17 Ways Rich People Make Money With Debt

hey everyone today we are going to have another long video that is going to be filled with valuable content most of you associate that with something negative like credit cards or student debt some people are still paying their student debts even though they have graduated years ago but their student debts are still hunting them down but what if I told you that that isn't as bad as you think what if I told you that that can be something good what if I told you that that can be used to make money rich people across the globe use that to make not just millions of dollars but rather billions of dollars but how do you do that that's what we'll find out in this video here are 17 ways to use debt to make money there is going to be a table of content in the description so you can skip to the parts that you want to learn or come back and re-watch them again this video is a combination of many of our previous videos so grab a drink and some snacks hit the thumbs up button and enjoy the video foreign have you heard the phrase that is the root of all evils never gets into debt that is slavery and that is true to a certain extent because when you're droning in debt your life is over while you're trying to pay your debts your debts are not waiting for you they're growing day by day since no one lends money for free there is always an interest despite all of this the United States has embraced that total U.S Consumer Debt is almost 15 trillion dollars which brings the average household debt to over 5 300 the U.S GDP is a little over 21 trillion dollars which means the entire economy consists out of that but I have some good news for you that isn't always bad that is unpopular opinion because most of the debts we have is bad debt you probably have some credit card debts a car loan and maybe be a student that and you're thinking it will take me decades to pay off all of these debts how on Earth can that be something good in order to understand how that can be something positive let's take a look at how people with Deep Pockets still use that to make even more money it might sound a bit confusing because why would anyone with a lot of money use debts in the first place that is supposed to be used by people who do not have money but that's not how capitalism works that is a powerful tool if you know how to use it and in this video you will find out how rich people use that to make even more money so give this video a thumbs up and let's get right into it number one most of the trade is based on that it might sound a bit controversial because borrowing money to start a business is a horrible idea and personally I would never do that but there are businesses especially traditional businesses were using that is your best option let's say you want to sell pens it's a very common product and there's pretty much always a demand for it ideally you would fly to China find a factory that produces that kind of pen with good quality and the right price you would purchase a container of pens ship them to the US and distribute them to your clients but today that's mostly done online through websites like Alibaba unless it's a more complicated products where you have to fly to that factory but here is the catch you don't really have to pay for the products to have the product First Let Me Explain how in the past 50 years China has become the factory of the world producing literally everything thousands of factories work non-stop to produce everything that the world needs and in order to make it easier to sell most of these factories would gladly loan you their products in return that you would pay them some time in the future of course they would not lend to strangers so you will have to build some kind of trust with them first but that's how business has been running for the past 50 years once the client would sell the product in the US or any other part of the world he would pay the factory and borrow more products you're basically telling the factory you know how to produce it so let me help you sell it if I can sell it for anything above this price that's going to be my profit what makes this strategy great is that you're not tying up your own money in this transaction that's why selling is one of the greatest skills you can ever master number two refinancing real estate debts is the best kind of debt because it's filled with loopholes if you don't have a mortgage then you're paying extra taxes rich people always have multiple mortgages to be able to get all of those deductions remember every dollar that you're supposed to pay in taxes but instead you save is an extra dollar earned so that's another way rich people get richer but let me give you a more practical way this is how basically rich people get rich in real estate let's say you saved two hundred thousand dollars that's a lot of money but if we're going to be honest that's peanuts you can't even buy a house of course you can't get a mortgage up to eight hundred thousand dollars since you have to make a 20 down payment but here is the secret let's say you find a property that costs half a million dollars it's in a bad condition and needs some or maybe a lot of renovation you head to a bank and get a mortgage by making a 20 down payment let's say you're going to spend around 10 percent of the total cost of the house to renovate it or around fifty thousand dollars you head to your bank again but this time to refinance your mortgage when you got your first mortgage the value of that property was just half a million dollars because it was in such a bad condition that no one wanted to live there but since you have renovated it now there are people who want to rent it out so the market value of that property let's say Rises to seven hundred thousand dollars like the first time let's say you're going to get an 80 mortgage but eighty percent out of seven hundred thousand dollars is five hundred sixty thousand dollars four hundred thousand dollars out of that money is going to go to your first bank that gave you the first mortgage and let's deduct another fifty thousand dollars that you spent on renovation and you're going to be left with an extra profit of a hundred and ten thousand dollars you made one hundred and ten thousand dollars using debt and you're left with a property that you can rent out to build equity and general rate passive income on top of that you are going to avoid paying taxes because you have a mortgage this is a very common practice among Real Estate Investors can you really see after this that that is bad I will leave that for you to answer in the comment section below number three hedge funds hedge funds are made by the rich for the rich to make rich people richer and they usually use unpopular strategies mortal people like me and you we make our best efforts to predict which companies are going to grow and rise in value and invest the money will work so hard to earn in hopes for these companies to grow but hedge funds often use a completely opposite strategy they try to make money when companies fall or go bankrupt as it was with the case of GameStop although in that case the internet challenged hedge funds and pushed them to lose over 13 billion dollars but how do hedge funds make money with debt let's say you expect a certain stock to decline like Facebook because you know that Apple who produces the most popular smartphone will announce next week that they will no longer let apps to track you like Facebook or Instagram track your online activity and make privacy their first priority which will greatly damage Facebook's business model so you pick up your phone and call your broker to borrow from him a single Facebook stock that cost let's say a hundred dollars and instantly sell it in the open market for a hundred dollars congrats now you have a hundred dollars in your pocket but you you still owe your broker one Facebook stock let's say you are right and next week Facebook stock price drops to seventy dollars use that hundred dollars to buy one Facebook stock for seventy dollars since the price dropped and return it to your broker and pocket the difference congrats you've made thirty dollars out of a full of a stock it sounds simple in theory but it's extremely difficult and risky in practice what happens if you're wrong what if the price doubles overnight you still have to return that single Facebook stock to your broker and pay interest for borrowing that stock now you have to buy that stock back for 200 to return it to your broker when you buy a stock and try to sell it when it rises the maximum that you can lose is the amount you invested in but not in the case of shorting if the price keeps Rising your losses keep Rising theoretically you can make unlimited losses since theoretically the stock price can rise indefinitely but if you have a hundred analyst working for you you can make a fortune using the strategy number four Forex we have already discussed this in our Forex video which link I will leave in the comments section but here is how it works in short Forex is a market where currencies are traded it makes International Trade possible you can use US dollar in China you have to buy Chinese yen to pay your employees for example in China so there is a market where anyone or any company can come in and purchase foreign currencies and based on different factors these currencies fluctuate for example the FED Rises interest rates that will limit the supply of dollar in the market and make US dollar stronger against other currencies or vice versa so if you can predict which currencies will rise or fall you can make a lot of money in this market but what makes these markets so different from the rest is that for every dollar you use to trade in Forex you can borrow an additional hundred dollars that means if you trade using your thousand dollars you can hold a position worth a hundred thousand dollars if you end up making a small profit like one percent it will be huge number five credit score as you can see that is a powerful tool every successful business company or entrepreneur uses that in various ways especially if you have a proven business model borrowing money to finance purchase orders is practiced pretty much by every business so stop thinking in terms all that is bad of course that's with the high interest rates such as credit card debts is horrible but in order to get a lower interest rate you have to minimize the risks of loaning your money how do you do that you build a track record of being a reliable borrower there are billions if not trillions of dollars in the banks waiting for someone to borrow them and even if there isn't any money Banks can create money out of thin air and we have explained that in a previous video in July of 2012 Mark Zuckerberg financed his six million dollar Palo Alto home that's three miles away from Facebook's headquarter with a 30-year mortgage at that time he was 28 years old and the world's 40th wealthiest person worth an estimated amount of 15.6 billion dollars the question is why would you get into debt when you have billions of dollars and can easily afford it if he wanted he could easily buy a dozen 6 million dollar homes in cash without betting an eye so why get a mortgage the answer is long and complicated but in short it's free money sounds ridiculous who would give you free money when you are already a billionaire let me explain it all has to do with interest rates the inflation rate in the US is 2.5 to 3 percent so any money you borrow that's below the inflation rate is considered free money Zuckerberg's mortgage rate is just a little over one percent but it's adjustable meaning that based on the circumstances the rate could possibly go up for one reason or another if you do the math the bank is losing money since the mortgage rate is below the inflation you don't have to be genius to do the math for the sake of example let's say you borrow one million dollars at the rate of one percent the average rate of return on the savings account is 2.4 percent meaning that if you deposit that million dollars in another bank you end up making twenty four thousand dollars a year while you only have to make a monthly payment of 10 500 to the bank that lent you that money imagine if you can do that with a hundred million dollars or how about a billion dollars when you can borrow money for free there is no point in tying up your own money when you can use that money for more profitable things of course when you are talking about small amounts of money this might not make sense because the difference isn't that big however when it comes to large sums playing around with one two or even half a percent could potentially mean dozens of thousands of dollars if not hundreds let's say you were a businessman and you can easily afford a million dollar house why buy a house when you can Finance it for one or two percent while you invest the rest of that money in your business that could potentially get you 10 20 if not 30 returns even if you're lazy to find a more profitable way to use money just throwing it all into an index fund can be much more profitable especially when we are talking about 20 or 30 years historically an index fund has shown to have an average rate of return of eight percent if you take a mortgage and invest your money in an index fund the percentage difference will end up in your pocket it all comes down to opportunity cost economically it wouldn't make sense for Zuckerberg to buy the house in Cash when he has been offered a one percent mortgage rate but he is not the only one who is so smart to do that take Elon Musk for example most of his wealth is tied to Tesla and SpaceX to buy a house for 20 million dollars he probably might need to sell a considerable chunk of his wealth pay taxes and incur other expenses however he can take free money and keep his monthly payments under his budget he took out a 61 million dollar mortgage for five properties in California with a monthly payment of a hundred eighty thousand dollars that's not unique to billionaires by the way it's also practiced by moderately rich people like Jay-Z or Beyonce they took a mortgage to buy their 88 million dollar house they put 40 down payment and finance the other 52.8 million dollars that leaves the couple with a hundred fifty thousand dollars of monthly payments in comparison the national median home value is around two hundred thousand dollars instead of tying up 53 million dollars in a house he definitely knows where to invest it to maximize his profit at the end of the day he's made a lot of great Investments and he's on his way to becoming a billionaire the Richer you get the better ways you find to make more money but let's be honest not everyone gets such a low mortgage rate Nationwide it's around three percent but even at that rate it still doesn't make sense to purchase a house if you can Finance it however wait a second let's make this clear why do the super rigid get a lower rate in the first place than the rest of the country first of all when you are a billionaire the bank can sleep calmly because no one is worried that you might default on your lawn and in case if something happens you can easily sell part of your business to pay back your mortgage that takes out the risk out of the equation now compare that to an average employee who could get sick and not be able to work or just lose his job for one reason or another secondly paying your mortgage on time every month helps you build and maintain a healthy credit score so when you're in trouble next time with a strong credit score it will be much easier to borrow money from the banks you're basically building trust between you and the financial institutions but it also could be the other way around Banks do offer such a low mortgage rate to establish a strong relationship with rich people so that when their companies would need a loan from A bank they would come to them and not their competitors it's a win-win situation but these low mortgage rates are adjustable which means as I said earlier they could go up but no one is worried because if it stops making sense economically to these Ultra rich people they can easily pay back their mortgage but most people associate that with something negative because we usually borrow money that we can't afford for entertainments and end up paying a lot more back in fact right after getting out of college you realize what a burden your student debt is already and once you calculate how many years you have to pay back that debt you immediately create a perception that that is bad especially when you can't even default on it playing around with that is not easy you are eventually taking a huge risk and a small miscalculation can lead to disastrous consequences in fact we've got into so much debt that most people can't even afford unexpected 500 bill because we have to make all of these monthly payments however that's what distinguishes bad debt from the good one that can ruin your life make you homeless and your family if you're reckless but it also can make you unbelievably Rich if you know how to use it because it's leverage the average is a superpower that can make you rich instantly let's say for the sake of example you buy this house for ten thousand dollars go to the market and sell it for eleven thousand dollars congrats you just made a profit of a thousand dollars however that's not much but if you use leverage you go to the bank first borrow nine hundred ninety thousand dollars with your additional ten thousand dollars that's going to be a million dollars you head to your supplier and buy a hundred phones now for a million dollars turn around and sell it to the market for 1.1 million dollars but you still owe the bank so you go back to the bank again and return them nine hundred ninety thousand dollars that you borrowed earlier and another ten thousand dollars in interest now you're left with a hundred thousand dollars after you deduct your own ten thousand dollars you're left with ninety thousand dollars of pure profit that's how you make money when you don't have money the bank made their share of the profit and you made yours of course when you take this formula to the extreme and it's not regulated by the governments and practiced by everyone in the Wall Street it turns into a financial crisis as it happened in 2008. remember when home prices crashed and then they took down the entire economy with them well it's because the investment banks used leverage to maximize their profit to the point where their strategy backfired because they began giving mortgages to people who didn't necessarily have the best credit score and weren't financially prepared to make the monthly payments and then they defaulted on their mortgages as they suppose it was a nightmare for the investors because for the last 40 years home prices were rising and suddenly they are going down well we're not going to get into the details of the 2008 financial crisis that's a story for another video but in any ways it's a major tool of how rich people make money of course it's risky and you can end up losing everything but if you know what you're doing you can make a fortune overnight everyone assumes that if you make a lot of money you must be paying a fortune to the government but Trump's tax reports left many people confused how on Earth do you make hundreds of millions of dollars but pay nothing in taxes the answer is long and complicated but we'll try to simplify it here in this video just a disclaimer I don't want to politicize this video you're not a political Channel regardless of which party you affiliate with or which candidate do you support Donald Trump is a pretty good example of someone who used debt to build his multi-billion Dollar Empire of course some of his methods are quite controversial to say the least but we're not going to look into that if you make over six hundred thousand dollars you probably pay over 37 in taxes and that number could drop if the Democrats pass their tax bill but as they say the devil is in the details if you would have made that six hundred thousand dollars using debt you could have lowered your tax rate to zero percent or even apply for a tax refund as Jeff Bezos did with Amazon back in 2018 when Amazon received a federal tax refund of a 129 million dollars if you master debt and real estate you can use other people's money to make millions of dollars and pay absolutely no taxes at all real estate isn't the only industry where you can use debt to make a fortune that is used pretty much everywhere including the stock market let's say you have fifty thousand dollars in your bank account and you're looking to trade some stocks based on your analysis you believe that stock a will increase by 10 tomorrow you can use your fifty thousand dollars to buy stock a and let's assume that your predictions turn out to be correct stock a Rises by 10 you immediately sell your stocks for fifty five thousand dollars and end up making five thousand dollars in profits great but that's one way to do it your second option is margin investing with a margin account your broker would loan you an extra fifty thousand dollars so now you can buy stocks worth a hundred thousand dollars if we use the exact same example and assume that you spend a hundred thousand dollars buying stock a and sell it once it rises by ten percent you end up making ten thousand dollars instead of five suddenly out of nothing you double your income on the exact same deal you don't have to make a lot of deals to build a fortune if you're going to be right just once and leverage it that's enough to make a fortune that's probably the only shortcut to build wealth but not everything is sunshine and rainbows with leverage comes risk a lot of risks if the stock price Falls below of a certain value your broker has the right to liquidate your stocks and leave you with a loss so you have to be quite confident about your decision for those who are not as risk tolerant as some of the other investors there is an option to leverage ETFs ETFs usually follow a particular index such as the S P 500 or a certain industry or bones so instead of using that to purchase a particular stock you can try ETFs of course ETFs don't usually rise as fast as individual stocks but they neither fold dramatically since they perform as good or as bad as the industry average but margin investing isn't as popular as Short Selling you probably have heard about this term alongside Tesla because these two Awards go hand in hand while most beginner investors try to make money by predicting which stocks would rise in value some professional investors make money by predicting which stocks would fall in value it's not as confusing as it might seem stock prices drop up and down for one reason or another poor quarterly reports or any other negative news can drive the stock price down let's say Apple stock price is a hundred dollars and tomorrow apple is going to release its quarterly reports and based on your analysis it had a bad quarter so the stock might fall you borrow 1 000 Apple stocks from your broker and sell them for a hundred dollars each or a hundred thousand dollars in total now you have one hundred thousand dollars in your pocket but you still owe your broker 1 000 Apple stocks you use that hundred thousand dollars you earned yesterday and buy one thousand Apple stocks for eighty thousand dollars since the stock price fell and returned them back to your broker without using a single time out of your money you have earned twenty thousand dollars on a full of a stock investors use this use the strategy all the time especially with stocks that are more volatile such as Tesla that's why whenever you heard the news that Tesla stock has risen there will always be an investor who will short it although on the last occasion investors lost millions of dollars since Tesla stock kept Rising short Elon Musk recently crossed a net worth of 300 billion dollars that is more wealth than the entire GDP of countries such as Greece Portugal or Finland if he spends one million dollars a month he would need 25 000 years to spend all of that money even if he would spend 1 million dollars a day he will need more than 821 years to spend 300 billion dollars imagine how your life would look like if you could spend 1 million dollars a day Elon Musk is 50 years old let's assume he will live for another 50 years he will have to spend 6 billion dollars every single year or 16.5 million dollars every single day for the rest of his life to be able to spend all of that money within his lifetime can he do it you can ask him on Twitter the only problem with this wealth is that it is not real this wealth only exists on paper if you try to turn it into real money he might end up losing all of his fortune when the CEO sells off his shares when the company is barely profitable that can scare off investors an oversupply of Tesla shares can easily drag the stock price down on top of that he will have to pay a 20 capital gain tax further diminishing his net worth so at the end of the day he is not as rich as he might appear on the Forbes lace but that's not a big deal when the world's richest man wants some cash he can simply borrow money by putting up some of his Tesla shares as collateral Elon Musk and walk into a bank and say how about you loan me a hundred million dollars in case if I won't be able to pay back I will give you the authority to sell my Tesla shares since Tesla is booming the bank isn't taking any risk so they will loan him as much money as he wants at one or two percent Elon Musk or any billionaire can access their wealth that exists only on paper without paying taxes since you do not pay taxes on debts in 2012 he bought his first mansion in Bay Area for 17 million dollars back then Tesla's stock price was just six dollars ideally you should have sold 17 million dollars worth of Tesla shares to buy that Mansion but instead he put the shares as collateral and took a mortgage since then Tesla's stock price has grown by 17 000 percent while he only had to pay a two percent mortgage rate if he had sold his shares he would have paid a 20 capital gain tax and would have missed the opportunity to grow shares by seventeen thousand percent do you realize now why billionaires loved that so much here is another strategy buy a piece of art for 10 million dollars pay some journalists to create a buzz around it pay some experts to write about what a great piece of art it is and why it is worth a hundred million dollars go to our bank give them your piece of art as collateral and boom you can borrow up to a hundred million dollars in cash at one or two percent interest rate now you can buy a mansion a yacht or throw a huge party just make sure to make the minimum payment when your business generates some cash at the end of the year without selling any of your shares and paying millions in taxes if you think it ends there then you have no idea to what extent billionaires love that it's the 1990s the British economy is suffering inflation is high unemployment is rising and the government is in chaos Britain had to devalue its currency to survive but it was part of the ERM or the European exchange rate mechanism which fixed All European currencies against each other to prevent currency fluctuations to make it easier for businesses to trade across Europe the demand for the British pound kept declining as Britain fell into a recession hence the bank of England had to buy billions of dollars worth of pounds to keep the pound at the same rate as other European currencies while it was bad news for Brits it was a billion dollar opportunity for George Soros by looking at the numbers he realized that sooner or later the bank of England would have to devalue the pound even if that meant leaving the erm Soros was one step away from a gold mine he went to various hedge funds borrowed billions of pounds at a very low rate and then sold them in the Forex Market in exchange for German marks the idea was simple when the British pound will collapse Soros will buy those pounds cheaper and return them pocketing the difference on September the 16th when the president of the bundes bank hinted an interview that it is possible for some currencies to come under pressure that night when Europe was asleep Soros began calling all the major Banks or in fact any bank to borrow as many pounds as possible by morning Soros borrowed and sold over 10 billion dollars worth of pounds the bank of England was an absolute disarray the British pound was collapsing the bank of England purchased 27 billion dollars worth of pounds raised interest rates to 15 percent but it was too late already the entire Market began to sell their pounds the most dramatic intern is calming pressure Soros profited over a billion dollars without spending a single penny out of his pocket he borrowed billions of pounds broke the bank of England and pocketed a billion dollars can you really say that that is bad after that it's 2005. Michael Barry is going through mortgage-backed Securities and he's suspicious something unusual comes up he can't believe his eyes so he starts digging farther and farther but the more he digs the more he's shocked every mortgage-backed security is filled with multiple Jank loans in fact these loans are given on the basis that the borrower doesn't have a deadline to pay the principal they can even skip the interest on the interest which means that even a high school dropout with no job or savings could buy a house ideally the rating agencies would give these loans a c rating but investment Banks pile them together with good loans and boom now you have AAA loans if a small minority of these borrowers will default on their loans it will drag down the entire Market in 2007 alone 500 billion dollar worth of these loans were sold that's when Michael Barry shorted mortgage-backed Securities exactly like Soros shorted the pound he borrowed as many mortgage-backed Securities as possible and immediately stole them in the open market hoping that when the market will crash he would be able to buy these Securities at a much lower price and return them back everyone thought he was crazy betting against the housing market but that's 1.7 percent here lost 37 points or so Apple shares were just getting hammered this morning we're down by between three and four and a half percent generally across these markets with which we are watching this Market deteriorate with red everywhere essentially down by four five percent Michael Barry walked away with the personal profit of a hundred million dollars all of that was done with debt but not everything is sunshine and rainbows [Music] it's April 2020 Melvin Capital Citadel and a few other hedge funds decided to make a few billion dollars by bankrupting another barely surviving company called GameStop by that time the hedge funds had already shorted a hundred and forty percent of the total stocks more shares were shorted than actual shares in circulation it was a matter of time before the stock collapses and hedge funds closed the deal with a few billion dollars for their investors but something went wrong a Reddit user realized that the only way these hedge funds can get out of this deal is by purchasing back all of the existing shares if he purchases GameStop shares and holds them long enough these hedge funds will pay whatever price you want to buy back the shares because if they don't they will keep paying interest since these shares have been borrowed the Reddit post went viral and everyone began buying GameStop shares to the point where the stock price sold hedge funds purchased the stock at five to ten dollars but now had to buy them back at 300 or 400 dollars to give them back the news broke the internet Wall Street was in absolute chaos for the first time retail investors beat Wall Street at their own game at this point the hedge funds knew that if they didn't stop this Rebellion they might go bankrupt first they pushed Robinhood to stop selling games stop shares on their platform soon other Brokers followed even though they stopped the Rebellion hedge funds ended up losing almost 13 billion dollars in the process that is a powerful tool but it's not for everyone it can be your best friends or your worst enemy even if you have hundreds of millions of dollars stashed in your bank account not a single smart businessman will use that money to grow the business instead let the banks know that you and your companies for example actually have the money and borrow the same amount of money to finance your operations at the end of the year when it's time to pay taxes you can claim that you did not make any profit on paper since you owe the bank so much money suddenly instead of paying a 21 corporate tax you pay nothing and in case you need money to finance your lavish lifestyle use the company's fund to pay for your private jet expensive restaurants and luxurious hotels and write them off as a business expense at the end of the year that's what almost every company does in the US or anywhere else in the world here is a simple question why would anyone give you millions of dollars when they can use that money for themselves why are they wasting it on you let me tell you a secret you have no idea how much money they're in the world trust me the amount of wealth that is there in the world is an imaginable there are people who have hundreds of billions of dollars in offshore accounts officially they're around a thousand people with a net worth of at least a billion dollars in the United States and 3 311 billionaires worldwide and this is just the official number if you have a private business nobody knows your numbers and nobody can have access to your financial statements you could be making hundreds of millions of dollars a year and nobody knows so you could be one of these undercover billionaires now every single day this enormous wealth is stored in offshore accounts and inflation is eating it out Apple alone has over 200 billion dollars of cash stored in offshore accounts so if you can come up with a way and say that you will borrow this money use it effectively that you can give them back a two or three percent above the inflation rate they will gladly lend you that money it's as simple as that now inflation is like seven or eight or nine percent now but normally it's about two to three percent so any money you make above five percent is yours let me tell you how rich people use that to make a ton of money what business do you think when you think of Starbucks selling coffees right that's what they want you to think Starbucks is the place you go to get your daily latte but what if I told you that Starbucks is actually a bank it's a bank like JPMorgan Wells Fargo Citibank you name it if you're a loyal Starbucks customer you probably have the Starbucks app downloaded on your phone and whenever you pay for your daily caramel latte you use the app to pay for it because it lets you generate points that you could eventually use to get a free coffee as much as they want you to believe making a cup of coffee is cheap Starbucks is charging you like six or seven dollars per venti frappuccino but the actual cost is literally pennies so for them to give you a free coffee once a month because you buy a coffee from them every single day is nothing but most importantly you hold your money in their wallet so that you can earn these points at the end of 2021 users held the collective of 1.5 billion dollars in balances 1.5 billion dollars might not sound like a huge amount of money but it's more than what the most banks hold in the US Starbucks can do whatever they want with that money open more stores invested in real estate expand their operations to close the grope invested in the S P 500 trade stocks whatever they want they know that you're not going to ask for that money back anyway in fact when it's about to be over you're going to reload your Starbucks wallet for a week or a month Starbucks built a business that essentially relies on borrowing money from customers with zero interest in return for giving them a cup of free coffee a month isn't that genius Starbucks isn't a coffee company it's a bank that sells coffee it can simply lend that money on interest to someone else and live off the entries it will generate out of it since it pays zero interest to the people who lend the money to Starbucks in the first place except for a free cup of coffee once a month that's not the only way the rich people make money with that banks are ripping off the little guys like you and I it's us who pay for decades of interest on the student loan we borrow to pay the bills but the rich only benefit from the banks banks are like passive income sources for the top one percent imagine you're a wealthy dude Elon Musk Mark Zuckerberg doesn't matter you have this tech company that is worth like hundreds of billions of dollars you might own like 10 or 20 percent of the company on paper you are a billionaire but if you turn around and sell those shares you will your net worth it will just crush the stock price making you poorer so you cannot do that so how about using the profits your company generates nope you can do that either your company might earn like billions of dollars but it has to reinvest that money back into the company otherwise there is like a 30 corporate tax waiting for you so what do you do as a tech CEO who owns stocks worth billions of dollars you go to a bank and ask for 50 million dollars but instead the bank will give you a hundred million dollars to buy a private jet a yak or a couple of supercars what are you going to do in return is give your shares to the bank as a collateral the shares are still yours the bike can only sell them to get back their money if you won't be able to pay back your debt so you're fine as long as you'll make your annual minimum interest payment the increase on your loan is going to be very small because you are considered to be a high net worth individual and the chances that you will go broke are very slim that's why billionaires even though they have like so much money they still borrow money to buy their expensive toys Mark Zuckerberg took a mortgage to buy his Palo alteha Elon Musk borrowed money to buy his luxurious mansions in Bay Area as the price of your shares keeps Rising you keep borrowing more and more financing your lavish lifestyle while making the minimum interest payment to the bank and when you finally make a profit oops your tax rate is going to be significantly lower because you can deduct all of these interests from your tax payment it's as simple as that

Channel: Proactive Thinker

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Keywords: Proactive Thinker, minoritymindset, minority mindset, minority123, jaspreet singh, rethink rich, financial education, financial literacy, passive income, cash flow, make money, invest money, investing 101, investing money, investing in stocks, investing in real estate, earn passive income, build wealth, real estate, stocks, real estate investing, stock market investing, real estate 101, stock market 101, how to invest, investing for beginners

Id: _1BkSmWyWmA

Length: 44min 3sec (2643 seconds)

Published: Wed Feb 15 2023