Minority Mindset: When THIS Happens - The Recession Will Start

There's one factor that will determine when the recession will hit, and it's not the Federal Reserve Bank, it's not the stock market, it's not the banks, it's you. Who, me? When people run out of money, that's when you see a recession. Our economy goes through these types of booms and bust cycles, and every time we see an economic crash or a recession, you see the same factors come together. Now, you might have a couple different details, but the same overall factors happen each and every time. You have people that spend money, and then they say, uh-oh, I can't keep spending, so then people go into debt to spend. And now people spend, spend, spend, now even more with debt, and then you hit a breaking point where people don't have the ability to spend anymore. And now instead of spending, people have to spend more of their money paying off their debt instead of spending, which creates an economic slowdown. And that economic slowdown creates an even bigger economic slowdown because now companies are not making as big of profits. They have to lay people off. People get laid off. They're not making as much money. They can't spend as much money. So that causes the economy to slow down. We saw this happen in 2008. Well, people were buying homes so big that they couldn't afford. Then the cost of owning the home went up because everybody, or most people, were on a variable interest rate mortgage. So now all of a sudden, you got hit with a much bigger mortgage payment that you didn't expect. Now you couldn't afford to keep making your payments, and that's what caused the economy to slow down. The economy started to slow down, which then created that ripple effect, caused the dominoes to fall, because now all the Wall Street banks that were betting on the housing market started to get hurt and in pain, and that caused even more pain into the economy. You saw the same thing happen in the 2000 dot-com bust. Everybody was throwing money into these dot-com companies. Everybody thought that if you had a company with the word dot-com on it, that it could never fail. Now people are throwing money, throwing money, throwing money into the companies, and then eventually the money starts to dry up. These companies couldn't raise more money, and that's when things started to fall. We saw the same thing happen in 2020. It was a little bit different in 2020 because we saw this forced economic slowdown, but that was when people couldn't spend for the short term because nobody had money coming in, and when people couldn't spend, the economy started to hurt very quickly. Then, of course, the Federal Reserve Bank and the government started unleashing a tidal wave of free money into the economy in the form of stimulus checks, bailouts, and all different types of money, whether it's to people or corporations. You saw a lot of money go out into the economy to help stimulate the economy, but the thing that then ultimately triggers the economic slowdown is people's inability to spend, which also means people's inability to buy assets, and so people don't spend, meaning corporations start to get hurt because they're not selling as much stuff, and then people also lose the ability to buy stocks. They lose the ability to buy real estate because they don't have an income, and that's what then causes the economy to slow down, and today, we're seeing a little bit of uncertainty in the economy. I mean, we have high inflation. We've been seeing a lot of ups and downs in the economy, but people still have money, and you might be saying, but Jaspreet, what are you talking about? People are struggling to pay their rent. People are struggling to pay for gas. People are struggling to buy things, but the data shows a little bit otherwise, actually. This chart shows the excess savings in households across the board. The orange is the highest income earners, and the purple is the lowest income earners, and what you'll see is that compared to 2020, people today still have a lot more excess savings than they did when the pandemic first hit. It's less than what it was a year ago, but people still have a lot of excess savings. The latest report on excess savings came out on October 31st, 2022, and it said that consumers in America have $1.7 trillion worth of excess savings. Now, to put that in perspective, the highest amount of excess savings was in the later part of 2021, when consumers in America had $2.3 trillion worth of excess savings, and to put the current $1.7 trillion worth of excess savings in perspective, in the first quarter of 2020, people in America had excess savings of less than $250 billion. So we're still many times more than that. What this means is that even though the prices of things have gone up, people still have the ability to buy things. And maybe people don't have the ability to buy it with the cash in the bank, but people still have the ability to buy it with the help of credit and debt, even though the debt cost is rising. And this is one of the things where you have the Federal Reserve Bank looking at this, you have the government looking at this, saying, oh, our economy's strong. People still have the ability to spend, people still have all this excess cash, and then this then will also drive up the cost of things, because people can keep buying more than what can be produced. Let me give you an example. I went to Cedar Point recently, which is an amusement park near me, and they have a few different types of tickets. First, they have your general admission ticket, and then you could buy a fast pass, and then you could buy a VIP fast pass to get you into the lines even faster. And then on top of that, they had this Hello Weekend pass, which will get you into the haunted houses, and then they had a fast pass for that. Now, if you wanted to get a fast, fast pass, which gives you the fast pass into everything, it's somewhere between $350 and $400 a person, but a general admission ticket was about $50. So we bought all these fast, fast pass tickets, which was about $400 or so a person, and we get to the park. And before, if you ever bought one of these fast, fast passes more than a couple years ago, you wouldn't be waiting in line more than 5 to maybe 15 minutes at the max, because there was very few people who were buying the fast, fast passes. Well, we got there, and most rides had a wait of 45 minutes or more. We were waiting for more than an hour at a handful of rides as well. And so now you have Cedar Point looking at this, and they're saying, wow, we have people buying way too many of these fast passes because they don't want to have people waiting an hour to two hours in the fast lane because then that makes everybody else upset and just creates a whole bunch of logistical issues. So then they're looking at this saying, well, we might have to raise the prices of our fast, fast passes. Maybe we're going to change it from $400 to $1,000. This way, less people buy it. That way, people get more benefit out of the fast, fast passes. This is one of the things that causes the price of things to keep going up because you have demand that keeps outstripping the supply. Now here, the supply is a little bit different because the cost to produce a product doesn't really change. But when you have things like, say, clothes, where people see the price of a shirt that was $10, now it's $20, and then people keep buying more and more of it. Well, then the retailer might have to keep charging more because the manufacturer is now being pushed to produce more, and they can't keep producing more. The labor costs keep going up. And so now the cost of the shirt goes up, the price of the shirt goes up, and people still are spending and buying. And this is where you have the Federal Reserve Bank and the government saying, we can't enter a recession yet because people have the ability to spend. Now, this might not sound very good to you, but this is how the system works. When people run out of money, that's when you see an economic slowdown. Just look at the previous crashes that I talked about. Anytime you see a point where now people's expenses start to exceed their income and they don't have the ability to keep spending, keep buying, keep making their payments, that's when you see the economic slowdown. And this correction can then become a crash if you have a whole bunch of debt involved, like we saw happen in 2008, where we saw a little correction in the housing market, but then because people were so over-levered on their homes, that more and more people started to default and turn in their keys on their homes. And then because you have all these Wall Street banks that were betting on the housing market with all this debt, that's what then triggered the whole financial collapse. And this is where you have to understand now that we are at a point where the cost of things are still very high. People are having a tougher time today buying things than they were a year ago. People are having a tougher time paying for their housing. People are having a tougher time paying for their rent. But today, people are still able to pay it. It's very difficult because the cost of living is growing way faster than wages. It's unfortunate that we're seeing the regular person get hurt. And this is why financial education is so important, but I'll get to that in just a second. But people are still having the ability to pay it. So this is where the Federal Reserve Bank is saying, well, our economy is not that bad. People can still pay for things. Yeah, the price of things have gone up, but people are still able to buy it. Maybe they're struggling, but people are still able to make ends meet. Once people cannot make ends meet, once you start to see people sleeping on the streets because they can't afford a home anymore, that's what then triggers a deeper economic slowdown, which can then trigger the other dominoes. And this is where it is so important to get financially educated because the unfortunate reality is that inflation disproportionately hurts the poor, the middle class, and the financially uneducated. And it disproportionately benefits the financially educated. And this is why the wealthy keep getting wealthier. It's not because they own or control the system. It's because they understand how money works. You don't have to be a millionaire or a billionaire to take advantage of it, but you have to get financially educated because inflation is going to be around for a while. And inflation continues to devalue the dollar. What is inflation? It's when you inflate the monetary supply. It's when you create more money. And when you create more money and you just inject it into the economy, now you have a whole lot more dollars out there. And even if you were to distribute it equally, so poor people, middle class people, and rich people didn't get any of the money, let's just say poor people and middle class people got this money, then what happens? Well, poor people and middle class people who are not financially educated will go out and spend. They're going to go out and they're going to spend. Maybe you've got to buy your groceries. Maybe you've got to buy a rent. But then people will also go to the Gucci store, the Louis Vuitton store. You're going to go to the Apple store. You're going to start buying a whole bunch of things because now you have money. When the majority of people have $1,000, they don't think, oh, I'm going to take this $1,000 and I'm going to go invest it, and I'm going to go save it, and I'm going to pay off my debt. The majority of people take this grand and they're going to go spend it. This is why you keep hearing of people talking about stimulating the economy. When the 2020 pandemic happened, the presidents, this is the president when you had President Trump and President Biden, everyone kept talking about why we need to stimulate the economy by giving out these stimulus checks. What does that mean to stimulate the economy? They're not talking about you stimulating your wealth. They're talking about you getting this money and then going to Gucci, going to Louis Vuitton, going to Lululemon, going to Amazon and spending your money. You're stimulating the economy because you're making somebody else rich. So even if you go out and give all this new printed money to people who are not financially educated, who are poor, who are middle class, people get this money and then they spend it. Where? Amazon, Apple, Lululemon. Then what happens? These corporations now have a new fresh influx of cash, and each individual dollar that people have is worth less. So now you have this bigger hoard of cash at the top while regular people have less. And the less that you have, the less dollars that people have, have less buying power now than before. This is why financial education is so important. And if you keep just trying to stimulate people without any sort of financial education, you're going to keep making the rich richer. And this is where you need to be financially educated. That way you can take better care of yourself, you can take better care of your family, and you can take better care of your community because we're going to continue to see this number shrink. Inflation, even if inflation starts to fall, inflation is still high. It's going to take a long time for inflation to come down to the 2% goal that the Federal Reserve Bank keeps talking about. And in the meantime, as inflation is slowly, hopefully coming down, interest rates keep going up. As interest rates keep going up, the cost of living keeps going up, home affordability goes down, car affordability goes down, the cost of living is more expensive, businesses have a tougher time surviving, so you're going to see more layoffs. All these things happen at the same time that people have a lesser and lesser ability to spend. And this is where now you want to be the person that's not just a victim to the system, but now understands the system. That way you can take advantage of the system because it all starts with financial education. But now if you understand how inflation screws over regular people, now you will think, how do I take advantage of inflation? Because inflation disproportionately benefits people who are asset owners. And so now what are you going to do? Well, you're going to start living a little bit smaller, that way you have extra cash to put money into assets. You're going to take this extra cash and you're going to put it somewhere where you can actually get a return on your money, where now you're not just trying to keep up with inflation, but you're actually going to benefit from inflation because even when you have inflation coming down, if your wages are not growing at or faster than inflation, well, you're becoming poorer each and every year. And most people's wages haven't grown at the rate at inflation, which means you got a raise, but you can still buy less stuff this year than last year. And then on top of that, your savings, because most of us are only taught to save our money, and so if you don't have that sort of financial education on how to put your money to work, what do you do? You save your money. Well, if your savings account isn't growing as fast as inflation, your savings are also making you poorer each and every year. So now you got a raise, but your raise isn't enough to keep up with inflation, so you can buy less this year than you could last year, and then you go work hard to save your money because you think you're being financially smart, you think you're doing the right financial thing, so now you work hard to save your money in the bank, but then your bank isn't paying enough to keep up with inflation either, and so it becomes this game, what a lot of people like to call it, there's a rat race, where you're working hard to spin your wheels, but because you don't know how to use your money the right way, you just keep spinning and spinning and spinning, but you don't actually end up anywhere because you're just spinning on this hamster wheel, and you think you're doing the right things, but because you don't have the right financial education, you're not actually going anywhere. This is where you gotta do a few things. First, you need to know how to levy below your means, even though we have high inflation, because you need to have a cash buffer. You want a cash buffer for two reasons. One, to protect you against a financial emergency, and then two, to be able to capitalize on opportunities that might come your way. Second, now that you have this cash buffer, this is where now you want to start investing your money into assets, not into a home that you live in, not into your liabilities, your car, your Gucci, Louis Vuitton. You want to put your money into something that's actually going to make you money. What are those things? It could be stocks, it could be real estate, it could potentially be cryptocurrency, it could be your business, it could be other startup businesses. You want to put your money into assets that are working to grow, that will produce more money for you. And third, once you do that, now you want to be working to grow your income. This is where you want to be working to learn now how to fuel this funnel that you've created. You have built this system where now you're making more than what you're spending, you're putting some cash aside to invest, you're putting some cash aside to save, and now you want to earn more money, that way you can just fuel the system. How can you earn more money? Well, you can earn more money through your investments, you can earn more money through a side hustle, you can earn more money from a side business, you can earn more money from your own business, or you can earn more money from a second job or working hard at your job. This is going to depend on you and whatever it is that you want to do because when you earn more money now, it's going to be able to get you the biggest return because before, and what happens to so many people, is when you earn more money, your expenses magically go up with the new earnings. We've seen this happen for generations where people always keep increasing their lifestyle with their new wage inflation. And this is where you want to get that wage inflation without just inflating your lifestyle until you have a bigger wage inflation. So you want to be increasing your wages like this while increasing your lifestyle like this, that way your wages are growing faster than your lifestyle, that way, yeah, you can live bigger, but you have more money to invest, you have more money to invest, and you have more money to build bigger wealth. I've been talking about why you want to pay attention to what the Federal Reserve Bank does because the more the Federal Reserve Bank raises interest rates, the more impact it's going to have on the economy. Well, the reason why it's going to keep impacting the economy is because as interest rates go up, the affordability of things go down, which will then impact this. So you want to keep your eye on the Federal Reserve Bank because that's going to be impacting this, because as the affordability of things go down even more, it is going to impact the economy even more, and that's what will then tip our economy into a recession, which is why you want to be paying attention to what's happening so you're not scared of what's going to happen, but rather looking for the opportunities that way you can actually take advantage of the opportunities that come your way. Now, of course, we'll be keeping updated on Market Briefs, which is a completely free newsletter that I created to help you stay up to date on what's happening in the financial markets, that way you can make better decisions with your money. It's completely free, and you can read Market Briefs in less than five minutes every morning. So if you have not joined Market Briefs yet, I'll put the link to how you can join down in the description below. If you make $100,000 a year and you save and put aside every penny that you earn, it will take you 10 years to have a million dollars and become a millionaire. Now, it's unrealistic for you to put aside and save every penny of every dollar that you earn. So if now we're being more realistic and instead of putting aside 100% of every dollar that you earn, you earn $100,000 a year and then you save and put aside 20 cents for every dollar that you earn, so $20,000 a year. Now, it is going to take you 50 years to accumulate a million dollars and become a millionaire. Now, the good news is there's better ways for you to become a millionaire than just saving 20% of every dollar that you earn because most people who become wealthy, who become millionaires, don't do it by saving their money. There are three assets which have stood the test of time, which have made more millionaires than anything else. That is investing in your own business, that's investing in physical real estate, and that's investing in stocks. I'm going to talk about these three assets in this order, which are the most risky to the least risky, but also have the most upside to some of the least upside, but even the ones with the least upside have huge upside potential to make you not just a millionaire, but a multi-millionaire if you do it the right way. So make sure you stick with me until the end, that way you know how to do this the right way. And let me start by talking about building your own business because this is one of the beauties of being in something like the United States of America because you have the freedom to start your own business, you have the ability to start your own business, and you're not overburdened with regulations. Now, some of you might be watching this saying, but the United States has so many regulations. Well, if you go anywhere else in the world, you are going to be burdened by so many other regulations making it extremely difficult to even start a business where here in the United States you have the ability to start a business. Now, if you've heard me talk in any of my other videos about building wealth, the secret to building wealth is understanding a term called equity. Now, most of us are familiar with the term equity, but we talk about buying a home. People want to buy a home because that way you can, instead of paying your rent to your landlord, you can pay money to your bank and build equity in your home because when you have equity in the home, you are building wealth. This is what we're all taught, and we're taught that homeownership is good because you can build equity in your home and pay off your home and build this sort of generational wealth when in reality, this equity in your home is some of the worst kinds of equity out there. It's good to be able to own your home, but when we talk about where those dollars could have been spent, you have the opportunity to earn a better return investing this money somewhere else. Now, it comes back to that term equity. Where are other places that you can get this equity? You can build equity in stocks, you can build equity in real estate investments, not the home that you live in, and you can build equity in your own business. Now, if you want equity because wealth is built through equity, there are two ways that you can get this equity. You can either buy this equity or you can build the equity. These two real estate and stocks are primarily equities that you have to go out and actually purchase. So you need money to do that. The more money you have, the more of these assets that you can buy, the bigger the equity that you can build, and the faster that you can build your equity in those asset classes. When it comes to your own business, when we talk about building your own equity in your own business, you don't need a ton of money to start. What you need now is the sweat equity, which is now your time, your effort, your creativity, your labor, your hustle, your discipline, putting in that work to actually build a business. I can give you personal examples. I started here, Minority Mindset, with less than $500. It was significantly less than $500. I think it was only a couple hundred dollars, but we'll go with $500 just to make it an over-assumption. I started making videos off of my cell phone under the alias Minority Mindset because I was working on a different business at the time, and I got scammed and screwed over during the launch of this other business that I was working on. I decided to start a class on a platform called Udemy. This class is no longer there, on how do you launch a business without getting screwed over? I charged $7 for the class, and people really liked it. After that, everyone was saying, Jaspreet, can you please start a social media page with this whole Minority Mindset thing? I decided to start an Instagram page called Minority Mindset where I was posting the same stuff, how you can build a business, how you can manage your money better, because these are things that I was never taught. These were things that I was never encouraged to do. I was actually discouraged from starting a business. I was discouraged from investing. I was discouraged to learn anything about any sort of financial education because I was supposed to be a doctor. My parents are immigrants to this country, and they really, really, really wanted me to be a doctor. Anything that was not a doctor was considered a failure, and so for me, I had to learn all of this myself because I don't have entrepreneurs. I don't have investors in my family that I could look up to. These were things that I had to figure out all by myself, so I started this Instagram page called Minority Mindset because it's all about the mindset of thinking differently than the majority of people. If you don't think differently than the majority of people, you're never going to become successful. That was the premise, and then people said, your Instagram posts are really good, but it's hard to read these captions because I would post these long posts about how you can build your business or manage your money, and people would say, can you go out and start a blog because it'll be easier to read, and I was like, well, starting a blog is very difficult for me because English is my second language. My first language is Punjabi. That's what I spoke at home, and so it would be difficult for me to go and actually start this blog. Instead, I can talk, so I started a YouTube channel. I didn't go out and buy a fancy camera. I didn't go out and buy fancy lights. I didn't have a whiteboard. I had a white wall behind me. Now today, I'm in Manhattan recording this, but before, I recorded my videos off of my cell phone in front of a white wall. I didn't have any fancy audio equipment, and I bought a $25 or $30 light from Amazon, and I bought a $25 or $30 tripod from Amazon, and that was it. I didn't have any fancy equipment. I just started making videos off of my phone, and that's how the whole Minority Mindset brand got started. Eventually, we started to grow, and our channel grew, and with that, more opportunities grew. Our channel started to grow, and I started to invest more time into the Minority Mindset channel because I really enjoyed what I was doing here. I didn't start Minority Mindset with the intention of making money. I didn't even know how you could turn on advertisements on your channel. Someone else had to tell me that I could turn advertisements on on my channel because I didn't really care about monetizing my channel at the time. Then, the channel started to grow, and then I started to spend more time on the channel because I really enjoyed it, and then, I started to find other opportunities. Like one, I created Market Briefs, which is our free financial newsletter. If you haven't joined Market Briefs yet, I got the link for you down in the description below. I started Market Insiders, which is a financial education app, I'm now working on a tax firm that I'm working to build to help small business owners manage their taxes better. These are things that all started with a small investment, and that small investment of less than $500 has now grown into something significantly bigger. We have a portfolio of companies here at the Minority Mindset. We have a team of people, employees, some people who come into the office, some people who work completely virtually, but it all started with a small investment but a whole lot of time. I worked a lot to build Minority Mindset. I was very dedicated to building the brand, to building the name, to building the presence. I spent a lot of hours, a lot of weekends, a lot of nights putting this together. This is where now understanding the equity, the valuation of companies, for example, Market Briefs, is now significantly more than $500. It's significantly more than the amount of dollars that we put in to build it. But this equity that now I own is only worth something because of the effort that I have put in and the effort of our amazing team members. And this all started now again with that little investment. But again, this wasn't my first business idea. It took me a lot of different businesses to get to where I am today. Before this, I was working on a sock company. That sock company did very well. I was making a big profit with that sock company, but I decided to not go forward with the sock company because I wasn't very passionate about socks. Now, for the sock company to become successful, I had to go through a lot of hardships and a lot of hurdles. I got scammed when I started the company. But I had to learn how to market. And I had to go through all the lessons of how to do any sort of digital marketing when it came to that sock company. So that was a very expensive, very time-consuming lesson. And I also learned that because before the sock company, I started an Amazon store. But now I'm selling things not just on Amazon but also eBay. We're selling products online. Things that we were buying from Amazon. Things that we were buying from Alibaba and other manufacturers in China. But in order for me to do this successfully, I had to know how to talk to people. I learned how to talk to people because when I was in college, I worked on an event planning company that I started where I was hosting parties, concerts, and shows. We got to the point where I was hosting one to two events every single week when I was in college. And this was very difficult on its own because now it was very time-consuming. And it was difficult dealing with the people in the event planning company. Dealing with club owners and bar owners. Especially when I don't drink. I'm not into partying. I don't even like the scene. That's why I had to shut that business down because I started it because I thought it was fun. And then I ended it because I hated it. I realized that it wasn't an industry that I wanted to be in. But I was able to get my start in here because I got to meet a lot of the local DJs. Because I used to work at Indian weddings when I was in high school. I used to play an Indian drum called the tol. So I used to go to weddings, play this drum. I got to meet a lot of the local DJs. And then we collaborated to start this local teen party company when I was in high school. And then that then became my event planning company that I started when I was in college. So these things all built on top of one another. And yes, many of them failed. But everything taught me something. Some of them made me a lot more money than others. Some of them I really liked. Some of them I didn't like. But I learned along the way which allowed me to build and build and build and be able to produce content which then allowed me to build more businesses which is something that I really like to do. Now, building companies, building businesses is not easy. It's not for everyone. Entrepreneurship is very hard and it's very risky. You have to work a lot. All the people that are saying that you can work six hours a week from the comfort of your laptop on a beach and not have to stress about anything are lying to you. It is very difficult to go out and start a business and all the risk is on you. However, when you don't know of your limitations then nothing stops you from trying. And that's what it was for me where I had no idea of the risks involved of all the things that I was doing. For me, it was fun. I enjoyed entrepreneurship. I love the idea of producing something, creating something, building something. This is something that gets me excited and it's something that I want to do which is why entrepreneurship made sense for me. But this is where now you have to understand is this something that you would enjoy or is this something that sounds like a nightmare, something that's a big stressor, something that's a big pain to you. Because if you hate the idea of building something, creating something, having all that risk, having all that stress and spending hours and hours to do something hoping it's going to work and potentially failing and having to start all over, if you hate the idea of it don't go out and start a business. But if you love the idea of it go out and start a business because, I mean, I love entrepreneurship. I love the whole idea of working with entrepreneurs but this is where you have to understand it is the most risk, it has the most upside, but it's also the most work. This brings me to number two which is investing in physical real estate. Now the reason why I put real estate above stocks here is because to get started investing in real estate is much more difficult than getting started with investing in stocks because you can start investing in the stock market with as little as literally just one dollar nowadays. But if you want to go and invest in physical real estate you need access to much more capital, you need access to more people and it takes a lot more physical work. There's a saying out there that goes something like real estate has made more millionaires than any other asset class. Now it's hard to verify that but you can understand where it happens when you understand how real estate works because real estate allows for some of the best things possible in the investing world. You can get consistent cash flow, you can get appreciation and you get some of the biggest tax breaks that a tax code has to offer. So the way that real estate investing works now is you're going to take your money and then you're going to go out and buy a property. Now not all this has to be your money. You can use investors money, you can use the bank's money, you can use the seller's money. There's many different ways to get access to this money but you're going to need some of your own money typically to show that you have skin in the game that way you can get started. There are some exceptions to this but in general you're going to need some of your own money and then you're going to go out and buy a property. Now you're going to buy this property with the purpose of making money. That's why when I talk about investing in real estate it's different than buying the home that you live in because when you buy the home that you live in you're not buying it for the purpose of making money you're buying the home that you live in for the purpose of making memories to live there to have something to raise your family. When you buy a real estate investment property the analysis is very different. When you want a home to live in you want a cute home. When you want a real estate investment property you don't want a cute home because cute homes are going to make you cute little profits. When you're investing in real estate the whole idea here is you want to have a building or a house or an apartment complex something that's going to generate cash flow. You're going to have tenants that are living in your property or using your property and they're going to pay you rent in exchange for your value. Your value is now owning this property. And now once you own this property the tenants are going to have to pay you every month that they are in your property. So now that you start getting this cash flow the key is now for this cash flow that you're generating to now pay for your property expenses. That means your property taxes, your insurance, your maintenance fees, your management fees and your mortgage fees if you have some and then put some money in your pocket. If you can do this correctly now you have created a new stream of income from your property and now your property tenants are now paying for all of your expenses and putting some money in your pocket every single month and now you if you do this correctly can get tax breaks on the income that you're getting because when you invest your money into one of these assets you get tax breaks. The way that a system works is it benefits investors and it benefits business owners. Now this can make you upset and angry or it can make you educated and want to actually own the investments or the business that way you can take advantage of these tax breaks because this is how the system works. So now when you invest in real estate and you generate this cash flow you can now deduct a piece of the value you're building against your cash flow every single year through something called depreciation. So if you make $10,000 with a profit typically you would have to say hey IRS I made $10,000 with a profit and I will have to pay taxes on this $10,000 but in real estate it doesn't work like that. You can tell the IRS hey I made $10,000 with a profit. This $10,000 is in my bank account but I'm not going to pay you taxes on all $10,000 with an income. Instead I'm only going to pay taxes on $7,000 or $5,000 or sometimes $0 because of how much depreciation that you can get. Now this depreciation size is going to depend on how big the property is and how valuable the property is so you're going to depreciate essentially take a piece of the value of the property so if you paid $100,000 for the property you're going to take a piece of that $100,000 that you paid and you're going to deduct it against your taxable income which means you have a smaller taxable income and a smaller tax liability and then when you go to sell the property let's assume that you bought a property for $100,000 and then you sell it for $1,000,000 typically you would have $900,000 with a taxable income meaning a big tax bill but with real estate it doesn't have to be that way you can take all million dollars that you just made go out and buy a bigger property that's going to pay you bigger checks every single month that's going to give you a bigger depreciation deduction every single month and you can pay $0 in taxes on this $900,000 of gains thanks to something called the 1031 exchange this is a little loophole in the IRS tax code that allows real estate investors to flip properties for huge profits and pay nothing in taxes today and this is completely legal the IRS tax code says that you can do this now there are a lot of complexities to this so before you go do it make sure you talk to a tax advisor in your area but this is where you have to understand the value that real estate provides now again we go back to the topic of equity what are you doing now you're working to build equity in your real estate investments that way you control the property that way you can get the cash flow the profits from the property and that way now when you sell the property you are the one that gets to capitalize on this equity the appreciation and then when you go and buy a bigger property you're the one that owns it you're the one that controls it you're the one that gets the cash flow you're the one that gets the profits and then when you go and flip it again you get that equity this is where the real wealth is built wealth is built through equity not just through your salary because in America the way our system works I wish they would teach this in school but the way our system works there are two ways you can make money in this system you can make money through your labor this is what we're all told to work for go to school get a good degree get a job why? so you can get a salary but in reality in this economic system that is the worst way to get paid because when you get paid for your labor through your salary it doesn't matter how big it is $50,000 a year or $500,000 a year or $5 million a year when you get paid through physical labor you pay the highest taxes it takes the most work and if you stop working you stop getting paid but now the second way you can get paid is through your equity through your capital this is the way the system works you can build the money you pay less taxes it takes less work and even if you don't work your money is still making you money this is why it is so important to understand this system because becoming a millionaire is not rocket science it's spending less than what you make and then putting the rest of your money to work or if you really want to go out and start a business and hoping and working to make that business succeed of course that's the most risk but if you don't want to start a business the alternative is just earning money spending less than you make and investing as much of your money into these two things as humanly possible now before we move on to number three which is investing your money in stocks if you do want to learn more but how do you actually invest your money and generate this type of passive income me and my team have put together a free guide on investing your money for passive income where it goes through how do you invest your money how do you get these returns and how do you passive income I'll put the link to how you can do it down in the description below the third way to do this is just to invest your money into stocks which is a way for you to invest your money into businesses without actually building a business yourself this is what Warren Buffett does Warren Buffett hasn't built in actual business I mean he has his investment firm but he hasn't built a different type of business he invests in companies he invests in companies like coca-cola and so he takes his capital his money and he builds equity in somebody else's company and this strategy of investing your money consistently and aggressively make him one of the wealthiest people in the world now you don't need to be one of the wealthiest people in the world to achieve this sort of financial freedom that you need in your life but it requires you now to understand how do you invest your money in stocks and actually doing it because now when you invest your money into stocks what you're doing you're investing your money into actual companies so if you're going to go and spend money at apple you're going to spend money at lululemon you're going to spend money on amazon you're going to spend money wherever now it's a matter of flipping the script and actually investing your money to own a piece of the company if you're going to spend your money at apple you're going to spend your money at amazon you're going to spend your money at airbnb you're going to spend your money at airbnb you may be worthwhile to own a piece of the airbnb company now this is the most rudimentary type of analysis that you can make, where if you're investing your money into buying their product, you might as well invest your money into the company, that way you own some equity in the company itself as well. But then, as you dive a little bit deeper, that's when you're going to want to start doing more deeper analysis into the investments that you're making in the stock market, because the reality is for most people, investing in individual companies is not the best thing to do, because when it comes to investing your money in individual companies, you need to have the education of how do you analyze a good investment, and then you need the psychological education of how do you manage your investment, because what happens to so many people is they make an investment thinking that they're going to be a long-term investor, and then six months down the line, something bad happens in the economy, something bad happens to the company, and then they panic, and then they sell. And this is where you have to understand that if you're investing your money for the long term, you don't want to be paying attention to these day-to-day swings, you want to be paying attention to what's happening over the long term. So if you want to be investing your money into individual companies, great, but that means now listen to the earnings calls, pay attention to what's going on with the revenues, pay attention to what's going on with the profits, pay attention to who is running the company, and it's not that hard to do this. Just search them on LinkedIn, search them on Google, see what type of people they are, see their passion for that industry, and look at the type of products that they're creating. Is this something that's just needed today, or is this something that's going to be needed 10 years from now, and how are they innovating for the future? Because you want to be investing your money into a company that's growing, not a company that's dying. So that's the first side. The second side is always investing in your own psychology, because if you're constantly just monitoring what's going on with the price of your stocks, it's going to make you more anxious, and more scared, and more worried about what's going on, and it's going to make you more likely to do things that you don't want to do that are not aligned with your investment strategy. So if you want to invest in individual companies, fine, but that's the type of analysis that you want to do. Now if you say, I don't want to spend all the time, and effort, and energy researching companies, is there any alternative? And the answer is yes. For most people, what you should be doing is, instead of investing individual companies, is just invest your money into low-cost ETFs, or low-cost index funds, and do this passively, automatically, and consistently. And this strategy can make you a millionaire, but it requires you to stay consistent, to make it automatic, and keep it going on from now until the time you retire. How does this work? Well, it's a very simple strategy. Now every time you get paid, you want a piece of your paycheck, the more the better, to be automatically invested into your portfolio of ETFs. Now what is an ETF, or index fund? It is literally a group of companies. An ETF stands for an exchange traded fund, and it's literally a group, or a basket of companies. There are ETFs out there that give you exposure to the biggest 500 companies on the stock market. It's called the S&P 500. There are ETFs out there that give you exposure to technology companies. There are ETFs out there that give you exposure to health care companies. There are ETFs out there that give you exposure to real estate. There's ETFs out there that give you exposure to emerging markets. There's ETFs out there that give you exposure to dividend-paying companies. So you've got to figure out now what type of industry that you want to invest in. You find a few ETFs that you like, and now you build a portfolio of ETFs that you want, and now anytime you get paid, you want to just passively invest your money into these ETFs. Now if you do want to learn more about these types of ETFs, there's videos on my YouTube channel where I talk about the different types of ETFs that you can invest in. You can watch that if you want to learn more about specific ETFs that you can invest in. But this is where now all you're gonna do is you're gonna build this system. There's apps out there that will make it completely automatic that are free. If you want to see what I use, you can check out the links in the description where I post some of my links. Some of these are affiliates, meaning they compensate us if you use them, but these are the actual companies that I use. And so now it's very simple. No matter what's going on in the market, no matter what's going on in the economy, no matter what's going on in the world, every time you get paid, you want some money to leave your account and automatically get invested. And if you do this and stay consistent with it, over time you will see your portfolio grow because now every time you invest more, you're owning a bigger piece of the equity. You're buying more equity every time you invest more dollars in there. And then over time, the goal is for your equity to become more valuable because your investments become more valuable. And this is where if you believe in the American economy, if you believe in the future of America, then you should believe in the future of our stock market. Now does this mean that it's gonna be a straight line upwards? No. You're gonna have volatility. You're gonna have downtimes. We see recessions. Recessions happen consistently. I mean they've been happening pretty much every decade. We see market downturns. This happens. But the goal is now every time the markets go down, now you buy more equity. Every time the markets are up, you're still buying more equity and the equity that you have is becoming more valuable. So it's just consistently working to build your wealth. And now how are we building our wealth? We're doing it through equity. You're buying and building equity here by consistently, passively investing your money. This can be the most hands-off way and this is the most accessible way for regular people to become very wealthy by just investing your money consistently, passively, and automatically. Here with real estate, now you got to be more involved. You need access to more capital, but you can get some of the best tax breaks. You can get consistent cash flow and you can build a lot of wealth through real estate. And then you have building your own business. Now you are building your own equity. This is the most involved. This is the most risky, but it also has the most upside because there's no limit to what you can earn here and you don't need that much capital to start if you are resourceful, if you're willing to work, and if you're willing to learn. So if your goal is to become wealthy, the way that you do that is by building equity into assets, assets that will work to grow in value. That way your equity can grow in value as well. School doesn't teach you to be rich. School teaches you to be an employee. If you want to be rich, you have to understand money. If you want to be an employee, you have to know how to work. The problem is when you spend all your time working, you'll never have any time left over to make any money. Let me explain what I mean. If you think of some of the wealthiest people in the world today, they didn't just get there by working and getting a paycheck for the hours that they work. They did something different. They took a risk. And this is one of the concepts the school never teaches us, but it is the backbone of building wealth in this country. And I had to learn this the hard way. It is the backbone of how you can become successful in this economic system. We live in a capitalist system. You can hate it. You can love it. The reality is this is what the system is. I wish my teachers or somebody would have told this to me and explained this to me instead of saying that the capitalist system is the greatest system in the world or saying that it's the worst thing in the world. Like that doesn't do any good. Explain how it works. That way you understand how the system works. That way you understand how you can win in a capitalist system. In a capitalist system, the risk takers who win get rewarded. Let me explain that because I'm a football guy. When you play football, you don't get an abnormal amount of benefit for an abnormal amount of risk. What does that mean? If you have the football and you're throwing Hail Marys all the time, well the most amount of points that you can make if you get a touchdown is six. If you throw a Hail Mary, you get a touchdown, you get six points. If you do another Hail Mary, you get a touchdown, you get six points. There's no difference between doing a Hail Mary and getting a touchdown and doing a bunch of slow running games, a bunch of slow and short passes and working your way down the field. There's no difference. It's six points if you get a running touchdown. It's six points if you get a Hail Mary touchdown. In this capitalist system, the one that America is in right now, that's not how it works. If you take a big risk, there's no limit to how much you can make. You can 1x, 2x, 100x, a million x your money and your return, meaning there's no limit to how much money you can make and the more risk you take, the more calculated risk you take, the more money that you can make. But if you don't take any risk, you never have the opportunity to get any of that upside. So why do some people become insanely wealthy? Well, most people don't. It's because some people understood how the system works. They took that risk and they were able to win in that risk. Now, of course, some people get this money handed to them. Some people get this money passed down to them. Some people win the lottery. I'm not talking about those people. Those are the outliers. They're not the rule. When you go to your job, when you go to work, you're guaranteed a paycheck. If you go to work, you put in the time, you put in the hours, you will get paid a check. There's no risk there. There's a little bit of risk that your company could go bankrupt, your company could go under, and maybe they can't make a payroll or maybe two payrolls, but your risk is very minimal. The biggest that you can lose is that you can lose your job. But now, when you are the business owner, if you're starting a business, the risk is very different because maybe you have a product where you need to sell a widget. You got to sell something and it takes you three employees in order to build this business. One person's got to make it, one person's got to market it, and one person's got to handle all of your fulfillment and inventory. You have three people that are needed in order to build a business, and each person costs $50,000 a year in salary. Now, you have to front the salary in order to do that, or you have to find a way in order to fund that. You got to pay $50,000 to employee one, $50,000 to employee two, $50,000 to employee three, and now you have to hope that you can make enough money to pay the employees. Maybe for the first six months, you're not making enough money. Maybe you have to pay out of your own pocket. Maybe you have to go and get a loan. Maybe you have to go and raise money from investors and take that risk in order to be able to pay these employees. But then maybe six months go by, and then you start to break even. You haven't made a dollar yet, but your employees who are coming to work every single day are getting paid. They're coming into work, and they're putting in the hours, and they're getting paid. They're taking a risk that they're hoping that their company doesn't go under, but your risk is now you have a loan that you're personally liable for, so if you don't pay the money back, they might take your car away from you, or they might take other things away from you. You have investors that are relying on you, and so if you don't pay them back, they're going to be upset. They might come after some other stuff, depending on what your arrangement with the investor is, or you invested your own money, and so if you don't make your money back, well, that's your own money that's lost. You just lost $150,000 because you had to pay these three employees for the year, but maybe month six happens, and now you start to break even. Now, you can make your debt payments. You can make your investment payments, and you're able to pay the employees. You're still not making any money, but your employees are making money. Now, another 12 months go by, and now you're not making $50,000 a year. You're not making $100,000 a year, but you're making $5 million a year, and let's assume that your costs have not gone up. You still have the same three employees as before. Each of these employees are making $50,000 a year, but now you're making $5 million a year as a company. Yeah, you might want to reward your employees. You might want to give them a raise. Maybe you give them a profit share bonus. Maybe you give them some sort of revenue share bonus. That's up to you, but all that other upside, all those other millions of dollars are now yours because you are the one that took the risk to start this business idea. In this economic system, if you take the risk, you get the reward. Now, maybe you don't like that. Maybe you get angry, and you want to fight about it, but this is where you got to understand. Do you want to be right, or do you want to be rich? If you want to be right, and you want to argue about it, that's fine. That's completely up to you. It's a free country, or you can understand it, and you can work to be rich and learn how the system works because the reality is this is how the system works. It's happening around us right now, but you got to also understand that this risk and reward can also work in the opposite direction. Let's assume that now instead of starting a business where you're selling a product, you're investing in real estate, and so now you're working to buy rental properties, and you built up a portfolio, and things are going well because property prices are going up, rental prices are going up. You're making so much money. Things are going great, but then something like 2008 happens where now home prices are going down. Tenants can't pay. Well, a tenant doesn't have that much risk. They're in a contract to pay their lease, but the most that they can lose is whatever's in that contract, and usually they can walk away and just lose their security deposit. You really don't have that much at risk when you're a tenant, but you as a landlord, as the investor, as the owner, now you're taking on all the risk, and so if your tenant leaves and property prices fall, now maybe you go underwater on your properties, and you can't refinance, and if you can't find another tenant who's willing to pay, now you're stuck. Maybe you have to cut your rent prices. Now, if you cut your rent prices, maybe you lose out on all of your profits. Maybe you are relying on your real estate business in order to pay for your lifestyle, but now you have no income coming in because all of your money is going to pay off all your expenses, and if the economy continues to go down, and now you have this real estate business that you are relying on, and now tenants aren't paying. Tenants are damaging your property because they're angry. They're upset with what's going on in the economy. They damage your property, and now you have these broken properties, and you have to keep lowering your rents that now you're not making money. In fact, you're not even making enough money to make your payments. You can't even pay your contractors, and now you're underwater, and you have no money coming in anymore to pay for your lifestyle because now your real estate was funding your life. Now, not only do you not have money to pay for your lifestyle, to pay for your expenses, but you don't have money to pay back your mortgage lender for all of your properties, and that's when they come in and they foreclose on you. Now, your credit score is getting hit. The bank might put a multi-million dollar lien on you. The contractors might be suing you for this back money that you owe them, and now you're dealing with all the stress while you have no money coming in, and now you have to go and figure it out. So, you have risk, which is now you investing in real estate. You have the risk of the downside. It's the same thing in business. It doesn't matter when you have risk. You have risk of the downside, but the benefit is when things work in the upside, you get to reap the rewards of that. This is how the system works. The nice thing about being alive in this day and age is that you can take advantage of a lot of the upside without taking on all of the downside risk. How? Well, there are so many different investment platforms out there right now which will let you invest your money without worrying about having to lose your home or lose your car, that you can invest your money in the stock market, and now the most you can lose is the money that you invest. And investing in the stock market is very accessible today, where 10, 20, 30, 40, 50 years ago, it wasn't so accessible. Because now, if you want to invest in the stock market, there are so many free brokerages out there that you can open up on your phone. Back 10 years ago, there were no free brokerages out there. You had to pay a commission, so it was much harder to do that. Now, you can start investing with $1. Same with real estate. There are crowdfunding platforms that will let you invest in real estate, get exposure to real estate with as little as $1,000 or $100, some even $10 nowadays. Now, the nice thing is you get to get some of the upside, where now you can get some dividends, you can get some appreciation, but the most that you can lose is the amount of money that you have to put in, and you don't have to deal with any of the headaches. When a tenant destroys your property, when someone sues the real estate owner, you're not the one dealing with that. You're just investing your cash. You can also invest in startups now. Right now, you can invest in companies that you like, that are innovative for less than $100. There are so many crowdfunding platforms out there right now. One of them is Republic. One of them is StartEngine. One of them is WeFunder. I'm not paid by any of these companies. These are just some of the platforms out there that allow you to invest in startups. Yes, it's very risky because most startups will fail, but you also have the potential for a lot of return. This is that abnormal return versus risk benefit that you can understand, where in this system, the risk takers are the ones that are benefited. We are never taught this, but this is the reality of how the system works. This is what's happening around us right now, and you can either spend your efforts trying to be right, fighting the system, or you can get rich understanding the system, and then taking better care of yourself, your family, and your community. This all comes back to the whole concept of equity, which I'm going to talk about in just a second, but if you do want to learn more about how you can invest your money, even if you don't have a ton of money, and start generating passive income, I put together with my a free guide on how to start generating passive income, which will break down different passive income generating strategies, how you can start investing your money, even if you don't have a ton of money, so you can start generating some income. If you want to read this guide, it's completely free, and I'll put that link for you down in the description below. But this is where we come back to the whole concept of equity, which is how wealth is built in America. In America, wealth is built not through your salary, but through equity. In this capitalist society, there are two ways that you can earn money. You can earn money from your labor, or you can earn money from your capital. Your labor is your salary. This is your paycheck. You go into work, you get paid. Very little risk. On the other side, with your capital, this is much riskier. You're investing your own money. Either you're building equity, or you're buying equity. Building equity is going out, and starting to invest in real estate yourself, is going out and building a business. This is the most risky, but also has some of the biggest returns. On the flip side, instead of building the equity, you can just buy the equity. This is investing your money. This is investing your money into stocks, investing your money into the real estate crowdfunding platforms, investing your money into the startups, because now your risk is so much less. The most that you can lose is how much money you put in. There's no limit to how much money you can make, but you're going to be limited in the sense that if you went out and actually built the equity yourself, if you were building the company, if you were the one that was actually owning the real estate, you would get more upside. But there's still no limit to how much you can earn, because if you invest in a company or the stock market and the tenfold, no one's stopping you from getting those gains. This is where you want to be able to understand the system and how the system works. That way, you can use the system for your advantage. See, we're taught to go to school to get a degree, to get a job. When you go to school to get a degree, to get a job, you're getting a salary. That's nice as a way to start earning a paycheck, but a salary is never going to make you wealthy. Wealth is not built through your salary. Wealth is built through equity. What we should really be taught is go to school if you want to get a job, fine, but working to build equity. The whole system revolves around building wealth through equity. What we should be learning is, okay, here's a class on how do you become wealthy. It's through building equity. How do you build equity? You can buy it, you can build it. The whole system is revolved around building this type of equity, and that's where real wealth is built. The last thing that I want to mention about this is the whole idea of getting rich quick because there's this whole movement or industry on the internet where people show off, I'm 25 years old, I'm 35 years old, and I have millions and millions of dollars, and it was so easy. I did it in six months. The reality is for 99.9% of us, it's not that easy. It takes a ton of work. We don't get rich parents who are just going to give us millions of dollars. We don't win the lottery. We don't find this magic idea that's going to magically make us millions of dollars in six months. For the majority of people, the way that real wealth is built, and I'm talking about real sustainable wealth, not some accidental, I threw my money into a meme stock and I turned into a millionaire overnight. The real sustainable long-term wealth is built through long-term investing for regular people. Not everybody is meant to be an entrepreneur. Entrepreneurship is hard. It is very difficult. It takes a lot of stress. It takes a whole lot of different types of way of thinking. Not everybody's meant to be a real estate investor. It's got its own headaches. It's got its own stuff, and so if you're not meant to be a real estate investor, that's okay. If you're not meant to be an entrepreneur, that's okay. You can still be a business owner without actually running and operating the business. How? By owning it through your capital. Taking some of the income that you're making and instead of spending it all, putting it to work. Investing this money. Investing this money, whether it's into the stock market, whether it's into real estate funds, whether it's into actual real estate, whether it's into startups, whether it's into cryptocurrency, whether it's into whatever type of investment that you believe in, that you understand, but now you can put your money to work. That way you can build wealth, but if you want to really build wealth over the long term, for the majority of people, time has told us this, that the way it's done is through slow, long-term investing. Constantly investing a piece of your paycheck every time you get paid and slowly doing this week after week, month after month, year after year, letting your money grow, letting your money compound, and letting your money build you wealth over long term because if you do this for long enough, you will be able to become very, very, very successful, but it requires you just to get started, and it does not matter how much money you're starting with, whether it's $100,000, $1,000, or $1. You need to get started, and then you got to keep learning. Keep investing in your own education, and thanks to YouTube, it's completely free to start doing that, and so then you can start learning from YouTube, then you can start reading books, and then maybe you can start taking classes. If you find a class that's going to help you excel at whatever it is that you want to learn more about, but this is that way you can capitalize on the system, but it requires you to actually understand the system instead of just complaining about it and hating the system. The cost of living is significantly higher now than it was 12 months ago because of the high inflation, and as people's and businesses and national debts begin to readjust at the higher interest rates, people's businesses and our country's costs are going to go up significantly probably.