The 4 Sources of Cash (and why I bought a $10M building) | Ep 869
Discussing wealth-building and financing major purchases, this podcast episode breaks down the four primary sources of funds: savings, income, debt, and a lesser-known concept called "new money." Alex Hormozi delves into how the wealthy often intentionally generate additional income to pay for large expenditures, avoiding dipping into savings or taking on debt.
He provides insight into strategies the affluent use to temporarily earn this "new money," including overtime, freelance work, rideshare driving, and renting property. Hormozi also shares his personal experience buying a $10 million building in cash using funds generated from "new money"—demonstrating how this approach can facilitate significant investments while preserving one's financial standing.
This is a preview of the Shortform summary of the Apr 11, 2025 episode of the The Game w/ Alex Hormozi
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1-Page Summary
Monetary Sources: Savings, Income, Debt, "New Money"
According to Alex Hormozi, there are four main sources of financial capital for large purchases: savings, income, debt, and "new money."
How the Wealthy Generate "New Money" For Large Purchases
Hormozi explains that the wealthy typically avoid using their savings, income, or taking on debt for major purchases. Instead, they prefer generating "new money" - creating additional income specifically for the purpose of funding these large expenditures. This approach allows them to maintain their financial standing and lifestyle, while preserving their core reserves.
Hormozi says the wealthy view big purchases not just as costs, but as opportunities for creative revenue generation. He gives the example of someone writing and selling a song to pay for a swimming pool, rather than using savings.
Examples Of how Wealthy People Generate "New Money"
To generate this "new money," wealthy individuals often take on temporary work or revenue streams for a defined period. This could involve working overtime, taking on extra client projects, offering services like rideshare driving, or renting out part of their home.
Hormozi advocates creating a strategic plan with a set timeline to earn the required funds through additional work, avoiding prepayment penalties or long-term debt. He cites the example of someone working an extra day per week for a year to buy a car.
Speaker's Experience Using "New Money" to Purchase a Large Building
Hormozi reveals that he personally used "new money" to purchase a $10 million building in cash, without touching his savings or taking on debt. He justified the purchase as it would save his companies $4 million per year in event space costs.
Hormozi says he bought a 36,000 sq ft building - larger than immediately needed - with the intent of making it generate income exceeding its costs. This aligns with his long-term goals while avoiding financial disruption, highlighting the "new money" strategy's role in major purchases.
1-Page Summary
Additional Materials
Clarifications
- "New money" for large purchases involves creating additional income specifically to fund significant expenses, rather than relying on existing savings, income, or taking on debt. Wealthy individuals often generate this "new money" through temporary work or new revenue streams for a defined period, allowing them to maintain their financial stability while financing major purchases. This approach is seen as a strategic way to fund significant expenses without depleting core reserves or incurring long-term debt, emphasizing the importance of proactive income generation for financial goals.
- Wealthy individuals generate "new money" by creating additional income specifically for funding large expenditures, rather than using existing savings, income, or taking on debt. They often take on temporary work or new revenue streams for a defined period, such as working overtime, taking on extra projects, offering services like rideshare driving, or renting out part of their property. This approach allows them to maintain their financial standing and lifestyle while preserving their core reserves, by strategically earning the required funds through additional work within a set timeline. This strategy helps them view major purchases as opportunities for creative revenue generation, aligning with their long-term financial goals.
- Generating "new money" through temporary work or additional revenue streams involves wealthy individuals taking on extra tasks or projects for a specific period to earn additional income. This can include working overtime, taking on more client projects, offering services like rideshare driving, or renting out part of their property. The goal is to create a strategic plan with a defined timeline to accumulate the necessary funds without relying on savings or taking on long-term debt. By pursuing these short-term income-generating activities, individuals can finance significant purchases without depleting their existing financial resources.
- Strategic planning to earn required funds through additional work involves creating a detailed plan with specific goals and timelines to generate extra income. This can include taking on temporary work, extra projects, or utilizing alternative revenue streams to reach the financial target. The aim is to avoid long-term debt or prepayment penalties by strategically increasing earnings within a defined period. By following this approach, individuals can fund large purchases without depleting their savings or resorting to traditional borrowing methods.
- Alex Hormozi used the concept of "new money" to buy a $10 million building without using his savings or taking on debt. He planned to save his companies $4 million annually in event space costs by owning the building outright. This purchase exemplifies how the wealthy create additional income streams to fund significant investments while maintaining financial stability. Hormozi's strategy involved leveraging "new money" to acquire an asset that would generate income surpassing its expenses.
Counterarguments
- The concept of "new money" may not be feasible for everyone, as it assumes one has the capacity to generate additional income streams or take on extra work.
- Generating "new money" often requires having an existing platform, skills, or resources that not all individuals may possess.
- The strategy may not be sustainable or practical for those with limited time due to other commitments, such as family or existing full-time jobs.
- The approach assumes that opportunities for additional income are readily available and that markets for such opportunities are not saturated.
- The idea of purchasing assets that generate income can involve significant risk, and not all investments may lead to the expected returns.
- Hormozi's personal experience with purchasing a $10 million building may not be relatable or applicable to the average person's financial situation.
- The strategy may overlook or underplay the value of traditional financial planning and saving, which can be more accessible and less risky for the general population.
- The emphasis on avoiding debt neglects the potential benefits of leveraging debt responsibly as part of a broader financial strategy.
- The narrative may inadvertently contribute to the stigma associated with using savings or taking on debt, which are legitimate and sometimes necessary financial strategies.
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Monetary Sources: Savings, Income, Debt, "New Money"
When it comes to financial capital for large purchases, there are generally four main sources people rely on: savings, income, debt, and what can be termed as "new money."
Money Sources: Savings, Income, Debt, "New Money."
Wealthy Avoid Using Savings, Income, or Debt for Large Purchases, Focus On Generating "New Money"
The wealthy typically have a different strategy for making large purchases compared to the average person. They often refrain from using their savings or income and also avoid incurring debt. Instead, their focus is on generating "new money" to cover these costs.
Generating "New Money" For Large Purchases Without Using Core Reserves or Debt
Generating ...
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Monetary Sources: Savings, Income, Debt, "New Money"
Additional Materials
Clarifications
- "New money" in the context of financial capital typically refers to generating additional income specifically earmarked for a particular purpose, such as a large purchase. This approach involves creating new revenue streams or increasing existing ones to fund significant expenditures without depleting existing savings, income, or resorting to debt. It allows individuals to maintain their primary wealth sources while still being able to afford substantial costs. The concept emphasizes the importance of strategic financial planning and resource allocation to achieve financial goals without compromising long-term financial stability.
- Wealthy individuals often generate "new money" by leveraging their existing assets to create additional income streams through investments, business ventures, or other financial strategies. This approach allows them to increase their wealth without depl ...
Counterarguments
- The concept of "new money" may not be clearly defined or universally applicable, as the means to generate such funds can vary greatly and may not be accessible to everyone.
- The strategy of generating "new money" for large purchases may not be exclusive to the wealthy; individuals with varying levels of income could also employ similar tactics according to their capacities.
- The text implies that using savings, income, or debt for large purchases is not a strategy of the wealthy, which may not be entirely accurate as wealthy individuals might still choose to use these sources under certain circumstances or for strategic financial planning.
- The idea that wealthy individuals avoid debt entirely may not reflect the complexity of financial strategies where leveraging debt can be a powerful tool for wealth expansion when used wisely.
- The text does not acknowledge that generating ...
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How the Wealthy Generate "New Money" For Large Purchases
Alex Hormozi explains the strategies that wealthy individuals use to afford large purchases without tapping into their existing resources, like savings or income.
Wealthy Individuals Create "New Money" For Major Purchases Instead of Using Savings or Income
Instead of depleting their savings or relying on their income, wealthy people prefer to generate "new money" to finance big purchases. Hormozi points out that rather than seeing large purchases as a drain on their resources, they consider them as opportunities for creative revenue generation.
Approach Sustains Financial Standing and Lifestyle For Purchase
This approach allows the wealthy to sustain their financial standing and maintain their desired lifestyle. They focus on generating specific funds for their purchases, thereby preserving their core financial reserves. For example, Hormozi tells a story about someone who wanted a swimming pool. Instead of using savings, income, or incurring debt, this person wrote a song and generated money from its sales.
Wealthy View Large Purchases As Creative Revenue Opportuni ...
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How the Wealthy Generate "New Money" For Large Purchases
Additional Materials
Clarifications
- Generating "new money" for large purchases involves wealthy individuals creating additional income or funds specifically earmarked for significant expenses, rather than depleting their existing savings or regular income. This strategy allows them to maintain their financial stability and lifestyle while pursuing expensive items or investments. They achieve this by exploring innovative ways to generate revenue, such as leveraging their assets, starting new ventures, or tapping into alternative income streams. By viewing large purchases as opportunities for financial creativity rather than mere expenses, the wealthy can sustain their wealth and continue to grow their resources.
- Wealthy individuals often employ innovative approaches to fund significant purchases without relying solely on savings or regular income. These methods can include leveraging existing assets, creating new revenue streams through entrepreneurial ventures, or utilizing unique skills to generate additional income. By thinking creatively about financing, they can preserve their financial reserves while still acquiring the desired assets or experiences. This approach allows them to maintain their lifestyle and financial stability while expanding their wealth through unconventional means.
- Wealthy individuals often approach large purchases as chances to create new income streams rather than just expenses. They seek innovative ways to finance these purchases without depleting their existing resources. This mi ...
Counterarguments
- Wealthy individuals may not always have the time or inclination to engage in activities like driving Uber or renting out a room, and these examples may not be representative of how most wealthy people generate new money.
- Generating "new money" for large purchases may not be feasible for all wealthy individuals, especially if their wealth is tied up in non-liquid assets or if market conditions are unfavorable.
- The ability to generate new revenue streams on demand assumes a level of creativity, skill, and opportunity that may not be available to everyone, even among the wealthy.
- The strategy of generating new money for large purchases could lead to increased risk-taking, which might not always result in successful outcomes and could potentially harm financial stability.
- The concept of generating new money for each large purchase may not align with traditional financial advice, which often emphasizes the importance of budgeting, saving, and investing for future needs.
- The idea that wealthy individuals should always find ways to generate new money could perpetuate a stigma against using savings for purchas ...
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Examples Of how Wealthy People Generate "New Money"
Alex Hormozi showcases strategies employed by affluent individuals to generate income for specific goals without drawing on their existing wealth or accumulating debt.
Wealthy Individuals Work Temporarily to Fund Specific Purchases Without Using Their Income
Generating Supplemental Income
Wealthy individuals often look for ways to generate "new money" to fund specific purchases like a car or boat. Hormozi gives an example of someone who worked an extra day per week for a year specifically to fund such a purchase. Similarly, a single mom of four exemplified this concept by driving for Uber one day a week to afford her gym membership.
To create this supplemental income, Hormozi suggests that wealthy individuals may take on temporary work. This could involve taking on a new client project, delivering one-on-one services they usually wouldn't offer, driving for rideshare services like Uber, or renting out a room in their house.
The goal of these activities is to develop an additional revenue stream specifically earmarked for a large purchase. By doing so, they prevent the need to dip into savings or acquire new debt.
Wealthy people adopt a systematic approach, creating a clear plan with a specified timeline to secure the necessary funds. Such a p ...
Here’s what you’ll find in our full summary
Examples Of how Wealthy People Generate "New Money"
Additional Materials
Clarifications
- Generating "new money" involves creating additional income streams specifically designated for certain purposes, such as making a large purchase, without relying on existing wealth or taking on debt. This concept often entails temporarily engaging in extra work or activities to accumulate funds for a particular goal within a defined timeframe. The goal is to avoid depleting savings or incurring debt by strategically generating income separate from one's regular earnings. By setting clear objectives and timelines for earning this "new money," individuals can achieve their financial goals without impacting their overall financial stability.
- Wealthy individuals may take on temporary work to generate additional income for specific purchases. This temporary work could involve tasks like taking on new client projects, offering unique services, driving for rideshare services, or renting out property. By creating a clear plan with a specified timeline, they aim to accumulate the necessary funds without impacting their existing savings or resorting to debt. The goal is to establish a separate revenue stream earmarked for the desired purchase, allowing them to achieve their financial goals without depleting their current wealth.
- Wealthy individuals may undertake temporary work such as taking on new client projects, providing one-on-one services they don't typically offer, driving for rideshare services like Uber, or renting out a room in their house to generate supplemental income for specific purchases.
- Creating a clear plan with a specified timeline to secure funds without incurrin ...
Counterarguments
- Wealthy individuals may not always have the time or desire to take on additional temporary work, as their primary income sources or investments might already demand significant attention.
- The concept of generating "new money" through additional work may not be practical or necessary for truly wealthy individuals who could instead focus on investment strategies to grow their existing wealth.
- The strategy assumes that wealthy individuals have the skills or opportunities to easily find temporary work that pays well enough to justify the effort, which may not be the case for everyone.
- The idea of working extra to avoid using savings or incurring debt may not align with efficient financial management principles, where leveraging debt or investments could be more advantageous in certain situations.
- The approach may not consider the opportunity cost of time spent on temporary work versus other potentially more lucrative or fulfilling activities, such as spending time with family, leisure, or personal development.
- The strategy may not be scalable or applicable to all levels of wealth, as the ability to generate significant "new money" through temporary work ...
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Speaker's Experience Using "New Money" to Purchase a Large Building
In an inspiring financial maneuver, Alex Hormozi reveals his strategy for using "new money" to purchase a large, expensive building, a move that aligns with his long-term goals and maintains his financial health.
Speaker Generated "New Money" for Large, Expensive Building Without Using Savings, Income, or Debt
Building Purchase Justified by Event Space Cost Savings
In a notable economic play, Alex Hormozi paid for a $10 million building entirely in cash, although he did not detail the specific source of this "new money." Hormozi outlines four sources of money: past money (savings), income money, debt money (future earnings), and "new money." He expresses a clear preference for the last, signaling an innovative financial strategy.
Hormozi shares his personal narrative, revealing his considerations for a building purchase and his intent to use "new money" sourced from new ventures. He aimed to ensure that the purchase of a home gym, a significant expense in itself, would be offset by advisory services designed to cover the building’s cost without dipping into savings or incurring debt.
Speaker's Strategic Purchase Aligns With Long-Term Goals Without Financial Disruption
By delving into Hormozi's thought process, we learn that he justified the investment in the building due to the considerable cost savings it offered. His companies were spending nearly $4 million annually on event spaces—a cost the new building would absorb—providing a sound financial reason for the purchase.
Horm ...
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Speaker's Experience Using "New Money" to Purchase a Large Building
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Counterarguments
- The concept of "new money" is not clearly defined, which could lead to misunderstandings or misrepresentations of Hormozi's financial strategy.
- Using "new money" from new ventures to purchase a building could be risky if those ventures do not perform as expected, potentially leading to financial instability.
- The assumption that the building will generate more income than its cost is optimistic and may not account for potential market fluctuations or unforeseen expenses.
- The strategy of buying a larger space than currently needed assumes continuous growth, which may not be guaranteed in an uncertain economic climate.
- The focus on aligning purchases with long-term goals is commendable, but it may not always be practical for individuals or businesses with more immediate financ ...
Actionables
- You can redirect a portion of your regular income into a separate account for future investments. By doing this, you're creating your own "new money" fund that's specifically earmarked for growth opportunities. For example, if you're a freelancer, you could set aside 10% of every payment you receive into this account, gradually building a reserve that can be used for strategic investments, like upgrading your equipment or taking a course that could expand your services.
- Consider renting out a room or space in your home to cover a specific long-term expense. This strategy turns an existing asset into an income stream, much like purchasing a building to offset event space costs. For instance, if you have a spare bedroom, you could rent it out on a short-term rental platform and use the earnings to fund a home improvement project that would increase your property's value over time.
- Evalua ...
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