To the Moon & Beyond: Sage Financial Advice from Entrepreneur, Mr. Henry Culbreath - Part II

To the Moon & Beyond: Sage Financial Advice from Entrepreneur, Mr. Henry Culbreath - Part II

Back with the second part of this inspiring info with entrepreneur, Mr. Henry Culbreath.  Sorry I kept you waiting, it has truly been a hectic month in my life. If you are just tuning in or need to refresh your memory, you can catch up on the first part here.

Continuing with the backstory...

I left Harvard in 2002 at 24 years old, making about $110k a year. You really couldn’t tell me nothing!  First thing I do, I go buy the Range Rover with tv’s in the headrest. Sounds wack now, but in 2002 tvs in the headrest? That was in the rap videos. Here I am. Flyest car, making good money. I have no problem with girlfriends, so I’m living the life. This is the trap. It wasn’t until my boss, invited me to his house. I’m a strategy consultant with a firm up in Boston and my boss invited us to his house for a fondue and some other stuff. I didn’t even know what fondue was and I had taken French in high school. Whatever. I didn’t know what fondue was. We go to my boss’ house and I’ll never forget this. Here I am, I was just hired, the other consultants had been working there before me and I remember pulling up and I had the most expensive car.

More expensive than your boss?

More expensive than my boss.  I do remember when I was in his yard. We were throwing a football around and I remember when I threw the football to his son, I threw the deep ball, and we were still in his yard. Anyone who knows football knows the deep ball, means I threw it really far. I threw his son the deep ball and we were still in his yard.  We didn’t leave his yard, and I remember saying to myself, “I’m acting like a typical negro. Aren’t I?” There was this epiphany. I have no excuse because I have studied money at the highest level but my behavior is such that I’m still acting like a stereotypical “Negro”, and so to make a long story short, I did that for only about a year and a half. Here I am, I made probably about $150k in that year and a half, and I have nothing to show for that. I came home to work with my father, I started my own organization. My father had an organization. He was doing some contract stuff and I basically helped my father explode his business, basically retired my father in about 4-5 years. He had contracts with the government.  He’s the one who had the inroad, if you will, working with kids from depressed homes so I came and added my flavor to it and I was able to secure some really good contracts and do some good work in the community and he rolled off and retired and I said,  “ok - let me just go and do my own thing”. 

Let me just ask. At that point, had you set up some goals for yourself, financially?

Yes. This is in 2004, I’m tired of starting over because I thought I had the big salary and then I came back home. I took a pay cut working with my father, but I knew the upside was huge because I’m at the top end of my business. I’m in the ownership room. I knew the upside was tremendous if I could go on and secure some big contracts, and I knew I had the skillset to make that happen. So now I’m thinking as an entrepreneur and it’s not just being an entrepreneur to own your own thing and to work for yourself which virtually I am, but it’s also knowing what to do with money when you receive it. Now in my first 9-5, I was not the entrepreneur. I was working for someone, but it doesn’t mean anything because I still did not know what to do with money when I received it, so it’s still a waste. $150k made by just me and I had nothing to show for it. That’s unacceptable. That’s blasphemous.  That was my first shot. Now I have another shot but now I’m at the top of the chain. To make a long story short, I took money that I received from my business working with the contracts that I had with the government, and I’m investing it. I’m investing it in real estate.  Investing it in the stock market, mutual funds or what have you, and I’m taking roughly 80% of my income. I’m living below my means; I’m living in the DC Metro area. I move into a relatively poor community, and bought my first home. I don’t have to, but I bought my first home. I didn’t want to rent. Now the key is, I know how to live in a poor community, which makes it easier. My resume would suggest, ‘what are you doing living here’? But, my background is “ehhh whatever. I’m from here. This is nothing.” That’s because I’m living below my means and I’m taking my money and I’m buying a different house every year.

So now I’m thinking as an entrepreneur and it’s not just being an entrepreneur to own your own thing and to work for yourself which virtually I am, but it’s also knowing what to do with money when you receive it.

And you are buying cheap homes and fixing them up? Rental homes? What kind of homes are you buying?

All of the above but my strategy was that I’m buying homes that could be rented out to Section 8 tenants because I didn’t have the cash flow to cover myself if tenants were moving out so I needed guaranteed money. That’s the first phase of my strategy. Two properties I purchased already had tenants in them covering the mortgage so all I had to do was the paperwork. I did have to save up for my down payment. So now I secure an asset but when the mortgage comes through, I take the rent and pay the mortgage so I’m basically breaking even at that point.

Now my portfolio is filled with a lot of debt but I have a portfolio.

So the second phase is, now my business is booming and I want to balance my portfolios. I now start buying properties with cash and this happens fortunately for me at the perfect time. 2008 the market slumps, so you can buy a house for virtually nothing. To make a long story short, I made several purchases for properties that doubled in value. So that’s a win. If you made any purchases from 2008 – 2011, you really made a significant financial improvement and my business is booming, so I have the cash, I have the money to go get it. But the thing is, Javi, it’s the profit, not the money that is important. It’s my behavior with the money. I could have purchased a Bentley. Some people buy a Bentley and they are faking. I could have purchased a Bentley and I’m literally in that realm but instead, I put money into things that are going to make money so now I have multiple revenue streams. The passive income that I receive from my properties, I always set it up in such a way. I had a five year goal as I’m making these investments and buying these properties. My goal is to set this thing up in such a way that I have enough income coming in where if I don’t want to go to work, I don’t have to. This has been my goal in life. I realize something, there are people out there that have great jobs like when I had my great job I remember thinking, “Darn I make good money” but I remember not getting home until 8p and I said to myself, what was the use of making all this money and I gotta wait until I’m 50 or 60 years old, when my joints are aching and-

(laughs) and you can’t enjoy it!

I can go to Miami and kick it but no one wants to sit next to my old ass. I’m all washed up. Or when I go to the beach, by the time I get to my chair, I’m exhausted and I want to go back to my hotel room. So I saw the play working out, ok I can make good money and ya da ya da but I’m not sure it’s enough for me to enjoy this life. Fine for my kids, but let me see how it’s going to benefit me. That’s why I was very aggressive with my money. I didn’t play at all for that 5 years straight. As a matter of fact, when I went on vacations, I went and I only vacationed with my homies who were working a 9-5. There were 4 or 5 of us in the same room. Now, during that time, I could have went and got the top room at the Hyatt, overlooking the ocean in Trinidad and all that stuff.  I was vacationing below my standard but I kicked it with the crew, I lived on the same level as the crew, while I’m taking 80% of my income and I’m investing it. The benefit I had in that 5 years of an aggressive approach, is lifelong. Let me say this again, by doing the right thing for those 5 years, I’m now in a position where I can secure easily a six figure income doing absolutely nothing.

I was vacationing below my standard but I kicked it with the crew, I lived on the same level as the crew, while I’m taking 80% of my income and I’m investing it.

That’s the power of investing. What people don’t understand is that investing doesn’t just bring you income, but ultimately it gives you back life. The fact that you can actually take your time, and do with it what you want. That’s the part, that’s priceless. So my goal is for every business model, I have that I pursue, I want it to secure for me a minimum, a six figure salary and I want to set it up structurally, where by it makes income without me working. That’s the key. I need the passive income. I don’t mind working but I call it the “luxury of laziness”. I want the luxury of being lazy. Lazy is ok. I applaud laziness. There’s a trap to this engine behind the American economy and you’re frowned upon “Oh you’re lazy” No, no, no - because we talked about Mitt Romney making all these millions of dollars off of investment income. We don’t know how hard Mitt Romney worked. It doesn’t matter, but he has the luxury of laziness andthat’s what I want. I want the luxury of being lazy. If I want to be lazy, I could choose to do that. Today, instead of a hard day at work, I’m going to sit down and have a drink. That’s my day.

If I want to be lazy, I could choose to do that. Today, instead of a hard day at work, I’m going to sit down and have a drink. That’s my day.

Let me ask you this. How does the average 9-5 person, living paycheck to paycheck, dealing with student debt and everything else, get ahead? What are some of the first steps they need to take? They may need to provide for children etc.

Sure. So one of the things I spoke about on FB was that when you look at the spending habits of the average person, there is a problem. Most of the people I speak to believe they live paycheck to paycheck, and they do technically, but they don’t have to. The problem is that most people are victims of what I call the ‘consumption culture’. We live in a society where it’s almost like, if you’re not consuming, you feel like you are missing out on something. That is the biggest area where I have found many, if not most of the people I have spoken to. can save significantly. Like I said, in my post on fb, think about this. Let me ask you a question Javi, when was the last time you drove off road? Never. Do we have a snowstorm every weekend?

No, we don’t.

We have about one or two big snowstorms per year. Let me ask you a question. You can jump on cars.com and get the number and volume of the different types of cars there are and range of how expensive they are. Listen. 9 out of 10 people only need a small buttoned up Honda Civic. That’s all they need. A nice small four cynlinder car that’s going to drive you and three other people easily. Why do you need a lot of space? You’re not sitting in a car for 4 hours every day.

That’s right. It’s funny that you say that. I went to get my car from the dealer. I had to get my brakes fixed the other day and they definitely tried to get me to upgrade and I was like no, I don’t need this. I want to finish these payments and be done with it.

Right and it’s the consumption culture. So that’s a big area of spending where the majority of people are overspending and this is actually important because they only see the spending loss. They reason things out the wrong way. They say if they can make the payment, they’re ok. No, no, no. The fact that you can make the payment is not the issue. The question is “what do you need to invest in the vehicle to put you in the position, where that car is paying you back. That car needs to be your slave. You do not need to be a slave TO IT. So we need a vehicle and the reason I said this is because when you are living paycheck to paycheck you have to look at what you are spending your money on.  You don’t have that overflow of income above and beyond your bills where you can say, now I’m going to invest in this. No, you have to look at what you are actually spending money on and make the adjustment and the place where most people can make the adjustment easily, is their car. We don’t even spend enough time in our vehicles to be buying luxury vehicles, like what are you talking about? You’re ass is going to be sitting in there for maybe 45 minutes. On your way to work and back. I mean do you know you just spent $40k? I mean you spent more than that.  You think you spent 40 but you spent more than that when you compare that to the fact that you could have taken the exact same trip with a 4-cyclinder vehicle that would last you just as long, if not longer and you could have spent about a $16k /$17k. When I stretch that out and show you the time valuation of the loss plus the maintenance and the gas which has a bigger engine, all that stuff, you are throwing away about $200-$300k minimum, off the purchase of one car. This is important. If you stretch it out over a 30 year period, of the type of return you can get over your lifetime, you’re throwing away $200-$300k on one car and this is the problem. What about the people who buy this nice $40k car and then they got to have another one? They finished paying it off, they think they are ok and now they buy another one.

Right they want to upgrade.

Yea, you have literally thrown away whatever cushion you possibly had to secure wealth, you have thrown away a lifetime amount of money. So what I say to the working class person, the key is to live below your means. If you do not have any money left, live lower.

Ok, and then let me ask you this as well. I have a young son. He’s 2.5 years old, as you know. He has a little piggybank, but where do I start? Where do other people start with teaching children about finances because the interesting point you made, and I think that you see this is in other communities about building wealth, where people are taught at a very young age certain habits, so I want to get that as well to my readers.

Let me just say this, I threw away $400k by not saving any of that income.  Let’s say I could have saved at least $50k. They say money in the stock market can double every 10 years, so I threw away about $400k in the next 30 years. Threw damn near half a million dollars because I couldn’t settle my a$$ down. Money I wasn’t already making, so it’s not like I was losing anything, Javi. All I had to do was keep a low lifestyle and take the money and invest it. Make a long story short. The key is, you have to have these conversations at the dinner table whenever a dollar conversation comes up and this is the distinction, I’ll never forget this. There was a guy at Hobart and William Smith Colleges. I won’t mention his name because I never got his permission, but I remember I was taking the bus during spring break back to Hobart and I went from DC to New York. I was going from New York to Geneva and it was spring break. I will never forget this, my junior year, we were at the bus station and he had a book in his hand about the stock market. Spring break! I don’t know many students who are reading up and learning about money on their leisure. He was a white guy and it was at that point that I realized, well damn, you have to make it cultural. You have to make it conversation, you have to make it “well this is what we talk about, this is what we do”. There is a population on earth that does it all the time and they are the most successful ethnicity of our era, sorry to say it. They’re the Asians. Everything in some shape, form or fashion, is about ‘let’s talk about the dollars behind it’. It’s completely entrepreneurial. See people laugh at that little nail shop, sitting on the corner, but you don’t know they’re making at least $300k profit every year.  You see that little Chinese food carryout spot? You don’t know it makes a million dollars. I sat in one of those stores and I counted the amount of food they sold in a 20 minute period, and I said to myself, “damn, this dingy, hole in the wall spot. These severely, underdressed people, very low profile people. They’re making a million dollars a year in this B---H.” I ran the numbers. I got away from the optics of it all and I ran the numbers and then, I looked around and I said “Damn they’re on every corner.” I haven’t seen them protest for shit, yet. I don’t see them running for office. I don’t seem them doing any of that shit.

well damn, you have to make it cultural. You have to make it conversation, you have to make it “well this is what we talk about, this is what we do”.

I just don’t see them doing it and guess what I also don’t see? I don’t see anyone effing with them. You know why nobody messes with them? Because they got the dollar. They really are running ish. Listen, they don’t have to be running anything but they run enough, to keep you off of their ass and that’s the key. I just want to be that type of guy. I know you dislike me but don’t come bothering me because I’ll put these dollars together and find a way to knock your hat off. Ya know? That’s the key. I am no longer interested in the politics of things, I get it. Let’s build some wealth.

Generational wealth! I remember Chris Rock doing a piece about having something that can't be blown away with a bad drug habit one summer. You need to be building something that your children are benefitting from. Your children’s children are benefitting from, and that’s why I asked this question because if something happens to you, God forbid, you don’t want your children to have to have a bake sale to bury you.

Well it’s more than that. This is the deal. Our parent’s taught us that as long as you got a good job and you could take care of yourself, you made it and that’s because they came from a generation where that’s what people did but they couldn’t see further enough into the future to see how this thing really, really plays out. The bible says a good man leaves an inheritance for his children’s children. Right? That’s in the bible. Now this is the key. This is the place where I am and I’m going to be for the rest of my days. If I were to leave this world right now, Maya and Soleil, do not have to work. All they have to do is stick with the business plan, I have already laid out. Go around and collect your rent. Now this is the problem, that means their entire life, assuming they follow the play, Javi. Because if they want to go out and pick up a rap habit, and start a rap studio and sign some artists that tank and blow all your money, fine. They wanna go and do some stupid ish. Fine. You can’t save anyone from stupid. Right? But there is enough set up where they can survive. This is the power of generational wealth transfer that frees up their entire day to do whatever they want, to secure even more wealth. But you asked a powerful question about the person who is working a 9-5 and I feel for that person, because I try to extend sobering news. I was talking to a good friend of mine, I won’t say their name but you know the person, so let me just share this with you. A good friend of mine who has a kid and they’re doing their thing and they’re at a phase now where it’s like just me looking at the numbers, it’s going to be very difficult, if not impossible for them to truly secure wealth outside of winning a lottery ticket. Once you reach that age of 40, your life expectancy has changed. Your life expectancy is different at 40 than when you were 20 and if you’re knee deep into your job or your career, it’s hard to simply pivot when you have other mouths to feed so the question is, what does a person like that do? You have to have a multi-generational strategy.

You have to have a multi-generational strategy.

You may not be the person to eat all the food. You may have to die first because the strategy is going to take the rest of your generation but your child’s generation but you may reap some reward. This is what you can do. If you set your child up and position your child to make all the best decisions, early in life, your child may give you a phone call, 20-30 years from now “Mom or Dad, leave that apartment. Why don’t you come and live in one of my properties in my basement?” because your child made the best decision with their savings, credit, best decisions with school. Your child looked at school not as something you should do, but a return on an investment. I’m going to go pursue this degree for $100k, 200k, $350k, and I’m studying basket weaving? I can’t do that. We’re in an economy right now where I need to see where this degree that cost me this much, can put me in a position where I can be making this much and if I don’t see that – I’m not knocking school – but it has to work. Our generation is the first experiment with, we all get to go to college” The problem is and it’s sad but it’s true. All degrees are not made equal. That’s some sobering ish. It’s insulting to some people but it is, what it is.

You have to have a multi-generational strategy. You may not be the person to eat all the food. You may have to die first because the strategy is going to take the rest of your generation but your child’s generation but you may reap some reward.

Everybody can go to Hobart and William Smith which is one of the most expensive schools around and spend $30-$35k/year and if you don’t leave with a certain skillset, you’re going to struggle. Particularly in the beginning, and you paid the same amount for your degree, as they did. You got the same loans as they got. Every degree is not made equal and this is the key and that’s why I jumped into the economics of things because I said to myself that I have to be able to cash in on this. The bottom line is that we have to make sure our kids do not end up with $300k in student debt and we don’t know how they are going to make that money back. It’s those critical decisions, early in life so they have a long time horizon to cash in on good decisions. If you are going to be my child, I don’t want to ever see you own a luxury car until you have at least 3 properties and this much in your 401k. This is important. That’s culture. The worst thing to happen to us is that we got infected with the “bling bling” culture. We actually convinced ourselves that as long as we looked like a million bucks, we are a million bucks.

The worst thing to happen to us is that we got infected with the “bling bling” culture. We actually convinced ourselves that as long as we looked like a million bucks, we are a million bucks.

A lot of people would rather have an addition to their wardrobe instead of travelling and seeing the world.

That’s a generational thing too because we were not groomed to see the world.

No, we’re not and it’s funny that you say that because I did two study abroads while I was in school. I went to Brazil and I went to Senegal and I did an internship in Parisand it’s very different from my parents.

Absolutely and once your eyes are open to something like that. Wow you’re like “you really don’t know what the world looks like” That’s one of your epiphanies that you now need to pass down to your children. See the world. More than what you know. I recommend to everyone. Particularly people with children. You should have an intergenerational, multigenerational, financial strategy that your child can articulate. If you sat my daughter down, she’s 10 years old. And you say “if you have money, what do you do with money?” she will say, “I take money and I put it into investments and assets. If you ask, “What is an investment?” She will say “An investment is something that will give you money back”. That’s what she’ll tell you. Now, this is the key. She doesn’t really know, all of what that really means, but her orientation towards money, is being formed right now so that when she receives her first paycheck and it looks like a lot of money…Let’s say she gets a paycheck of $600. Damn, this is a lot of money. No, it won’t look like a lot of money to her, because in the back of her mind, she’s going to say, $500 goes towards investments. All I have is $100 because that’s her orientation towards money. Now, someone else looks at $600, and says “damn I could go to six flags, I could bring my friends, and we can get all of the candy we want.” You’re supposed to say, I only have $600. I’m going to six flags, just me. That’s how the Asians look at their money. It’s investment and I’m generalizing but the bottom-line is, the Asians are actually wealthier than white people in America now. That’s because if you talk to them long enough, you see that there is some business or some entrepreneurial thing that they are plugged into.  Don’t get me wrong, you see a lot of them balling and wearing some fly ish. First of all that’s not always authentic ish. They ain’t crazy. They’ll remake that ish andmake you think that’s the one. As long as you think that’s the original Louis, mission accomplished. There’s no reason to spend a couple of thousand on a bag if I can spend $100 and you still think it’s a $1000 bag.

Or you can buy it thrift, which is what my parents used to do, at a fraction of the cost because a bag is not an investment and its not a cushion for you to live off of.

Chase the American dollar but don’t get caught up in consumption culture. That’s the best play. You can maximize. You can win and obliterate the competition. Live below your means and save money, you are going to win. In America, this is the place that you can actually beat the system. Our problem, we violate terribly one principle. We live ABOVE our means and we can’t get anywhere. For some reason, culturally, we refuse to get anywhere. We feel like we’re losing. That’s the danger. I know a guy who I mentored for a while. I finally got him to buy his own house. He had a BMW 745. Paid about $60k for it. He had the car for like 6 years and he just finished the payments. That car has made him a slave. Guess what he wants to do now? He wants to go buy a Mercedes.

Our problem, we violate terribly one principle. We live ABOVE our means and we can’t get anywhere.

No way.

His lights have been turned off. You cannot have the power cut off in your house while you are riding around in a 745.

That’s right. Thats hood rich.

Yea you are playing yourself but the problem is this. He can’t get below his means.  The idea of him going out to get a nice little 4 cylinder Honda. It’s so mentally debilitating to him, he can’t get around to doing it. So this is the problem. Even at the risk of struggling.

I see that with us. Our self-esteem is tied into that for some reason. Your self-esteem isnt tied into the wealth that you could be acquiring, it’s tied into the image and that unfortunately is the trap that a lot of us fall into. That we cant forgo that for the longer term goals.

Absolutely. First off, you’re absolutely right and this is the problem. It has disastrous consequences economically and this is why. Because we actually are the first generation that’s clearly educated and we get good jobs but many of us are going to die broke and that’s a disaster. That’s tragic. When our parents died broke, I get it. They really weren’t making a lot of money. They didn’t have the opportunities for the careers that we have but we are actually out here. Many of us.  We get a chance at getting a shot at getting a good job and we are still going to die broke. That’s a disaster and this is why. The “bling bling” culture and consumption culture has gotten us to the point that if we don’t look like the money we are making, then what’s the use? 

The “bling bling” culture and consumption culture has gotten us to the point that if we don’t look like the money we are making, then what’s the use? 

That’s right?

When I got my six figure job, every female in Boston needed to see “well, that young ninja is on”. That’s what they needed to see, so I went and I got my Range Rover. TVs in the headrest and when I pulled up to the club, they had to know “oh he’s on”. Yea he’s doing pretty darn good. At the end of the day, I had nothing. I spent it all. Proving to someone that I was making it. Don’t get me wrong. I was making the money but--

It was fleeting. It wasn’t long-term. It didnt have a permanent status. 

The truth of the matter, is that I was living above my means. Just because you can afford a car, doesn’t mean you get it.

Thats right. Listen, Henry, I have to wrap up. Unfortunately. I thank you so much, you have imparted so much wisdom. Are there any final things you want to say or things you want people to know?

Ok I would say, I challenge people. I don’t care if you have to get one roommate. Two roommates. Three roommates. I challenge people to pick a phase of their lives. A 5 year stretch or what have you and say to yourself “I’m going to live below my means” and I’m going to take every dollar that I save, during this phase, and I’m going to invest it. Your investment strategy can be a multitude of things. A conversation you could have with yourself or someone else but at the very least, if you are living paycheck to paycheck, fine but get further below your means during a certain stretch of your life and invest your dollars accordingly. It could be in stocks. It can be in properties or what have you but I challenge you to live below your means. That’s the issue. The consumption aspect of this is the biggest problem with our community. So that’s the last thing I would leave with anyone for sure.

I challenge people to pick a phase of their lives. A 5 year stretch or what have you and say to yourself “I’m going to live below my means” and I’m going to take every dollar that I save, during this phase, and I’m going to invest it.

Wow! Are you down to take the challenge? I truly thought Henry dropped some valuable gems of knowledge. LIVE BELOW YOUR MEANS!! I'm definitely inspired to accept his challenge.  I hope you are too.  Please share your thoughts either here or on my Facebook.

xo,

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