buying assets, we are generating additional income from those assets. This is where we get flexibility, right? Because our money is starting to earn money. So just to recap, survival mode, paycheck to paycheck, you are just affording your basic expenses, you can't do the things you want to in life stability mode, we're out of survival mode, we are actually saving in addition to the things that we have to afford. Flexibility mode is when we are investing, so we aren't just dependent on our paycheck for income. But we have investments that also bring us income. This is what we teach in the wall circle, we teach you how to diversify your income through investing, and build up assets that can allow for passive income, because your job is always going to be active. A job literally means doing work for payment. So I don't know about you. But most of the jobs that I know about, especially in corporate America, they require your time in order to make your salary. And the more you work, the more hopefully raises you're going to be asking for. And it's also going to come with more responsibility. So it's still active money, the way to get off of that track, or kind of hamster wheel, as I like to think of it is to invest your money, invest some of your income so that it earns money. And when you do this, and you start to do it time and time again, and you get good at investing. That is what can get you into the financial freedom level, the tip of the pyramid, because it means you've exponentially grown your wealth through investing. And the work becomes an option, no longer an obligation. Okay, so hopefully those phases made sense. And I hope you're considering right now listening to this, what phase you might be in. But let's talk about how do we move up the staircase out of survival mode? Well, first, we need to build a financial foundation, which is essentially a set of financial habits and tools that allow us to achieve our goals and build a better life than this survival cycle of paycheck to paycheck money in money out money in money out that stressful feeling of needing to earn enough to afford your bills, and maybe some debt obligations you've already ascribed to yourself. So introducing the fact Torah financial framework, which is what the well circle is built upon. You can think of this framework as your roadmap to creating the foundation, that's going to lead you to that beautiful financial freedom we just talked about where you don't have to trade your time for money because you already traded your money for money. And now you get the ultimate creme de la creme, asset back, which is your time because you don't have to clock in at work. Your money is doing that for you. So if you're a visual learner, a lot of this will really come together and you can see and visualize the framework in our free workbook that I will include in the show notes that walks you through all this. But essentially this framework is a pyramid. And as your wealth grows, you're able to ascend up to the next step, allowing that additional stability, flexibility and ultimately freedom in your life. So I want to just talk about the framework briefly. And then we're going to have an episode that deep dive that deep dives each piece of the framework that will help you build a rock solid financial foundation. But if we're starting from the bottom of this pyramid, the first thing we need to do is understand, mitigate and eliminate our high interest debt. Why? Because owing someone money at a high rate, behooves them, not you. So high interest debt effectively steals from your ability to build wealth, then we need to understand our values so that we can spend based on our values. I have done this work for so long at this point. In fact, Hora has been up and running since 2018. But even before that, I was so interested in personal finance, and I was getting my wealth building going. And one of the biggest learnings I had is that budgets don't work. They are like diets, they are restrictive. No one likes them. No one is effective with them. So I tossed them out altogether at Factoria, we teach you how to have a values based spending system, a system is something that can work again and again and again,
instead of a restrictive budget that you'll might follow for a while, but then you break and then you feel guilty, and then you binge, right, just like the diet model and why I don't believe personally that diets work. So spending based on your values is going to help you eliminate all of that guilt and frustration and confusion about where to spend your money. Because we can't value everything right, we obviously each as individuals have a set of values that we care about. And if we can understand what they are and prioritize them, then we can spend our money accordingly. And spending in this way is going to align with your wealth.
Next step up on the framework is filling an emergency fund, which I briefly mentioned before, and emergency fund is not my favorite term, but it gets at a really important thing, which is life is unknowable, right? We don't know what tomorrow holds, we don't know when our last day is going to be. Life is a set of on known things, you're never going to have all the information to make a decision. Life is literally about making decisions based on some information that we have our gut just we have to go with the flow. That's the beauty of life that we don't know what's waiting around the corner for us. But we can be prepared by having an emergency fund filled, which is going to protect our wealth. And I always like to say emergencies aren't a matter of if just when and what the heck is going to happen. Because something's gonna happen, your dog's gonna eat a lollipop off the street. And then suddenly, he needs dog surgery and it cost you $3,500. And you had just been eliminating your high interest debt and figuring out spending based on your values. But your dog is one of those values, it's a part of your family and you're going to save its life. So if you don't have that cash, at the ready in an emergency fund for life's unexpected lemons that it's going to throw at you, it is going to pull you backwards. So an emergency fund is critical to protecting your wealth and alleviating additional stress because when life throws you curveballs the last thing you want is to also have financial stress. So an emergency fund is going to eliminate that and we'll do a whole episode on preparing an emergency fund. Next step up, when we have these things set, high interest debt is figured out spending based on our values is happening and we have an emergency fund at the ready. We're going to start saving for our near term goals. Why? Because saving is going to build our wealth. And then we are going to start investing for our mid and long term goals. And we want to do this at the same time because we have things that we want to accomplish in the near term in the midterm and In in the long term, but we have to invest for those longer term goals, because that is what compounds our wealth. This is what we spend the bulk of the wealth circle on. Because if you don't understand what compounding is, and how to earn returns from your money, then it's always $1 and $1 out, right. So I just want to take it back to that high interest debt that I started with. Imagine this, you have a credit card, your credit card is a 20% APR, meaning that's the annual percentage rate that you are paying for having that credit limit. So if you are spending money on a credit card, and you are not paying it off at the end of each month, and it has a 20% APR, that is whatever financial institution extended that credit to you, that is them earning 20% compounding month over month, I mean, it really adds up. And so over here, in the investing world, it might be really incredible if you can find a 10% return. So if the financial institution can earn 20% off of you, but it's pretty difficult to even earn 10% off investing yourself, you can see why we do not want to have high interest debt, pulling us backwards. Okay. So in the investing for mid and long term goals, we want to understand the different investment asset classes. So the stock market, the real estate market and the business market, so that we can invest in those and hopefully earn a return. Now, obviously, all investing is risky. But I would argue that life is risky. And we all know that if you don't take risk, you can't have reward. So that's why we we risk things, right, we choose a career path, we change our mind and choose another one, we pick a partner, we have children, there's risk in all of that. And like I said, The future is unknowable. So investing is exactly the same. But I know a lot of women can have some trepidation around it. Well, you don't have to when you realize it's so imperative to your financial life. But also, you're already taking risks all the time, we just have it in our mind that financial risk is the worst thing possible. But I would argue that if you don't take that risk, you can't build the significant amount of wealth that you see out there. Anyone you see with significant wealth, unless it was inherited, they took a risk, they started the company, they invested in that project, they built up a real estate portfolio, they built up a stock market portfolio, basically, if you want to be wealthy, and I recommend that you do, because I think the more women who have wealth, the more we can do with that money and add value to the world. So nothing bad about being wealthy. It's frickin awesome. And it brings so many incredible women together. It's inspirational. I frickin love wealth building. But my bigger point is, you have to invest to do it, and get there anyways. So you might as well learn because with education, and inspiration, watching other women do it and accountability so that you actually get it done. Investing is so possible for every single person listening. And then at the tip top of that framework is financial freedom, as we've discussed. So that really just means living life on your terms. Because like I said, when you have financial freedom, you really have time, freedom and work is no longer an obligation. It's an option. That's where a lot of people actually transition their quote unquote work from going to work to serving others and being more charitable with their extra money and their time. So I don't know what financial freedom looks like to you. I know for me, it means being the international matriarch of a fun loving family. That is my goal. And I want to spend the most amount of time possible with my family, my new daughter, my future children, my husband, and that is why wealth building is incredibly important to me. These steps that I just went over are not complicated. They are absolutely achievable regardless of how much you know about money right now, or how much money you have right now. The key is to learn them and get started applying them so Sooner rather than later, because creating a strong financial foundation does require time. It requires you building healthy financial habits that you're performing on a consistent basis. And we all know that habits don't get built overnight, right? So we love to say that time is one of your biggest assets as an investor, because it's true. The longer you have, as an investor, the more wealth you have the opportunity to build. So I'm going to leave it at that. Hopefully, it was digestible without a visual, but definitely go to the show notes and download the workbook that is going to help you understand this framework and start building up your net worth today. And I will see you next time for eliminating high interest debt, which should be at the very tip top of your financial Priority Checklist.
If you enjoyed this episode, come join us in a while circle. It's our live online 12 week course and community where we teach you how to create a personalized financial plan alongside hundreds of other women building wealth. It will change your life and your money for good. You can apply at Factoria wealth.com forward slash wealth circle. That's factorial wealth.com forward slash wealth circle. See you in the next episode.