Rethinking Retirement: Assets vs. Liabilities — Full Breakdown & Transcript

[00:02] your pocket. A liability is something that takes money out of your pocket. Wealthy people want to own assets. I was buying a whole lot of liabilities promotion business and I wanted to look the part. So, I would make a little bit

[00:15] of money, buy a nice watch, make a little bit more money, put some new rims on my car, put a new sound system in my car, put a new uh subwoofer in my car. I mean, I was blowing money on all these dumb things to look like I was rich when

[00:29] in reality I was just making a lot of other people rich. And then I learned about this thing called investing, which really started to upset me because I thought I was doing everything right.

[00:43] And I'm reading these books that are talking about how every wealthy person invests in real estate. I have no idea what that means. Nobody in my family is a real estate investor. I had never heard of this concept of

[00:56] real estate investing before. I don't know what it is, but if wealthy want to become wealthy, maybe I should invest in real estate. So, when I was 19, I'm now studying to get into medical school because I still

[01:10] think that I'm going to become a doctor. And I was bored out of my mind because I would spend all day, 10 to 12 hours a day in the library studying. And this day in the library studying. And this was around 2011.

[01:24] And the reason why I say the year is because if you remember 2008 was the great financial crisis. >> That was when we had the real estate collapse in America. So real estate prices were decimated and they didn't

[01:38] hit rock bottom until 2012. That's why I'm saying this. So in 2011, I'm studying to take the medical college admission test, the MCAT. And I'm wealthy people invest in real estate. and now I'm making a little bit of money

[01:52] little bit of cash in the bank. So during my breaks when I'm studying for during my breaks when I'm studying for the test, I start looking on the internet websites of finance and they all talk about how real estate prices

[02:05] have hit rock bottom, how real estate is being decimated in America. And so I was like, well, maybe I start looking to buy real estate. And so on August 22nd, I took the medical college admission test. And then

[02:20] on August 23rd, I purchased my first real estate investment property. It was a small condo that I purchased out of foreclosure. A few years prior, it had sold for a little bit over $150,000.

[02:35] And then, like many properties, it went through foreclosure. The banks couldn't sell it, and it was listed on sale for $8,400. That was the total price of the condo. So, I came in with an offer of $4,000

[02:51] because I don't know what how this real estate investing stuff works. And we went back and forth with the bank. The bank said, "We'll sell it to you for $7,000." I tried to negotiate them even lower. And then the bank said that they

[03:05] had another offer on the table. So, now it's a bidding war and I had to pay offer my highest and best price. So, I said, "I'm willing to offer $8,000 to buy the condo, no more." and they accepted my bid. So, I purchased this

[03:19] condo for $8,000. I put in a few thousand worth of work and then I rented thousand worth of work and then I rented it out for $600 a month. And now I start to question things. Why did nobody tell me about this? This condo is putting

[03:36] to do something because I own this asset. We're all taught to trade our time for dollars. We're all taught to work to get paid because that's what we're taught to do. But wealthy people

[03:49] are not working for a bigger salary. They're working for more assets because that can continue to pay you even when you're not working. And that's that shift when I saw that. That really sparked a fire under me and really made

[04:05] me angry. And I don't know why I got so angry, but I got angry because I felt like I was checking all the boxes. I was doing good in school. I bust my butt in things, become a doctor, and do everything that I was told. But what I

[04:20] didn't realize is those boxes weren't my boxes. Who created these boxes? And why is there this whole world of financial education that were never taught? Because if this is how wealthy people build and grow

[04:33] their wealth, why is everybody else not taught this? >> So, I want to make a distinction here. Are you saying that in order to build wealth, people should buy a house? >> No. If you want to build wealth, you

[04:47] have to buy assets. When people say buy a house, what does that mean to most >> Yeah. >> I want to buy this nice place for me to get a bit of money? They take their salary from work and then they go and

[05:01] buy a house to live in and then they pay into the mortgage, which means that they are now building an asset, right? They're building what many people call generational wealth, which is one of the biggest lies when it comes to money. The

[05:15] biggest lies when it comes to money. The reason why is because your house is actually a money pit. The way you build wealth in the stock market is not by chasing hot stocks. It's through what I call AB, always be

[05:28] buying. And I just wrote a brand new book called ABB, Always Be Buying. how you can build wealth in any market where I break down the exact strategy of how you can build wealth in the stock market and turn your extra money into income or

[05:41] more wealth. That way, you can now use the stock market to build wealth. And going to give you a digital copy of my book completely free. I have that link in the description below. And [clears throat] when you sign up for the

[05:54] Market Briefs, which is my newsletter team is breaking down what's happening in things like the economy, housing, stocks, crypto, and global markets. It's read by hundreds of thousands of

[06:06] you want to get my ebook and market briefs, all for free. All you have to do down in the description below. And that's why I want you to think of your house as a liability. But I want you to hear me clearly. I'm not saying you

[06:19] shouldn't buy a house. I'm not saying it's bad to buy a house. You have to treat your house like a liability. This suit that I'm wearing is a liability. This watch is a liability. My shoes are liabilities. Should I not buy them? No.

[06:33] So, when people think about buying a house, what do they think of? They wealth. I'm going to build wealth. I'm going to pay it off and I'm going to be able to have more freedom in my life because I can own this house. Let's go

[06:48] with the best case scenario. You buy a home for, let's call it, $300,000. You pay it off and throughout your lifetime, this million dollar. And now you're going to say, "Just pri I showed you this is an

[07:04] asset. My house tripled in value, more than tripled in value, and now I'm going to pass it down to my kids." So now, yeah, your kids got a million-doll house, but unless they have the income to support paying for a million-doll

[07:16] house, they might have to find some more cash. Now, what do they do? Because you can't just pull cash out of this house, right? I mean, it's not an ATM unless you go to the bank. The bank will give you the cash because the bank says, "Oh,

[07:29] you have a million dollar house. How about we loan you $800,000?" But that's not an ATM because you have to pay that money back plus interest. And now unless your kids have the income to pay for the property tax, to pay for

[07:43] to pay for the maintenance and the mortgage, they can't afford that house. So maybe now they have to sell. Okay, now you sell it. You got a million dollars. Great. We're not even going to talk about taxes right now, but you got

[07:57] a million dollars. You're rich. But if they don't have any financial education and you have a million dollars, what's going to happen? Well, million dollars, what would you do with it? If I went down the street and I

[08:11] a check for a million dollars today, what would you do? What are people going to say? I'm going to go to the Bahamas. I'm going to buy myself a nice house. myself some nice clothes. Go to the Gucci store. Go to the Louis Vuitton

[08:24] store, and buy myself the extra guac at Chipotle. That's what the average person more financially smart. You say, "I'm just going to live off of $50,000 a year." But after 20 years, you have nothing left. Not to mention the fact

[08:39] nothing left. Not to mention the fact that 10 years from now, that $50,000 a year lifestyle is going to buy you half of what it can today. So now, let's go back to that situation. You thought you built generational

[08:51] paying off the mortgage because you don't have to pay the mortgage payment. But is that really the type of generational wealth that you want? And now to fully hammer this home. I'm not saying it's bad to own a house. It's

[09:06] actually very great. It's an amazing thing to own a house free and clear because now you can rest assured you don't have to worry about the mortgage payments. If you have the financial education, that's great. But let's talk

[09:18] about now the real way to do this and build true wealth. When I buy my real estate investment properties and my property values go up, the rental values also go up. The rent is what pays for the maintenance. The rent is what pays

[09:32] paying for the property taxes and the insurance. The rent is putting money in my pocket. And this is cash flow that I can use. I can use this cash flow to buy a vacation. I can use this cash flow to

[09:46] buy food. I can use this cash flow to pay for my lifestyle. But your house doesn't do that. You have to pay to live in your house. getting their mortgage payments, they're spending whatever they are, you know,

[10:00] They they think they're well, we're kind of told that that mortgage payment is an of told that that mortgage payment is an investment into an asset. investment into an asset. Your mortgage payment is a payment to

[10:13] your bank. Banks are not stupid. In fact, they're very smart. Banks do something called front-loading your mortgage. What that means is if you go out and get a 30-year mortgage, which is what many people do in America,

[10:27] and you pay $3,000 a month on your mortgage, you're not paying $1,500 to your interest, your bank, and $1,500 to your principal, your equity. The way it works is banks frontload your mortgage. Which

[10:42] means for the first almost 15 years, it's about 14 years and 8 months or so, but for almost 15 years of your mortgage, the first 15 years, the majority of your mortgage payment is going directly into your banker's pocket

[10:57] in the form of interest. Which means if you're paying $3,000 a month on your for the first part of your mortgage, maybe $100 is going out of the $3,000

[11:09] maybe $100 is going out of the $3,000 into your equity. The other $2,900 is going right into your banker's pocket with interest. And now, yeah, after 15 with interest. And now, yeah, after 15 years, now half of your mortgage payment

[11:21] is going to your equity and half is going to interest. But if you refinance before that 15-year mark, that starts over. And so this is where banks understand the game. Again, I'm not against buying a house, but you

[11:36] got to understand the m game of money. And most people don't understand that. And so the mistake that people make is they buy a house they can't afford, and their mortgage thinking that I'm building wealth. They no longer have

[11:49] money to save. They no longer have money to invest into other real assets. down their mortgage thinking that this is going to build my wealth. But you've been sold a lie. >> This term opportunity cost, most people

[12:03] don't know what this term opportunity cost means, but it appears to be very especially when you just said this is money that you can't then invest in assets. Can you explain what opportunity cost is and how it's impacted if you if

[12:16] you buy a house? >> Sure. If you have let's let's just make the numbers very simple. you want to buy a $100,000 home and let's say the banks a $100,000 home and let's say the banks require a 20% down payment, $20,000,

[12:29] you could do a few things. Number one, you can take that $20,000 and go out and buy this house. And now that's how that money has been used. But if you use that money to buy the house, you lose the opportunity to take that $20,000 and say

[12:43] use it to buy a rental property. You lose the opportunity to use that $20,000 to invest in the stock market. you lose the opportunity to take that $20,000 and maybe build a business. Now, the question is, what is going to give you

[12:58] the best and most growth? Now, hopefully this house that you buy will go up in value. It's not guaranteed. We know that houses don't always go up in value, no what your real estate agent says, because we saw what happened after the

[13:12] 2008 crash where real estate prices were slashed in half. slashed in half. It was as much as 93% real estate values dropping in the state of Michigan where I am. So we know real

[13:26] estate prices don't always go up. Stock prices don't always go up. Businesses don't always work. Everything has a risk. But now the take? And which risk do you want to take

[13:38] Are you in a situation now where you're ready to go out and buy a house or do you want to build your wealth first a little bit more? And that's the question that I want people to start thinking is, am I ready to buy a house? And then

[13:51] people say, well, if I go out and invest my money, the problem is housing prices keep going up. I'm chasing this housing market, it keeps getting more and more and more expensive. And you're 100% right. It's a risk, but there's also a

[14:06] risk the housing prices could fall. >> I think one of the biases that makes they're currently renting and they see that as just giving money away. So, they on a mortgage and I'll own this thing one day or I could spend this same

[14:21] $2,000, whatever it is, on rent, and I'm never going to own this thing." >> Well, I'm here in Los Angeles right now. I had to stay in a hotel. That hotel payment is paying somebody's mortgage. It's paying somebody's college tuition.

[14:36] It's paying for somebody's stuff. When I go to a restaurant and I eat out, I'm paying for somebody's college tuition. I'm paying for somebody's bills. Because what everybody says. I am making my landlord rich. Well, when you eat at a

[14:51] restaurant owner rich. When you go to a hotel, you're making the the hotel owner rich. When I go and buy a mug, I'm making the mug owner rich. And the reality is, yeah, it's good for you to own a house,

[15:06] but are you ready to own a house? Can you afford to own a house? And what do you want to own first? I rent where I live right now. I am making my landlord rich today. I also rent from my offices. I am making my office landlord very rich

[15:21] because my office rent is very expensive. Do you feel bad for me? I hope not. And this is where we have to get over these these money myths that can't build wealth if you rent where you

[15:36] live. You can't build wealth if you don't get a good degree. That's not the way that the system works. See, there's the traditional rules and then there's the real financial education money rules. And again, I'm

[15:48] it's bad to own a house you can't >> How do you know if you can afford one? >> Well, there's three parts to afford a payment. You have to afford the monthly payment. And you have to afford the

[16:01] moving costs. I'm going to go start from the simplest one, which is the moving costs, because many people don't factor this in. When you buy a house, you got to move in. And I'm not talking about the the closing costs. You might have to

[16:14] hire movers, which are expensive. You might have to upgrade your furniture, which is expensive. You might have to upgrade the house, which is expensive. Factor that in. Then I want to talk about your down payment. People don't

[16:27] like when I say this, but I don't say what I say to make friends. I say what I One of the things that I've learned in life is that often times the things you don't pay attention to end up mattering the most. And that's why I want to talk

[16:39] to you about life insurance with our sponsor, Policy Genius. Because if you don't have the assets to live off of yet, and something tragically happened to you, the last thing you want is now your spouse and your family trying to

[16:52] that's where term life insurance can come into play. Now, I'm talking about term life insurance here, not whole life insurance. The whole idea with term life insurance is it's life insurance for a period of time, 10 years, 20 years, 30

[17:06] years. That way you can work to build your assets. It is a lot cheaper than whole life insurance because the whole idea is you're not here trying to get rich off your life insurance. It's just there as a bridge until you can build

[17:18] your assets. This is one of those things where the earlier you start, the cheaper 30-year-old guy, you could potentially get a half a million dollar term life insurance policy for less than a dollar a day. So, if you have any questions,

[17:31] insurance, or you want to see how much a term life insurance policy would actually cost you, I'll put a link to Policy Genius's form down in the to complete, and it'll give you an actual quote on how much term life

[17:44] have that link for you down in the description. If you want to afford the house, you have to have at least a 20% down payment. That way, you actually have some equity, some skin in the game. That way, you can actually afford the

[17:58] house. The third part is you have to afford the monthly payments. Now, every bank is going to have a different rule for you. Banks have like the 28% rule and these other rules. I have

[18:10] people not like it when you say that? >> Because it's very hard to pay a 20% down >> You want to [clears throat] buy a $500,000 house, you have to have payment. >> And that's extra cash, right? Now if we

[18:26] talk about the monthly costs the simple way that I like to follow it is you have to have a system for yourself. You have to know how much money you are allowed to spend how much money you need to be investing and how

[18:40] single month then just factor it in. So the way I like to look at it, a simple rule of thumb is something like a 751510

[18:52] plan, which says for every dollar that you earn from here on out, 75 cents is you earn from here on out, 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. Now, let's

[19:08] do the math. If you know that you make, let's call it $100,000 a year, that means the max you can spend out of the $100,000 is $75,000. So if out of that $75,000 you can afford your mortgage costs, you

[19:24] can afford your food, you can afford your vacations and lifestyle, then sure you can afford it. But if you can't afford that, then you can't afford that mortgage. And the reason why I like to go by this rule is because some people

[19:37] are going to say, "I can live in a small house. I just want an expensive car and some nice vacations." Other people are going to say, "I want a beautiful home. vacations." So now you can factor it all in there. How much can you afford out of

[19:51] that 75% of what you make? >> Do you think people even know how much money they spend? >> No. I was thinking, I wonder how many people listening right now know over the last six months the exact figure that

[20:06] they spent every single month. >> Most people statistically >> So they're basically spending everything >> or more. >> Okay. >> 78% of Americans are living paycheck to

[20:20] >> 78% of Americans are living paycheck to paycheck, which means I make some money there's a joke that I like to make which is in the traditional Indian culture, people make a dollar to spend 20 cents.

[20:36] In the traditional American culture, people make a dollar to spend $2 through the help of lines of credit, credit cards, and other forms of debt. a step back. I don't think you wanted me to go this way. I'm going to go anywhere

[20:50] anyway. We live in what's called a creditbased economy, which means if you make $50,000 a year, you don't live off of $50,000 a year. At least most Americans don't.

[21:04] economy, which means you have the ability to spend the $50,000 you earned plus debt. Because as you make more money, as you have a good job, you become more creditworthy. And so as you show the bank, hey, I made $50,000.

[21:19] give you lines of credit. They'll give you whatever types of debt that they can. That way now you can go out and spend 60,000, 70,000, $80,000 because that's what grows the economy. The more money you spend, the richer

[21:35] somebody else gets. And so now when you live in this credit based economy with no financial education, people spend, spend, spend. The economy grows, grows, grows. And most people have no idea what hit them. Do

[21:47] >> you know what's really interesting is two days ago I was having a conversation with one of my friends. It was actually I did a podcast about finance um of my friends and then they messaged me on WhatsApp and we were having a chat in

[22:01] our group chat and I for the first time ever one of them asked me to guess. money. We talk about how much money we have etc. They said guess who has the through and I did I think this is this person's net worth of my five best

[22:15] friends and I think this is how much cash they have. Now one of my friends is very what's the word I guess frugal

[22:27] going through I go you know what this friend is this like high-flying guy lives in this amazing apartment this person has all these wonderful things business this person's successful in crypto but do you know what I bet my m

[22:42] and I won't say his name I bet he's richer than everyone else in that chat And so I did my little prediction and I said, "I bet you've got X figure." And he replied and and said, "This is my current cash position." He was richer

[22:58] than everyone in the chat in terms of cash combined. This guy lives so he lives in like a studio apartment. He never balls. He doesn't have like a And he's richer than the entire [laughter]

[23:11] thought, God, there's something really important here in terms of and it's it's so crazy if you if you know the context of what I'm saying who's built like a big business. I've got a friend like everyone in that chat

[23:25] runs businesses, is successful, but they're living in different ways. And the one friend who runs the smallest business, who like probably has the business, who like probably has the least income is the richest. [laughter]

[23:39] it's so funny. I was thinking about all the dinners I've bought this guy millionaire. [laughter] Like I would not I would have >> But this is really I mean if we ignore your friends, it's very easy to look

[23:52] >> Because everybody will give you a line can't afford the Gucci. Guess what? I can buy now, pay later. I can open up a like I'm rich >> when in reality I'm just making Gucci

[24:05] rich. In fact, one of the richest people in the world. In 2023, he was the richest person in the world is Bernard Arnold. He's the founder and CEO of LVM Arnold. He's the founder and CEO of LVM or he's the founder and CEO of the

[24:19] company that owns Louis Vuitton. And why? Because millions of people pay him to look rich when in reality he's the one that's getting rich. And we money, you got to start looking the part. And this is that mindset shift

[24:35] part. And this is that mindset shift that we have to make. And you know a lot of people resonate who come from the Indian traditional families. They message me saying JJ just pri I became a doctor or my wife and I are doctors. We

[24:50] make hundreds of thousands of dollars a year. We make a great income but we have don't know what to do. And the reason why is we have a Range Rover and a Benz.

[25:02] doctor vacations. We have to look the part. But we don't have any money left over at the end of our paychecks. And it's a very easy thing to get caught up in because when you make more money, you

[25:16] become more creditw worthy. Banks will give you bigger loans. When you make money. And it's very easy. >> And you have to understand how do you control that spending. And that's why if you follow something like 751510,

[25:30] one of the simplest things you can do to start is just always, no matter what, whether you're making $10,000 a year or $10 million a year, you always put money aside to invest. You always put money aside to save. And you spend whatever's

[25:42] >> My friend doesn't invest. The friend I'm talking about doesn't actually invest. He just doesn't spend. He like just doesn't spend money. and he's just stacked up like a million dollars in cash

[25:54] whilst earning less than everyone else of my five friends in that chat. And it's it didn't take a long time. Like it took him four years or something. Four or five years of just running this small business with a couple of people. When I

[26:07] say a small business, I mean a really like a small business like a business of >> Money isn't what it used to be and it's about to change again. For centuries, money wasn't this paper. It was actually physical gold. It was coins. It was bars

[26:21] But carrying around physical metal wasn't very easy. And that was when this paper money got created. But this paper money was backed by physical gold. So if money was backed by physical gold. So if you had a $100