Podcast Summary: The Game with Alex Hormozi – "The 4 Sources of Cash (and why I bought a $10M building)" | Ep 869
Release Date: April 11, 2025
Introduction
In Episode 869 of "The Game with Alex Hormozi," host Alex Hormozi delves deep into the financial strategies that distinguish the wealthy from others. Titled "The 4 Sources of Cash (and why I bought a $10M building)," Alex explores the fundamental behaviors and money management techniques that have propelled him from a $100M to a $1B net worth. Through personal anecdotes, practical examples, and insightful discussions, Alex provides listeners with actionable advice on generating, managing, and utilizing cash effectively to build lasting wealth.
1. The Wealthy Mindset: Strategic Spending Over Existing Resources [00:02]
Alex opens the episode by contrasting the spending habits of the wealthy with those who are less financially successful. He emphasizes that the richest individuals prioritize generating new money over using existing income or savings for large purchases.
“The richest people I know, that is the behavior that they typically use. They're like, I want this thing, and so I'm going to go make the money to buy the thing. I'm not going to use my existing income. I'm not going to use my existing resources. I'm not going to use my savings...”
— Alex Hormozi [00:02]
Key Points:
- Wealthy individuals avoid depleting their savings or using their regular income for significant investments.
- They refrain from incurring debt unless it's manageable and repayable within a short, defined timeframe.
- Strategic planning is essential; wealthy people have a clear roadmap for generating the necessary funds to support their expenditures.
2. The 4 Sources of Cash: Building a Financial Framework
Alex introduces a categorization of cash sources that underpin wealth accumulation and management. Understanding these sources is crucial for anyone looking to emulate the financial habits of the wealthy.
a. Past Money (Savings)
- This refers to the money accumulated from past earnings and savings.
- It represents a financial cushion but is not the primary source for significant new investments.
b. Income Money
- Regular income generated monthly.
- Used for daily expenses rather than funding large investments or purchases.
c. Debt Money (Future Earnings)
- Borrowed funds that are to be repaid with future earnings.
- Utilized when there is confidence in the ability to repay promptly, minimizing long-term liabilities.
d. New Money
- Innovative sources of funds generated by leveraging existing resources.
- Represents income generated from underutilized assets or new ventures.
Alex elaborates on each source, emphasizing the importance of generating new money to fund major investments without straining existing financial structures.
3. Practical Application: Purchasing a $10M Building [Various Timestamps]
A centerpiece of the episode, Alex discusses his decision to purchase a $10M building, illustrating his principles in action.
“Right, then don't worry about it. And so the thing is, is that I would say these are kind of almost like different personality types in terms of where people are taking the money from.”
— Alex Hormozi [04:45]
Key Points:
- Strategic Investment: The building was not an immediate necessity but a strategic investment to consolidate event spaces and reduce annual expenditures.
- Cash-Paid Acquisition: Alex opted to pay in cash to avoid debt, ensuring no prepayment penalties and having a clear repayment plan.
- Generating Income: By consolidating various expenses (e.g., event spaces), the building's cost was offset by the savings, effectively making the investment profitable.
Notable Example: Alex recounts advising a business owner on choosing a larger office space, emphasizing the importance of having a clear repayment plan within a year to ensure financial prudence.
“If we buy this building, I will make sure that it makes us more money than it has cost us.”
— Alex Hormozi [06:30]
4. Behavioral Insights: Utilizing Existing Resources for New Income [07:15]
Transitioning from theory to practice, Alex highlights the behavior of leveraging underutilized assets to create new revenue streams, which he refers to as "sawdust money."
“It's sawdust money. It's money using your existing resources that you're currently underutilizing to generate new money for a specific project.”
— Alex Hormozi [08:20]
Key Points:
- Resource Optimization: Identifying and utilizing existing resources that are not being fully exploited can generate additional income without straining current finances.
- Tactical Examples:
- Encouraging team members to take on extra work or projects to fund personal or business expenses.
- Enabling members to undertake side gigs, such as driving for Uber, to afford desired services or memberships.
Case Study: A single mother, one of Alex’s gym members, chose to drive Uber one day a week to afford her gym membership. This commitment led her to become one of the gym's longest-standing members, demonstrating the power of leveraging extra effort to achieve financial goals.
“I had a business owner came here and he was like, hey, I'm choosing between two offices...and he was like, the big one...I said, but the deal is you gotta pay it off in a year. He was like, I can do that.”
— Alex Hormozi [05:50]
5. Philosophy on Money: Money as a Tool, Not a Goal [10:10]
Alex shares his perspective on money management, distinguishing between making money the end goal versus using money as a means to achieve desired outcomes.
“But if money isn't your goal, then the people that I've seen that are the happiest that I think spend money. Well, they use money like a tool...”
— Alex Hormozi [11:15]
Key Points:
- Money as a Tool: Successful individuals view money as a tool to facilitate their goals and enhance their lifestyles without becoming enslaved by it.
- Avoiding Scarcity Mindset: While some wealthy individuals hoard money out of fear, Alex advocates for strategic spending that aligns with personal and business objectives.
- Creating Financial Goals: By setting specific financial goals (e.g., purchasing a home gym), individuals can motivate themselves to generate additional income rather than relying solely on existing resources.
6. Conclusion and Key Takeaways
Alex wraps up the episode by reiterating the importance of strategic financial behaviors that focus on generating new money through innovative means rather than depending on existing income or savings. He encourages listeners to adopt these behaviors to build sustainable wealth and achieve their financial aspirations.
“I'm building a home gym right now. I'm buying equipment right now. Like, as I'm doing this, I'm almost like, more joyful about doing the work because I know exactly what it's going towards.”
— Alex Hormozi [11:50]
Key Takeaways:
- Embrace Strategic Spending: Prioritize generating new funds for significant investments instead of utilizing existing financial resources.
- Leverage Underutilized Assets: Identify and exploit untapped resources within your control to create additional income streams.
- Set Clear Financial Goals: Define specific financial objectives to drive focused efforts in generating the necessary funds.
- Adopt a Wealthy Mindset: Shift your perspective on money from a goal to a tool, enabling more effective and enjoyable wealth management.
Final Thoughts
"The 4 Sources of Cash (and why I bought a $10M building)" offers a comprehensive look into the financial strategies that underpin substantial wealth. Alex Hormozi combines personal experience with actionable insights, providing listeners with a clear framework to emulate the behaviors of the wealthy. By understanding and applying the four sources of cash—past money, income money, debt money, and new money—individuals can enhance their financial management skills and set themselves on a path to greater financial success.