The Wealth Formula the Middle Class Was Never Taught

The middle class is getting destroyed right now and your savings is getting destroyed because of inflation. Taxes, they just keep going up and debt, it's more expensive than ever and housing, it's becoming impossible to afford. The harsh reality is this. The old playbook. Work hard, save money, pay off your house. So today I'm going to show you the five things that the rich use to build wealth over a long period of time, even in times like this. Number one, shift your mindset around assets versus liabilities and know the difference. So why isn't working hard and saving money working anymore? Because the rules of the game changed in 1971 when Nixon took the dollar off the gold standard and the Fed and everyone else and all the administrations, not just the current one, just continue to print to pay for stuff, therefore devaluing the dollar over a long period of time. Kiyosaki says savers will be losers. What he's really saying is not that you're a loser. He's saying to make sure that your money is tracking the economy because the economy has been inflationary and money has devalued over time and paper currency, which is now fiat currency, has devalued over time. Let me give you a couple examples of assets versus liabilities. And this, of course, is one of the primary focuses of the cash flow game, which if you haven't played, you should. If you're not playing with your kids, you should because these are two very simple concepts to understand. What's the difference between an asset and liability? I would say that most people don't really, really get the difference. So as a young man, fresh out of college, every single time I got a little bit more money, I would go out and buy a new car or lease a car only to realize that those new cars depreciate over time. So like many of you, perhaps, the car was actually worth less than the actual loan itself. This is all by design. That is something that you bought that depreciated over time during the time you used it, perhaps. Now, you could do the exact opposite, which is finally what I ended up doing, which was I started to buy used cars like with 2,000, 4,000, 5,000, 10,000 miles on them, let's say, one to two years old, after they had depreciated. And once I started to do that one simple little practice, then I was in a much better situation when I started to turn that car into maybe another used car. That's a very simple example. It's a stark reality of what most people do, and it's certainly what I did. Once I stopped buying brand new cars and started buying used cars that were still in great shape with just a little bit of miles on them, I immediately changed my financial position. Another one is, of course, cash or fiat currency, which we just talked about a minute ago. If you're holding cash and you have inflation and the dollar's devaluing over time, which we know it is, then you're better off not holding cash. You're better off holding it in things that maybe rise with inflation, for example, like gold or silver or water or timber or whatever it might be. And while I'm not advocating that you invest in those things, I'm just trying to tell you there's a huge difference. Cash right now is a liability and metals are an asset. The same could be said for savings. Savings accounts are in jeopardy right now because of the way the economy's running. So you're better off to be in things like real estate, things that are paid off by other people. These are very basic things. Once you start to see the difference between an asset and a liability, your financial trajectory will change. Two, master financial education. So I often say that financial education is more important than traditional education. So why would I say that? The reason is is from my own personal experience, and maybe some of you have the same experience. But when I went to college or high school, a lot of my teachers were not very wealthy people. They were not rich, most of them. And every once in a while, we would have somebody that came in from the private sector, let's say, that had money that was teaching because they loved to teach. But the overwhelming majority of teachers today, the ones that read out of a textbook or teach you something from some syllabus or curriculum, they're not very wealthy people. Now, I'm not saying that they can't teach and they can't follow these things. They can, of course, and they do. And I'm not saying that you shouldn't learn some traditional education because you should. But the people that you should be learning financial education from are the people that are actually living it today, the people that have experience and wisdom and are practicing what they preach. These are the people that you're not gonna find in the front of the classroom. Sometimes, every once in a while, you'll see them speaking at a seminar, maybe on YouTube, or maybe they're a guest speaker somewhere and I would highly encourage you go in there and listen to what they've done and their story because it's not a traditional story and it certainly is not a straight line. It's typically ups and downs with a lot of highs and a lot of lows. You're just not gonna get that from a traditional education. So one of the first things that people should look at if you're starting from zero, like a lot of us, certainly like I did, is who are your teachers? Are they wise and are they experienced? And are they actually practicing what they preach? Are they living what they're telling you? So years ago, somebody told me, why are you using this attorney? You should be using an attorney that actually owns real estate. And the difference was remarkable, both attorneys. One real estate attorney was just cranking paper out and didn't understand the practical and the nuances of actually owning real estate. When I switched, I realized that the attorney that actually was buying real estate, investing in real estate, and was involved, was in the game, was a way better attorney than somebody that was just actually producing the documents. So it's the same thing in life. Who you're getting information from should be actually people that are doing what you're trying to get the information about. So how did financial education give me an edge early on? For sure, this was during my property management years. So for like a lot of you, I didn't know much when I graduated from college. And I went to college on an athletic scholarship. And luckily, I got a business degree when I was there. But when I really got out, I wasn't really valuable to anyone. I didn't know much. I certainly had no experience. I hadn't done any internships except for more of the hard labor side. But the minute I started in property management, I realized that if I was gonna take over a property and I was not able to improve the operations in any way, I was gonna lose my job and I was gonna get fired. The world is a very interesting place. So if you cannot do a better job than your predecessor, then the chances of you keeping that job are low. I also learned another lesson. If I just maintain the property, let's say for what it had been operating before, then I'm in no way remarkable. The only way I'm gonna get a promotion, the only way I'm gonna make more money is actually to figure out a way to grow the income at this property. One, on the revenue side and two, on the expense side because by reducing expenses, you can actually grow your income. So as a property manager, I learned early on and not through some teacher and not through some school and not through some textbook that if I wanted to make more money and I wanted to improve in this job, I had to bring value to the owner, the management company or whoever was my employer. And if I didn't, I was gonna stay flat or lose my job. Once I figured out how to value add the property, once I figured out how to raise rents, bring more income, cut expenses, raise the net operating income, which is simply just income minus expenses, then I became more valuable. Then people started to notice. Then people started to realize that I was somebody different than somebody that wasn't doing those things. And that is the only way that I started to move up in this company. And I moved from property to property, eventually becoming a vice president and eventually starting my own business using the same principles. I was always looking at ways to benefit somebody else. If I was managing somebody's property, how was I creating value for them? How was I making them richer? Because I knew eventually once I learned those things, I was gonna be irreplaceable. I would be the last person that they wouldn't wanna remove from that property. So from a financial education standpoint, it was survival. I was just trying to figure out a way to not be fired. By the way, if you really want to understand how inflation is crushing the middle class, and more importantly, how to use real estate to actually benefit from inflation, instead of getting destroyed by it, I put together a free guide that explains this entire process in plain English. Just click on the link below to get it. It's completely free. So the third thing is around debt and taxes. So most people are terrified of debt. I completely get this. That's because they don't understand it. Robert Kiyosaki and I always joke about this. The people that use debt properly get richer and the people that don't understand it get poorer. And how can that be? Because if you think about debt or OPM or other people's money, that's what debt is. When you go to a bank, it's not the bank's money. It's the depositor's money. It's people actually putting deposits in the bank. And then the bank has the ability to lend against that. So that's what debt is in most cases. Sometimes it could be private. It doesn't have to be from a bank, but you get the point. It's somebody else's money or OPM, other people's money. That's what debt is. The key to debt is figuring out how much it costs. So that would be an interest rate, as an example, or the points or whatever the terms are. These are important things. If you don't understand, that's okay. I had to figure these out myself. But debt is really, really, really important. Here's why. You can buy a million dollar property and have a small down payment and use debt as the balance and you get the appreciation or the value add on that million for a small amount of money out of your pocket. And another point, you actually don't even really need the equity. You can actually borrow that too. But of course, the whole thing has to work financially. For those of you who watch my YouTube channel, you know I have a bunch of videos on exactly how to figure this out. Reality is, is debt is a key point to becoming rich. So right now, I tell everybody, if you have debt in the two, three, 4% range, it's actually an asset because you're actually borrowing at less than inflation. So that's how powerful debt can be. Imagine that you can actually borrow somebody else's money, lock it in at below three, 4%, let's say, and you're beating inflation. So you're getting free money, basically, to be able to invest as you see fit, which means that you need less of your own. So this is how the wealthy use debt. And how the wealthy use taxes is a whole other story. So all you gotta do is go to the IRS handbook. Each and every year, they give you a huge handbook. It's really thick, and it basically says, these are all the things you can't do. But then there's a section in there that says, this is what we want you to do. So the IRS actually has a piece in the IRS handbook that says, these are the things that we allow right now. And as you guys know, the tax bills change year to year, and they change based on administrations and all that kind of stuff, and I'm not here to debate it. All I'm trying to tell you is they change, and it'd be the equivalent of you being in the middle of a Monopoly game and somebody coming in and changing all the rules. Well, at that point, you gotta play by the new rules. It's not a big deal. You just gotta know what the rules are, and then you play accordingly. If you wanna know what the government wants, just take a look at the tax incentives, and it'll tell you right there. That's their playbook. So right now, it's oil and gas. It's solar. It's green energy, let's say. It's real estate. It's opportunity zones. It's all of the things that you guys are reading about right now. This is what's important to them. And so all you do is say, okay, this is where we are now, so this is a great opportunity to invest in those things now. Can those change? Yes. Will they change? Yes. Some administrations embrace those and others not. The reality is just understand these rules because they change from year to year, and I'll give you a great example. Some of you know I started investing in billboards, and it's not because I absolutely love billboards and not because I have ADD and I wanted to jump to some other asset class. The reason I'm investing in billboards right now is because Trump just passed the big, beautiful bill, something that's called bonus depreciation. And bonus depreciation allows the write-off in the year that you buy it in anything that's considered a land improvement as one piece of that bill. Now, a land improvement is technically a billboard. So typically, these billboards are on leased land, and they're literally just a flat screen in the sky. So it's literally a land improvement. So if I invest $1 million into a land improvement, which I'm gonna call a billboard, then I can have almost 100% write-off against that exact investment. So let me work you through the math. A $500,000 or $1 million investment in a billboard can generate $100,000 to $200,000 of cash flow, but the investment itself, I could write off in that same tax year. So I invest the money, but I get it back against taxes somewhere else. But now I still own the asset, and I'm getting $100,000 to $200,000 net each and every year from that one billboard. Of course, there's a whole bunch of work around the billboard on keeping it full and managing it and all the things that are associated with it. But you get the point. The point is not about the billboard. The point is why I invest in billboards, because I can offset other income legally through bonus depreciation as a result of this new tax bill. And this is how the wealthy think. This is why the wealthy own oil wells and solar farms. And this is why they own jets, because bonus depreciation, believe it or not, also affects the private aircraft market, which of course, Ross and I own one as well. And we're able to write off 100% of our jet in the year that we bought it, even when we financed it. And that's the important piece. So by paying attention, because taxes are gonna be the number one expense in your lifetime, you should pay attention to how you can legally use tax and the tax incentives that the government hands you that could be state or local to be able to offset some of those tax liabilities that you might have to be able to legally maximize the amount of revenue and cashflow and income that you might have each and every year. So step four is acquiring cash flowing assets. Now, we talk a lot about this. Rich Dad, Poor Dad talks about this. I've certainly talked about it in all my books. The ABCs of buying rental property, the ABCs of real estate investing. This is something that is near and dear to my heart. So cashflow is always more important than speculation. Yet, most people invest off of speculation. So think of, I'm trying to time a stock. I'm trying to buy a house. I'm trying to flip a house. That's all speculation. The reason why I like cashflow, and it's definitely not as sexy, is because cashflow is controllable. If I'm buying something today and I understand what the numbers are and I understand what the cashflow is, and I have a plan to increase cashflow and I really, really understand it, now I'm in control of my cashflow. And yes, I also want the capital gain. I also want that asset to go up. But I'm not banking on that as my sole strategy. So you need to do both. But cashflow needs to be your base. If speculation is your strategy, then you literally are gambling. And sometimes not just with your money, but with other people's. This is just complete luck. You cannot control the market, but you can control the cashflow of the day. So people always ask me, what kind of assets should I invest in? And I always say, what are you good at? What's your experience? Where do you live? Because I think that has a lot to do with the actual question. I have friends, for example, that are in the car business. And they're mechanics. And so they actually just started investing in the transportation business. Think about Uber, think about Lyft, think about just transportation services, right? So they're in that space. They understand that space. They're buying and selling cars directly from wholesalers. And they know how to fix them so they can keep their costs down. So now their job is to basically go out and just make sure that there's people renting those cars or using them for transportation for various places. Now that's one idea. Another friend of mine grew up on a big ranch. And so theirs is mostly around rodeo and horses and cows and sheep, okay? So these assets, I know I'm way off track and I'm certainly not on real estate at the moment. But again, what do you know? Where do you live? What are you most comfortable with? I know friends in the oil and gas business that started doing mobile homes and started buying up little hotels just to house their workers. I know physicians where their hospitals are growing and they started buying single family and little apartment buildings and duplexes and fourplex in areas because they knew the families were also looking for housing when they came in for medical procedures. And you don't have to try to jump into a brand new space and try to figure that out. What I always suggest is you start small. If you're a student and you're paying rent somewhere, then perhaps you look for offsite housing in a college or a campus or a university that's actually growing, and you look for the money and you try to figure out how to fill it with all your friends. So it's not that complicated to get into this business. And it doesn't have to be just big multifamily or self-storage or retail or commercial office or all the things that you see. So I often get the question, how does somebody scale from one asset to another asset or even scale into another category? I would be very careful about this. And so what I've tried to do, and I've strayed many times, by the way, but when I first started in multifamily, I strayed into commercial office, I strayed into self-storage, I've strayed into land development, custom home building, and all those kinds of things. And even condo projects. At the end of the day, what happens is it makes you believe that you're really good at everything, and I'm telling you, you are not. Every single journey, you start, you go uphill, you're pushing a rock uphill, and then eventually it starts to get flatter and you start to push it a little more flat, and eventually you start to get momentum and it starts to push downhill. That's where we are in multifamily, based on our experience, our wisdom, our track record, and all the people that have come along with us. The minute I jumped over into commercial office, as an example, I was learning about everything else. All my tenants come home at night, for example, in the multifamily, with an office building, they all leave my place and go somewhere else during the day. So basically, commercial office buildings are mostly vacant at night, whereas multifamily buildings are mostly full. Now that might not sound like much, but it is a lot. It's very different asset class. Whereas it's really, really hard to find a new lessor in a commercial office building because it's a big decision, you're actually dealing with a business. Whereas apartments, they're a little bit easy. You get a lot more people looking for apartments as they are needed. So what I learned as I jumped from, let's say, multifamily to self-storage to office, is that they could not be more different. The language is different, the nuances are different, the needs are different. And so what I always suggest, become an expert in whatever it is you do, and then be very careful to jump out of that lane. Because I actually think it's better to go really deep, be an expert in what you do, learn everything you can on that business, because there's a lot to learn. And I think what happens is people get this temporary success, maybe that's something that they flipped, maybe that's something that they held. And I can assure you that there's a lot more you can learn about whatever it is you're doing. So for me, I like to stay in my lane and go as deep as possible and be an expert in that field and not jump around. The fifth is building communities and partnerships and a network. Now, I know this might sound rather obvious, but you cannot believe how many real estate agents I see that are one man bands. You know, I'm telling you, like it cracks me up. Like they literally don't trust anyone, they don't delegate to anything to anybody, and so they stay small. Same thing I've seen with CPAs, I've seen this with physicians, I've seen this with all kinds of people and you know who they are. People that don't use other people stay small. Building wealth is a team sport, it's not a solo game. When I'm buying something, I'm on the phone all the time. Just yesterday, I was on the phone with multiple people on one issue that I actually kind of knew the answer to, but I called two or three people just to verify and also to get their perspective. So real estate is a team sport. So when I'm looking at a real estate deal, I have views from everyone, I have views from my lender, I have views from my attorney, I have views from the title company, I have views from the property manager, I have views from the maintenance person, I have views from a contractor. And all those people, as an example, just to name a few, are important to the process. They all have a view, they're all looking at the same thing very different. And for you to think that you can have all those views, it's super short-sighted of yourself. You have to understand, you're better off using a team and building a network and partnerships and communities around whatever it is you're trying to do. So I often get asked, how do you find the best partners or mentors or coaches? Well, I don't know how you guys have done it, but for me, I've just been completely aware. They're everywhere. And so, for example, when I wanted to raise an incredible family, I found a guy that had five kids and all five kids wanted to hang out with him and his wife. He'd been married a long time, but all five kids, more importantly, wanted to hang out with him. They wanted to spend vacation with him, they wanted to spend summers with them, they did regular family dinners and all those things. So I asked him, his name was Charlie, I said, hey, would it be okay if I just met with you one time a month so I could try to understand some of the things that you've done in order to keep your family close? And he accepted. I did the same thing with real estate, I did the same thing with business. You guys know I'm involved in YPO, a Young Presidents Organization. I've also been in EO, Entrepreneurs Organization. The specific reason for joining those organizations was to build my community and my network. There are people that I'm texting, there are people that I'm emailing, there are people I'm meeting with, there are people that I'm calling and meeting with regularly. As I'm moving forward in my professional and personal life, these are people that are helping me shape what I'm doing and where I'm doing it and how I'm doing it. It's very, very, very important that you're not trying to be a lone wolf here. So sometimes people ask me, how did some of my mentors and coaches shape my life? And I just mentioned a few of them, but I do have to mention my good friend Robert Kiyosaki. So Robert, of course, was the first one to tell me that the best way to learn is to teach. And so I said, well, what do I have to teach? Because at that point, I had done a lot of deals when we first met. And he said, just put that in a book. So I wrote the book, The ABCs of Real Estate Investing, and then my life changed forever after that. I didn't realize the amount of people that actually would devour that kind of knowledge and where it would take me, including this podcast, including speaking, including all these things that we've done together and apart. Once I started to learn that people really wanna know what goes on in the boardroom, what really happens when you're buying a deal, what really happens when you own a deal, what are your investors saying, what do they want? All those kinds of things we talk about on this channel. It's really, really important. And all I do is tell the truth and try to teach what I'm learning from day to day, month to month, year to year. But I do think one of the biggest things that can happen in any partnership is when there's an inequity effort. I've been in partnerships like this, I certainly do not have one right now where my partner, Ross McAllister, and I, I've never felt that way about him. So we talk all the time, we text all the time, we're on the same page almost all the time. Not all the time, but when we aren't, we're discussing it. And sometimes he takes a position, I take another, but we listen to each other respectfully. But there's no question in my mind that he brings a significant amount of value to our partnership, and he certainly feels the same way about myself. What happens when partnerships break down is where one person, for example, provides the money, and the other person is doing all the work. That's the one I've seen that has the most stress. Because eventually, when the business starts to get up and rolling, the partner that's doing all the work, for example, there feels like they're making half the money, and they're doing 100% of the work. So when you start to see inequities in partnerships, they need to be addressed right away, otherwise those partnerships will fall apart pretty quick. So if someone was starting from absolute scratch right now, maybe they're broke, or maybe they just have a lot of bad debt. I've been asked, what's the very first move that they should make today? How do they get on the wealth building path? It's obviously a complicated question, and it depends on the individual circumstance of the individual. But the very first thing, if they're in high bad debt, is to take a look at the cost of the debt, and have a plan for that. And if you don't know how to do that, then you need to find people that can actually give you sage advice. Not necessarily some of these debt relief people. But just be fully transparent. Maybe it's embarrassing. Yes, it's probably gonna hurt your ego. But you need to sit down with somebody and say, this is the financial situation I'm in. Because, as I've heard before, sometimes you're in the middle of a forest, looking around, and you can't see past the trees. So that's what happens a lot of times. If you're starting at zero, and you're highly in debt. To seek out somebody, and this is free, by the way. Seek out somebody that's actually where you want to be. Now, I've given you a couple examples. But these people are everywhere. I have people that I've mentored over time, and I have friends that are mentored today. It doesn't matter what age. It just matters the experience. If there's a direction that you want to go, whether it's running a marathon, climbing a mountain, building a business, it doesn't really matter. There are people that know how to do it better than you. And that's what I've done. When I wrote a book, I found somebody to help me write a book. And when I climbed Kilimanjaro, which I did twice, I found somebody that can make sure that I made it to the top, and I did it successfully. When I was running as a young man, I found groups of people that would help me get across the finish line. When I started to create businesses, I had a network in EO and YPO, and friends that were business owners, and they could help me on a number of levels. When I jumped into the social media and the YouTube and all that stuff, I did the exact same thing. I found people to help me. There's plenty of people that will help you as long as you don't continue to think that you're the smartest person in the room. So these people are out there. I fully understand that if you're standing in the forest and all you see is the trees, you have to start walking until you see a path, and then you see a stream, and then you see a river, and then you see a lake, and then you see a road, and then eventually a town. That's all you need to do. You just got to start moving. For those of you who are committed to doing the five steps that I just mentioned, I'm going to warn you that it's going to take you probably a good 10 years to see a difference. You have to be committed for the long term. It took me a long time for the passive income to cover my expenses, and when you do that, when you are now financially free, you realize you cannot believe the freedom that you have and the time that you have to be able to do whatever it is you want, when you want. Just imagine having enough passive income to cover all the expenses that you would ever need and be able to do whatever it is you want to wake up in the morning, but you have to make a commitment and you have to be disciplined, and it is going to take time, and you can never stop learning. The system is designed to keep you poor, but there's one hidden strategy that the wealthy use that I didn't actually cover here. So just click on this next video and I'll show you exactly how it works.