How The Ultra Wealthy Get Paid First [Money Ladder] Ep 294

Summary Notes


Alex Ramosa, a successful entrepreneur, delves into the concept of the "money ladder," explaining the hierarchy of financial flow and control. He describes how employees typically work before getting paid, whereas self-employed individuals may receive payment upfront or upon delivery. Ramosa emphasizes that higher levels of the ladder, like doctors, receive payment before services, and banks have priority in financial claims. He finds insurance companies fascinating as they collect premiums long before potentially providing services. Highlighting the importance of understanding money flow, Ramosa shares this insight as a transformative wealth belief that has significantly impacted his financial success.

Summary Notes

Introduction to the Money Ladder

  • Alex Ramosa introduces the concept of the money ladder during a podcast.
  • The money ladder is a framework for understanding the order in which people get paid.
  • The concept emerged from a conversation with his wife, Layla, who suggested it as a podcast topic.
  • The discussion is aimed at helping listeners understand customer acquisition, increasing customer value, and retention.
  • Alex is currently writing books on wealth beliefs and acquisition.

"And one of the talks I want to talk to you about today is the money ladder. And so this was actually came up during a conversation I was having with Layla, my wife, and she was like, you should make a podcast about this."

The quote introduces the topic of the podcast, which is the money ladder, a concept that Alex's wife, Layla, believes would be beneficial for people to understand.

Alex Ramosa's Background and Intent

  • Alex has built three companies with a combined sales of $110 million.
  • He now invests in other companies.
  • He is working on writing books that include topics on wealth beliefs and business acquisitions.
  • The money ladder is tied to his personal change in wealth beliefs and understanding of money flow.

"Built three companies that did $110,000,000 in sales and continue to do so. Now we invest in other companies as well."

This quote provides background on Alex's experience and success in building and investing in companies, establishing his credibility on the subject of wealth and business.

Wealth Beliefs and the Flow of Money

  • Alex's change in wealth beliefs played a significant role in his financial success.
  • Understanding the flow of money and who controls it is crucial.
  • The money ladder represents the sequence and hierarchy of payment and control over earnings.

"One of the biggest beliefs in my life that changed as I got wealthier and that changed before I got wealthy, that caused me to become more wealthy was how I viewed the flow of money."

This quote highlights the importance of changing one's mindset about money and its flow as a pivotal factor in Alex's journey to wealth.

The Hierarchy of Payment

  • The money ladder illustrates a hierarchy of how different types of workers get paid.
  • Alex differentiates between employees, self-employed individuals, and other positions in this hierarchy.
  • The hierarchy is based on when and how individuals receive payment for their work or services.

"So what's the money ladder? That's what I'm calling it, but basically, it's the order in which people get paid."

The quote defines the money ladder as an order of payment, which is the central theme of the podcast.

Employees and Payment Structure

  • Employees are at the bottom of the money ladder.
  • They typically work first and get paid later (bi-weekly or monthly).
  • This structure involves fronting labor and time before receiving payment.

"At the bottom here, you have an employee in general, all right? And there's nothing wrong with this, right? I was an employee, too. So it's not that there's anything wrong. It's more so that you just have to understand how it works from a hierarchy standpoint."

Alex clarifies that being an employee is not a negative position but emphasizes the importance of understanding the payment hierarchy and where employees stand within it.

Self-Employed and Contractors

  • Self-employed individuals, contractors, and gig economy workers have a different payment model.
  • These workers may face two scenarios, which were not fully discussed in the provided transcript.

"Now, if you've got somebody who's self-employed, this is kind of like a lot of contractors, vendors, gig economy, et cetera."

This quote introduces the next level on the money ladder, highlighting the different payment dynamics faced by self-employed individuals and contractors compared to employees.

Flexibility in Payment Models

  • Freelancers or independent contractors often begin by fronting the work and getting paid later, similar to traditional employees.
  • As they gain experience and independence, they might receive partial payment upfront and the rest upon delivery.
  • Progressing further, some contractors get paid entirely upfront, which signifies greater financial control and power.

"So on the total, I would say, worst side of the equation, the lowest side of the equation, they basically model the same thing that an employee would, that a normal employee would set up, which is they front the work and they get paid later."

This quote explains the initial stage of a freelancer or independent contractor's payment model, where they do the work first and receive payment afterwards, just like regular employees.

"Later, if they get better and better and they become truly more independent contractor type things, then they might get paid half up front and then half upon delivery, right?"

This quote describes the progression in the payment model where a more experienced contractor might negotiate partial payment upfront, reflecting increased independence and bargaining power.

"Some of them will get paid up front or as they work, et cetera."

This quote indicates the further advancement of contractors in the payment hierarchy, where they can secure payment upfront, demonstrating a higher level of control over their finances and work.

The Concept of Getting Paid First

  • Getting paid first is a business model where services are paid for before they are rendered, as seen with doctors who receive payment before performing surgeries.
  • This model implies a higher degree of wealth, control, and power for the service provider.
  • There are variations in this model, such as partial payment upfront versus full payment.

"So think about this. If you go to a doctor, right, they don't do the surgery, and then they get paid. They get paid and then they do the surgery, right?"

The quote exemplifies the 'paid first' model by comparing it to how doctors receive payment before providing their services, which is a marker of financial security and client trust.

"Getting paid first is another level of kind of wealth and kind of control and power."

This quote emphasizes that the ability to get paid before performing work is indicative of a higher level of financial stability and authority in one's business or profession.

Banks and the Capital Stack

  • Banks operate at a higher level in the financial hierarchy through the capital stack, where they have priority as preferred creditors.
  • In real estate transactions, the bank effectively owns the property until the mortgage is repaid, ensuring they are paid first if there are financial difficulties.
  • Understanding who gets paid first and how the money flows is crucial in assessing financial positions and risks.

"Banks have something called a capital stack. So what I mean by that is when you buy your House, right? The bank's really buying your house, and then you're paying the bank back."

This quote explains the concept of the capital stack, where banks have a superior claim over assets, such as houses, which they effectively own until the borrower has repaid the mortgage.

"The bank is a preferred creditor. What that means is if shit hits the fan, they get paid first, and then whatever's left over is yours, right?"

The quote clarifies the position of banks as preferred creditors, meaning they have the right to be paid before anyone else in case of financial distress, securing their investment at the expense of the borrower's equity.

"And then if shit goes bad, who's the one who gets paid out first"

This quote prompts consideration of the financial pecking order in adverse situations, highlighting the importance of understanding who has priority in payment and asset distribution.

Insurance Industry Insights

  • Insurance companies collect premiums long before they may need to pay out.
  • Insurance can be seen as the opposite of a depreciating asset.
  • The structure of insurance allows for the collection of money without immediate obligation.
  • Insurance premiums can be collected for years without the company having to fulfill any service.
  • The insurance business model involves collecting fees with the potential of not providing the promised service due to contract terms or fee increases.

"Insurance gets paid far before they ever have to do anything."

This quote explains the payment structure of insurance companies, where they receive premiums well in advance of potentially having to cover any claims.

"You pay your insurance for 20 years before they have to fulfill what they are due, and they also can not end up having to fulfill anything."

This quote highlights the long-term nature of insurance contracts and the possibility that insurance companies may never have to provide the service for which they've been paid.

"Imagine I started signing people up for an insurance business... And they start paying me $1,000 a month... I'm doing a million dollars a month. And I do that for decades."

Alex Ramosa uses a hypothetical scenario to illustrate how lucrative the insurance business can be, emphasizing the substantial income from premiums over a long period.

"They might not qualify or they can no longer afford the fees because I increase the fees as they become higher and higher risk of actually me needing to fulfill this stuff."

This quote reveals a potential strategy within the insurance industry where increasing fees can lead to customers no longer being able to afford the insurance, thus relieving the company from its obligation to pay out.

"So the point is that if you look at insurance, it's basically the opposite of a depreciating asset."

Alex Ramosa contrasts insurance with depreciating assets, noting that insurance can increase in value to the company over time, as opposed to assets that lose value.

Social Media Engagement

  • Alex Ramosa encourages listeners to connect on LinkedIn.
  • Listeners are invited to send connection requests and notes.
  • There is an opportunity for listeners to suggest connections for Alex Ramosa.

"Hey, Mozanatian, quick break, just to let you know that we've been starting to post on LinkedIn and want to connect with you."

Alex Ramosa takes a moment to engage with the audience, inviting them to connect on LinkedIn for further interaction and networking.

"So send me a connection request, a note letting me know that you listen to the show and I will accept it."

This quote provides specific instructions for listeners on how to connect with Alex Ramosa on LinkedIn, emphasizing the show's listener community.

"There's anyone you think that we should be connected with, tag them in one of my or Layla's posts, and I will give you all the love in the world."

Alex Ramosa encourages listeners to facilitate connections by tagging others in their LinkedIn posts, offering appreciation for such engagement.

Understanding Business Models and Wealth Accumulation

  • Insurance companies have a business model that allows them to collect money upfront and appreciate it over time.
  • The oldest insurance companies are centuries old, predating the tax code, and are not required to pay taxes.
  • The concept of a "money ladder" is introduced, where individuals or entities move up in terms of when they receive payment for their services or products.
  • As one moves up the ladder, the proportion of upfront payment increases, reflecting demand and skill level.
  • Banks and insurance companies are positioned high on the money ladder because they receive money first and may provide services later or not at all.

Insurance companies get all the money up front, and then they get to appreciate the money over time and then pay you off of that, right?

This quote emphasizes the advantageous position of insurance companies in the financial hierarchy, where they collect premiums first, potentially earn interest on those funds, and may pay out claims at a later date.

The oldest companies in the world, the oldest ones are 100 and 8200, 300 years old.

This quote highlights the longevity and stability of insurance companies, suggesting that their business model contributes to their enduring presence in the market.

God gets 10% off the top, period, for life.

This quote metaphorically places religious tithing at the pinnacle of the money ladder, indicating that it is a consistent and top-priority financial obligation for believers.

Personal Growth and Financial Strategy

  • Alex Ramosa shares a personal belief that has significantly impacted his wealth: the importance of understanding money flow and payment timing.
  • By observing and adapting to where money is directed and who gets paid first, Alex has altered his agreements and business approach.
  • The money ladder concept has been a transformative tool in Alex's financial journey.

This is one of the beliefs that changed my life, that made me a lot wealthier, is watching where the money flows, watching where it goes, and watching who gets paid when.

This quote underscores the personal impact of recognizing and adapting to the flow of money, which has been a key factor in Alex's increased wealth.

I changed the way we did agreements, all that kind of stuff.

Alex's statement reflects the practical application of his financial insights, leading to changes in business practices and contractual agreements.

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