DON'T SAVE! Where is Inflation Going in 2021? - Ken McElroy LIVE!

[Music] nothing out there could ever stop me from chasing after the way [Music] lovely [Music] [Music] baby you'll make [Music] [Music] [Music] me up is cups of coffee baby you make me feel so lovely [Music] is [Music] okay hey everybody welcome to the ken mcelroy show we are having little camera issues so we are now using the computer camera for this episode every week it's kind of something right that's all right so um glad to be live with you guys yeah it's our last um full monday in idaho so next monday we're going to be on the road um headed down to california yep going to washington on sunday and then oregon and then california yeah we a lot of fun so um and today we're gonna be talking about why you shouldn't be saving money right now and um so why don't you comment if you are saving money if you're not saving money if you have money and you don't know what to do with it all that would be good um hey john john's here from west florida um looks like random is here from austin texas he said he can't believe he made it on in time but we were running late so i don't know um yeah and then jesse yeah we're not in arizona we're definitely in idaho it's like what like 80 degrees or something 85 degrees nice uh we were out on the boat last night and we didn't get home till 9 15 9 30. uh it gets late uh you know a light here uh all night so it's it's also late in the morning but i like it so we're quite a bit up north yep yep definitely really nice so um so anyways so about saving money um well to start hold on to start everybody should be hitting the like button because we're putting on a live show and we need those likes so go ahead and hit the like button and uh make sure you subscribe and uh put the notification bell on so you always know when we're going live and then secondly is we have a great handout on today's show at kenmacroy.com forward slash inflation definitely want to grab that for a rundown of how everything is going to work okay so now we can start yeah i think it's important to talk about you know what's happened over the last few months if you go back to some of the videos that we've done we talked about how inflation is going to be high and how it's going to erode savings accounts and and so that's kind of the purpose of the show here is to maybe uh give you guys some ideas and some things that you can do obviously you can't you have to everyone has to have some money and savings um you know but uh the banks they don't want you to save money and i think probably the biggest you know if you really take a look at um you know the bigger picture you know what what tax breaks do you get for saving money i mean it's an interesting question you know because there's a lot of tax breaks and tax incentives for things and certainly you get tax breaks for buying a house you get tax breaks for the capital work you know that you do on certain things or you know in the house but really you get taxed on any money that you make on your savings so you know it's there's no real tax incentives right right so there's no incentives on tax for saving money but you know um right now banks have a big surplus of savings so that's why they're not paying you any interest on it i mean the savings rate right now is 0.01 yeah well right that's that interest rate but if you go back and look americans have historically been horrible at saving we've never actually been double digit if you go back and look at the fed you know st louis fed or there's a bunch of websites on this you're gonna see that it's been four five six seven percent it was trending up pre pandemic oh was it okay yeah i mean well i see trending up it went from like six to seven but but then you know it jumped at the 14 percent and even into the 20s why aren't it's 33 right now yeah so if you take a look at the website it actually says it went back down to 12 or 14. but that's measured monthly and i i think that um the the point is it's more than double and so why do people save more money right now i mean it's obvious yeah the pandemic people didn't know what to do you know the government's giving out all this money and some people don't actually need it so they're just saving it well that's one reason but also typically if you look at one savings is high it's when there's uncertainty okay and you know it's it just like anything else like if you lose your job or you're about ready to lose your job or you think you're gonna lose your job or you know you're kind of hunkering down a little bit you know to whether that so traditionally savings rates have gone up when there's been some level of uncertainty right correct and then you know if you guys let comment and let us know like are you saving money do you have money that you don't know what to do with like we're really curious as to what you guys are and girls are dealing with so um and then you know back 10 years ago with savings you could get a cd do you remember those seats yeah yeah it's a deposit by the way yeah and you could get you know 10 12 on a cd through the bank which then you were actually making money on your money to some degree i'm now at the point zero one percent and i looked at the cds too the cds are also 0.01 percent like down the board um you know you're not even keeping up with inflation so what that means is if you have a thousand dollars in savings and then month after month that thousand dollars has less purchasing power than the month before so you're actually losing money yeah so i i we we keep harping on this and i hope you guys understand um i understand you know the comfort that you get when you save money right you want to have some savings i was i was with my 20 year old son this last week and he was bragging about how much money he had saved because he had been working and he was proud of that and it gives him a little bit of comfort i completely get that you know he hasn't had a savings account that big ever what he doesn't realize is but he did ask me about investing so what he what he doesn't realize is that if inflation is higher than your interest rate uh which right now you know we know that the savings rate is about one percent and we also know that inflation's been three four and five percent as reported some people think it's a lot higher then you are going backwards negatively that yeah it's just a fact you're going to be able to buy less with that same amount of money that you saved and nolan has an interesting comment i'm going to get to you in a second nolan let me just go over a couple things first um one we believe in saving for an emergency fund you want to have what three months worth of you gotta have whatever you're comfortable with of three months is a minimum so let's say your burn rate is two or three grand a month you should you should have that i know uh pre-pandemic like 4 out of 10 americans didn't even have a 400 uh for emergencies yeah so it's it has not been good in the past so it's good that these savings rates are up and and i think there's a bit of uncertainty obviously ahead of us yeah so you definitely want to save for emergencies and also you know you can save for a purchase right if you're saving to buy a car you're saving to put a down payment on a house those things are okay too but they also have to make sense i mean if you're saving 10 grand a year on a house right now and the house prices keep going up you know 20 or whatever then that might not make sense um but if you're you know saving for something that is in your you know you're going to be eventually able to save two um not counting inflation so yeah i i'm always monitoring how much cash i have and you should be too so as an example um you know people's savings and cash go up and they go down based on fun and based on emergency funds and based on you know things that they want or vacations or whatever that's pretty common not saying to eliminate that but that's you gotta always take a look at what's happening to the money that's the most important thing so i had a bunch of cash and so i ended up buying a 500 000 uh house in scottsdale and um yeah for a rental because i i wanted to move my cash into a hard asset and that's on and i didn't put debt on it i just used the cash to buy the hard asset and yes i could put debt on it and maybe i will at some point but what i was really trying to do was move out of cash right i think that's the most important thing is it possible that the price of that house goes down absolutely is it possible that goes up yes but regardless of that i'm gonna have a renter in there paying me on on on that money so i'm gonna get a better return on that 500 000 house than i am sitting in the bank in cash and that is actually the point it doesn't have to it could be 5 000 it could be 50 000. it doesn't really matter but that's the way you guys need to be thinking how can you make money on your money and still kind of keep it liquid right and then that's what i did too you know i had a hundred and some thousand saved and i put it towards a condo and then took out a small loan on the condo but it cash flows so now i'm making money on my money so i'm not really worried about where the market's at i just know i'm now making money on my money versus depreciating uh and back to nolan's question because i think it's a good question it said if we shouldn't be saving does that mean you don't see a correction or crash coming so i actually do see a crash coming i've talked about this uh you know and there's obviously we're gonna start to see this forbearance and we're gonna start this eviction moratorium and and house prices are not sustainable guys and um you know it we in fact i think i don't know if you guys have already looked today if you take a look at this um this um this uh article here today in um cnbc now not that you should only look at this but this is um the housing boom is over the pre-pandemic now whether it's true or not i don't know but things are definitely softening and and so yes but i think we need that things cannot always go up and so for that you obviously need cash but it doesn't have to be in savings that's kind of the point so you know you need you need things that you can get liquid on and uh they and there's lots of different options for that and remember guys like it's not about timing the market it's about cash flow so if you find a deal that cash flows it doesn't matter where in the cycle you're at you just need to make sure that it cash flows um and matt had said that crashes seem very localized and we do agree with that you know we think certain areas of the country and certain parts of different states are going to crash harder than other parts of other states yeah you guys as you guys know like on anything like there's bubbles and there's depressions in all kinds of markets all over the united states and some are on fire some are not on fire there's always cities that are ranked at the top like austin and boise as an example and there's going to be cities that are ranked at the bottom and each one of those are going to have different forbearance issues each one of those are going to have different employment issues and so you know you can't just make paint a broad brush and say the us is going into a real estate crash however one thing is for sure um things just don't seem to be adding up you know you've got over 9 million people unemployed you have a lot of people that are choosing not to go back to work and don't want to go back to work right so that is going to be some disruption and then you have the forbearance ending you have the evictions ending and you have prices at an all-time high yeah so all of those things are a recipe for affordability issues and once this government assistance kind of dries up then i think you guys are going to start to see a very different uh uh remaining uh 2021 you know through this year what do you think no i agree yeah you're already starting to see it in the articles i mean home sales are down we have some big-time realtor friends we've talked to uh their sales were down and their showings are down so you're starting to see a slow down in the markets but remember you guys you're not trying to wait for the market to bottom out because you'll never know when that is you just have to make sure that you're making money on your money meaning that the property is cash flowing so yeah but for purpose sales of today we're not really trying to predict the real estate market and all that kind of stuff what i'm trying to say to you is make sure that if you guys are heavy in savings while we're heading into this pretty high inflation the the worst thing if you've saved 50 grand let's say and uh it could very easily be worth a lot less in one year it will buy you a lot less and so you could take that and move it to something that is more asset or protected with an asset or inflation adjusted yeah definitely that's what we're trying to say here yeah and so okay so you have some cash so here's some options that you can do with it that kind of are good in times of inflation or typically good uh one cash flowing real estate that's what a lot of you do that's what a lot of you are interested in that's why you're here but what if you only have a few thousand dollars and you don't have enough to actually buy a property or you can't find a property that cash flows what else can you do with it and one of the things that we really like is gold and silver yeah and physical you know stuff that you can actually hold that's the key is is actually having gold and silver that you can actually hold and and and i i think you know i have a i've been doing uh saving gold and silver for years and years and years and years i've bought it at all kinds of different prices but one thing is for sure you know and and um you can you can buy silver relatively inexpensively as an example and and you can always trade it for cash you know there's there's plenty of places that will do that and i wouldn't consider it an investment i would consider it a hedge against the dollar a hedge against inflation yeah yeah potentially it depends if it goes up yeah you know you could buy silver is you know uh goes up and down and gold goes up and down and there's lots of things and i'm not advocating that you go out and buy a bunch of gold and silver i am telling you that i have a bunch uh as a hedge against the dollar i call it my insurance policy i don't necessarily consider it an investment i consider it an alternative to the us dollar right it's something you know because typically when the dollar goes down in value silver and gold go up in value typically typically they do go the opposite directions but there's all these nuances right so depending on when you need cash and miles had an interesting comment he said in san francisco they have an app where they can purchase physical gold the app will hold it in storage and they can use a credit card a link to the gold so we don't really love anything where you don't physically have the gold with you um because a few reasons you know there's a lot of things where even in your uh etfs or whatever where they um they sell more than they actually own so if you ever really needed it or there was a big correction or everyone was trying to get everything out at once it's a little bit ponzi-ish it is an interesting concept though because think of this what what he's done is he's taken cash moved it to physical gold hopefully it does exist and um and then the the uh depending on what happens to the gold hopefully you get that appreciation from that but what they're doing is they're actually taking your cash putting in a gold then linking a credit card to it which may or may not be a good idea either depending on what they're charging on the credit card fees as an example if they even are but it is actually a little bit better than sitting heavy in cash if the gold exists fujisan has an interesting comment he says he believes cash is king when markets drop uh with stocks bonds real estate prices at high levels cash earns if you already own property cash can be a hedge against market correction so he's saying that he wants to have cash when the markets drop but the question is is we don't know when the markets are going to drop versus when the inflation is going to rise right so obviously you need cash to buy real estate the the the one thing that i want to caution you all is the real estate crashes if you look at they can take a while so you know when things start to cool off it looks to be like they are it could take a year two years you know for certain markets to uh and we haven't even seen the forbearance numbers so not uh every market is considered equal of course but also it takes a while you know what what what throws real estate off is lack of demand or over supply those are two things so lack of demand might be unemployment issues lack of demand might be affordability issues lack of demand might be from interest rates that have hiked up and made it less affordable or over supply could be obviously a lot of building in an area or perhaps maybe a bunch of defaults in an area all that stuff takes time and so real estate moves pretty slow just like it did to where we are now the the air in the balloon also goes out very very very slow so it's not something that you need immediately you don't need cash immediately the last thing you're going to want to do is buy immediately if you know if we're on our way to a crash you don't want to as i like to say you don't want to catch a falling knife you want you want the real estate to crash even back in 2007 2008 during the last crash we really started ramping up our purchases around 2010 2011 and 2012. and you know everything was very disruptive at that time and banks had owned a lot of real estate and that's kind of what happens uh in a crash it takes a while for that to make its way back to whoever holds that real estate and back then it was primarily the banks and it's a long process and remember right now we're super behind on building because we have an issue with prices being so high lack of workers all that so we're trailing on the supply creating more supply so that is going to affect things too and slow things down a bit construction costs and construction labor or labor in general as you guys know labor is a problem right now i mean restaurants are closing one two three days a week to make ends meet and um and labor costs are going up uh so one people aren't working but two the costs are going up so people are having to pay more for um you know and so therefore the cost of those services or whatever they provide is going to have to go up to cover the payroll costs exactly um and christina said she doesn't see the markets going down anywhere in the u.s and um my and she kind of asked where we're seeing that and we're just hearing it from our connections and our realtor uh friends that showings have slowed down purchases have slowed down houses are staying on the market longer and that's all part of the beginning of a slowdown cycle but it might be temporary too but but you know we've been up here for um almost four weeks and you know i've been meeting with obviously a ton of real estate people people that own realty companies uh one of my friends uh did 120 million last year himself and he's on he did 70 already uh this year and he said uh as just one one one example that listings that he would put out um hardly have any showings at the moment and that could be an affordability issue it could be you know a timing issue but here in the summer in coeur d'alene idaho you know july and august are the prime months and so to have a slow down here in in the summer is is a bit concerning as uh told by people they're actually doing deals here locally and that's just here um you know that's not phoenix that that's that's not seattle that's you know very very different there yep yep and then another way to hedge against inflation is through the commodities market which that's like your grain electricity oil beef natural gas those kind of things you can invested that through the stock market or through directly think of this guys like what do what are what are people gonna need and want you know in this next cycle that's what you want to try to put your money into right like those are those are things that uh are gonna do very very very well exactly exactly let's talk about some things that are probably not a good idea no matter what the sale yeah yeah yeah yeah yeah so these are this is so if you are in any of these you you might want to take a look at um the one though the one one of my biggest concerns that i have around inflation um and i mentioned this before is somebody like my mom so i'm gonna see my mom on sunday and uh she's on a fixed income you know when my dad passed away he had a fixed income from a pension he was a union worker um you know fixed anything that's fixed any fixed income from a pension from a retirement account or anything like that is actually going to be in trouble because if it's not indexed for inflation that you could potentially be in trouble because your the amount of money that you continually get is going to stay the same but the you're going to be able to buy less with it exactly yep and they're on a fixed income but even those of you that have a job you know you might have to get a new job in order to make more money to catch up with inflation that's higher yeah you know paying more yeah that's why we've done some videos on side hustles and i i think that's something that and people are doing that i mean you know people are jumping into the airbnb market people are jumping into you know rental markets you know one of the reasons the rental market and the real estate market is so hot is because people are actually afraid of how the fed's been pumping up the stock market right so they've been not to say that they're jumping in one or the other there's nothing wrong with being diverse but people are are actually taking a look and they're investing as well so shelving uh on youtube is letting you know that your mom should never have to worry about money and she does it you were just using her i i know i take care of my mom it's my mom um fujisan i want to clear this up he said physical gold and silver do not cash flow you make your money when you sell which is 100 true but it does protect you against inflation usually because it will you know when inflation goes up and the dollar's worth less those things typically are worth more typically yeah yeah not always but it's a very good point that you know again it's an insurance policy i don't consider it an investment it it does not cash flow there's a couple things that you got to be careful of one is a whole life insurance policy right yeah so these are the things that really don't hedge against inflation even if people tell you that they do so yeah the whole life insurance policy yeah yeah just if you guys are in one of those just take a look at the terms in it um i'll give you a great example um again going back to my parents when my dad passed away he would always talk about this insurance policy i got my your mom has taken care of that uh she's you know i got this insurance policy when he did he had bought an insurance policy for her and it was 10 grand and uh the insurance policy was 10 grand it didn't move with inflation no and he probably bought that like 70 years it was a long time ago i can't even remember the time frame but the point is he bought a ten thousand dollar research policy which was a lot back then and it was ten grand i mean it barely paid for the funeral and um you know so uh that's my point you just gotta be really careful around that definitely definitely um another thing is bank cds as we've already kind of touched on um you know fixed if they're fixing certificates of deposit yeah right now they're like 0.01 you know and they don't really work with you with the inflation you know what i mean it's not going to help you out right right right this is a time guys where you should be looking at all the things if uh you know that you have um you know money doesn't care that's the doesn't care if it's in savings it doesn't care if it's in a cd it doesn't care if it's an insurance policy it doesn't care if it's in real estate they all have different returns it doesn't care if it's an oil and gas it doesn't care if it's in silver or gold it does what it does based on the investment and so your job is to make sure that if we're going into a high inflation economy that your money is being protected because of that that's all we want to try to communicate to you here on this particular yes you do not want to be saving money that's right just keep that in mind through this whole thing but you do need savings but you need savings for your emergency fund and things like that yes um and a lot of people are asking about crypto so let's just touch on that really quickly um it really remains to be seen in my opinion if it hedges inflation we haven't went through a high inflation period with crypto it you know it's been kind of up and down and up and down i just went up again the last day or two um but i'm not seeing a trend with inflation but it's too early to tell in my opinion yeah i mean let's look at why crypto well one of the reasons is is so popular one is it's easy right you know and and you can pay somebody anywhere in africa and and and not have to get banks and everybody else involved that is why it's so popular and so what what it's really what people are concerned about again is what's happening with the dollar what's happening with inflation i think so as long as they're concerned around those kinds of things i think an alternative is always going to be a good thing now for me as we've had george gammon on the show and we've talked to mark moss and we've talked to a bunch of people um we have friends that are all in in crypto i don't think that's a good idea i don't think being all in on real estate is a good idea i think that you just need to have allocations uh i have an allocation for gold and silver i have an allocation for crypto i have an allocation for real estate obviously because i'm heavy in real estate but i have allocations for all kinds of things i even have stocks and and so you you know i'm in different things and and i think that's the most important thing agreed yeah we definitely agree on that so at the end of the day basically what we're saying is your savings account is not going to make you wealthy and you could be uh sorely disappointed in the loss of buying power that you have if you sit on a lot of money in your savings account yeah yeah just again guys we you know just take a look at the facts i know the fed is trying to figure out how to curb inflation what they what they're also afraid of is deflation so you know deflation is obviously when something goes down inflation is something when something goes up so they're there they have this balancing act and one of the things that they've used over the years are interest rates so if you rise interest rates or or they slowly tick up then consumer spending goes down people buy less tvs they buy less cars they buy less houses and so all of that stuff is is something that's used to kind of curb inflation and if that happens it's going to push affordability uh even even worse yep yep and we had a good question um you know i'm sorry i don't remember who asked it but they had asked about pre-foreclosures you know do you think it's good to buy pre-foreclosures but i don't think we're there in the market cycle yet well they're they're they do exist uh but the market's uh to i think uh you know to one person's point um you know in a lot of areas they're not seeing um you know any slowdown so i'm sure the woman who mentioned that is obviously 100 correct uh but we are also seeing areas that are and and so uh the point is um the pre-foreclosure um if there's a number of buyers then and it's still cash flows then it's not necessarily uh a bad thing but if there's no buyers and there's a lot of pre-foreclosures and a lot of forbearance also coming into the market you're probably better off to wait because obviously it's a supply if there's a lot of supply hitting a market let's say then it will spin that market a little bit more off balance and prices will come down yeah and make sure you guys we have a whole handout on this it's very informative kenmcrory.com forward slash inflation we took a lot of time putting that together so i think it'll be really helpful for you if you go ahead and download that yeah and there's one question i want to answer uh from carlos hernandez here so he's our premier he's a premium member of ours yeah and he said if banks offer a 40-year mortgage should i take it i say a hundred percent if it's fixed so we are actually do 40-year mortgages through our hud program it's called the 221 d4 program on some of our apartment buildings and all that does is it lowers your payment and pushes it out another 10 years if you can hedge inflation with 40-year mortgages fixed i highly recommend it it's a great question carlos yeah and we have another premium question here from jennifer she said she's a house flipper looking for advice on what she should do before purchasing her first multi-family unit she's considering house hacking so um obviously uh i'm a massive fan of house hacking if you can for those of you might not know house hacking is essentially buying something and renting the rest to pay for your mortgage and you basically living somewhere for free um i'm a massive fan of that because you get the tax benefits you get the income you know and you get somebody else to kind of pay for your place uh we were just meeting with a young man last week that i have been kind of mentoring and he just did that two years ago and then just pulled up he refinanced and pulled 138 000 out of cash tax free through a cash uh cash out refinance and he's looking to do it again so it's a great way to get your your um rent paid for obviously you got to come up with the down payment somehow and certainly there's enough money in a floating around in the economy you should be able to if you find a deal like that you'll be able to find an investor yeah and then our last question on premium is from missy and she wanted to know um what the motivation would be to invest outside the u.s would it be to hedge against the u.s housing downturns well there's a couple things to consider here first of all i don't have a tremendous amount of experience about other countries but you have to look at the political environment the tax benefits all of those kinds of things you know the us is taxed on its worldwide income so if you're investing in mexico let's say or canada or australia or europe or whatever and and you profit there it's my understanding that you have to pay tax there and then you also have to pay tax on your worldwide income so you really need to take a look at your tax um however one thing i a lot of people are investing in other countries to get additional passports and also to get um residency somewhere else you know so these are more that can i would call maybe conspiracy theory or backup plan or whatever and there's a bunch of people out there really really smart people that are doing this so there are ways to invest in other countries and then um and then get an additional passport if that can uh and then you so you can get invest in another country you get the cash flow from um obviously that investment if you buy it correctly and you could potentially get another passport which allows you access to other countries so almost like a dual citizenship which a lot of people are doing right now and that's something that you might want to take a look at but the one thing that um you always want to make sure of are the tax consequences because when you bring that money back into the united states it's my belief that it's taxed so it doesn't really matter where you uh invest and also you have to be careful investing overseas because the laws and the rights of ownership or not yeah you can i've had friends that have um had issues in mexico um and other areas you know so again back to the political environment and but um i'm not the expert on that there's a tremendous amount of information on out there and some really really smart people out investing outside i know george gammon for as an example has done a lot in uh in colombia and he's been very very happy there i know robert and kim kiyosaki have invested outside of the country i uh the real estate guys yeah the real estate guys have done pretty well in multiple countries uh i have uh we've done a lot a lot of uh cross-border stuff with uh canada and mexico uh because of the proximity to the united states and we've had no issues uh uh generally and i want to uh give a shout out to zach on our youtube he said he's 26 and he house hacked his way to over 700 000 in cash flowing real estate with only 35 000 down on the deal wow he said it can be done yes yeah it's true zach uh guys i'm telling you um you know pay attention to that young man he's he's probably gonna do very well yeah and zach uh reach out because we'd love to have you on the show yeah because your story as an example a lot of people um they just don't think that it can at work and um you know and that's kind of the thing that we hear mostly is i can't believe how how it worked and it won't always work if you're not doing the right things so you do have to have some education around it you shouldn't just go out and buy and try it without a tremendous exactly so anyways i think that's our show for today it's been awesome to see you guys and uh we'll see you again next week yeah thanks guys we'll talk to you soon [Music] you

Channel: Ken McElroy

Views: 16,699

Keywords: Rich Dad, Entrepreneurship, Investing, Personal Development, Get Wealthy, Earn Wealth, Ken McElroy, Entrepreneur, Rich Dad Advisor, Success, Business, Self-Help, Coaching, Real Estate, Real Estate Entrepreneur, Real Estate Investing, Freedom, Lifestyle Business, Hustle, Real Estate Investing, real estate investing for beginners, real estate investing with no money, real estate investing 2021

Id: OlS9QJjwAjU

Length: 41min 25sec (2485 seconds)

Published: Mon Jul 26 2021