The Real Wealth Formula Most People Never Learn (And Why Money ≠ Wealth)
This post is an excerpt from my recent YouTube episode on "The Wealth Formula." You can [watch the full episode here] to dive deeper into these concepts and see the calculations in action.
Here's something that's going to blow your mind: Most people think money equals wealth. It doesn't.
I've been working with families for years, and I see the same mistake over and over again. People focus on how much they're making instead of understanding what wealth actually is. If it cannot be passed down, it's not part of your wealth. Period.
The Four Questions That Will Change Everything
Before we even get to the wealth formula itself, you need to audit every single account you have. I call this the "Laser Fund Test" - four critical questions you must ask about every account, every income source, every asset:
1. Liquidity - Can you put money in and take money out whenever you want without penalty? Your 401k? Nope. Your savings account? Yes. Your business income? Depends on how you've structured it.
2. Safety - Will it lose money in a downturn? There are three types of losses to consider:
Loss of growth (the money you've earned disappears)
Loss of principal (your original investment shrinks)
Loss of potential (opportunity cost of what you could have had)
3. Rate of Return - Is it growing at a competitive rate within its category? Don't compare a high-yield savings account to Apple stock. Compare apples to apples.
4. Taxation - Are you paying taxes now, later, or never? This is huge and most people get it completely wrong.
Here's the kicker: There's only ONE type of account that checks all four boxes - Indexed Universal Life (IUL) policies. Everything else has trade-offs, which means you need multiple accounts to cover all your bases.
The Wealth Formula That Actually Works
Ready for this? Here's the real formula:
Money + Time + Rate of Return - Inflation - Taxes = Your Actual Wealth
Let me walk you through a real example. Say you want $120,000 per year in retirement (today's buying power). Here's what you actually need:
Add inflation: That $120k in 35 years? You'll need $386,732 per year just to have the same purchasing power.
Add taxes: If you're in a 25% average tax bracket, you'll need $483,415 per year before taxes.
Calculate total needed: Using the 4% safe withdrawal rate, you need $12,085,375 saved by retirement.
Work backwards: That means you need to save about $121,000 per year for 35 years (assuming 5% average returns).
Sounds impossible? That's where the magic happens.
Why Most Financial Advice Fails You
The problem with traditional financial planning is it treats all these variables as fixed. "Just save 10% and invest in index funds." But that's not how wealth building actually works.
The biggest variable - and the one you have the most control over - is your rate of return. This comes down to which accounts you choose and how you structure them.
That's why I don't just call myself a financial advisor. I'm a tax-free retirement planner. My entire job is getting people to a 0% tax bracket in retirement while maximizing their rate of return through the right account mix.
Your Next Steps
If you're serious about building actual wealth (not just accumulating money), you need to:
Audit all your current accounts using those four questions
Calculate your real wealth number using the formula
Find the right mix of accounts to get you there
Most people try to do this alone and end up with mediocre results. The math is complex, the account options are overwhelming, and one mistake costs you decades.
Want to see how this applies to your specific situation? This is exactly what we do in our free retirement planning sessions. [Schedule a call here] and we'll run your numbers using this same formula.
Watch the full YouTube episode where I break down all the calculations and show you exactly how to apply the Laser Fund Test to your accounts. The visual examples make this so much clearer than just reading about it.
