Epic Real Estate Investing - Even More Wealth Traps Your Financial Planner Isn't Telling You About - Epic Wealth Wednesday | 262

Episode Date: May 3, 2017

Epic Real Estate Investing is back with another Epic Wealth Wednesday! Get your money situation right and learn to avoid the wealth traps your financial planner isn’t telling you about. Boost your plans for retirement with a better understanding of the wealth traps that are keeping you from financial freedom. Listen as we identify and avoid major weaknesses in your financial planning. It’s time to start thinking and strategizing for Epic Wealth! ______   The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? • E.ducation • P.roperties • I.ncome • C.oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

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That gets you into trouble. It's what you know for sure. That just ain't so. You don't have a money problem. You have an idea problem. Welcome to the final frontier. where the average person has a legitimate shot at creating Epic wealth.

Your host, Matt Terrio. Yes, hello, and welcome to the Creating Epic Wealth show, the revolutionary new money show disguised as a real estate show. As real estate, it's the final frontier where the average person has a legitimate shot at creating epic wealth. I mean, you really just don't have a chance at any sort of financial freedom unless you incorporate real estate into your financial plan. And if you just don't have the time to do it,

nor the desire to really take on all of the heavy lifting, you don't want to do the work, then this is just the show for you. Glad you found us. All righty, so last week we discussed specific traps that are preventing you from creating your wealth, downright stopping you. Wealth trap number one, saving money.

Wealth trap number two, budgeting. Wealth trap number three, maxing out your 401K. And all three of those are, passed on to us as sound financial advice and for as far back as we can probably remember as well. I mean, they may be good advice for sustaining your current financial position. I mean, making sure things don't get any worse. But they are terrible wealth-creating strategies. You know, saving money to create wealth, it's just, it just moves too slow and it's

darn near impossible for the average person to maintain the discipline to carry that out. And then budgeting. Wealth, it's not created by saving. a nickel, but rather by generating a dollar. You need to focus on production rather than reduction. And the 401K sounds good on the surface, right? Is this tax-deferred savings plan? First, it has savings in the description.

And just as how you're sold on the concept of compounding interest over time, the eighth wonder of the world, people call it, you've been sold that. That eighth wonder of the world compounding interest, it also works for the fees inside of the 401K as well. robbing you of more than 60% of your potential in that vehicle over the long-term placement of money in the 401k. Additionally, by the time you're able to withdraw the money from that account, you'll be at a much higher tax bracket than you are probably right now, of which the money will be taxed at a higher rate once you are able to actually access it.

And probably the biggest reason it's a terrible wealth-creating strategy is that you don't get to pick your stocks or what you're invested in. and you have absolutely no control over the outcome. It's a gamble, at best, and a very low-paying one if you actually end up winning. So how could that be? How could saving money, budgeting your expenses, and maxing out your 401K being bad ideas? Well, I'll clarify one more time. They might be okay strategies for preserving your wealth, but they are terrible strategies for creating your wealth.

So, are you ready for another wealth trap that's about to blow your money? mind? All right, try on wealth trap number four for size. Paying off your home as fast as you can. You've heard that before. It's sensible, prudent advice, right? Wrong. It could be quite possibly the worst financial advice ever given. And here's why. Let's imagine you followed this advice. You worked hard to pay off your house as fast as possible. You paid down your mortgage, maybe even shortening the term by paying some additional on the principal every month or by paying bi-monthly. Now what? Well, a large bulk of your money now. It's in your house, isn't it? And if you're like most retiring Americans, you're going to need that money at some point. So, sure, there's no

mortgage payment at this point, but you still have expenses. Your bills are less, but costs of living are going up. They're always going up. You're going to need money. No one ever retired just by eliminating their house payment. You still need money to live. You're living in a pile of cash, so to speak. Now, selling the house, that's an option, but then you've got to find another place to live, right? And it's all probably going to be a step down or two from your custom lifestyle. You could hit the road and head south in an RV and, you know, with all the cash in the cooler. You could do that. That might be fun.

But your basic problems still really remain. There's no financial security. And what if an emergency comes up? Heaven forbid, an emergency comes up. I mean, you could borrow against the equity. But if that is the plan, then why did you work so hard to pay? pay it off in the first place? You paid off your mortgage just to create a new one? Does that make sense? What problems have actually been solved here? What financial advantage has been created by

paying off your house as fast as you can? Now, I have nothing against you paying off your mortgage. I'm just saying that you can't count on that as a strategy to secure your financial future, let alone build wealth. It makes a lousy primary investment strategy. It's not even a good secondary or territory strategy, tertiary strategy, however you pronounce that. In fact, your primary residence is simply a terrible investment. Your residence may have been a good and worthy purchase, but your own house is almost never a good investment. Consider this scenario.

You just wrote the check, right, the last check to your mortgage company, and it feels good, right? Feels good. It looks even better when you consider that the home you paid $100,000 for 30 years ago is now worth $300,000. You tripled your money, right? And you might be wondering, how could that possibly be a bad investment? Well, what most people fail to consider is that over 30 years,

the total combined principal and interest payments will amount to approximately double, if not more, than the original purchase price of the home. Then you need to account for the 30 years of property tax, insurance, and maintenance costs. When all is said and done, after you've paid for that house, you're going to see that you pretty much paid $300,000 for your $300,000. $300,000 home. You know, as you are working all those years and paying the house down, you probably were thinking that you were investing in your future, but all you really did was deposit your money into a zero

interest-bearing savings account. You deposited your $300,000, and now you have a home worth $300,000. And sure, it's free and clear, but it's a wash. Now, I'm not discounting the feeling of owning your own house. You can get a great deal of value out of that. You've probably put in time and effort into that home. Memories have been made there. You have it just like you want it, and now it's truly yours.

Well, except for property tax. Try not paying those and see how long the house is yours. You still got to pay that. The reality is that your money could have done so much better over those 30 years. Without really any extraordinary effort either, without even an elevated financial IQ. Because the money in your house was doing absolutely nothing for 30 years. Certainly you could have found something that did best.

better than nothing. Now, there are exceptions. I can already hear you, I can hear it right now. There are exceptions. If you're fortunate enough to be approved for, say, a low, single-digit interest loan and you purchased your home in a higher appreciating area and you timed the market just right, you could experience an acceptable rate of return on your investment, perhaps, but you can't bank your future on exceptions.

And that's exactly what that would be. Those are just the exceptions. I mean, do you want to gamble your future on being an exception? You have to look at the vast majority of cases. You know, gambling on being the exception is not a sound investment strategy. This wealth trap has snares so many people because it seems to make sense. On the surface, you are tripling your investment. You don't have to dig too deep before you begin to see that this investment is simply just a bad deal.

It's just a math equation. And unfortunately, it gets worse. You think you've at least saved the $300,000, right? you were forced to save basically because you had to pay your mortgage. So you were forced to. You didn't lose money or did you? Because you can't ignore inflation. You know, over the last 40 years, the average published inflation rate averages somewhere, I don't know, around around 3 to 4%.

That means that your money has lost 3 to 4% each year, 3 to 4% of its buying power. You know, in order to make your financial situation actually improve, your returns must outpace inflation. If you're making a 3% gain per year, but money is worth 3% less that year, then it's a wash. You may have more money than you did 30 years ago when you bought your $100,000 home, but that money has less value. There is some relation now between your home's appreciation and inflation. Inflation affects appreciation. But the relationship, it's not straightforward.

I mean, considering everything, the absolutely best case scenario is that you didn't lose any money. but you most likely suffered a slight decrease. You lost money on the deal. And one more problem. Your house is now 30 years older than when you purchased it. Perhaps it's a little outdated. How's the roof holding up? What about the pipes?

What about the wiring? I mean, without a doubt, you are going to need to invest in home maintenance. And the older the home gets, the more maintenance required, right? You may even need some major repairs on the property, which can be very costly. So, sorry to break that to you. A primary residence just does not add up as a retirement strategy, or at least not for the primary strategy.

Yet so many people are convinced that this strategy will grant them peace of mind and ease in retirement, but it will not. You must understand that no one has ever retired, simply. by paying off their primary residence. I mean, yes, you should buy real estate. You should buy income producing real estate. And the reason you want real estate is, for the income it produces, the appreciation it experiences,

the hedge against inflation that it provides, the tax deductions it allows, the fact that it will never be worth zero, the fact that it's tangible, The fact that it's that humans need shelter, there will always be demand for it. The supply is limited. We're not making any more land. I mean, I could go on.

You absolutely want real estate for those reasons, for all of those benefits. But you don't have to live in the real estate you do own to experience those benefits. Got it? We'll be back right after this. If waiting for your investments to grow feels like waiting. for paint or dry. There's a powerful secret your financial planner doesn't want you to know. You can accelerate your investments growth by two, three, or even four times.

That's bad news for Wall Street, but great news for you. We're cash flow savvy, and we'd like to offer you free information that will show you how to take control of your investments and double, triple, or even quadruple their returns, and it's yours for free. For the secret your financial planner doesn't want you to know, go to cashflow savvy.com. That's cashflow savvy.com. And now, back to creating your epic wealth.

All righty, so paying down your house, paying it down as fast as you can, bad advice, really terrible advice. And I'm really sorry to break that to you because I know before you heard this, you were probably, you know, that might be your plan, that may be in the plan you're immersed in right now.

It might be the one that you have almost fulfilled. But it's not. It's a bad move. you know, primary residence just does not add up as a retirement strategy. Or, you know, like I said, at least not for the primary strategy. I wouldn't even say the secondary or the third strategy. Yet so many people are convinced that this strategy is going to grant them that peace of mind in their golden years that they've been looking for.

It's going to make their retirement a lot easier. It's simply just, it's a terrible investment. It's just one way of piling up cash. And perhaps, the worst way. Just understand that no one has retired simply by paying off their primary residence, ever. Again, I'm not saying don't pay it down or don't pay it off. It's okay if it's part of your plan. I'm just asking you to consider where it actually is in your plan. I'm asking you to consider the order of what you do pay it down. Where is it in the list of priorities in creating your wealth?

You need to bring it down a few notches. And if you think you already got to lower on the list of priorities. Consider moving it down a couple more. Look at it this way. You get up each and every day to go to work, right? And if you put every extra cent you have into paying down your house as fast as possible, you're essentially retiring your money before you retire yourself. I mean, you're still getting up and going to work every day, sweating it out. You're still running that rat race while your money over there on the sidelines kicking it, sipping a fruity drink by the beach, while you're still working. Your money's watching you. It's relaxing while you, it's watching you work. So sure, you can retire your money at some point in the interest of preserving your wealth. I'm actually all

for that. But focus on retiring you first. But what about the debt, right? What about the debt? I mean, you might not be able to get past the idea of debt because debt is bad. How can you just ignore that giant mountain of debt sitting on top of your home? Right? At least I got rid of the debt. I got rid of the worry. Well, that would bring us to the fifth wealth trap, the advice of never go into debt. The idea that all debt is bad.

You know, pay off your mortgage as fast as possible and pay cash for your car and leave those credit cards in the wallet. avoid debt by any means necessary. That's really common advice the gurus on TV from the gurus on TV. The ones with the national audiences, the one with the biggest platforms. And it's really sad that that is the message that prevails. It's the message that prevails and it's the message that sticks. And that's sad because if you follow that advice, you have fallen into a trap. You have fallen into a wealth trap.

it's keeping you from your wealth. It's preventing you from getting there. Now, irresponsible consumer debt should be definitely avoided. However, the financially educated understand debt's place in the financial world. Debt is, for good or evil, an intrinsic part of our national economy. Debt will also be essential in your personal economy. It will be essential in creating your wealth. You see, your savings account,

at the bank. It's an asset to you, but it's a liability to the bank. They have to pay you interest. And to offset that liability, the banks lend your money out at a higher interest rate rather than, or, yeah, above what they pay you. The world banking system operates on the fractional reserve system. For every $1 you save, the bank can lend out $10. The banks love borrowers because they make a lot of money this way. When they lend out the $10 based on your $1 of savings, the money supply is increased, more money is printed, and the economy is stoked. If they lowered the fractional reserve, interest rates would go up and the economy would slow down. The system is crazy, but it's the one that we have.

Because the government has the ability to dictate the amount of money that can be printed. Every dollar you save becomes subject to government control. As more money is printed, the dollar decreases in purchasing power, and the money you have in the bank becomes effectively worth less. Savings, your savings account, becomes a really poor asset, because the dollar is basically being gutted by the system. For you, this has a few important implications. One way you can stop the devaluing of your assets is to purchase commodities,

such as gold and silver. It's a hedge against the inflation. And you're also incentivized to use debt to acquire assets. generally it's it's more lucrative to play the debt game the system is based on debt and if you use debt as well you can prosper in that system if you play by their rules you can go along for the ride and win the way that in the way that they're winning and now for this to work for you you need to be crystal clear on the difference between an asset and a liability and the simple distinction is that is that if it pays you then it is an asset if you pay it it's a liability

the government and financial system rewards you for good debt. Good debt is used to purchase assets. That's how you classify whether your debt is good or not. Did you use it to purchase an asset, something that pays you? If you use debt to purchase liability such as furniture or vacations or cars, as most people do, you're going to run your financial ship right into the ground. Debt used for assets, that's going to enable you to increase your wealth many times more quickly because of the advantages of leverage.

And we will certainly talk about that in the future. You see, the wealthiest people in the world use as little of their own capital as possible when acquiring an asset. And then they make it a priority to quickly get back whatever amount of their own capital that they did invest. Now, why would the people who have the most money

choose to use someone else's? There's a big clue right there. If you want to be wealthy, first stop doing what poor people do and second start doing what wealthy people do wealthy people use debt to keep their wealth growing you see you can get rich using your money certainly but you get wealthy using other people's money so I'll leave you with this when it comes to creating epic wealth when it comes to creating your epic wealth I want you to access as much debt as you can for the purpose of buying assets.

Then, once you're satisfied with your wealth, eliminate the debt to preserve it. You got it? You want to take on as much debt as you can to acquire assets. And once you've got your wealth to where you want to be, once you've got your cash flow to where you want it, now eliminate that debt to preserve it. Now that's solid advice. That's advice you won't get from your stockbroker. You won't hear that from Dave Ramsey.

You won't hear that from Susie Orman. You're not going to hear from Jim Kramer. You're not going to hear from The Motley Fools or any number of the popular money gurus that are dominating mainstream media. And, you know, it makes you wonder a little bit, doesn't it? It makes you wonder, if the advice of saving money, if the advice of budgeting money, if the advice of maxing out your 401K, if the advice of paying off your house as fast as you can, if the advice of avoiding debt at any cost. If that's all sound financial advice, the advice that the masses adhere to,

then why are 95% of all Americans by the time that they reach the age of 65? 95% they are either dead or they're dead broke. There's only 1% of a population that reaches the age of 65 wealthy. Just 1%. What's the big difference? To get wealthy, you observe what the poor is doing and do the opposite. The poor, they save money. The wealthy creates streams of money.

Do you think Dave or Susie made their wealth saving money? No, they did not. They created streams of money through selling to the masses of the advice to save money. The advice of saving money will not make you wealthy, but boy, selling that advice sure will. We'll be back right after this. If opening up your financial statement each month is about as exciting as watching paint dry. The Epic Wealth Fund may be the next investment opportunity for you. The Epic Wealth Fund invests in distressed real estate and shares the profits with its shareholders.

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Nothing herein shall be construed as investment, tax, legal, or accounting advice. That's it for today. We'll pick up from where we left off right here next week. See you then. Simons is here to make your holiday season magic. We've got thousands of gift ideas and festive decorations to help you turn your home into a winter wonderland. with green boxes piled under the tree.

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