Watch THIS VIDEO To Learn How To Become Wealthy (SOONER Rather Than LATER)

unlike what the majority people say you will not become Wealthy by just avoiding Starbucks and you will not become Wealthy by just simply earning a six-figure salary let me show you see everybody wants to become rich but only a fraction of those people who want to become rich ever will achieve any sort of Financial Freedom the question is why is it because the system is rigged against you is it because of your work ethic or is it because of something else let me start with the system yes it is rigged against you it is profitable to keep you poor and stupid our education system doesn't teach you to become wealthy it teaches you to be an employee then we never learn about how to use our money in fact if you learn how to use the money it would be very unprofitable for the system because the reality is if you don't understand money it's much easier to sell you a loan to go out and finance your next vacation it's much easier to sell you credit card debt that way you can go Finance all the Gucci and Louis Vuitton that you want it's very easy to sell you things that you don't need because everybody else on Instagram is buying it so yes it is profitable when you spend all of your money because that stimulates the economy and despite that some people will have success dropped onto their lap some people will be born with Rich parents who will give them everything some people will have that success easily handed to them because of one reason or another but the reality is despite that kicking complaining screaming crying is not going to pay your bills and the reality is despite the system being rigged against you you can still win in the system if you understand how it works and by the end of this video you will know exactly what that means but what about your work ethic because there's a lot of people on the internet especially who keep saying that you don't need to work hard you just got to work smart and if you find the right system you can sit on a beach and make six figures a year but the reality is if you don't work hard it is going to be impossible for you to ever achieve any sort of success but hard work by itself isn't enough but the third thing and the most important thing that stops so many people from Ever having a chance to ever become wealthy is that we don't know how School teaches us to be an employee maybe even a high paid employee and that's it if you're going to become rich or if you want to become wealthy that's a whole different skill set of financial education and these are things that most of us are never ever taught let me show you over here you have cousin Bunty who graduated school making a hundred thousand dollars a year and over here you have sister paramjit who graduated school making fifty thousand dollars a year by the way in my native language Punjabi you call a mustache a much and a braid a good now based off of this information if both of these people started investing 15 of their income when they started working because they were both financially Savvy enough to start doing that that means cousin Bunty started investing 15 a year as soon as you graduate the school and sister bottom Jeet started investing 7 500 a year as soon as she graduated school based up this information you would think that cousin Bunty is going to end up richer and wealthier because for one he's making more money and number two he had that Financial savviness to start investing at the same time as her and he's also investing more money than her but you've also been following my videos long enough to know that this is a trick question see the difference between cousin Bunty and bottom teeth is that cousin Bunty just gave his money to a money manager and he was able to get a seven percent average rate of return on his money after all fees not bad but bottom Jeet decided to do something a little bit different she decided to go out and learn about investing she wanted to manage her money a little bit better and she was able to get a 10 annual return on her money even though she's investing less money but she was a little bit more involved on the financial education side of what to do with the money that she actually earned well after 40 Years of putting the money to work cousin Bunty had about 3.2 million dollars not bad for a guy making a good six-figure salary but bottom Jeep now after earning a 10 return on half of the money that she's investing here has 3.6 million dollars in her investment account even though she made half as much money as cousin Bunty she was investing half as much money as cousin Bunty but because she did a little bit better with her Investments she ended up with more wealth and more money than cousin Bunty this is where Financial education becomes so important because when we go to school we learn how to get this you learn how to get a salary and that's it see in this situation we're looking at it from a utopian point of view where both of them actually started investing their money when they started earning but most people don't do that because most people don't understand what investing is or the importance of investing and so most people don't do this but because it started doing that they ended up with decent amounts of money but school only teaches us this part when in reality if you really want to become wealthy there are are three different aspects to this financial education number one is how much money you earn number two is what do you do with that money once you earn it what type of returns can you get because a higher return can significantly change how much wealth you get and this higher return is going to depend on now what fees you're paying and how much returns you can get meaning how your financial education is going to impact your Investments and the third thing that will impact how much wealth you build is how long you invest your money for in both of these instances we assumed that they started investing as soon as they started earning money and if you don't start investing your money sooner you're going to have to start playing catch up because time is one of the most important factors when it comes to Building Wealth so if you want to build wealth there's three things you have to understand time the return that you get on your money and how much money you invest now how much money you invest is the only part that we learn in school but there are many ways to earn money without your traditional job you can go out and create an income beside hustle from a business you can go out and get certificate there's a lot of different ways to earn money now more money you earned the more money you have to invest but when the majority of people earn more money they just go out and dig themselves into a deeper Financial hole this is where what I want you to do is number one understand that if you want to become wealthy you can't spend all your money you got to take some of the money and put it to your Investments number two you want to start sooner rather than later because the more time that your money has to compound and grow the wealthier become and then third if you really want to become wealthy you have to understand how can you increase the Returns on your money because the faster you can double your money the faster you'll be able to build wealth see all this way to return is telling you is how long it's going to take for your money to grow and how fast your money is going to grow this is the velocity of money the higher the rate of return the higher the potential risk but also the higher and faster that your money can grow and so now if you want to double your money quicker you got to understand how do you get a higher rate of return on your money now this might require you to take on more risk which is why starting a business has a much higher rate of return if you start a business you can get a 20 40 50 even 200 percent return on the money that you invest but you're going to take on way more risk and this is we're now understanding how much risk you need to take to get the returns that you want it's going to be so important that we can actually hit the wealth that you want let's break this down now because it's easy for anybody to say just go out and start investing 15 of your money but if you have credit card debt or if you don't have any savings and if you don't know where to start what do you actually do so let's break this down step by step because the very first thing that you want to do before you go and start investing your money is number one you want to save two thousand dollars ASAP this is building your financial base because if you want to build a home the first thing you got to do is you got to lay that foundation and the very first thing you need to do is you have to save two thousand dollars as fast as possible because if you don't have two thousand dollars saved up for an emergency you are in a financial danger zone because if anything bad were to happen if your window breaks on your car or if your AC stops working or if a car breaks down and now you have to pay to fix it I have to go into credit card debt to fix the problem and then you dig yourself into a Financial hold so the very first thing you need to do before you go out and do anything else is you need to go out and save two thousand dollars as fast as possible and that means stop spending money or go out and try to earn some more money or go sell something that we could put aside this two thousand dollars and this is money that you do not touch this is money that you're gonna put aside into a bank account that you don't touch unless it is an extreme emergency if it's a TV that's on sale or Gucci is having a sale you don't go out and spend this money this is money you only use if there's a real Financial emergency once you do that the next thing you need to do is you got to pay down your high interest credit card debt as fast as possible your credit card debt is skinning you alive financially we talked about seven or ten percent returns well your credit card company is getting a 15 to 25 return on their money year after year after year every time you spend a dollar on your credit card that you cannot afford to pay back you are making your credit card company Rich at the expense of you ever becoming rich you know it's cool to get the perks from credit cards I'll be honest I only use a credit card because I love the cashback that I get I love the perks that I get I love the rewards that I get but the reality is if you're paying interest on your credit card if you ever pay a penny in interest on your credit card you are using your credit card the wrong way and you are the one that's paying for all the perks and all the rewards for everybody else so now if you have any credit card debt before you go out and start investing your money you have to pay down your credit card debt and just look at this from a financial level if a credit card debt is costing you 15 a year and you're trying to invest your money into the market to get a say seven to ten percent return on your money you are losing your money because when you invest your money to pay down your credit card debt you're getting a guaranteed guaranteed 15 return on their money because if you can pay down your credit card debt one year early that's one year that you don't have to pay 15 on your money on versus when you go and try to put your money into the market you're trying to get a seven to ten percent return on your money but there's no guarantees you might get less you might get more this is why if you have any sort of high interest credit card debt you have to pay that down first then once you create this financial base this is where you can go to number two where you start actually putting your money to work and this is where I want you to go out and create three different bank accounts you want to have one bank account for where your deposits and checks come into this is your spending account you want to have one bank account for your emergency savings and then you wanna have one bank account for your investment money the reason why you want to have three different bank accounts and most banks will allow you to do this without much issue is because you want to make sure you separate the money the big thing that stops people from becoming wealthy is you spend all of your money well if you don't have any money in your spending account to spend you can't spend more money so you need to create these three different bank accounts that way now when you get paid you get your direct deposit into one account then you need to take some of this money automatically most banks who do this for free if they're charging you a fee to do this look at different banks you want to automatically take some of this money and have it deposited into your savings account and into your investment account and when I say investment account this isn't a technical investment account I mean this is money that's going to be invested because if you go to the bank and you say you want to open an investment account they're going to interpret it as something completely different where they are investing your money for you when I'm talking about this investment account I just mean a bank account that has the money that is going to be invested this could be automatically invested into ETFs or index funds through whatever automation you have or this could be you not taking this money and putting it into Investments manually but it's just cash that needs to be invested and the reason why you want to do this is because now you have this cash in your spending account this is the money that you can spend and now you know this money in your investment account is the money that's going to be invested and the money in your savings account is the money that's protecting you against an emergency so what do you do to do this well you got to go to your bank create three different bank accounts and then create an Automation and one thing that you can do is follow something like a 75 1510 plan which is now for every dollar that you earn 75 cents is the maximum that you can spend 15 cents is the minimum that you invest 10 cents is the minimum that you save if you don't like this you can create your own formula this is just a simple rule of thumb where now every dollar that you earn is going to automatically be distributed in this way so 75 cents is going to stay in your spending account 15 cents of every dollar that you earn is going to go into your investment account 10 cents of every dollar that you earn is going to go into your savings account that way now get money for savings you have money for Investments and you have money to spend now automatically no matter how much money you earn you're going to be living below your means and you're automatically going to be investing your money in accordance with how much money you're making the more money you make the more you invest the more you save now when it comes to your savings you want to save somewhere between three months to 12 months worth of expenses so calculate what your monthly expenses are multiply the number by three and then multiply the number by 12. once you get these numbers that's the range of how much money you want to be saving once you hit the goal of how much money you want to save you don't need to save more money because your savings aren't growing they're not there to make you wealthy unlike what most people tell us your savings are just there to protect you against an emergency once you hit that savings goal now you can stop saving that money and you can take the money and invest it instead because the reality is your Investments are what are going to make you wealthy at your savings now where do you invest your money well you can invest your money into the stock market you can invest your money into the real estate market you can invest your money into your own education you can invest your money into your own business idea you can invest your money into somebody else's business idea there are a lot of different ways that you can invest your money but the goal here is you want to put your money into a place that is going to be trying to grow right say trying to grow because when you invest your money you are never guaranteed to make money in fact you will probably lose money at some point which is why you want to always do your own due diligence before you invest and never blindly trust a random guy on YouTube investing has risks but the goal is to make more money than you lose the problem is in order to make money you have to go through the experience and the painful part of losing money every investor loses money I have made videos of me talking about different losses that I've had like I made a video talking about my worst real estate deal ever on this channel to date it is the only deal that I've ever lost money on in the real estate market and it was a very painful and expensive lesson but that is a part of the process you lose money sometimes and the goal is to make way more money than you lose so now the whole idea is you're going to take this money that you're putting aside for your Investments and you want to put this into an asset that will grow that way now your money can be working to make you more money because when you go to job to get paid you are physically working to get paid whether you're a doctor or whether you're a cashier at McDonald's you are physically working in order to get paid because you have to do a task you're either doing a surgery or you're flipping a burger but you have to do something in order to get paid if you don't work you don't get paid if you can't work you don't get paid but your money can work when you're not working because now when you own an asset like if you own a rental property or if you own stocks that pay dividends or if you just own stocks or businesses or whatever it might be and you can start with as little as a hundred dollars you don't need a ton of money to start investing you just have to start the reality is now your money can continue to pay you even when you're not working if you own an asset whether it's stocks or real estate and you're not working this asset will continue to keep working the business will continue to keep working the rental property will continue to keep working even when you're not working and it'll continue to keep working to put more money in your pocket now does this mean you're always going to make money no but it's going to keep working even when you're not working and this is what wealthy people are working for wealthy people are working to own more assets they're not working to just increase their salary that is the mindset of the average person ninety percent of America is working for a bigger salary 10 of America is working to own more assets because the real wealth in this system is built not through how much money you earn but through how much you own you can earn way more through what you own than you can from what you do and guess what you also pay less taxes on the money you earn from what you own because when you own an investment the money you make from your Investments is taxed at a lower tax rate than the money you earn from a job I can tell you this as an attorney who's not your attorney but this is where you have to understand that our system is designed to benefit the business owner and it's designed to benefit the investor again you can kick complain scream cry but that's not going to pay your bills when I first found out about this I was very angry because I was studying to become a doctor because I thought that's how you win in this economic system when in reality that's not true now nothing against doctors we need good doctors we need a good accountant we need Good attorneys we need good professionals we need good people who want to do these jobs but the reality is there's a difference between your job and your financial success and if you want to have the financial success you need the financial education that means what do you do with the money that you earn and this could be money that you earn from your job or money that you earn from your business and the thing that you have to do with the money that you earn is you have to put this money to work through your Investments now how do you invest this money well there's a whole different array of Investments out there and this is where that Financial education comes into play of how do you actually invest your money I'm not going to go super deep into how do you actually do that in this video because that could be a multi-hour long video but I have a free ebook through Market insiders my education company where we go over how to start generating cash flow some people like to call it passive income I like to call it cash flow how do you start generating cash flow from Investments how do you start investing your money and how can you start investing even if you don't have a ton of money to start this ebook is completely free and if you want to read this free ebook and how you can start investing and generating passive income I got the link to hike and download this ebook down in the description below so now you have built the financial base now you're starting to put your money to work because you have your spending money your investment money and you have your savings money the third thing that you have to do is you have to know how to spend your money the right way because the big mistake in this economic system is following the consumerism culture because most people assume that if you have a hundred dollar pair of shoes or if you have a hundred dollars in your pocket you can afford a hundred dollar pair of shoes but that's not true and then you have a whole new sector people who say well if you have a hundred dollars in your pocket you can afford a 200 pair of shoes because of things like credit card debt buy now pay later zero percent APR financing and this is where now you have to understand the difference between an asset and a liability and how you can spend money on assets versus liabilities liabilities are things that take money out of your pocket and don't grow your wealth assets are things that take money out of your pocket but then work to pay you back with more money assets are things that make you money or things that you buy with the purpose of making money liabilities are things that you're buying that make you look rich nice shoes nice cars nice vacations a nice home all these things are liabilities they don't make you rich they make other people Rich they might make you look rich but they're really not adding to your wealth at all versus assets things like stocks things like real estate things like businesses these things don't make you look rich you can't show off your stock market portfolio or your rental portfolio the way you can your Gucci belt or your BMW but your Investment Portfolio can actually make you wealthy and that means you're going to have to sacrifice some respending in other places now the easiest way to do that is for number one stop financing things that don't pay you if you want to go out and buy a new furniture set a new TV a new fridge do not Finance it even if it has zero percent epr pay with cash that means you might have to downsize the reason why zero percent APR is so profitable for businesses is because they can get you to buy way more stuff if you buy it with zero percent APR and they can get you to buy something that you wouldn't normally buy because you can buy it with zero percent epr if you wanted to go out and buy a three thousand dollar fridge but you only have six hundred dollars in your bank account well they're going to show you that 600 fridge that you can afford but then they're also going to show you the three thousand dollar fridge that you can buy with 300 down and then you just pay it off in installments now you're going out and buying something even bigger then you have to use next month's paycheck to pay back last month's fridge and this is where now if you live a little bit smaller you start financing the things that don't pay you you'll have more money to actually invest your money and you don't have to get into this payment scheme of constantly working to pay back last month's bills so if you want to stop getting into the game you got to stop spending the money today that way you have more money to invest and it's a sacrifice and this is where a lot of people are going to look at you like you lost your mind because when you go from driving a BMW to driving a Toyota Corolla people are going to think is something wrong are you going into bankruptcy there's something wrong at home is something going on with your company did you lose your mind but in reality this is where now you're making the decision to change your finances for the better and you want to actually achieve the financial wealth which means you're gonna have to make some sacrifices today the fourth thing that you have to do once you're building your financial wealth is now you got to start working to earn more money and the reason why I say this is the fourth thing that you have to do is because if you give the average person more money they go out and spend more money and now just like what we talked about you're never going to become Wealthy by spending more money you're going to become Wealthy by investing more money this is why earning more money has the most value and the most impact when he know how to use your money and this is where you have to know how to spend you have to know how to save and you have to know how to invest first that's what we talked about doing once you know how to spend save and invest that's where earning more money has the most impact and the most power because now when you earn more money well now you can put more money to work to make you more wealthy now how do you earn more money well they can go and try to do it from a job you can try to get a raise you can try to get a bonus you can try to get a promotion you can get a new career or you can try to create your own income for me I'm an entrepreneur that was something that was natural to me because I hated the idea of working a traditional job I couldn't work for somebody else it just didn't make sense to me and it didn't align with the type of Personality that I had now not everybody's meant to be an entrepreneur not everybody has to be an entrepreneur and you have to figure out what is the right way for you to earn money maybe you have that entrepreneurial mindset where you're like you know what I don't want to work a job I hate the idea of having a boss I have the idea of clocking in I hate the idea of trying to create somebody else's dreams if you do then try to create your own business it has become so much more accessible now than ever before and understanding content and social media is more crucial now than ever before especially as an entrepreneur and a business owner because nowadays with the internet every business needs to have a direct line of communication with their customers and now with social media it is so much more accessible to Market your products because before if you wanted to create something like a pen or a notebook you'd have to get this pen or notebook into stores which was very difficult and there was a lot of politics played in order to get your products into a store but now you don't have to do that you can just Market your pen or your notebook on social media make some viral posts make it go viral which is a lot easier said than done but if you can get traction on your content then you can Market your products through it and this is where now understanding social media understanding the way that the internet has changed the game and using these tools to your advantage that way you can earn more money through your products well that's the name of the game but then the question is what do you do with that money if you're just making more money to buy nice things you're doing it the wrong way and this is where now you need to be making more money that way you can invest more money and if you're an entrepreneur that could mean investing more money back into your business or it could also be investing your money into other assets depending on what your business is and how you want to use that money because when you invest that money back into your business you can get a much bigger return it has higher risks but it also depends on now how much do you want to scale your business how big do you want to grow your business how fast do you want to grow your business but that's a whole different concept for a whole different video of how do you scale your business which brings me to the topic of number five which is now how do you protect your wealth because the reality is when people realize that you have money or that you're building your wealth they're going to try to take their hand put it in your pocket and take some of the wealth for themselves too and this is where now you have to make sure you build Shields and protections around you legally now I'm not just saying this because I'm an attorney I'm saying this because I've seen this happen and this is where you need to make sure you have the right insurances you want to make sure you have good business insurance you want to make sure you have the proper other insurances that you have in life like health insurance car insurance and all that but you also want to make sure you have the right legal Shields because if you're starting a business look into getting something like an LLC or an S corporation talk to an attorney about the right legal entity for you because this can protect you in case something bad happens or if you get sued or if whatever happens in your business you want to make sure you can protect your personal assets and having a Legal Shield can protect you from that so get an attorney early that way you can have those Shields and then you want to make sure you're also getting some estate planning protection because now when you start making money you want to make sure that well one day when you die hopefully a long time from now that you can decide where this money goes because the easiest way is to create fights and arguments after you die is to let the government decide where your money goes so talk to an attorney about what the right estate planning tools are for you is it a will is it a trust and there's a lot of different types of trust out there how can you create these things and then let's just start thinking about what you want to do with the money after you pass that way you can avoid the fights you can avoid the arguments that way you can protect your wealth today and that way your future Generations can also understand and have the money that you work to create that way it's not in the hands of the government this brings me now to the topic of when you go to invest in your money what are some of the best investments or investment ideas that you can consider that way you can put your money to work and have your money build your wealth most of us have heard that you need to invest your money if you want to get rich but no one tells us where do you actually invest your money that's why today I want to go over five different assets that you can consider buying starting with stocks then realize the state than businesses and cryptocurrencies than gold that way you can understand different types of assets that you can use your money to buy that we can use your money to actually make money because the real key to becoming wealthy isn't by making a big salary it's by making money and then using this money that you're working to earn to buy assets because there's no limit to how many assets that you can own there's no limit to how much these assets can pay you but there's a limit to how much you can do and this is where now you have to really shift the way you think from going from that consumer mindset of just trying to make money to buy things to making money to buy assets and then using your assets to buy things this is what the wealthy people are doing wealthy people make money that way they can buy more assets that way their assets can pay for their lifestyle broke people and the majority of America are working that way they can make money to buy a nicer car they're working to make money that way they can have a bigger home they're working to make money that way they can have another vacation but you're never going to be able to build wealth if you're you're constantly making money just to spend it if you want to become wealthy you have to make money to buy assets and then use these assets to actually make you money that way you can make this money without you having to physically go to work that way you can keep getting paid no matter what you're doing that way next to me go on a vacation your assets continue to pay you now the question is which assets do you buy and I'm going to be going over five in this video let me start by talking about number one which is the stock market and stock market assets see what most people think about investing the money in the stock market they're thinking how can I find the next Amazon but that's not the only way that you can make money in the stock market and in fact that's how most people end up losing money in the stock market is because they're trying to find the next hot stock without a long-term game plan and they're just trying to find the next way to make money quickly and that's why the majority of people end up losing money in the stock market even though the stock market has gone up historically over the last century even though we've had periods of Market crashes we've had periods of recessions pretty much every decade but yet most people want to continue trying to find the next hot Trend the next hot stock the next hot meme stock instead of actually trying to find the next real investment and I'm going to break this down into three different categories number one we'll talk about the different things that you can invest your money in in the stock market these are things like stocks index funds mutual funds and ETFs then I'm going to go into investing in cash flow producing stocks versus non-cash oil producing stocks and then I'm going to go over what is your stock market investing strategy whether it's a passive strategy or an active strategy let's jump into now understanding the difference between stocks ETFs mutual funds and index funds when you go out and invest in a company like Amazon you're investing in one individual company and you're taking on all the risk and this is what most people think stock market investing is is trying to find the next hot stock but for 90 to 95 maybe even 98 of people you should not be investing in individual companies because when you invest in an individual company you need to be keeping up with the company you need to be keeping up with the earnings calls you need to be keeping up with the finances of a company you need to be keeping up with what the company is doing on the Innovation side you need to be keeping up with the Mote of the company how easy is it for competitors to come in to compete with this company and if you're not interested or not willing to or don't have the time to do so you probably shouldn't be investing in individual companies because then when you see a company that you invest and go down and they don't understand what's going on it can be much easier for you to panic and sell or it could be much easier for you to go in and buy because you keep hearing the stock go up and this is where now understanding if you are interested in actually doing all that work and taking on that risk because the reality is when things are good you get all the benefit if Amazon takes over the world and you own the Amazon stock hey you're going to make a lot of money because the Amazon stock is going to go up but if the CEO of Amazon drives the company into the ground and they go bankrupt you lose all their money because now your money goes on to zero and that risk can be a really hard pill to swallow for people especially when things are going down but it's very easy to understand when things are going up but the alternative is instead of investing in individual company you can look at investing in a fund what are these funds well you have index funds ETFs and mutual funds the way that index funds work is these are what are considered passively managed funds meaning they give you exposure to a certain group of stocks which is managed by a computer which means that the fees that you pay on these funds are significantly lower than when the managed by say a person so there are index funds that give you exposure to something like the S P 500 which is a group of the largest 500 companies on the stock market and if one of the companies in this fund starts to struggle and they're no longer one of the 500 largest companies a computer can kick that company out and put a new company in that way it's all automatic so if index funds that can give you exposure to many different types of funds like the S P 500 is one there are index funds that can give you exposure to the Dow Jones their index funds that can give the exposure to the NASDAQ their index ones that give you exposure to Health Care stocks there's a lot of different types of index funds out there but these are generally passively managed so the fees are less the second thing about index funds is that there are restrictions to how often an index fund trades so if you wanted to go out and buy the Amazon stock you can buy and sell that stock in a second versus with an index fund they generally only trade one time a day this way you don't have that same volatility and you can't have people just buying in and out of index funds you can buy it or you can sell it once in a day and that's it because these are long-term Investments and the third thing you have to understand about index funds is that they generally have minimums of how much money you need to invest in order to purchase an index fund it might be 500 it might be thirty five hundred dollars it might be five thousand dollars where you have to invest a certain amount of money in order to own an index fund a mutual fund Works kind of like an index fund except mutual funds are generally actively managed so now instead of having a computer manage and create the algorithms with the mutual fund you generally have a person a money manager who is working to try to beat the market now this might sound good in theory but many times this higher fee is not going to justify the returns that you get because what we've seen happen over the last decade Moody's did a study and they found that about 75 percent of the time a high-paid money Manager Management during the mutual fund did not outperform the market meaning if you just bought a low-cost fund you would have gotten a better return after factoring the fees so is a mutual fund ever worth it no just understand that the higher fees are going to make it less attractive so you want to pay attention to the fees mutual funds also trade generally one time a day and they also generally have a restriction on how much money you need in order to go out and buy a mutual fund then you have ETFs which are kind of a hybrid between index funds mutual funds and stocks because ETFs can be either passively managed or actively managed just depending on whatever the ETF is but the big difference between ETFs and index funds and mutual funds is that ETFs trade just like stocks meaning you can buy in and out of an ETF as many times in a day as you want because they trade just like stocks so if you want to buy ETF in the morning and sell it in the afternoon you can do that and generally ETFs don't have minimums of how much money you need to invest if you want to actually own an ETF so what is the right thing for you well this just depends on what your goals are and what you like me personally and I can't tell you what to do you got to always do your own due diligence you never blindly trust random guy in YouTube don't do what I do I'm just telling you what I do I personally like atfs because they're the most convenient and they're easy for me to purchase and they're easy for me to sell and I like that convenience factor with ETFs so for me I like ETFs but this is where now you have to understand what is your goal when you invest your money because for me I like cash flow cash flow means that when you put your money into this thing yeah you want this thing to go up in value but it's also paying you while you wait and in the stock market this payment is called a dividend a dividend is when a stock pays you money for doing nothing except owning the stock not all stocks pay dividends but some stocks do and if a company is paying out a dividend this means a few things that you want to understand because number one it means that a company is making a healthy profit and now if a company has this profit they can do three things with this extra cash they can save this money for an emergency or a rainy day they can invest this money back into the company to invest in open more stores to invest in research and development and to help grow the company and the third thing that they can do if they don't want to invest this money back into the company or if they don't want to save this money is they can give this money away to their shareholders meaning the owners of the company meaning people like you if you own one share of a company you are one of the owners of the company and if they give this money away through the form of a dividend that literally means they're going to give you a check or they're going to deposit this money directly into your brokerage account which is a payment that you get for doing nothing except owning the stock now this can sound good for you but it has its pros and cons that I want you to understand because number one this means that generally a company's stock price won't grow as fast because now instead of using their money to grow their company and grow the valuation of their company meaning grow the stock price they're just giving it away second this also means that you have to pay taxes because when you get paid you have to pay taxes and so now when you get paid a dividend this tax is that you have to pay on that money even if you automatically reinvest that dividend if you get a thousand dollars with the dividends and you reinvest all the way back into the company well you still have to pay taxes on that one thousand dollars so something you have to understand although the tax rate that you pay on qualified dividends is the lower capital gains tax rates meaning generally you get a lower tax rate on your dividend income than your income that you get from your job so it makes up for that but this is where now you have to understand what do you want to get from your Investments do you want cash flow or do you want to see more growth in the stock because if you're investing in a Growth Company like a startup company they're not going to be paying out dividends because if a startup is paying out dividends that means that they're using their money not to grow the company but just to make their shareholders richer and if you're a startup you want to go out and get bigger you want to get more of the market share you want to get a bigger share of the bigger pie out there and that means you got to use your money to grow quicker and faster instead of just trying to make your owners richer so if you want to see the big growth in a stock price well then you're probably not going to be investing in the dividends if you want more slow and steady growth then dividends can be a better option for you because you also get that cash flow and this is where you got to find the right strategy for you for me I like cash flow that's why 75 of my Investment Portfolio now my stock market portfolio but my total Investment Portfolio are cash flow producing assets and in my stock market portfolio I have a lot of ETFs that pay me with cash flow and I own some companies that also pay me with cash flow because for me I like cash flow most of my investments are cash flow producing are all of them casual producing no but most of them are because I like that cash flow because the advantage of this cash flow is you can go out and buy this thing and it will continue to pay you even when you're going out and sleeping or you're going out on vacation and you're going out and traveling you're continuing to get the cash flow for me I want to have a system where my cash flow is funding my life that way now I don't have to worry about my money because I own assets that are paying me with cash flow that's why I like cash flow and then the third thing you have to decide is what type of investor do you want to be do you want to be more of a passive investor or do you want to be more of an active investor an active investor is what I call somebody who is now actively investing in individual companies right now you're resenting the company you're investing in this company for the long term and you're going to keep up with this company a passive investor is where now you set up a system where every week every two weeks or every month you're just buy more of the funds whether it's ETFs mutual funds or index funds you just buy more of these funds no matter what's happening and this is consistent it's passive and it's automatic now you don't have to pick one I have both a passive investing system and an active investment system where now I'm looking for individual companies to invest in and I also have a system where every Wednesday I have money that's leaving my checkings account has automatically invested into my portfolio of ETFs and this happens no matter what whether the Market's up whether the Market's down whether when the market crash whether in a market boom this strategy does not change I guess the only time it might change is if you go through a market crash maybe I'll buy more but that's it this is where you have to find the right strategy for you for how involved you want to be as an investor now let's diagram this out so you know exactly what this looks like let me start by going over a few dividend paying stocks and again as a reminder I'm not telling you what to invest in these are just examples so at the time we recorded this video Verizon is paying out a seven percent dividend on their stock McDonald's is paying around a two percent dividend on their stock Bristol Myers the Healthcare company is paying around 3.2 percent dividends on their stock and then Apple is paying around half a percent of dividends on their stock now what does this mean this means that if you go out and invest a hundred dollars into a company that's paying say a seven percent dividend that means for each 100 that you invest over the course of one year you're gonna get seven dollars which is seven percent of a hundred dollars in cash flow just for owning that stock that doesn't include the stock price going up or down that's just the cash flow that you're getting now this percentage can change because the real amount you want to pay attention to is the dollar amount of the dividend that you're getting now this dividend that you get is typically paid out every quarter meaning every three months so every three months you get a payment and that payment would be one-fourth of whatever the total dividend amount is that you're getting over the year and if you don't want to invest in individual companies you can also look at investing in things like ETFs now here are again some examples not telling you what to invest in number one is spy this is an ETF that gives the exposure to the S P 500 again which is a group of the 500 largest companies on the stock market at the time of recording this video If you invest in spy the S P 500 you would get about a one and a half percent dividend and when you invest in this one ETF you're getting exposure to the 500 biggest companies in the stock market then you have Dia which is paying around a 2.8 annual dividend right now Dia gives the exposure to the Dow Jones Industrial Average which is a group of about 30 companies that are spread across different sectors across the stock market this is one of the most commonly tracked indexes when people talk about the stock market if you've ever heard of people talking about the Dow Jones well this tracks the Dow Jones then you have QQQ this is another ETF that tracks the NASDAQ the NASDAQ is a group of 100 non-financial companies most companies currently in the NASDAQ are tech companies but it's a group of 100 very large non-financial companies at the current time it's paying around a point six percent annual dividend and then we have vym this is an index which tracks High dividend paying companies I started because this is an ETF that I'm personally invested in just so you know as a disclaimer so this investment companies that are paying out dividends so if you're looking for cash flow this is an ETF that focuses on investing in cash while we're hosting companies currently they're paying out just over a three percent annual dividend before I go on to the second asset class that you can consider investing in if you do want to learn more about how to actually start investing with a step-by-step guide and how do you start generating cash flow and how do you start investing even if you don't have a ton of money again we have a free ebook through Market insiders that goes through how you can start investing and start generating this type of cash flow the ebook is completely free so if you want to read this ebook I got the link to how you can join down in the description below the second asset class we can consider investing your money is into physical real estate this is one of my favorite places to invest my money where now when you invest in real estate what you're doing is you're taking your money you're going out and you're buying a physical property this could be a single family home this could be a condo this could be an apartment complex this could be an office building this could be a retail building this could be a mixed use building this is going to take more capital and more work on your end but it allows you to own something that you can see feel and touch and you're buying something ideally for the purpose of creating cash flow now there's a lot of different goals people have when it comes to investing in real estate for me my number one goal when I invest in real estate is cash flow meaning when I buy a property I don't care or try to speculate where property values are going to be next year or five years from now I'm buying the property based off of one goal how much cash flow will this property generate this year next year the year after that and the year after that meaning if I have to invest a dollar today how much cash flow will this Dollar pay me every single year from here on out this is my analysis when I invest in real estate I don't like looking at speculation meaning how much what property values rise next year or the year after that because it's speculation there's no real way for me to guess or predict how high property values are going to go that's too risky for me instead I can look at what this property can generate in rent today I can predict what the expenses are going to be and then I can pretty accurately calculate how much my profit is going to be every single month and based off of that if there's enough profit I will consider buying this real estate investment deal now for me I look for a seven percent cash and cash return meaning for every dollar that I invest I'm looking for a seven percent cash flow if I invest a dollar I want seven cents of profit after expenses hitting my bank account every single year if I invest a hundred thousand dollars I want seven thousand dollars worth of profit hitting my bank account each year from the cash flow alone if property values go up hey there's icing on the cake if property values fall oh well I'm still getting the cash flow the reason why I want this type of cash flow is because now if we go into a recession or bad things happen in the economy and I have to lower rents I still have enough margin in there that I can lower rents still be competitive and continue to not have to bleed cash because a big thing that happens in the real estate game when you go through these Cycles is people over leverage they get excited about an area they get excited about a property they go in and they overpay and all their expenses are so high because when you overpay you have to take on more debt when you take on more debt we have a bigger monthly mortgage payment when you overpay you also have a bigger property tax bill because your property taxes are valued based on the value of the property so if you're paying more money your property taxes are going to be higher and you also have a higher insurance payment because when you buy a more expensive property or you pay more for a property you're insuring a more expensive property meaning your monthly insurance payments are also higher so now when you go out and overpay for a property of higher expenses and then if bad things happen you don't have any margin you don't have any leftover room to protect yourself so now if you have to lower the rents or if you see vacancies you can very quickly become underwater and now you don't have a way to continue making your payments this is why you definitely don't want to chase real estate deals because they can really end up biting you in the butt because when you go out and invest in real estate it's much more intense versus going on buying a stock because when you go out and invest in real estate now you're actually managing and operating the property because now this is under your control when you go out and invest in Amazon or you go out and invest in the S P 500 you have a CEO who is managing this company all you do is buy a piece of the ownership and a piece of the profits when you go and you buy the rental property you are the management team now I don't recommend you going out and actually managing the property yourself I don't manage any of my rental properties I hired a property management company whose sole job is to manage the rentals their job is to find the right tenants their job is to screen the tenants their job is to collect the rents their job is to make sure that there's no issues in the property and where there are issues to handle and manage the repairs to make sure that the bills are paid and to make sure that the properties are in good condition and this is where now if you have a good property manager it can make your life a whole lot easier if you have a bad property manager it can make your life a whole lot more stressful and this is where now that hurdle of getting involved in real estate is difficult because a lot of people make a seem that investing in real estate is this like amazing thing that is so simple all you got to do is go out and buy a rental property hand over the keys to a property manager and now you're going to be rolling in the money at least that's how it made it seem to me when I first started investing in real estate because when I first started investing in real estate I didn't have any guidance I didn't know any Real Estate Investors and so I had to figure it out on my own and all these books made it seem so easy and like it would not be that painful but getting started is so difficult and so time consuming because you have to find all the right people you have to find the right real estate agent you have to find the right property manager you have to find the right contractor you have to find the right real estate agent you have to find sorry the real estate attorney you have to find the right real estate accountant you have to find a good property inspector you have to learn how to deal with City inspectors there's a big learning curve but once they get over the learning curve you find the right people you go through the pain you go through the mistakes which is a process because I've been there those mistakes can be expensive they can be difficult and they can be very stressful but once you get through that and you figure it out then it can be much easier and much simpler like when I go out and I invest in real estate today the process is much more streamlined because I have a team of people that I know who I can work with and rely on versus when I was first getting started it was very difficult the first deal is the hardest maybe even the first three for me it was the first three Deals that were really the most difficult but once it got past the first three Deals it became much more streamlined much easier and this is where now if we can go through that hurdle if you're willing to go through the process you will be able to succeed but you have to be willing to put in that work now the next big question or concern that people have is the cost because real estate investing is much more Capital intensive meaning it's going to take more money and this is really now a matter of priorities and what I've seen is when you prioritize investing in real estate you will find a way to do it it might not happen for a number of months maybe even a couple of years but if you prioritize becoming a real estate investor you will find a way to put aside the money that way you can go out and buy property and when you go out and become a real estate investor the nice thing is well you can build the cash flow because now you own a hard asset that you can rent out that's paying you with cash flow and in addition to that you'll also get some of the biggest and best tax breaks that a tax code has to offer as a licensed attorney who's not your attorney I can tell you that the tax code provides a lot of benefits to Real Estate Investors and in order for you to capitalize on these benefits that a tax code has to offer you have to go and actually invest in real estate as an investor that way you can capitalize on things like the depreciation deductions the ordinary and necessary business expenses and everything else that the real estate tax code has to offer because now with real estate not only can you generate income and pay less money in taxes legally but you can also flip properties and when I say flip properties I don't mean like literally flipping properties I mean buying a property holding on to it for at least a year and then selling the property if you do that and you make a big profit well you can defer the taxes on that so what I mean is if you go and buy a 200 000 property today and let's just assume that you hold on to this property for five years and now you happen to buy this property in a great area where rents are rising property values are rising you bought the property for two hundred thousand dollars and hypothetically five years later you sold this property for a million dollars now you'd have a big profit eight hundred thousand dollars worth of profit which is a big taxable income but with real estate you can do something called the 1031 exchange which allows you to take all one million dollars go out and buy a new bigger property that's going to pay you with more cash flow pay you with bigger profits and pay the zero dollars in taxes today legally because the real estate has that 1031 exchange benefit which you can't do somewhere else if you bought a stock for two hundred thousand dollars five years later it goes up to a million dollars and you sell it and then you take all million dollars and buy another stock you still have to pay taxes on that profit that you got with real estate you have special rules that don't apply to other places but before you go out and do that talk to a professional 1031 exchanges are very logistically complex there's a lot of rules and regulations around them and you got to make sure you have the right people around you so make sure you have a good accountant a good attorney and a good 1031 professional who's going to help you with that but just understand with the new invest in real estate you can build cash flow to fund your lifestyle like when I was getting started in my financial education Journey when I started investing in real estate I realized that holy moly I can make cash flow I can get paid without me having to do something because at the time I was running an event planning company and the only way I got paid was if I was hosting a party or I was working at a wedding or I was doing some event and then I realized whoa I rented this condo out for 600 a month and now I'm getting this cash flow which wasn't really passive at the time because I had no idea what to do to make it passive but I could kind of see the light at the end of the tunnel that one day this could be passive and from there I realized the game is Just stacking cash flow if I can buy enough rental properties then I can make enough cash flow to fund my lifestyle if each unit can make me 300 a month how many units do I need to be able to fund my lifestyle is it 10 is it 20 is a hundred and then just going out and figuring out how to make it happen and that was the name of the game for me for a long time was just buying the properties buying the units stacking the cash flow that way now you have this consistent cash flow coming in that I don't have to work to earn the third thing that you can consider investing in if you want to build wealth is in businesses now when it comes to businesses there's two different ways that you can do this one can be in your own business and the second can be in somebody else's business my number one place where I invest my money is into my own businesses now I don't really consider this a traditional investment because when I invest my money into my own businesses I get to briefs media which is my newsletter company that is an active investment because I run that company I am the CEO of that company I work every single day to operate and manage briefs media so when I invest money into briefs media I'm working to actively grow that money and that is another form of investment it's a way for me to now put my money to work not into real estate not into stocks in fact over the last couple of years I've been actively investing less money into real estate less money actively into stocks that will have more money to invest into my own company because I want to grow my own company because when you invest your money into stocks or real estate you're trying to get again a seven ten percent return on your money which is a great return over the long term especially as a passive investor but when you're investing your money into your own business there's no limit to the types of returns that you can get so financially you can get higher returns it comes with more risk but then you're also able to grow whatever it is that you're working on and for me briefs media has a lot more upside right now which is why I've been investing a lot more aggressively in that again it works for me because I am an entrepreneur I am that type of person and so I'm willing to accept that risk that if the company goes bankrupt I will lose all the money that I invested into it and all my time that I put into it but I'm willing to take on the risk if you're not an entrepreneur you don't have a business idea that you want to invest in that's okay you can also invest in other people's business ideas you can invest in startups and this was something that I started doing around the pandemic time because I started seeing that investing in startups has become much more accessible thanks to something called crowdfunding there's new regulations that allow regular people people like you me anyone with as little as a hundred dollars to invest in crowdfunded or startups with small amounts of money and with this you also have to understand that when you invest in somebody else's startup you will probably lose money the statistic is like eight to nine out of ten startups will fail or go bankrupt within the first five years meaning most of the startups that you invest your money into will lose money period you have to understand that when you go in but the goal isn't to lose money always the goal is that when you make money that one time it should hopefully make up for all the losses but it's a whole different skill set and a whole different type of work and a risk I guess you can call it but something for me that I really enjoy because I love working with entrepreneurs I am an entrepreneur myself and I have built a platform form fortunately where I can also help grow entrepreneurs I can help provide awareness to companies that I've partnered with so for me I love this type of startup investing although I don't do as much of it as maybe I would like because again I'm focused on building my own brand but I have invested in a handful of different startup companies now a few platforms that you can consider using and again I'm not sponsored by any of these companies I'm just letting you know who they are number one is we funder quick disclaimer I'm an investor in the we funder Corporation number two is Republic number three is start engine these are three different platforms where you can go and invest in startups now again the way that you get paid here is if the startup that you invested in either goes public or it gets acquired goes public meaning it trades on the stock market or gets acquired meaning it gets bought out by another bigger company if the company that you invested in doesn't get acquired it doesn't go public you might never see that money again if the company that you invested in goes bankrupt you will never see your money again so it's very risky but it has a lot of upside because it's like investing in a new company in the very early stages of its life and so you can have a lot of upside but a lot of risk and if that's something you're interested in it could be a piece of your Investment Portfolio probably not don't want to make it a huge chunk of Investment Portfolio especially if you're just starting off but it can be a small little piece of your Investment Portfolio it's kind of a fun way for you to invest in smaller startup entrepreneurs as long as you're willing to understand the risk the fourth place where you can consider investing your money is into cryptocurrency now cryptocurrency again very speculative very volatile and the thing that I want to kind of point out here is in my total Investment Portfolio eighty percent of my investments are in things like stocks and real estate if I take up my own business I have eighty percent of my money going into stocks and real estate 20 isn't more of what I call the speculative Investments these are things like startups these are things like cryptocurrencies and they said things like Precious Metals like physical gold 20 of my Investment Portfolio or these speculative Investments eighty percent stocks and real estate you're going to figure out the right percentage for you but understand now cryptocurrency falls under that speculative side because it can go to zero and it can also go up very quickly now the reason why I like cryptocurrency is because I have seen the benefit with things like cryptocurrency I've had contractors that work with me and for me overseas and paying contractors overseas sending money that far is difficult and expensive I used to have to go to the bank I used to work with a different bank an older Bank where I had to go to the bank to send wires sending a wire takes time and it's expensive it was like 45 bucks or something 40 to 45 dollars to send a wire overseas and I was traveling I was in California at the time where my bank didn't Bank didn't have little Regional operations over there so now I had a contractor that needed to be paid and I couldn't send the money I couldn't send them money through PayPal because this country didn't accept Paypal I couldn't send the money through payoneer or uh they changed their name but whatever the platform was where you can send money to countries overseas and so it was a big mess trying to send money to him when I didn't have access to my bank and then I asked them if I could send them some cryptocurrency he said sure and so I sent him cryptocurrency payments he got it in a fraction of a second or maybe like five seconds and it cost me a couple cents and that was a big light bulb moment for me where it's like wow this has really changed the game of how I can transfer money and how money is done and so because of that I own cryptocurrency now I don't own a bunch of the smaller coins I invest in the the big things like Bitcoin and ethereum and a couple other smaller ones but mainly Bitcoin and for me this is a speculative investment for me it's an investment in the future I believe in the blockchain but I also understand the risks I know I can go to zero if it goes to zero is it going to affect me not really but if it goes up a lot hey that'd be cool it'll be nice it'd be fun so it's part of the speculative investment something that I believe in I believe in the blockchain but I also understand the risks and that's how I invest my money where 80 of my investments are stocks and real estate 20 are some of the speculative things like startups cryptocurrency and gold which brings me to the fifth place where you can consider investing your money with just a precious metal like physical gold for me I owned some physical gold and when I say physical gold I don't mean an ETF or paper stocks of gold I mean actual physical gold it makes up two percent of my Investment Portfolio and for me I just buy some physical gold every month and that's it the reason why I buy gold is not because I'm expecting gold to shoot up in value I really don't even monitor the price of gold for me it's an alternative way to save money because the way that I look at it again this is just me don't listen to what I do just make your own decisions and follow your own advice but for me what I do in the way that I look at it is if I were to go to my backyard and bury fifty thousand dollars worth of cash and also fifty thousand dollars with the gold today and then I covered it up and then 10 years from now I go and dig up these two things these two piles I think that the gold will have more buying power than the fifty thousand dollars with the cash in the future because of that I look at gold as an alternative way to save money and I look at gold as a hedge against the worst case scenario types of situations and by worst case scenario I mean of something happening to the dollar something happening to our economy that is where gold could potentially have more value so I don't look at gold like an investment I look at gold like an alternative way to save money it's an alternative insurance against doomsday scenarios so that's why I own physical gold and that's what the five places where I invest my money and again don't copy me don't blindly follow a random guy on YouTube do your own research for me the five places where I invest are number one my own business and startups number two physical real estate number three stocks number four cryptocurrency and number five physical gold and this is where you can find the right combination for you now the reason why this type of real investment diversification is so important is because of where we are in the economy and because of all the changes that we're seeing in the economy our economy is on the verge of entering a recession at least that's according to the Federal Reserve Bank who in their latest meeting minutes said that the United States will likely enter a quote mild recession by the end of 2023. now while it's impossible to perfectly time and predict when a recession will hit what we do know is number one that recessions are a part of our economic system two we've seen recessions happen almost every decade for a century now and the longest period since the Great Depression that we've seen without a recession was after 2008 before the pandemic and third we have a lot of red flags in our economy today a recession happens when our economy slows down obviously our economy slows down when businesses make less money obviously and businesses make less money when people spend less money that's a little bit less obvious but this is where you have to understand that our economic system runs on spending the more money you spend the more money that somebody else makes if you go to Sweet greens and you look at the price of the bowl and you say you know what I'm not going to buy any sweet greens and then you walk out sweet greens isn't going to make any money but then if you walk into three greens and you say oh man these bowls are really good the salad is worth twenty dollars which we greens is the only salad that's worth twenty dollars you walk in and you give them your twenty dollars sweet greens just made more money now this is where you have to understand the more money you spend the more money that somebody else makes our economic system runs on spending which means if you made a thousand dollars from a job and you spent a hundred dollars and you saved the other nine hundred dollars that nine hundred dollars isn't stimulating the economy but if you go and earn a thousand dollars and then you spend all one thousand dollars at wherever well now you're really stimulating the economy because now you're working to spend all of your money but this is where I want to take it one step a little bit further can you tell me what is the difference between this twenty dollar bill and this one dollar bill right here besides their buying power the difference is this 20 bill is money that I work to earn I got this money from my checkings account and this one dollar bill is money that my bank lent me we live in a credit based system where if I go and I bought something from you you're not going to know the difference between this 20 bill or this one dollar bill you don't know if I'm buying something with credit or if I'm buying something with money that I worked to earn because in our economic system credit works the same as money so now if I go to work and I earn twenty dollars and the bank gives me one dollar now I have the ability to spend not twenty dollars but twenty one dollars and now I have the ability to spend even more money so now if I work to earn a thousand dollars and my bank has a thousand dollars and then the bank loans me an additional thousand dollars with the help of a credit card line of credit or some other home equity line of credit now I have a thousand dollars from my job and a thousand dollars in loans from the bank now I have the ability to go out and spend two thousand dollars now for the economic system that's great news because that means I have the ability to spend twice as much money today I have the ability to go to Sweet greens and buy twice as many salad bowls by twice as many avocados and buy twice as many Gucci belts because I have the ability to go out and spend more money today but this can also cause more severe slowdowns in spending because remember slow spending causes a Slowdown in business profits a Slowdown of business profits causes slowdown in the economy and a Slowdown in the economy can cause a recession you'll see how this all ties together because now if I go out and I keep spending money on debt what does that mean well I'm spending money on debt that means I'm spending next month's earnings and next year's earnings today that's what debt is debt is you spending your future income today plus interest so now if I go out and I keep spending more and more money with the help of lines of credit with the help of credit cards eventually I'm going to hit a point where I'm going to be over levered as a person because I kept spending and spending and spending and now the bank says no more spending for you no more credit card debt for you you got to start paying this off now when I hit that breaking point where I have too much debt I can't keep spending and now I have to use my money not to go out to Sweet greens not to go out to Gucci but I have to use my money to pay down my credit card debt and I got to pay down my high equity lines of credit now because I have so much debt I have to use my income more to pay down my debt because I've hit that breaking point when that happens now businesses suffer because I've spent so much money in the past number of years I've built up this huge debt pile and now I gotta start paying it down and now I'm using my money that I'm working to earn not to spend and stimulate the economy but to pay down the debt now when you go through this phase in the economy which is after the point where people are over levered now people are working to pay down their debt as opposed to spending and stimulating the economy so now when people are working to pay down their debt that means businesses are making money or at least not as much as before because more and more people have to now pay down their debt so that's why when you see these debt bubbles happen and people get over levered eventually you hit a breaking point where the credit stops flowing Banks stop issuing more money because people have too much debt and now they need to be paid back and now when people are paying the banks back now people aren't spending when people aren't spending them these businesses aren't making as much money when businesses stop making as much profits that means they don't have money to invest in new stores they don't have money to hire more employees they don't have money to invest in research and development which then causes the economy to slow down when you see the economy to slow down well that's what a recession is when you see a economic slowdown especially over a period of at least six months that's what causes a recession so an economic slowdown is what causes a recession but an economic slowdown is caused by a Slowdown in business profits and a Slowdown in business profits is caused by a Slowdown in spending and a Slowdown in spending is caused when people get over levered because people have already spent too much so after you hit that Breaking Point that's when you start to see that recession which is very interesting because that means that you generally see a recession happen after a big economic boom and that's exactly what happens if you think back to our most previous recessions besides the 2020 pandemic because that might be a little bit of an exception even though we were kind of in a booming economy before the pandemic but that was kind of like a forced recession because the economy was shut down but before the 2008 recession well we were in a boom economic period before the economy crashed because everybody was buying a home people were living large everybody saw their wealths rise because if you bought a home you saw this astronomical rise in wealth because people's other property values grow so people were buying things and businesses and banks are making money hand over fist until you saw this over levered period come and then it all came crashing down same thing before the 2000.com bubble bursting what happened then was we saw this huge rise of internet companies right before the year 2000. and people who are investing in these companies were making so much money hand over fist and people were living large they saw how much money they were making so quickly people were able to spend big live large and then came the year 2000 when the party came to an end because the credit stopped flowing and that was when the bubble burst and you saw a lot of people lose money very quickly so you see this economic boom period followed by too much spending followed by too much debt which then leads to well a recession period which is now where you have to kind of pay down that debt and reset from all the spending that you did and now if we look at where we are right now we are seeing credit card debt Rising we're seeing household debt Rising we're seeing corporate debt at the highest levels pretty much ever and this is a period now where also interest rates are rising meaning the cost of servicing this debt is also rising and every time we've seen a recession over the last century over the last 100 years we've seen the exact same three things happen number one people lose a lot of money when you see a recession or a market crash number two you see some people make an insane amount of wealth when you see a recession or a market crash and number three you see the government come in and try to remedy the recession and market crash and try to create programs to prevent Market crashes and most of the times these programs end up creating a bigger divide between the rich and the poor and this is where now I want you to understand this not be shocked by this not be blindsided by this but rather be able to find the opportunities because the reality is number one recessions happen period they have happened and they will continue to happen they happen almost every decade or so and so now when you understand that you can understand that you don't need to be so shocked when you see economic pain happen it is a part of our economic system but instead of being shocked like the majority people I want you to be prepared and find the opportunity because While most people end up losing money getting hurt getting panicked and getting freaked out when you see a recession some people see the opportunity Now where's this opportunity generally with a big bubble was when the 2020 pandemic hit and you saw the recession hit very briefly we saw the price of pretty much everything stocks cryptocurrency not really real estate but stocks and cryptocurrency a lot of paper assets fell very quickly the investors that came in and bought were able to make a lot of money very quickly because well the Federal Reserve Bank opened up the money printer after the 2020 pandemic and then prices skyrocketed when the 2008 crash happened well first it was the real estate market that really got hit and that was the big bubble people that bought real estate after the 2008 crash were able to buy real estate for pennies on the dollar literally like when I started investing in real estate after the 2008 crash I was buying properties for Pennies on the dollar the first property that I bought I happened to be in the Metro Detroit area which was arguably the hardest hit area after the 2008 crash and I was the first property that I bought was a condo that originally sold for 150 000 it was a one thousand square foot condo one bedroom one bath and it got foreclosed on and nobody was buying it and the banks needed to liquidate it and I came in and I bought that condo for eight thousand dollars that wasn't my down payment that was a total price of the condo so literally penry's on the dollar because of how big the bubble was and how much the bubble burst you also saw the stock market get cut in half during the 2008 crash if you bought good companies after the 2008 crash you're able to make a lot of money after the 2000.com bubble burst you were able to buy internet companies and a lot of stocks again for pennies on the dollar we saw the Amazon company Amazon that we know today Amazon that stock fell by over 90 percent during the.com bubble burst meaning you could come in and buy Amazon for pennies on the dollar and the people that did were able to make a lot of money now of course it's risky because people are losing the money there's a lot of panic there's a lot of fear there's a lot of greed there's a lot of confusion there's a lot of excitement and this is where now you need to be able to prepare that means using your money smartly today that way you have a financial cushion in case something bad would happen you have money to fall back on and second you have money to take advantage of opportunities meaning you have what people like to call dry powder this is what people on Wall Street like to call money for investing when things go wrong that when things go wrong you have cash money to be able to capitalize in Opportunities because if you see a good opportunity to invest but you have no money you can't go out and actually invest and this is where now preparing when times are okay that way you can take advantage of times when they're not so okay it's so important that way you can actually capitalize on the opportunities now where will these opportunities be well a lot of people have been labeling what we're seeing right now and everything bubble because of the amount of money that was printed during the pandemic era plus post the 2008 recession area era because of all the money that was printed we saw the valuations of pretty much everything rise so we could see opportunities in real estate in stocks potentially cryptocurrency whatever assets that you're looking to buy there could be opportunities there and this is where now you need to be one financially educated but then second you also need to be prepared that way you can capitalize on opportunities that might come your way we've already begun to see some of the issues in the banking sector after the Silicon Valley Bank collapse because then people started to really Panic move their money away from Banks they created some opportunities for investors who did go out and start investing in some Bank stocks that they felt were good companies that were hit hard again I'm not telling you want to invest in I'm just showing you examples of opportunities where we're already seeing pain and concerns in the banking sector that's one area where people will be able to find Opportunities some people will lose money there some people will find Opportunities there second we're seeing a lot of concerns and the commercial real estate market because a lot of commercial real estate debt is not a 30-year fixed rate mortgage they are adjustable rate mortgages that will adjust every five years or so and about half of the total commercial real estate debt out there is set to readjust in the next 24 months and we have a lot of empty office spaces where landlords are struggling to make their payments and interest rates are so much higher today than they were two or three years ago yeah so when these landlords go to readjust on their commercial offices or commercial buildings that are sitting vacant and if the bank readjusts their debt twice as high as it was before and their monthly payments double well that's going to put a lot of pain and a lot of pressure on landlords who won will not be able to qualify for a refinance and two who won't be able to continue making the payments because they won't be able to afford all these losses so that's going to create pain and opportunities in the commercial real estate sector as long as interest rates keep rising and third same with the corporate debt sector over the last number of years we've seen the amount of corporate debt out there balloon because corporations went out and borrowed insane amounts of money and what did they use this money for well some of these corporations use their money to invest into the company invest in more stores invest in more research invest in their products some corporations use this money to do something called levered corporate BuyBacks meaning you can go out borrow tons of money and use this money not to go out and buy an income producing asset but rather use this money to inflate your stock price it's good in the short term because it makes the shareholders richer because if you own a stock and a company does a stock buyback the stock price goes up but it can hurt in the long term because that means the corporation has to spend their future earnings to pay back this debt and it wasn't a big deal when interest rates were at their lowest levels ever in 2020 and 2021 but as interest rates start to go up and the cost of servicing this debt goes up because again corporations don't have 30-year fixed rate mortgages the interest rates readjust that means that your payments on these debts go up and we saw a big example of this with Bed Bath and Beyond Bed Bath and Beyond filed for bankruptcy recently why did they have to file for bankruptcy well bed bath and be honest obviously having struggles with the internet they were not selling enough on the internet people weren't buying the Bed Bath and Beyond stuff but if you look at the financial side of Bed Bath and Beyond well they also had their own struggles financially because in 2021 they had originally issued a 325 million dollar stock buyback but then the shareholders and the board got together and said you know what that's not enough of a stock buyback we want to see an even bigger rise in our stock price right now so then they extended the amount of the stock buyback to 625 million dollars they don't have all this cash they had to go to debt from Bed Bath and Beyond had a lot of debt that they took on and now they took out the 625 million dollars and then instead of using that to invest in their e-commerce store instead of using that money to invest in their employees to invest in their marketing they use a 625 million dollars to buy back their own stock which made their stock price benefit in the short term and help the shareholders in the short term but now they don't have the money to continue making their operations they were bleeding cash and they had their obligations to make pay back their debts and now because they had spent that 625 million dollars in stock BuyBacks they didn't have money left over to invest back into the company and they had to declare bankruptcy so it's not backpacks have their own place but they can be very expensive if you don't manage a money correctly and this is where now understanding the financials of what's going on is so important and where interest rates become so important because the Federal Reserve Bank is going to be working to bring down inflation and the question is now are they done raising interest rates or will they continue to raise interest rates and we have a lot of different opinions on this Elon Musk has been calling for the Federal Reserve Bank to start cutting interest rates in 20 22 back when the Federal Reserve Bank first started raising interest rates and the reason why Elon Musk has been so vocal about the Federal Reserve Bank cutting interest rates is partially because he's running a lot of startup companies things like Tesla things like SpaceX all these companies rely on cheap debt that way they can continue growing they can continue funding their operations and so for someone like Elon Musk when you have these higher interest rates will it makes doing business for him much more expensive because when you're a startup company when you're trying to grow and when you're relying on debt and your debt costs are growing that means you have to spend more money now to service the debt instead of trying to actually grow the company so that's where Elon Musk is coming in and saying that the Federal Reserve Bank is going to have to start cutting interest rates sooner rather than later and he's been saying this since 2022 that the FED needs to immediately start cutting interest rates because if the FED doesn't according to Elon Musk he says that we're going to see a big recession because companies are not going to continue being able to make these higher debt payments and companies are not going to be going out and borrowing more money so there's two aspects here because now when you have higher debt costs when you see interest rates where they are today you're less likely to go out and borrow money and that's what we're seeing happening in the business world or businesses are seeing interest rates where they are and they're less likely to borrow money which means less credit less money entering our economic system but the second thing is if you're a business and you already have debt well the debt that you have becomes more expensive because again businesses corporations don't have 30-year fixed rate debt so when that debt that you have readjusts whether it's every five years or every seven years or every three years when that debt readjusts the bank is going to change your payments depending on where interest rates are in interest rates today are significantly higher than where they were two years ago so now when startups and companies who rely on debt can't go out and borrow more money and then see their expenses rise while revenues are staying the same or falling that makes it much more difficult for these companies to grow and it makes it much more difficult for these companies to operate now that's one school of that which is Elon Musk then you have other schools of that that are saying the Federal Reserve Bank needs to raise interest rates much more aggressively now because if you don't get the inflation problem under control that's going to create a currency crisis that could risk hyperinflation that could risk D dollarization which are much bigger problems than a recession and this is where now every person has their own agenda every person has their own opinions and every person has their own reasoning for why they believe what they believe but this is where what I want you to understand is that yes we have concerns in our economy the high inflation is its own concern High inflation hurts the average person High inflation is slowing down the economy because when you have high inflation more money is going to pay down your rent so you don't have money to go out and buy other things so high inflation hurts the economy and high inflation also hurts the dollar which can cause a lot of issues a currency crisis is much worse than a recession then we have the higher interest rates higher interest rates slow down the economy because when somebody goes to buy a home and let's just say mortgages were 10 they're much less likely to go out and buy a home at a 10 mortgage than say a three percent mortgage so people are less likely to go out and borrow money so less dollars entering the economic system less demand for things less businesses borrowing money and investing because the cost of the debt is higher plus when you have higher interest rates the cost of servicing debt also goes up because when you're in business when you are a commercial landlord and your debts have to readjust every five years well in the next 24 months if interest rates stay high and Commercial landlords and corporations have to readjust their debt at four percent higher than what they were paying before that means you're going to see billions of dollars worth of debt readjust at significantly higher interest rates where if you're not making enough money if you're a landlord and you're sitting on vacant Properties or for your business with revenues that are not growing and now your debt costs are skyrocketing you're going to have to make changes you're gonna have to make Cuts what are those cuts it could be layoffs it could be laying off divisions and it could be more bankruptcies because you don't have the ability to continue making all these payments then if we take a look at the banking sector what we see is pretty interesting Moody's the credit rating agency recently downgraded 11 different banks and what they said let me read you according to the Wall Street Journal because Moody said that there are strains in the way that banks are managing their assets and liabilities and these trains are becoming quote increasingly evident and are pressuring profitability recent events have called into question whether some banks assumed High stability of deposits and their operational nature should be re-evaluated what does that mean a Modis is saying that they're looking at a lot of these smaller Regional Banks and the first thing that happened was when Silicon Valley Bank collapsed a lot of people went to the small Regional Banks and they took their money out of the regional Banks and they took it to the bigger Banks why did they do that because well the way that the treasury secretary put it was essentially if a bank fails and a bank failure would cause contagion or maths problems to the economy then the government would come in and they would defend and protect your deposits which translated to to regular people if you put your money in a big bank and they fail you're going to be safe the government will protect you but if your money isn't a small bank and the bank fails they're not going to protect you beyond the FDIC limits so a lot of people then move their money out of the smaller Banks and moved it to bigger Banks the government then come in and said no no that's not what we meant we are going to protect all banks probably but we just have to see what happens so there's a lot of confusion with what they were trying to say and what's actually happening and then because people move their money out of smaller Banks smaller Banks had a tougher time lending because our banking system is not designed for people to pull their money out of banks that was where then the Federal Reserve Bank came out and they enacted new lending programs for banks that way if you need short-term capital you could borrow money directly from the Federal Reserve Bank that way you could stay in business that was a big help to a lot of these Regional Banks because now they could borrow billions of dollars from the fed and stay afloat and continue lending money and continue to stay operational so then things started to stabilize and we saw a lot of banks come out and say essentially that their deposits have stabilized but then in the most recent earnings reports that we got from Banks we saw how much money people pulled out of these Regional Banks which then created a new wave of concerns and that was when essentially Moody's came out and said that because of the struggles that these banks are facing it could pose more long-term issues for the actual bank itself which is when they then downgraded 11 different banks and that naturally hurt the stock price of banks you can start to see where it becomes a self-fulfilling prophecy where when Moody has downgraded the banks investors don't want to hold on to a company that is a risky investment so then people started to sell off of their Investments and that hurt the prices the stock price of these Banks and when the stock price of a bank goes down well that also hurts the bank's ability to go out and raise more money because the valuation of a bank goes down think about like you own a home and you paid 500 000 for it when the home goes up in value to a million dollars it's easier for you to go out and get a home equity line of credit or to refinance and get cash out but if the home value drops to 200 000 you're gonna have a much more difficult time raising more money so this is where we're seeing more concerns in the banking sector we have people saying that we will see more bank failures but the government the better Reserve Bank and the FDIC have already essentially opened the door to protecting depositors we don't know to what extent they will continue protecting depositors and so this is where there's a lot of confusion now if you ask most wealthy people like Warren Buffett he has made it very clear that he does not believe anybody nobody will lose money in a bank so if you put your money in the bank and the bank fails the government will come in and protect you which you know you can pretty much see that the government has set a precedent with that that if you keep your money in the bank the government will go out and protect you if the bank fails that does not mean that banks will be protected from failing we could see more bank failures we probably will see more bank failures if interest rates continue to rise because higher interest rates mean that well valuations of things will go down and if banks are underwater on their assets and if banks struggle to get more money and if banks are struggling with profitability we could see more Bank closures so we're seeing a lot of concerns in the banking market and the last thing that I want to mention is what's going on in the commercial real estate market let me read you this title from Fortune Magazine it says Morgan Stanley analysts think commercial real estate is heading for something worse than the great financial crisis here's what Goldman Sachs and UBS have to say the reason why Morgan Stanley analysts are concerned about the commercial real estate market is because of two reasons number one is over the next 24 months we're going to see a big chunk about half of all commercial real estate debt readjust because again commercial real estate debt is not a 30-year fixed rate mortgage it readjusts every some years so in the next 24 months we're going to see about half of the commercial real estate debt readjust at the higher interest rates assuming the FED keeps interest rates High and the second part to that is that we have a lot of office vacancies that are sitting there losing money for landlords let me show you a second article this article right here is from Business Insider and what it says is a number one Blackstone reported big losses in the last quarter Blackstone is one of the largest owners of commercial real estate in the world and they saw a huge decline in the earnings for commercial real estate properties according to their numbers profits from the sale of their assets fell to 4.4 billion over the last quarter which is down 54 percent during the first quarter of last year so while Blackstone didn't actually lose money their profits are down about 50 percent from last year which really isn't that surprising but it shows you how much slower the real estate market is now compared to a year ago but it gets even more interesting take a look at this we have another company Brookfield corporation which defaulted recently on 161 million dollars worth of commercial real estate debt tied to office properties and recently in February Brookfield also defaulted on 784 million dollars of commercial real estate that was backed by two big office Towers in Los Angeles so what are we seeing happen we're starting to see some investors landlords who owned commercial buildings primarily office buildings that are now sitting vacant that are losing money where then the debt on these properties are being readjusted and now the landlords are saying well if we cannot make the debt payments and then the debt payments we adjust at a higher price we can continue to make these payments so either the default they try to sell it if you can't sell it you have to offer a discounted price or you get stuck in a very deep position where now you have to keep making payments and bleeding cash literally losing money because if you have a off if you own office building and it's sitting vacant and the tenants are not renewing the leases you still have expenses to pay you got to pay your property taxes you got to pay insurance you got to pay the maintenance fees you got to pay the management fees and then on top of that you also have to pay your debt payments well if you have no income coming in you got to pay these payments through your pocket through your savings through your other Investments and sure maybe you can go buy it for a little while but then if you have commercial debt that readjusts like we're seeing happen over the next 24 months where a big chunk of the commercial real estate debt is going to readjust and then your monthly payments double because your mortgage payment went from four percent to eight percent well now all of a sudden you're going to see much bigger expenses which means you're going to need more rental income but the problem is if you're sitting there vacant with an office building with tenants that are not willing to resign the higher price with tenants that you cannot even find you're going to struggle making those payments and this is a tough situation that we're seeing for a lot of commercial real estate across the country is that this hybrid work from home environment is changing the landscape for commercial real estate and so now if interest rates Stay High that's going to put a lot of pressure on these office landlords to either a get tenants back into their offices B convert these Office Buildings to something else like residential C try to get more money out of the properties or D sell while they still can this is why you're seeing a lot of experts some people are saying that they are predicting a big shift in the office real estate market the commercial real estate market because of all these office landlords who are going to be sitting underwater on their properties with loans coming due which could cause a lot of loan defaults in the commercial real estate space this is where if we go back to the 410 magazine article we also have comments from Goldman Sachs and UBS again two of the largest investment banks in the world that also commented on the commercial real estate market let me first start by talking about Goldman Sachs because Goldman Sachs is more along the same lines as Morgan Stanley where they see pain ahead in the commercial real estate market here's what Goldman Sachs had to say Goldman Sachs says most of the fundamental troubles for commercial real estate preceded last year's backup in policy rates in other words the higher interest rates are the reasons why we're going to see a shake-up or more pain in the commercial real estate market not just because of office vacancies they said commercial real estate borrowers are already exposed to higher interest rates which translates to higher funding costs and increased exposure to floating or variable rate liabilities in other words commercial real estate by itself is already exposed to higher interest rates and they have the variable interest rate loans like I talked about earlier and because they have these higher interest rates plus the variable interest rate loans we're going to see a big shake up in the commercial real estate market particularly the office real estate market as these interest rates readjust Goldman Sachs goes on to say that they estimate that 1.07 trillion dollars worth of mortgage loans will mature before the year end 2024 and borrowers ability and willingness to do so amid higher rates will be limited in other words we're going to see over a trillion dollars worth of commercial loans readjust not within the next 24 months but by the end of 2024 and when those trillion and some loans have to readjust you're going to see limited interest in the landlords wanting to readjust meaning more landlords will want to sell and if more landlords are selling well that's more supply of these commercial buildings on the market which could push the prices of this commercial real estate down and the third factor that Goldman Sachs highlighted is tightening lending standard Goldman Sachs points to tighter lending standards ahead and the effect of that on both Banks and those within the commercial real estate market in other words Goldman Sachs says for one that you have these variable interest rate loans and the higher interest rates in commercial real estate second you're going to have less demand for people wanting to actually refinance the real estate and third the icing on the cake the tightening of lending standards is going to make it more difficult for commercial real estate landlords to be able to readjust and all three of these factors together will cause pain in the commercial real estate market in the coming years now let's compare that to UBS let's start with the punch line for UBS because UBS says that quote a repeat of the 2008 liquidity crisis is unlikely even if credit tightens further now that doesn't mean that UBS believes that we're not going to see a shake up in the commercial real estate market or that the fundamentals of commercial real estate is different UBS still believes that we have a large amount of commercial real estate debt that is going to readjust in the near future what they said is that UPS expects around 1.2 trillion dollars of the outstanding 5.4 trillion dollar commercial real estate debt aside from multifamily were mature and be up for refinancing and that will likely happen amid higher interest rates which they say will only add to existing challenges around servicing debt especially in areas like office real estate so UBS the bank essentially agrees with Goldman Sachs and Morgan Stanley as to the risks that are out there and the concerns with the commercial real estate market but the difference is what UBS thinks will actually play out because of these risks take a look UBS says that those d defaults don't necessarily mean that there is risk to the entire commercial real estate sector as a whole and instead what they say is the office properties account for only 15 percent of their commercial real estate market so UBS just like every other bank says yeah there are red flags in the commercial real estate market we have a lot of debt that's going to readjust this is going to readjust the higher interest rates but the main sector that is exposed and that will probably hurt is office real estate every bank is agreeing on that but then what UBS says is that because office real estate makes up only 15 percent of the tire real estate market that is not going to create like a domino effect in the real estate market so what every Bank agrees upon is that we're going to see a shake-up particularly in the office real estate market but the disagreement is how this office real estate shakeup is going to affect the other sectors of the real estate industry but it all comes back down to what I was talking about earlier with interest rates and what the Federal Reserve Bank is going to do this is why you want to keep your eye on what the Federal Reserve Bank does because if the Federal Reserve Bank continues to raise interest rates and they continue to keep interest rates high that is going to play a major impact on Commercial Real Estate it's going to play a major impact on corporate debt it's going to play a major impact on credit card debt and it's going to play a Major Impact in our national debt because all of these debts are variable interest rates and if our debts continue to rise or stay high that's going to make the cost of servicing these debts higher and while we don't see the exact cost of this yet as more and more of these debts we adjust over the next 12 to 24 months where you're going to slowly start to see the impacts of this which is why you want to make sure you're staying financially educated you want to make sure you're prepared and stay on top of what's happening and of course we try to keep you updated with Market briefs my free financial newsletter which is why if you haven't joined Market briefs yet I highly recommend you do so and I got the link for you down in the description below our last inflation report came in cooler than expected which naturally has some people excited claiming the win on the inflation fight which then poses the next natural question if inflation is falling does that still mean that we're going to see a recession and what's interesting is just a few days after the inflation report came out

Channel: Minority Mindset

Views: 151,373

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, rethink rich, financial education, financial literacy, finances, stock market, stocks 101, how to invest, money management, investing 101, building wealth, how to manage money, financial advice, investing, buying stocks, housing market, inflation, wealth, passive income, personal finance, real estate, real estate 101, real estate investing

Id: Sq0bJ385NRI

Length: 99min 40sec (5980 seconds)

Published: Sat May 06 2023