The Ultimate Guide To Break Out Of The Rat Race & NEVER WORRY ABOUT MONEY AGAIN
Published: 2024-01-21
Status:
Analyzed
Published: 2024-01-21
Status:
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
A guideline for assessing affordability: if one cannot purchase five units of an item, it's likely beyond their means to comfortably afford even one.
"If you cannot buy five of them, you cannot afford one of them"
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Investing $487 monthly with a 7% annual return can accumulate to $36,000 in five years.
"After 5 years, there's $487 monthly investment at the 7% return would grow to $36,000"
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Continuing the same investment strategy for 10 years can grow the principal to approximately $87,000.
"After 10 years, your Investments won't be worth $36,000, they'd be worth about $887,000"
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Consistent monthly investments of $487 at a 7% annual return can accumulate to over $1.2 million in 40 years.
"After 40 years, your Investments would be worth over $1.2 million"
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Leasing cars is discouraged unless one is a millionaire. Financing cars is also deemed financially unwise because it involves paying interest on a depreciating asset, resulting in a double loss (depreciation and interest).
"these things almost never the smart financial decision so leasing should be completely out of the question unless you are worth at least a million dollars financing is never the smart financial decision when it comes to buying a car because when you finance you're paying interest to own a depreciating liability cars don't make money they lose you money and if you have to pay interest to buy something that is losing your money you are losing money twice"
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Distinguishes financial behaviors: poor people use borrowed money for non-essential items, middle-class people use their own earnings for non-essentials, and wealthy people use passively generated income to purchase non-essential items.
"The difference between a rich person a middle class person and a poor person financially is that a poor person buys dumb things with other people's money a middle class person buys dumb things with their hard-earned money and a rich person buys dumb things with easy earned money"
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A home is only an asset if sold for profit. Until then, it incurs ongoing costs (mortgage, upgrades, maintenance, taxes, insurance, HOA) that must be considered.
"The reality is your home is only an asset if you can sell it for a profit but until you sell it for a profit when you buy that home not only do you have to make the mortgage payments but you also have to pay for all the upgrades you have to pay for all the maintenance you have to pay for the property taxes you have to pay for the insurance you have to pay for the HOA and you have to pay for anything else to take care of the property"
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Realtors and mortgage brokers may frame homes as investments, but their asset status is contingent on future sale price exceeding all associated costs.
"if you are a realtor you've probably taught this this what I was taught when I went through my realtor training mortgage brokers will tell you the same thing but the reality is your home is only an asset if you can sell it for a profit"
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Mortgage payments are heavily weighted towards interest in the initial years (approximately 14.5 years), meaning the majority of early payments go to the bank, not towards building equity.
"Did you know that your mortgage payments are front loaded meaning if you go out and buy a home today with a mortgage most of your mortgage payment is going to be going to interest in your bank's pocket today and tomorrow and the month after that and the month after that and the year after that and the year after that and the year after that for the first about 14 years of your mortgage the majority of your mortgage payment is going to be going directly into your Banker's pocket with interest and not Equity"
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The core principle of wealth building is to avoid using hard-earned money on depreciating items ('dumb things'). Instead, leverage assets to acquire desired luxuries, using money smartly.
"the key to becoming wealthy is to not spend your hard-earned money buying dumb things meaning do not spend your hard-earned money to buy things that are losing you money use your assets to buy things that will lose your money if you want to buy nice things like a watch fancy car fancy vacations good it's a motivation for you but use your money smartly"
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Passive income or cash flow is a result of wealth, not the primary driver to achieving it. One needs to be rich first to generate significant passive income.
"the thing that so many people get wrong about passive income or cash flow is they think that is the secret to getting rich when in reality cash flow or passive income is the byproduct of being rich in the first place"
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True passive income is derived from owning assets such as dividend stocks, real estate, high-interest savings accounts, or genuinely passive businesses.
"The true passive quote unquote passive income is owning assets dividend paying stocks owning real estate getting interest from a high interest savings account in your savings account or owning a passive business"
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The speaker prioritizes investing in their own business due to its potential for significantly higher returns (10-200%) compared to real estate (7%), dividend stocks (3-4%), or high-interest savings accounts (4-5%).
"my number one investment is into my own business and the reason why is because when I invest my money into my own business there's no limit to the types of return returns than I can see right when I go out and invest in real estate which is my favorite way to generate cash flow I also generate cash flow from dividend paying stocks but if I'm investing my money into real estate to generate cash flow my goal is to get a 7% cash on cash return a 7% cash flow on my money when I invest my money in the stock market I'm getting dividends maybe it's three or 4% when I put my money into a high interest savings account maybe it's 4 to 5% so we're talking 3 to 7% are the types of cash flow returns that getting when I put my money into these passive assets when I put my money into my own business my goal isn't to get a 3 to 7% return on my money my goal is to get a 10 20 30 200% return on my money"
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Cars are liabilities that lose value over time and cost money (interest, maintenance), unlike assets like stocks or houses which generally appreciate.
"Cars are liabilities what that means is the longer you own it and the more you drive it the less your car is going to be worth you can compare that to something like a stock or a house which are assets where in general the longer you own this thing the more it's going to be worth cars on the other hand just take money out of your pocket every single month because you have to pay interest you have to keep paying money to maintain it and this car is losing value every single day"
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Investing $487/month in a 7% annual return index fund for 5 years could grow to $36,000, whereas a car purchased with the same monthly payment would be worth only $1,000 after 5 years, highlighting the superior financial outcome of investing.
"so you're paying $487 a month and you're getting a car with a heated steering wheel that's pretty cool but if you took that same $487 a month and you invested this money into let's say a lowcost index fund that was paying a 7% annual return so this is not something super aggressive we're talking about an average 7% return a year after 5 years there's $487 monthly investment at the 7% return would grow to $36,000 while the value of your car would come down to $1,000"
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Over 10 years, investing $487/month at 7% could yield $887,000, while the car's value drops. After 40 years, investments could exceed $1.2 million, with the car becoming worthless.
"so after 10 years your Investments won't be worth $36,000 they'd be worth about $887,000 assuming you get the same return and your car and your heated steering wheel would be worth about $45,000 if you do this for 40 years now so 40 years your Investments would be worth over $1.2 million and your car would be worthless"
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Redirecting car-related expenses into personal investments will build wealth, enabling the eventual purchase of dream cars without financial constraints.
"so what I want you to do right now is shift where this money is going and put it into your own own pockets that way you can make yourself rich first that way you can buy your dream car and not worry about the price"
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The speaker encourages driving desirable cars but emphasizes affording them first through wealth accumulation, questioning the necessity of a $400-$500 monthly car payment.
"I want you to drive a super car I want want you to drive that luxury car I want you to drive something nice but I want you to be able to afford it first that way you don't got to worry about the price and that way you're not sacrificing your future Freedom you need a car I get it what I'm saying is do you really need a car that's costing you $400 or $500 a month"
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Instead of financing, buying a reliable used car with cash frees up monthly payments and provides extra capital for wealth building.
"what I'd rather have you do is go out and buy a used but good workking condition car with cash now we don't got to worry about the monthly payments and now you got a car that takes you from where you got to go and you got the extra cash in your pocket that can build your wealth"
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Leasing cars is strongly discouraged unless one is a millionaire. Financing is also deemed financially unsound due to paying interest on a depreciating asset, resulting in a double financial loss.
"these things almost never the smart financial decision so leasing should be completely out of the question unless you are worth at least a million dollars financing is never the smart financial decision when it comes to buying a car because when you finance you're paying interest to own a depreciating liability cars don't make money they lose you money and if you have to pay interest to buy something that is losing your money you are losing money twice"
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Prioritize building wealth by using extra cash for investments, which will eventually allow for the purchase of any desired car without financial concern.
"Buy used use your extra cash to build wealth and now when you have this wealth go out and buy whatever car you want it doesn't matter because now you can afford it and the price doesn't even matter to you"
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To accelerate wealth building beyond a 40-year timeframe, one can either increase monthly investments (above $487) or focus on growing their money at a faster rate.
"if you want to build this wealth faster than waiting 40 years to do that now we talk a lot about this on our website the minority mindset.com and I will also link an article for you up here and in the description below but there's two things you can do to amplify this process you can either invest more aggressively that means put in more than $487 a month or you can grow your money faster"
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Increasing investment capital can be achieved by reducing expenses or boosting income through job changes, raises, or promotions, thereby accelerating wealth growth.
"if you want to invest more money then you can either cut more expenses that way you have more money to spend or you can raise your income that could mean looking for a new job or asking for a raise or getting a good promotion if you have more money then you can put more money towards the Investments that way you can build your wealth faster"
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While a 7% annual return from passive index fund investments is possible, achieving faster growth requires alternative strategies beyond simply holding the fund.
"or the alternative is growing your money faster than 7% a year I said this 7% a year because this is a completely passive investment if you went out and you threw your money in into a lowcost Index Fund which is a fund that gives you exposure to the stock market now you're not doing anything you're just throwing your money into this fund and you're letting the stock market do its thing"
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Achieving returns above 7% annually requires active involvement, combining time and money to invest, which accelerates wealth growth compared to purely passive strategies.
"if you want to beat the 7% return it's very possible but it's not going to be as passive this is a passive investment where you're just throwing your money into something and then you're walking away and you don't do anything and you just let your money grow if you now invest your time along with your money you can grow your money a whole lot faster"
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Starting a side hustle can yield returns significantly exceeding 7% annually, with the potential to recoup initial investment within six months, making it a more lucrative wealth-building strategy.
"or the alternative to that is you can start your own side hustle because now you're investing your money and your time into this thing the side hustle that can grow way faster than 7% a year if you took $1,000 and you went out and you started a side Hustle the side business there's a chance that you can make the $1,000 back within 6 months that's way better than a 7% return"
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To amplify wealth, one must either accelerate money growth through calculated risks or increase investment capital, which necessitates having more money.
"if you really want to amplify your wealth there's only two ways to do it you can either grow your money faster or invest more money if you want to invest more money you need to have more money and if you want to grow your money faster you got to take more calculated risks"
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Achieving wealth requires a deep desire, a willingness to take risks, and a commitment to making sacrifices; simply wanting it verbally is insufficient.
"everybody says they want to be wealthy with their mouths but the real question is how bad do you want it what are you willing to do to make it happen if you're not willing to take the risk risks or make the sacrifices I'm sorry it's never going to happen"
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Financial success is differentiated by how non-essential items are acquired: poor use borrowed money, middle-class use their earnings, and the wealthy use passively generated income.
"The difference between a rich person a middle class person and a poor person financially is that a poor person buys dumb things with other people's money a middle class person buys dumb things with their hard-earned money and a rich person buys dumb things with easy earned money"
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The pursuit of material possessions is common, but financially unsuccessful individuals resort to credit cards to acquire items they cannot afford.
"The average person is working harder to drive a better car to earn a bigger home and to go on nicer vacations Poor people people who are not financially successful want the nice stuff everybody does and when you don't have the nice stuff or when you can't afford it what do you do you put it on your credit card"
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Wealthy individuals generate income, then use that income to purchase assets, which in turn can fund the acquisition of desired luxuries.
"what rich and wealthy people do is they still buy that nice stuff but they're not using their hard-earned money to buy that stuff they're using their easy earned money to buy that stuff and what I mean by that is they go and generate an income whether it's at their job or whether it's at their business does not matter you go to generate this income then you take this income and instead of going on buying a new car buying whatever stuff you want you go out and you buy assets"
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Income is used to buy assets, which then generate cash flow. This passive income is then used to purchase non-essential items ('dumb stuff').
"Make money you buy assets and then these assets will produce an income and if it's in the form of cash flow now you produce a new stream of income that's paying you every month every quarter every year and then they use the money that their assets pay them to then go out and buy that dumb stuff"
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Items that do not generate income (clothes, shoes, cars, vacations, homes) are considered liabilities or 'dumb expenses.' The advice is to ensure these can be afforded before purchasing.
"So what is a dumb item well dumb things are things that do not put any money in your pocket your clothes your shoes your cars your vacations your home all these are dumb expenses I'm not saying don't buy any dumb expenses I'm saying if you want dumb stuff make sure you can afford it because all these things are known as liabilities"
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Assets generate income, while liabilities drain it. Wealthy individuals aim to use their earnings to acquire assets, which then fund the purchase of liabilities.
"Liabilities are things that take money out of your pocket and don't put any money back assets are things that you buy for the purpose of making money and what wealthy people want to do is they want to make money to buy assets and then use these assets assets to buy liabilities"
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A home is only considered an asset if its sale results in a profit. Until then, it incurs significant ongoing costs including mortgage, upkeep, taxes, and insurance.
"The reality is your home is only an asset if you can sell it for a profit but until you sell it for a profit when you buy that home not only do you have to make the mortgage payments but you also have to pay for all the upgrades you have to pay for all the maintenance you have to pay for the property taxes you have to pay for the insurance you have to pay for the HOA and you have to pay for anything else to take care of the property"
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The common perception of a home as a guaranteed asset, often promoted by real estate professionals, is challenged; its true asset status depends on a profitable sale.
"if you are a realtor you've probably taught this this what I was taught when I went through my realtor training mortgage brokers will tell you the same thing but the reality is your home is only an asset if you can sell it for a profit"
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The speaker advises prioritizing the acquisition of assets and investments over stretching finances for a home, as these are seen as the primary drivers of long-term wealth.
"what I'd rather you do is I would rather see you stretch yourself thin to go out and buy more assets to buy more Investments because that's what's going to make you wealthier in the longrun"
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Mortgage payments are heavily weighted towards interest in the initial ~14.5 years, meaning most of the money paid goes to the bank, not towards building equity.
"Did you know that your mortgage payments are front loaded meaning if you go out and buy a home today with a mortgage most of your mortgage payment is going to be going to interest in your bank's pocket today and tomorrow and the month after that and the month after that and the year after that and the year after that and the year after that for the first about 14 years of your mortgage the majority of your mortgage payment is going to be going directly into your Banker's pocket with interest and not Equity"
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An investor who dedicates nearly all their income to cash-flow producing assets sometimes struggles with basic living expenses like food, illustrating an extreme form of financial sacrifice for investment.
"I met a guy at this conference that I was at recently and he was talking to me about this problem that he had he said I'm running into a lot of financial difficulties but there are very unique financial difficulties I said tell me more he says that I am a very aggressive investor I said I like the sound of that he says I invest pretty much every dollar that I possibly can Into Cash FL producing assets like dividend paying stocks I said I like the sound of that he said the problem is I sometimes don't have enough money to eat"
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While increasing savings and investments is positive, focusing solely on reducing expenses from a fixed income has limitations. The speaker suggests that increasing income is a more scalable path to wealth.
"your problem now is you got to figure out how you can make more money because what you've been doing is focused on just squeezing more pennies out of this pie where if you make $50,000 a year you save and invest $10,000 now you're spending 40 you're saving and investing 10,000 and then what happens to a lot of people is you say wow I like this investing thing I like this idea of being able to build my wealth and grow my savings and grow my net worth I want to do more so what do you do instead of saving and investing 10,000 now you do 15,000 maybe $20,000 now again you're making $50,000 a year now if you're saving and investing 20,000 you're only living off of 30,000 but you're investing a little bit more"
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Since saving has limits, the focus should shift to increasing income. A tenfold increase in income (from $50k to $500k) allows for significantly higher savings and investments, accelerating wealth building.
"but there's a limit to how many pennies you can squeeze out of this limited pie because at the end of the day a penny saved is just a penny and once you understand this this is a good problem to have because now the next part is where things get really fun because now what you want to do is focus on the income side this is what we were talking about earlier how can you take this from $50,000 to $500,000 because now if you follow the same ratio you can now live off of 300 $1,000 and save and invest $200,000"
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The fundamental principle of wealth creation is to avoid using earned income for depreciating assets ('dumb things'). Instead, leverage existing assets to acquire desired luxuries, managing money intelligently.
"the key to becoming wealthy is to not spend your hard-earned money buying dumb things meaning do not spend your hard-earned money to buy things that are losing you money use your assets to buy things that will lose your money if you want to buy nice things like a watch fancy car fancy vacations good it's a motivation for you but use your money smartly"
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Aggressively acquiring income-generating assets and cash flow will expedite the ability to purchase desired luxuries without financial concern.
"the more aggressive you can be to buy these assets to buy the cash flow the sooner that you will be able to afford that crazy stuff the fun stuff the dumb stuff without having to worry about the money"
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Passive income is a consequence of wealth, not the primary means to achieve it. One must first accumulate wealth to generate substantial passive income.
"the thing that so many people get wrong about passive income or cash flow is they think that is the secret to getting rich when in reality cash flow or passive income is the byproduct of being rich in the first place"
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Genuine passive income streams are identified as owning assets like dividend-paying stocks, real estate, high-interest savings accounts, or genuinely passive businesses.
"The true passive quote unquote passive income is owning assets dividend paying stocks owning real estate getting interest from a high interest savings account in your savings account or owning a passive business"
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Achieving true passive income through assets requires initial effort and ongoing portfolio management, even though the income streams themselves are largely hands-off.
"but the true passive quote unquote passive income is owning assets dividend paying stocks owning real estate getting interest from a high interest savings account in your savings account or owning a passive business that's what most people would really consider quote unquote passive income but it takes number one work to get there and number two you still got to manage your portfolio"
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A young individual expresses a desire for passive income as a means to become rich, prompting a deeper exploration of their underlying motivations for wealth.
"is passive income really what you want right now and I remember having a conversation with a guy in the gym about this where there was this young I think he was like 24 years old 22 years old really young guy who told me that he wants to generate passive income and I said why he was like I want to be rich I said okay why like what are you really trying to get at"
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To achieve $200,000 in annual passive income at a 10% yield, an investment of $2 million is required, questioning the immediate feasibility for many aspiring to achieve this through passive income alone.
"I said okay well let's let's talk about this if you can generate say a 10% cash on cash yield on your money a 10% return on your money which is a really good return especially in this economy it's a really good cash flow on your money meaning for every $100 you invest you get $10 of cash flow or passive income whether it's from stocks or real estate or whatever it might be if you can generate a 10% return on your money how much money would you need to be rich he probably said I think like couple $1,000 or something and I said okay well that means you would need $2 million invested into assets today that way you can generate your $200,000 worth of cash flow is that really what you want to do right now do you have $2 million"
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Entrepreneurs should prioritize building businesses to generate income, which can then be used to acquire passive income streams, rather than solely focusing on passive income initially.
"if you're an entrepreneur if you have that Hustler or I want to build a business mindset your goal isn't passive income your goal is building a business and then if you can build a business you can build your income then you can take the income or the sale of your business you can take this money that you've earned that you've built that you've created and then you can use this money to go out and buy the passive income"
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The speaker's primary investment is their own business due to its potential for significantly higher returns (10-200%) compared to passive assets like real estate (7%), dividend stocks (3-4%), or high-interest savings accounts (4-5%).
"my number one investment is into my own business and the reason why is because when I invest my money into my own business there's no limit to the types of return returns than I can see right when I go out and invest in real estate which is my favorite way to generate cash flow I also generate cash flow from dividend paying stocks but if I'm investing my money into real estate to generate cash flow my goal is to get a 7% cash on cash return a 7% cash flow on my money when I invest my money in the stock market I'm getting dividends maybe it's three or 4% when I put my money into a high interest savings account maybe it's 4 to 5% so we're talking 3 to 7% are the types of cash flow returns that getting when I put my money into these passive assets when I put my money into my own business my goal isn't to get a 3 to 7% return on my money my goal is to get a 10 20 30 200% return on my money"
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Investing in one's business (hiring, technology, marketing) aims to accelerate growth and increase income, which can then be used to acquire passive income streams. This is an active, not passive, pursuit.
"when I put money into my business to hire more people to invest in more softwares to invest in more marketing now my goal is to accelerate the growth of the business we're trying to take more market share we're trying to increase the amount of products that we can sell we're trying to increase the size of our business it's a completely different game it's not passive I work every single day in the business it's not passive at all but it creates the opportunity for more income which can then buy me more passive income"
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The speaker prefers 'cash flow' over 'passive income' due to the work involved, but advises those seeking financial freedom to consistently invest in passive assets like real estate or dividend stocks to generate cash flow.
"I don't like using the terms passive income because there's always some sort of work required I like the terms cash flow but I'm just sticking with passive income because everybody in the internet is looking for this types of passive income and this is what I'm trying to get to understand is what do you really want if you just want the financial freedom and you want that type of passive income great because you don't like your job fine every time you get paid put some money into these types of assets the passive assets whether it's rental properties whether it's crowdfunded real estate deals whether it's dividend paying stocks whatever it might be that way now you can start generating this cash flow"
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Through persistent, aggressive investment over 1-2 decades, coupled with reduced spending and increased income, one can build a cash-flow portfolio sufficient to fund their lifestyle and achieve financial freedom, reducing job dependency.
"maybe do it for a decade maybe do it for two decades and you stick with it you stay aggressive with it you're working to spend less so you have more money to invest you're working to earn more so you have more money to invest pretty soon you're going to have a strong cash flow producing portfolio where you have enough income to fund your lifestyle and now you can not have to worry about your job as much because now you have that cash and freedom"
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Entrepreneurs should focus on building income and businesses first, then utilize that income to fund passive income streams. The speaker's current priority is business investment over real estate due to superior opportunities.
"but if you are more of the entrepreneurial type and you want to build that income is a completely different game now you're not playing for this passive income yet per se you're working to build the income and then you can use the income to then fund the passive income as you grow that income and you got to find that right balance for you I don't invest in real estate the way that I used to because I have a better investment opportunity in my business"
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