How to Protect your Assets Against the Upcoming Recession

Chris Miles: Means you're gonna work until you die. And that was my dad's story. Right? I mean, he's kinda on the forefront of the baby boomers. He was born during World World War two.

And I remember sitting down with him, this was twenty years ago, and I'm looking at this, and he said, hey, look at my finances. I'm 61 years old. I wanna retire. Let's do this. So I sat down with him, saw his money for the very first time in my life.

I've been doing everything right. And then when I sat down with him, I said, dad, well, based on what you have here, what you've saved in your four zero one k, even though you've been maxing it out, you've you paid off all your debt, The problem is you better hope you die in five years because you will run out of money in five years Mhmm. Without Social Security. Right? He was 61 at the time.

I said, with Social Security, you could stretch out a little bit longer. And he's like, well, I don't want I don't want that to be the case. I I like to live. Yeah. And I said, well, I don't know what to do for you.

Right? And that's the thing. Like, as a financial advisor, he was doing everything right. That's what got me out of financial advising. When I realized even someone who did everything right

Steve Trang: Mhmm.

Chris: Couldn't retire, who expects anybody else to? And we're seeing that today.

Steve: Hey, everybody. Thank you for joining us for today's episode of Real Estate Disruptors. Today, we've got Chris Miles with Money Ripples and Chris flew in from Provo, Utah to talk about how to protect your assets in the upcoming recession. Now I wanna make sure you create a 100 millionaires. Information on the show alone is enough to help you become a millionaire in the next five to seven years.

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Alright. So we put in a big, you know, catchy clickbait title. Right? How to protect your assets in the upcoming recession. So let's jump into it.

I guess let's jump into in in one way. Recession. Like, we all know the recession's over.

Chris: Right.

Steve: Right? I mean That's what they're saying. They're telling us on on television, and it is, like, recession be true. Has to

Chris: be true. Has to be true.

Steve: Right? So you don't feel like the recession's over?

Chris: No. It's a bunch of crap. It's total crap. Yeah. I mean and understand too.

I mean, we got a lot of political agendas going on here. We got the feds stuck between a rock and a hard place Mhmm. Between political pressure and then what they're supposed to be doing. I mean, there's all kinds of weird stuff going on. And and even if you've been if you're not quite even if you haven't been listening to the news, you can still feel like there's something not quite adding up.

Right? How is it that we have the lowest unemployment rate in history? How is it that still, even though we had skyrocketing prices and skyrocketing inflation, still people seem to be doing just fine even though their wages haven't even kept up with that inflation. I mean, you have all this stuff happening. It just it just doesn't seem to add up, does it?

It seems like there's gotta be at some point where it has slowed down. And and and things never go in a straight line. We know this. I mean, we've been around the block long enough.

Steve: Yeah.

Chris: You know, I've got enough gray hair to to in fact, most of these green hairs came from those those times. Right?

Steve: Yeah.

Chris: It's from all that crap that's happened, and it there's always cycles.

Steve: And so We talk about how it's not adding up, you know. Like, I remember even, like, I wanna say six months ago. Heck, it might have been a year ago. Mhmm. We're just watching everything happening, and we're saying this inflation is unsustainable, and we're gonna have a recession.

And, like, the feds are raising their rates to force pain upon us. Uh-huh. And yet we go to the mall, and you can't find parking.

Chris: Right.

Steve: And you go to the restaurant, and it's still, like, a forty five, sixty minute wait. Mhmm. And it's like the data tells me there should be more problems.

Chris: Right.

Steve: But there doesn't appear to be a whole lot of problems, at least Mhmm. On the outside. It seems like everyone's continuing on I guess, no big deal.

Chris: Yeah. It's like the Lego movie. Everything is awesome. Right. Everything is awesome.

Everything is awesome. Right. Yeah. It it you're right. Because the feds actually have said they've admitted.

They said their whole purpose is to, one, get the rates higher than inflation. But, two, they also wanna make sure that there's some kind of pain.

Steve: There has to be.

Chris: There has to be some pain. Pain.

Steve: Yes.

Chris: Like, they want layoffs. They want people to lose their jobs.

Steve: It's not a secret. This is not a conspiracy theory like they said. Over and over. We need we need more suffering. It's not not their words.

We need more job loss. We need more unemployment. Yeah. They want

Chris: they wanna see it in check more because they know if there's full employment, it's gonna keep driving prices up, and they wanna control that inflation.

Steve: Right? Right. They wanna adjust demand they wanna reduce demand. Mhmm. And the best way to reduce demand is for people to lose jobs.

Chris: Which is such a dumb way to do it. There is multiple ways to do it. Right? That's the old method they've always used.

Steve: Well, they only have one tool.

Chris: They only have one they're only using one tool, which is the interest rates. Right? Yeah. They said they had multiple tools in their toolbox, remember, in 2020. Right?

And they talked about selling off their balance sheet. They're not. They're not slowing down their spending. They're still printing like crazy.

Steve: Mhmm.

Chris: So if they really want inflation to stop, why do they keep printing more money? Why do they keep making it easier to keep full employment? It just it just doesn't seem to make sense.

Steve: Have they have they not slowed down? I have not paid attention to the money printing.

Chris: Yeah. The money supply is is still higher than it was pre 2020.

Steve: Well, it's definitely higher. Yeah. But But have they not tried to call some of that back, or is is raising interest rates not a function of calling? I'm still kinda detached not detached, unclear on this on this principle. I thought by raising interest rates, it's causing borrowing to go down.

By causing money to by causing borrowing to go down, they are reducing balance sheets. But is that not how it works?

Chris: It's not. No. I mean, the the feds I mean, they have their own balance sheets, of course, and they're supposed to be selling it off. Mhmm. But in March, they actually bought a bunch more.

So they actually pumped more money in the economy Mhmm. Which is, again, is the opposite of what they claim. Right? They were still raising rates, and then they pump more money in. Mhmm.

So it's so it's like one thing is not like the other. Right.

Steve: It's

Chris: not quite matching up.

Steve: They're still printing money.

Chris: They're still printing money. They're still going bullish on the dollar or really and and probably if you think about it with all the the debt and the spending that needs to happen, right, especially with the government having their their debt crisis happening, like, oh, where's the ceiling gonna be? You know, they they they're obviously caught in a tough place because they're elected by politicians, but they're supposed to be independent of politicians. Right? But it's like saying, oh, no.

I I don't care about my boss. No. My boss doesn't influence me. Yeah. But the boss is the one that hired you.

Of course, they influence you. Yeah. And they can remove you. If they don't like what you're doing, if it makes it look less favorable for their party Yeah. They're gonna fire you.

Right? So so we got all these little these games going on here that's affecting us day after day. And you like when you follow the data, like, credit card spending is up. Balances are higher. They actually hit about the $1,000,000,000,000 mark

Steve: at this point. Well, I I would say not that spending is up, although that that that may be another way to look at it is that total credit card debt is higher than it's ever been before.

Chris: Right.

Steve: Right? And people were paying down some of their debt with a stimulus money. Yeah. They were. Right?

So, like, we saw credit card debt as a country Mhmm. All, altogether go down. Yeah. And then the moment the stimulus check stopped coming, the people didn't adjust their lifestyles.

Chris: That's right.

Steve: They just maxed out their credit cards.

Chris: Yep. Savings rates go down. So that's the thing you watch. You watch what happens to savings rates, credit card balances, and then you look for, like, auto loan defaults. Right?

Because when you get auto loan defaults, yeah. That's not good because that's something that people usually need. It's like house foreclosures, but it usually comes first. Mhmm. Right?

And so we're seeing that number go up. So everything is showing that people are just consuming the money that was given to them three years ago.

Steve: Yeah.

Chris: And now we're kinda moving to a place where they're just like, oh, I'll spend out you know, get rid of whatever I can, sell off my assets, you know, things like that. But at what point does it get to where they say, I got numb nothing left?

Steve: Mhmm.

Chris: Right? I'm stuck. That's kinda what I'm seeing happening right now. And when that happens, that's when you're gonna see things really hit the fan.

Steve: So when you're saying you're seeing these things happen right now, what does that mean?

Chris: That means, like, when you look at, like, the quarterly or even monthly numbers, like, you're watching that trajectory, they're going like, balances are going up on credit cards, Defaults are going up. Savings are going down. When you see that happening, eventually, people run out of money. Right.

Steve: When

Chris: they run out of money see, that's the real thing. It's always about money flow. It's not about, you know, the interest rates and stuff. Like, the interest rates, the whole purpose of it is to stop people from spending more money, from using money to grow grow and expand their businesses and whatnot. And that's true.

That does help. But, ultimately, with the consumers, like the everyday Americans, if they don't have money to really spend more, they're gonna start cutting back more and more and more because they're not gonna have anything left. They have to. They have to. Right?

Especially if if they don't give them more credit. And it's just the government. If you don't give the government any more credit, right, they have to actually prioritize what they're gonna spend money on. They're gonna start cutting back. That'd be nice.

It would be nice. Not likely. Right? But that that that's what happens to us. Reality is we don't really get that luxury.

We're not given this unlimited line of credit. Mhmm. At some point, it's gonna get to a point where they're gonna say, either I have to get that second job, which many are starting to do, or two, I'm gonna have to cut back my spending, and that means less money flowing. And when there's less money out there, when people start holding on to their money out of fear Mhmm. That's what goes from a recession to a depression.

Steve: Are we seeing that? Are you're saying you're seeing more people getting second jobs?

Chris: Yeah. Yeah. I've I've started to hear that even just from normal people. Just picking up a little extra jobs, doing a little bit of Uber on the side or something like that or DoorDash or whatever it might be. There's starting to be people that are trying to raise money, even contractors.

Like, often when we hire contractors for a house, almost all of them have a full time job, and then they're trying to do it like a night job by doing these contracts on the side.

Steve: Got it. Okay. So because what I've seen, like, it seems to go really popular in the last couple years. I haven't seen it so much recently, and maybe I'm just not the audience where side hustles. Yeah.

Or, like, side hustles was, like, the biggest thing. Like, what are some things you can do? Right? And, I did an actual whole reaction video I did with my daughter about it. Right?

Like, there was, like, pressure washing. There was, like, selling knickknacks on Etsy and this and that. Yeah. So are you saying that right now people are picking up more side hustles as well, or is it just getting second jobs?

Chris: I I would say side hustles more.

Steve: Yep. Got it. Okay. So you you you feel like this recession is happening. And what the title again is how to protect your protect your assets from this upcoming recession.

Yeah. We can't predict the future, but, like, how do you feel it's gonna look? What's the time frame?

Chris: Yeah. You know, time frame, it's hard to say. I mean, I expect it to happen already, and it seems like again, it's almost like they're trying to create this soft landing as the feds will say. Right? They're trying to push it out.

But at some point, markets always have to come back into balance. So soft landing, is it just you create a bubble and you're, like, trying to keep the bubble there

Steve: Mhmm.

Chris: And maybe it can slowly start deflating instead of instead of popping. I I think at some point, it has to pop. If it doesn't, I'm actually more concerned because Really? Yeah. Because think of what a soft landing means.

It means no growth. Right? And it's kinda like this. Like, when you see stock markets, they go they go up, and they go down. Right?

And and usually the the faster they go down, the faster it stops and starts to go back up. Right. What happens when it goes flat? Like, the stock market in the nineteen seventies was basically flat for an entire decade. It didn't really go anywhere.

Steve: Really? It

Chris: had ups. It had some downs, but it kinda just stayed right there flat. It was a it was a decade that no one would wanna be in the stock market. You're like, I might as well put my money in the bank and make more. And so I think it's worse.

If you try to delay something,

Steve: all

Chris: it does is it just keeps it going longer. Yeah. Just imagine, like, the stock market in any market. Right? It has this invisible line that goes up, and it bounces off that line.

They call it trend lines.

Steve: Right?

Chris: Well, if all of a sudden that trend line is still going up and you go way high and then you just go flat, you gotta wait until that line catches up. Yeah. And then they meet, but it can be years and years down the road. That's what maybe we'll refer to as stagflation. Right?

That's worse than inflation in many ways.

Steve: Why is stagflation worse?

Chris: Stagflation is worse because it's nice when you have those market downs. Right? Think about in the real estate space. I mean, we we pray for crashes. Mhmm.

Steve: Right?

Chris: I mean, I mean, how many of us would love to go back to 2010 or 2011 and say, you know what? I'm so glad I've got a couple million dollars in cash to go buy whatever I want.

Steve: Well, when COVID happened

Chris: Mhmm.

Steve: I was ecstatic. Yeah. Because I was around in 02/2011.

Chris: Mhmm.

Steve: And I was watching all the rich people just gobble up properties.

Chris: That's right.

Steve: And I was like, man, it sucks that I'm broke right now.

Chris: Uh-huh.

Steve: This sucks. But the next time this happens, I'm gonna be ready. And, man, beginning of COVID, I was so ready. Mhmm. And then it didn't happen.

Chris: Then it didn't happen. It was like magic.

Steve: Right.

Chris: Yeah. And look at the great depression too. Great depression was a hard crash. Right? And it and it didn't just happen once.

There's multiple recessions within the nineteen thirties. Well, think of, guys like like Joseph Kennedy. Right? John f Kennedy's dad. So he was a bootlegger in in the twenties, but then, of course, they legalized alcohol and his business wasn't great.

His net worth in 1929 was $4,000,000. By 1935, his net worth in just six years went from 4,000,000 to a $100,000,000. Why? Because he had cash, and he went and he bought a bunch of commercial property in New York because it tanked. Right?

So we like it when things come back into balance. We like those opportunities. Right? That's why whenever you hear people say, do this, invest in this. No.

Do the opposite. Right? You know, if someone says, like, in 2022, one of the things I did to protect my wealth was everybody was saying, deploy all your capital. Get your cash out because you don't wanna lose inflation. Don't you dare keep in the bank.

Don't you keep it steady. Don't keep in that whole life. Right? Just get it out there and invest. And, yeah, I was doing investing, but when I started hearing everybody say that, even the the dumb money, as they say, like, even the average American, that's when I knew was the time to start building up more cash.

Right. And and then, of course, you know, that's what I'm preparing for for that very reason. So getting back to your point, stagflation. Right? Why is it bad?

Because without those crashes, if you can just imagine imagine real estate prices just staying elevated, not going up, not really going down. Let's just say they stay pre elevated, just stay by the same level. Well, how's that gonna work when you're I mean, you can still do flipping in that business. Right? You can still do stuff, but the consumer's gonna say, while I'm waiting for the price to go down, I don't feel any better.

My pay is not going up either. Mhmm. So I'm not getting increase in pay. The prices are coming down. They're basically still whining about the same things they're whining about until they say, well, this is my reality, but now I can't afford it anyways.

Steve: So stagflation then just basically stagnant?

Chris: It's stagnant. Right.

Steve: Got it.

Chris: But it's stagnant, but it's kinda like if you're not winning, you're losing. Right? It's it's very much that that way. And so you need those market cycles. Even though market cycles can hurt, we need it.

It's just like winter. You need winter because you need it to wipe things out. I know you're in Arizona. There's no such thing hardly as you you put on beanies when it's 65 degrees outside. I get it.

But, but, you know, but for the most part, like, you know, even even in Arizona, right, plants actually kinda refresh themselves. They kinda have to die. Just like fall, it has to die and go back in the earth to create something new. Right. Market cycles are no different.

They need that kinda death. It doesn't mean depth for you, however. It does mean that just needs a cycle.

Steve: Right. So we're talking about it should happen already time time wise, but it hasn't happened yet.

Chris: It hasn't.

Steve: So do you feel like it's, like, knocking on a door, like, it's just any day now, or it's, like, quarters?

Chris: It can either be a couple quarters or they could be what they they call kinda like the black swan event, like something happens. I mean, like, as we're recording this, we're talking we you just recently heard about heard hear it about. We just recently heard about, the credit rating of The US just by one beer one one credit rating service. Right? Saying, oh, we don't like it.

We're gonna give you a double a rating instead of the triple a.

Steve: Yeah. And that that was just a couple days ago. Who was that?

Chris: That was, not Moody's. It was,

Steve: Fitch. Fitch. Yeah. I saw that. Yeah.

Fitch. Fitch. Fitch. Where did that happen? Yeah.

Yeah. Yeah. I saw that. Yeah. And and and administration immediately was like, woah.

We don't agree with this. Like, everything's fine.

Chris: Yeah. Exactly. Like, no. No. No.

No. They're they're just being mean. You know, I I know I know what party they are. Right? They're trying to blame them, say, oh, you're just too Republican for us.

But, no, they downgrade them saying, no. You're you're you never solved the debt ceiling issue. You guys still still deal with Capitol Hill, you know, twenty twenty one January sixth thing. You're right. Like, you guys don't have anything figured out.

You're not any better off.

Steve: Yeah. Not only are you not solving, present problems, you're not thinking about the future. Yeah. You're only looking backwards.

Chris: You're kicking the Social Security can down the road. I mean, we got baby boomers that are already in retirement right now. Right? I mean, we're we're almost having gen x starting to enter retirement. They don't have enough money for all that.

But, again, they just say, oh, the next administration will deal with it. And they'll just keep kicking it down until it hits 2026 or 2028, and they're gonna be frantically trying to figure things out because

Steve: they will be Well, we can't fix anything by then. No. I don't know if you can fix it today. We definitely won't be able to fix it by then. Okay.

So, we don't know exactly when, but, like, how bad do you think it can go?

Chris: Well, give you example. I mean, I I watch the stock market a lot. Right? Because most people I talk talk to on my podcast are people that are stuffing money in their four zero one k's. They're, you know, the average people just trying to do that kind of stuff.

Steve: Very unfortunate.

Chris: Very unfortunate. Yeah. But, but the thing I watch with the stock market, like, I I also watch trend lines. I used to be a stock trader. Mhmm.

So I look at the S and P 500 trend line.

Steve: Oh, you're the anti

Chris: I'm the anti financial adviser. Right?

Steve: Yeah.

Chris: Yeah. So but I used to be a stock trader. I used to be a financial adviser as well. I even taught people how to trade stocks and options. Mhmm.

When you look at that long term trend line. Right? So the last time that SP came down and hit a bottom and then bounced back up was 2008, 2009. And then it's been up higher above it. And it could take decades before it comes back down again.

It doesn't mean it's gonna come back down. But if the S and P were to come back in a balance again, it's right now, like, right around 4,500. Right? It would have to come down to, like, 1,800 if it tried to do it today. Now, it probably won't because, again, it was gonna meet somewhere in the middle.

But still think about it. What if it went from 4,500 down to 2,000? That's more than a 50% loss of people's retirement accounts, especially those that are baby boomers, where I know most financial advisors are telling you not to not to take your money out of stocks because you need to put it in because you can't make enough in all these other bonds and things like that. So if they put a lot of money in stock market, what's gonna happen to them? It's gonna create total panic.

It's gonna create hysteria. If it does even even if it drops, I would say, even if it drops 40%, we would see some major major panic happening.

Steve: Yeah.

Chris: So we that's the thing. It's like, if that were actually to come back into balance again and and then bounce, great. You know, you can make money off of that too if you're on the right end of it. But if you're the one riding that roller coaster down

Steve: Mhmm.

Chris: That's a scary ride to be on.

Steve: And then your concern is how bad it could be is that everyone's stock portfolio would adjust by more than 50%.

Chris: Oh, yeah. And think about that. If that happens to you, right, I mean, if you're retired and all of a sudden you watch your money disappear, you're gonna be wondering what to do with the rest of your life. You're gonna wonder how I mean, your most the average $4.00 1 k balance is, like, less than a $100,000.

Steve: Mhmm.

Chris: Right? Even for retirees. So they're trying to live on as little as they can while they're living on Social Security. Mhmm. So that's gonna put a lot of pressure on Social Security.

It's gonna put a lot of pressure on them saying, well, maybe I gotta keep working to into my seventies now or go back to work. And then, of course, now everybody's fighting for the same jobs.

Steve: Mhmm.

Chris: Right? All this kinda craziness can happen.

Steve: And That's kinda happening right now. I think I think that's one of the reasons why unemployment's so low is that people won't quit because they can't afford to quit.

Chris: It's true. Actually, that they just I just saw a recent survey from, Northwest Mutual actually came out. And even Transamerica did a study too that even retirees, the current baby boomers, are saying, you know what? I'm gonna retire at 71. Yeah.

So the younger you go, the younger they think they'll retire.

Steve: Mhmm.

Chris: So, like, you know, you got the,

Steve: you

Chris: know, the millennials and even, like, the Zoomers. Right? Mhmm. They're like, oh, I'll retire at 55 or 60. But those that are, like, 60 are saying, no.

I gotta wait till at least 70.

Steve: Yeah. It's depressing.

Chris: It's depressing because it just means you're gonna work until you die. And that was my dad's story. Right? I mean, he's kinda on the forefront of the baby boomers. He was born during World War two.

And, you know, for him, I mean, he I remember I was I was his first financial adviser. Right? Probably the only financial adviser. Mhmm. Because, and I was shocked because I remember sitting down with him.

This was twenty years ago. And I'm looking at this, and he said, hey. Look at my finances. I'm 61 years old. I wanna retire.

Let's do this. So I sat down with him, saw his money for the very first time in my life because he never opened up. He was the penny pinching, saving like, really save save save away slave. Right? He was in saving slavery.

He was saving his four zero one k, paid off his house debt free by the time he's, you know, eighteen years into his mortgage. I mean, he was like Dave Ramsey's best friend. In fact, Dave Ramsey probably learned from my dad. I guarantee it, because my dad's older. Alright.

So anyways, okay. I can't guarantee it. But, but anyways but, I mean, he'd been doing everything right. And then when I sat down with him, I said, dad, well, based on what you have here, what you've saved in your four zero one k, even though you've been maxing it out, you've you paid off all your debt, Problem is you better hope you die in five years because you will run out of money in five years Mhmm. Without Social Security.

Right? He was 61 at the time. I said, with Social Security, you could stretch out a little bit longer. And he's like, well, I don't want I don't want that to be the case. I I like to live.

Yeah. And I said, well, I don't know what to do for you. Right? And that's the thing. Like, as a financial advisor, he was doing everything right.

That's what got me out of financial advising. When I realized even someone who did everything right Mhmm. Couldn't retire, who expects anybody else to? And we're seeing that today. The same situation is playing out over and over and over, yet are we seeing that in the news?

No. Hardly at all. Like, we'll see people saying they're not prepared for retirement or people have unrealistic expectations of retirement. We hear those kind of things based on the numbers not matching up with their thoughts. Most people think they're gonna be able to retire, and they can't.

Right. And so I mean, even real estate investors, I mean, it still affects you too because if these people go broke, this is gonna affect your business as well. How? Well, think about it. If people start holding on to their money.

Right?

Steve: Mhmm.

Chris: If money stops exchanging in the in the economy, everybody stops getting paid.

Steve: Yeah.

Chris: Right? Now it doesn't mean you can't make money in that economy because, obviously, I just mentioned Joseph Kennedy made lots of money in that that economy. Right?

Steve: But he was just buying depressed assets.

Chris: He was. And he had a lot of cash going in. Right. So you understand the Great Depression, a one you know, we always hear about people having a worse life, but only a third of people actually were worse off during the Depression because there's about a 20 to 25% unemployment rate during that time. Right?

Well, 33% had to live on less. Those are the stories we hear about in the news. The other third

Steve: Oh, and I think in our history books.

Chris: In the history books too. Right? It's like it's like everybody was broke.

Steve: Yeah. Everyone everyone was, like, living on the streets, and there was long bread lines.

Chris: Exactly. Yeah. I challenge you to watch the movie Cinderella Man. Right? If you remember that movie with Russell Crowe back around '2 that mid two thousands.

Great movie about about the boxer, Jimmy Braddock. Right? Well, you'll see him, like, for example, he's got his hands in his pockets. He's about to go to get welfare. And he sees, like, this this, couple coming out with their kid, and they've gone Christmas shopping, and they're all happy.

Like, well, how Ron Howard made that movie, he actually used reality. Because a third of people were like Jimmy Braddock, who were going broke, starving. Right? Like, giving his food to his kids, and he would go to work hungry. There's another third that just tightened the belt.

They'd live a little bit more cheap, but they were able to get through it. The other third prospered. That third actually got richer. Mhmm. Those people had the cash going in.

They weren't speculating. Like, some of the problem is a lot of people were actually gambling, throwing their money in the stock market. They were actually borrowing money from the bank to put in the market, which you can't do anymore.

Steve: Kinda like last year with crypto.

Chris: Oh, yeah. That's true. Yeah. Well, and that's and that's why, like, you won't see banks say, oh, I'll give you I'll I'll lend you money for crypto. Right?

Now you have margin accounts you can use for, like, stock trading and whatnot, but they can call it

Steve: Mhmm.

Chris: Anytime they want. Right? It's it's not it's not the same anymore. So you can't totally do the same thing that people did. But I see gamblers all the time.

And you do too. I know. Like, there's people that that think they're gonna strike it rich, and they're gonna swing for the fences, and they usually strike out. The best thing you could do right now, if you were talking about protecting your assets, is really start to gather your cash, gather your assets. You can still keep investing.

Keep keep your business going. Whatever business or job or career you're in

Steve: Mhmm.

Chris: Keep that business going because that is your economic engine to keep income coming in. But have profit, have extra that you keep putting away.

Steve: Mhmm.

Chris: Build up those reserves and building up fast because you can either you can be on one of the two sides of the coin of history. Right? That we know that something's gonna happen. There's gonna be a recession of some sort.

Steve: Well, there always will.

Chris: Always will.

Steve: But regardless of what you believe, politically, this or that Mhmm. Right? Whether you like Fox News or MSNBC, it doesn't matter. Yeah. Reality is recessions occur.

Chris: Yep. They occur. And if you don't if you miss this one, there's gonna be another one.

Steve: Alright.

Chris: You might have to wait another decade, but it's gonna happen again.

Steve: Like you and I were just talking earlier. Yeah. Yeah. Yeah.

Chris: There's always gonna be something like that. How you prepare yourself for those times, you know, when you I mean, that's why I always say boring is sexy. Right? Sometimes the most boring stuff of, hey, I'm gonna keep cash on the side, and no, it's not gonna do anything. Or, you know, I I'm gonna store more of my life insurance because at least I get paid some tax free returns, but it's not gonna make me rich Right.

By itself. But if I have that cash available and ready to go and ready to deploy when those things do turn south and everybody else doesn't have cash to deploy, that's when you actually become like a king or a queen.

Steve: So I wanna touch on this. But before we do, I just wanna go back to one last thing earlier. Yeah. So you're saying when I was asking what recession looks like, you were saying S and P normalizing. So I guess more or less what you're saying is that the S and P is outside the historic trend lines.

Mhmm. And balancing would be going back to because it's outgrown the the historic two to 4%. For sure. Okay. Yep.

That's an interesting perspective. Is that, like, a common perspective? I've I've never heard of re like, resetting it in that context, but it makes a lot of sense.

Chris: Yeah. I mean, in the financial adviser world, it's not a common perspective. Right? Because there's never a bad time to invest in the stock market when you're a financial advisor because you're a financial salesperson. You know?

But, I mean, among those of us that have done trading, yeah, like, we look at different trend lines. Now there's little mini trend lines like like, you know, hey, it's in a up mark.

Steve: You know,

Chris: it's in a bull market. You can follow that. But, eventually, that's that trend's gonna break, and and that's what's happened. So if I look at this like I'm a trader, like, I wanna bank on the stock market. And when I say the recession, the recession and the stock market aren't the same.

You can have recessions, the stock market go up. You can have boom times, and then the stock market go down. Right? They can be independent. But the thing I worry about, of course, is that it's all about money flow.

Right? It's about how much people are exchanging money. The more money that people are exchanging and spending and using, and that includes even getting money from banks, right, or whatever it might be. The more we're exchanging money, the wealthier everybody becomes.

Steve: Yeah. Well and I think this is one of the things that I think most people unfortunately, most people don't understand the importance of the velocity of money. Yeah. Right? Like, if I got a dollar and I gave it to Chris Mhmm.

And Chris doesn't have to pay as much in taxes and he gets to keep most of it. Mhmm. He's at 95¢ to go spend somewhere else. That's right. Right?

And then that 95 that 95¢ someone else gets, he can go spend 90¢ somewhere else. Mhmm. Right? So that dollar gets spent multiple times.

Chris: That's right.

Steve: If money is flowing, it's good for the economy.

Chris: That's right.

Steve: If money is not flowing Yeah. It's really bad for the economy. And I think most people miss this. Most people that don't understand, what's the word I'm looking for? How most people that believe we should have a a larger government and more taxes don't understand the consequence and how damaging it is.

If if everyone's paying a bunch of taxes, that that dollar just can't go as far. It's just not as much momentum. Yeah. Because a larger bite is taken out of the apple every time it's it's passed. So, anyway, maybe boring, but the velocity of money is really important.

Chris: Very important. It's every economy. Yeah. It is. I mean, it's it's true true in your own personal economy.

Right? Because the faster that you're doing transactions, the more money you make. When you teach sales. Right?

Steve: Right. I

Chris: mean, that's exactly what you're teaching people is to create more speed of money coming in and out of your life. Right. And then if you invest back in those ads or whatever you're doing and you're into those salespeople and it comes back, like, that's the whole reason you're investing. Right? Right.

But when people stop, like and you know, you've seen this. Right? When people stop putting dollars in marketing and the sales, they're like, oh, I need to shrink this. All of a sudden, their income also shrinks. That happens on a on a global scale, on a national scale.

All that happens. Absolutely.

Steve: You know,

Chris: and you're right with the taxes. Like, I mean, they'll say now the the argument will be, well, we're we're taking from the rich to give to the poor. Right? Those corporations, they have they just blow money. But somebody assumes that a somebody who owns a corporation, say, like, Elon Elon Musk, for example.

Right? They assume that he's just gonna sit on cash, which we all know. If you've read anything about Elon Musk, he doesn't even have cash. Mhmm. Right?

He has to borrow from his stock to get himself cash. Yeah. Right? He's always putting out cash into the economy. That's why, traditionally, they've always give tax breaks to the the corporations, not just because they can pay the big money, then that helps.

Right. But it's because it does actually create an effect. Mhmm.

Steve: But

Chris: if you take from the rich and you quote unquote give to the poor, what do you think they're gonna do with it? You know? Spend it. Spend it. Right?

Which goes right back to who?

Steve: The

Chris: rich. Exactly. Right? It's like it's like if you have a pool and you're just like, oh, I'm gonna take from the deep end of the pool. I'm gonna pour at the shallow end.

What happens? It just goes right back.

Steve: Yeah. No. We know that if we simulate the economy, money goes back. It gets redistributed eventually in the end anyway. Mhmm.

So going back then so the question is how you protect your assets. Yeah. Right? So we talked about, here's how bad it can be. Mhmm.

Right? I don't think you're wrong Mhmm. Unfortunately. So, you know, it's it's right around it was whether it's right around the corner, whether it's in two years, whatever, something is going something has to happen. Yep.

So then what should someone do to protect their assets against that?

Chris: Get lean and get liquid.

Steve: Mhmm. That's

Chris: what I recommend. Right? Is and I I recommend that back in 2020, and I'm still talking about it today, is get lean in your business. You know, don't you know, like, actually, we we see this a lot in our mastermind groups. Right?

Tracking your freaking numbers. Like, be anal about it. Mhmm. Like, know exactly what's your ROI? What's your cost on ad spend?

Right? What's your cost on even just the money that's going out to pay your employees? Is it coming back? Is it really worthwhile investment? Be very intentional with the money you're using to create more profit.

Get lean. And that means get lean at home. I don't mean you have to cut out everything joyous out of your life, cut out all your trips, or whatever it might be. That's not what I mean. Right?

Put money into things that you enjoy, that bring you joy, but be a wise steward of your money.

Steve: Yeah.

Chris: And and I know we talked about that on the show, like, two years ago, like, stewardship and such. Right? But it really is about stewardship is how do you make sure you can make the most of what you have to be profitable Mhmm. And keep increasing your income, keep increasing revenue, but when you're doing that, increase profits along with it. Don't just keep reinvesting money into your business, because you can do that.

But eventually, if you just keep putting money back in your business, nothing ever comes back of profit, and then it won't be liquid, which is that second point. Right?

Steve: Well, and that's that's my own personal mistake. Right? I I was hustle and grind, hustle and grind. Take that dollar, put it back in your business. Right?

And it's great. Right? Until the environment changes.

Chris: Mhmm.

Steve: And the environment change could be one of a few different things. It could be COVID. Yeah. Right? I had I didn't have a monopoly.

I was doing pretty well on PPC. You know? Mhmm. Buying houses. I was doing pretty well.

I mean, it was basically me and Shontarri. Right? Like Yeah. And really, like, 99% Shontarri and, like, 1% of me. Right?

But, like, that was really the environment, PPC, for the longest time. Mhmm. And then this company comes along, Opendoor. Yeah. Right?

And what happens? They've got way more money to spend in marketing than me, and they can pay more for houses.

Chris: Yeah. Ridiculously more. Right.

Steve: So where does that leave me as a house buyer? Right? So at the time, without great sales skills, they left me in a really, really bad spot. So I'm taking this money. I'm putting it back in the business.

Right? I know that I'm gonna continue to grow. It's gonna continue to grow, and, like, nothing bad is ever gonna happen. Right? Mhmm.

And then, boom, open door is there. Yeah. Boom. Offerpad's there. Well, it's hustle and grind, and I'll pay myself more one day.

Well, that one day got pushed Pushed back. Way further down the road. Yeah. Even as a realtor, you know, around the same time while while I'm buying houses with PPC, my competitive advantage was PPC for on the realtor side as well. Right?

I wasn't showing houses. I was buying leads through pay per click Mhmm. And then giving those leads to realtors, and then we would pay $50.50 on the commission. Right? Yeah.

They keep half. I keep half. Good situation for Steve. Yeah. Right?

And then one day, I think BoomTown was the big one. Right? Mhmm. BoomTown comes along and say, hey. What we'll do is you give us the money for the software, and we'll manage the PPC for you.

So what happens? Steve's competitive advantage vanish overnight. Yep. So for everyone that's watching, we're talking about, you know, like, this I'm gonna hustle and grind, and I'll pay myself one day. Mhmm.

Things happen, and that one day is pushed way down the road.

Chris: It could be someday, you know, or never if you're not careful.

Steve: Well and that was, like, for me and, you know, we we we brought up COVID a couple of times. Mhmm. When When they were talking about all the shutdowns Yeah. Right? Like, when shutdown was before the shutdowns Mhmm.

Shutdowns were was a conversation. Should we do this or not? Mhmm. And I remember saying to my wife, like, I don't like where this is going. And she's like, why do you care so much about this?

And I was like, because I'm that entrepreneur who has been putting money back into the business. Mhmm. And all those families that have been saying one day, we're going to pay off. One day, we're gonna be able to take all this money that we've been reinvesting in this business, and we can finally retire. Mhmm.

And there were millions of people whose dreams got crushed the days we started the shutdowns.

Chris: Yeah. Yeah. It's true.

Steve: So alright. So we talked about, so understand your return on ad spent, return understand the return on labor. Mhmm. Understand the cash conversion cycle, which is not a topic a lot of people talk about. Mhmm.

But, like, when you spend this dollar on ads, how long does it come back? Because Yeah. If it takes if it takes three months for that money to come back Mhmm. Pretty good situation. It takes twelve months to come back, man, you gotta been able to make you you gotta be able to maintain that advertising for twelve months That's

Chris: a lot of liquidity.

Steve: Right before that money comes back. And we see this a lot, you know, with direct mail. Yeah. Right? Direct mail has the longest cash conversion cycle.

Mhmm. It's the best one of the consistent with the best return on investments. Yeah. It was extremely long cash conversion cycle, and we saw a lot of operators when things slowed down in 2022

Chris: Mhmm.

Steve: Cut direct mail.

Chris: That's right.

Steve: Right? But you wouldn't know that if you didn't know your cash conversion cycle. Yeah. So you're talking about as far as, the the, understanding your numbers. So understand what what your turn on investment is for every, marketing channel.

Mhmm. Understand your return on labor, understand your cash reverse cycles. And if you understand that, you can run a leaner business. That's right.

Chris: Really, I'll if I give any advice at all, if you remember anything, is do the opposite. Mhmm. Whatever everybody's telling you to do, do the opposite. So you talk about people cutting cutting out paper mailing. Right?

Well, if you cut out mailers, great. That opens up a market to do mailers. If everybody says, you know, email marketing is dead, that's the time I know it's time to do email marketing. Mhmm. Right?

Steve: Well, we saw this. I mean, we have a mutual friend in Jason Lewis. Yeah. Right? And he runs Investor Machine.

Chris: Mhmm.

Steve: And He's like, yeah. As a service provider, this sucks. All these clients are canceling their direct mail. This sucks. Yeah.

At the same time, he was doing great in direct mail. Mhmm. Because since everyone else stopped doing direct mail in Utah, that

Chris: was a monopoly. He stands out. Yeah. That's right. That's that's a competitive advantage.

Right?

Steve: Yeah.

Chris: It's it's just like, you know, we're hearing a lot of people talk about AI. You know, if we're talking about, like, a marketing standpoint, like, oh, I could just use AI to do everything. Well, as a result, I hired a woman that I know, like, focuses on actual psychology and storytelling, things like that. I'm like, screw you, AI. Like, watch this.

Watch what will start happening right now where we can actually, like, get to the more emotional level versus just, oh, well, here's Howie, Google, and, like, here's the top five things you should do to create cash flow today. Right? That's great. It's useful.

Steve: Yeah.

Chris: But it doesn't quite hit on the same levels. Once everybody starts doing that, they start becoming, like, almost robotic. Mhmm.

Steve: I'm

Chris: not saying AI is not bad, by the way. I think it's actually kinda cool. Yeah. But it it creates an advantage. It creates an open space in the market Mhmm.

Steve: For

Chris: you to be able to stand out and create a lot more opportunity.

Steve: And

Chris: that's the thing. Like, when everybody says, hey. You don't need cash. Get it out. Inflation's horrible.

Get cash. Right? Get liquid. And even you're saying, like, if these cash conversions cycles start changing or anything starts you have to pivot in your own business, having cash on hand, even if it's sitting in a crappy bank by the way, I'm have my own opinion about banks right now. But even if it's sitting in the bank, still that's better off than if you did anything else.

But if you focus on profitability and say you do wanna expand, and let's just say that things are contracting, banks will start contracting money. But during that time of contraction, banks do still wanna lend money out.

Steve: They

Chris: still wanna make their money do something. They will give it to the person that knows what they're doing, that is profitable

Steve: The best stewards.

Chris: Good cash flow. They're good stewards, right, like you said. And then they they they're also liquid because they know that, oh, this person's wise through to their money. They know how to make it work. They're profitable in their business.

This is a good investment for me. Mhmm. You could look sexy to a bank now, and you keep preparing for that. Watch what will happen when everybody says, oh, I can't get loans for a bank. Yeah.

And then you're the one person who's like, I'm get I'm I'm just raking it in. And

Steve: I think David Richter was the one that was on the show, and he was talking about how he had a client who was running a business Mhmm. Super profitable. Right? You look at the p and l, it looked great. Yeah.

And that guy got a phone call from the banks like, hey. We're calling your loan. Like, why are you calling my loan? Like, the p and l's look great. It's like, yeah.

But we don't think you believe we don't believe you understand how money works. Like, what do you mean I don't understand how money works? I run a profitable business. Yeah. But you're not understanding cash conversion cycle.

Mhmm. You're not understanding that your actual your cash balances are going down every month. The way your business is running today, your cash balance is going down every single week every single month, and we see a scenario where you're gonna be out of money.

Chris: That's right.

Steve: Right? So, yeah, you run a profitable business and, like, people I remember the first time I heard this concept. Mhmm. How can you run a profitable business and run out of money?

Chris: Mhmm.

Steve: Happens all the time. Yep. Right? People don't understand, the, what's the one I'm looking for?

Chris: The Cash versus accrual?

Steve: Yeah. Cash well, it's not just cash versus accrual. It's like Mhmm. If I run go back to direct mail piece. Right?

Like, yeah, I can be profitable, but if it takes me twelve months for my money to come back Right. Right? Like, I how many flippers have you talked to? Like, I'm making, like, 80 k a flip.

Chris: Uh-huh.

Steve: Right? Yeah. But they're out of money.

Chris: Right.

Steve: Because they got money into this house, money into that house. Right?

Chris: Yep.

Steve: They've got, direct mail. They gotta pay for materials. All, like Money's not moving. Money's not moving. Yep.

All the earnest money deposits. Right? Like Yep. It's not it's not unbelievable Mhmm. To have $50.80 k out in earnest money.

Yeah. If you're doing business, it's not unrealistic. Right. So it's it's unfortunately, you know, more businesses, quite a business because they're successful and there was it they they they died of indigestion versus starvation.

Chris: Right. Yeah. Yep. They couldn't handle that bigger volume. Well, have you ever watched the TV show Shark Tank?

Right? It happens all the time. Like, why do you need capital? Well, we're trying to expand and grow, and we're not profit you know, we're not profitable right

Steve: now. I've got all these orders I can't fulfill.

Chris: Can't fulfill it. I don't have enough inventory to fulfill the orders.

Steve: Right?

Chris: I need more cash to do that. And it's true. Like, that can actually happen. That's why, again, lean and liquid. Like, those two things, if you keep your put your focus on those two things.

Right? And you get books like, probably David Richter recommend, like, Profit First in Real Estate, you know, which he wrote with Mike Michalowicz. Right?

Steve: Yep.

Chris: Things like that. If you really start to, you know, focus and become a student and really become a not just a student, but a steward of your own game, right, and really manage your cash flow and your money well. You will come out on the other side, even not not just on the other side of this recession. Right? Not just a hero on the other side.

Right? But you'll be the envy of everybody. You'll be that the success story people talked about, like, you know, Steve Train. Remember him? Like, what he did in 2011, like, oh my gosh.

You know, like, people start saying that about you because you actually stood out by doing something different. And and I wish more people would get that if they just realized that you get lean and liquid now before things hit the fan. You're gonna be able to pivot. You're gonna make better decisions. And I know this because my I I I was the opposite of you.

Right? Like, I got my butt kicked in the last recession. You know, I lost literally over $1,000,000. I went from millionaire to upside down millionaire. I was over $1,000,000 in debt.

Yeah. All because I was trying to go big or go home.

Steve: Mhmm.

Chris: And I ended up having well, not just going home, I lost my home. Like, I had to foreclose my house. I turned in my Mercedes even before they could fore before they could repo it. I said, here, take it. And then they auction off for 30,000 less, you know, than what I owed.

And so they were calling me with collectors. I had collectors call me all the time. Friends didn't even call me anymore because I didn't have any more money. Mhmm. So it's just collectors calling me.

They became my best friends.

Steve: Yeah.

Chris: I I they were consistent. Yeah. The that kind of situation, like, I wish I could go back in a time machine and take my own advice. Right? I wish I'd go back and and be leaner than I was.

Because I was just like, I have money coming in all the time. Who cares? I can make a huge money on a flip. Who cares? I get I'm good.

Right. And then, of course, when I couldn't do that anymore, then I'm like, well, now what? You know, now I'm in the whole $1,516,000 a month. I'm leaking. I'm bleeding.

I'm running up credit. I'm running out of savings. I didn't I had savings. I was somewhat liquid. I just wasn't really liquid,

Steve: and I

Chris: didn't have my cash flow under control. Had that been reversed, had I been prepared going into it and not as greedy

Steve: Mhmm.

Chris: Going into that last recession, I would have come out looking very different on the other side. Yeah. I'm a multimillionaire now. I could have been a multi decamillionaire at this point had I done that.

Steve: Well, you talk about understanding your numbers. So Yeah. Truth is, I was running Profit First for the longest time, and then I got lazy. Right? I got complacent.

Chris: Uh-huh.

Steve: And so, you know, when this this last one hit and I guess it's not a recession. I don't know what the heck you call it. But when the rate hike jumped, right Yeah. It's strongly impacted my business. Right?

And because I I was not as good with my numbers, I got you know, I kinda took my eye off the ball. Yeah. We went from half 1,000,000 liquid to not even close to that. Yeah. Liquid.

Right?

Chris: Uh-huh.

Steve: So, we got a call not a call. We had a conversation with the bank. Mhmm. And, this was, like, not that long ago. And we're like, hey.

Like, we used to have a relationship manager that would come to my office.

Chris: Right. Right?

Steve: So that we can sign documents there. They're like, yeah. You don't have enough money in your bank account for that anymore. I was like, well, that's

Chris: not demoted.

Steve: I've been demoted. Right? I'm no longer a platinum member at that bank. Now Yeah. We did move everything to another bank.

That's a whole different story. But Mhmm. To be told, mister Trang, you're no longer a platinum member, right, at Chase Bank. It's like, well, that's a nice middle finger to the face. Yeah.

Right? But what what happened? I was not as as good. I was not paying as much attention because things were really good.

Chris: Mhmm.

Steve: Right? And that's kinda what you're talking about. Like, if things are really good, I don't have to be as good with the money. And, really, you need to have that, that, what's the word I'm looking for? That discipline Mhmm.

When things are good to to be better prepared when things are not as good.

Chris: Yep. You never you never count the number of breaths you take until there's no air left. Right?

Steve: And you don't

Chris: start counting your dollars until the dollars are disappearing. Right? Right. It what if we could do the opposite? Right?

What if we could actually start counting our dollars when there's a lot of dollars coming in? And I get it because that was the same thing I did. Yeah. Exact same thing. It was like, oh, it's coming in.

It's so abundant. It's like air.

Steve: Mhmm.

Chris: I don't need to worry about it. Like, I'm good. And and, hey, and that's the thing. I was I was so so, really prideful.

Steve: Mhmm.

Chris: Right? I was like, I was I was feel I wasn't humble enough to realize that, oh, I may not have all the answers. Because I just thought, well, if something comes up, I'll pivot. I'll make it happen. Right?

I'll just make it happen.

Steve: Yeah.

Chris: Then after a while, I'm like, I can't make squad happen. I'm in I'm I'm I'm I'm lost, you know. Like, I don't know what to do. And I think that humility is another thing too. Even beyond just the prophets is having that humility to know that, you know, crap can happen.

You know, I I can get I can get thrown a curve, and I'm gonna have to deal with it. But I know that if I'm lean and I'm liquid Mhmm. I actually can breathe a little bit. And when I can settle down my emotions and breathe, that's when I can make my best decisions. When you make a decision out of abundance of abundance mentality versus a scarcity mentality, you make much better decisions.

Steve: Well, absolutely. And, you you know, we talk about we prepare for events that we've experienced. Mhmm. Right? So what about what event have I experienced?

Two thousand nine crash. Yeah. I was prepared for that. So I remember specifically having a conversation with Eric Brewer, right, sometime in 2021, 2022. And he's like, I don't know.

Something doesn't feel right. I was like, yeah. Whatever. Right? Like, if things go if things crash, we'll be fine.

Mhmm. Right? We'll figure it out.

Chris: Yeah.

Steve: And what we'll figure it out was if the market crashes, like, 60%, 40%, whatever, it's like, I've got all the relationships in the world. Mhmm. I can raise capital instantly to buy all these properties. That's not a concern at all. But that's not what happened last year.

Chris: Mhmm.

Steve: What happened last year was everyone's underwriting changed. The market didn't crash. Yeah. The velocity just changed. Yeah.

And I have not been in that environment where the velocity changes instantly overnight, but it doesn't affect the value. Yeah. Right? So I wasn't prepared for that scenario.

Chris: That's true. I mean, that when people say, what's the next recession gonna be like? I don't know. It's always different. It is always different.

Right. Y two k was different than the great recession.

Steve: You

Chris: know? Even in the nineties, it was different then.

Steve: Mhmm.

Chris: It's always different. Real estate, for the most part, didn't get hit as hard until the last one.

Steve: Right.

Chris: Because of recency bias, everybody's like, oh, real estate's gonna crash. That's one of the reason why I I kind of fight against a lot of the masses that say real estate's gonna crash. Mhmm. I think some markets could crash. I think California could crash easily.

Right?

Steve: Yeah.

Chris: But when it comes to a real estate crash, if everybody keeps screaming crash, that's usually what won't happen. It's usually gonna be something that people don't expect. So it's usually, like, it's not a or b. It's usually c Mhmm. That nobody even knew.

It was none of the above. Or the black swan. The black swan.

Steve: So you were talking about the, the lien and the liquid. So we haven't really talked a lot about liquid. Yeah. So what does liquidity mean to you, or what what's your target?

Chris: Available cash. Mhmm. Cash on hand. However you can get to it. And that does not mean lines of credit.

Steve: Mhmm. Right?

Chris: Because

Steve: Lines of credit can get pulled.

Chris: You got it. Right? I mean, that's one thing that that was a mistake I made last time too in the last last crash because I thought I was a mortgage broker in that time too. Because 2006, mortgage broker was great. Right.

Steve: You know?

Chris: It was

Steve: Good time to be a mortgage broker.

Chris: Great time to be a mortgage broker. 2008, not so much. Yeah. But I remember thinking, well, worst case scenario, I just get a line of credit. You know?

So I threw a bunch of my cash into my house. Mhmm. Right?

Steve: I was

Chris: like, I'm just gonna pay down my mortgage. I was kinda Dave Ramsey it a little bit. Right? Paying down my mortgage wasn't paid off. Paid it down.

But the problem is even though there's all this appreciation, of course, when things got tight, like, we got, you know, got caught up, banks I remember banks actually stopped lending in 2007. Mhmm. Because I remember in July 2007, I went to get a cash out refinance, and they said, oh, we just changed the requirements. You just need to get your credit score up two points.

Steve: Mhmm. If you

Chris: can keep it up two points by August, we'll do it again. So August '20 you know, 2007, I go back in. They said, good job. You kept making your payments. Your score is higher.

But last week, we changed the requirements. We need to do a, b, and c. We need Under

Steve: underwriting guidelines kept changing.

Chris: They kept changing. And then by September, they said, sorry. We don't do any of those anymore. Mhmm. Right?

It was gone. That was something I never expected to happen, you know. And so that's why I don't believe in lines of credit necessarily. It's not bad to have, but don't count on them. You need liquid cash.

Right? Get the money available. You know, so like I said, it could be in a bank. It could be simply in a bank. But, of course, we have the bank failures that have been an issue.

So I keep the bulk of my money in my my life insurance. Mhmm.

Steve: You know?

Chris: Not just because I offer you know, like, we sell life insurance. I mean, that's that only happened because I liked it so much. Right? And because we found a need in the marketplace. But but, really, like, when I have, like, my 300,000 of reserves that my wife wants kept kept there, that she wants 300,000 we don't touch, well, I keep 250,000 in the life insurance, only 50,000 at the local bank.

Because I know I can just go walk in that day and get the money from the bank Right. Where I might have to wait a couple days for my life insurance. Right? But I know I'm making more money, and I'm actually able to get to that money faster. So it just depends.

Like, I had another guy who was one of our friends in real estate. I won't say his name because he's a client, but But he was like he was actually asking one of our mastermind sessions. He's like, what do I do? Chase Bank's being a jerk to me. Like, and I've got millions with them, and they still don't give me the time of day.

Like, where do I move this money? I was like, dude, you already have a policy. Use it. Mhmm.

Steve: So

Chris: he end up getting another one after that event. Right? Because he's like, I'm gonna get a second one now. I wanna stay liquid and keep it in my control. Mhmm.

Steve: Because the

Chris: thing with insurance companies is that they don't go out of business as much. Right? Banks go out of business because they take high risk. They're lending money and doing stuff. Insurance companies legally can't do that, you you know, so they're protected that way.

But I also don't trust the FDIC. So I keep looking at

Steve: protects everybody now.

Chris: Yeah. Supposedly with their 1.7% protection.

Steve: You know? So, liquidity figures, though, like, what is a target everyone should have?

Chris: You know, in in general, I would say personal. I I actually would go for, like, twelve months of expenses Mhmm.

Steve: Is

Chris: what I'm going for personally. In business, minimum, and I say this very, very cautiously, minimum, I would say, two months of expenses in your business, and then building up more for opportunities too. Mhmm. So it's almost like you got your emergency fund. Right?

So you got at least two months for business, six to twelve months minimum for your personal, and then building up other cash for opportunities.

Steve: Yeah. And

Chris: I'm not saying, again, you don't invest to create more business, you know, generate more revenue, you know, doing your flips or doing wholesaling, whatever it might be. I'm not saying stop doing business altogether and just put all your money in cash. Mhmm. I'm saying now you're just balancing out where you might be kind of siphoning off a little bit more towards profits and towards cash and keeping it liquid. Yeah.

So percentage wise, it's whatever you can do. Yeah. I would definitely recommend that. Bucks a month. Like, do it, you know, something.

Steve: We generally recommend three to six months and then, like, a target of twelve months. Yeah. Right?

Chris: That would be great. You can

Steve: get the twelve months. Now while everyone's running around with a hair on fire, you're fine. I mean, like, going back to what we're saying earlier with direct mail. Right? Like, Jason Lewis is just gobbling it up in Utah.

Mhmm. Right? So, you know, we target twelve months. And, again, the reason why I'm asking is, like, you know, like Marcus Crigler. Right?

Someone I look up to a lot. It's like, you should you should have a million dollars liquid. Mhmm. You get a million dollars liquid. Everything's always gonna be fine.

It's like, that's great. Now we

Chris: see Depending on the scale of business. Right?

Steve: Right. True. Yeah. But for most people in our mastermind Yeah. Most people listen to the podcast, a million dollars liquid, Basically, there should be nothing that could take you out.

Chris: Right. Yeah. Exactly.

Steve: Okay. So three days like, bare minimum two months. Ideally, three months or more in business and then twelve months for personal. Mhmm. Alright.

So now that we're liquid, what should we do to protect our liquid assets?

Chris: So here's what you can do. Right? Like I said, you can keep some of the bank. Mhmm. But, again, I don't trust banks.

That's where life insurance can come in. But, and this is a big but, don't fall prey. There's a lot of guys that talk about infinite banking. Right?

Steve: Mhmm.

Chris: And they'll say, oh, we'll just dump in 3 quarters of $1,000,000. So we have, like, a mutual friend and a mastermind that he reached out to me. And he actually he reached out. He said, he's like, hey, Chris. I have a friend that got sold that was that was told that got this proposal from this insurance agent to throw 3 quarters million dollar in and then put in a quarter million a year.

Mhmm. And, I was like, well, first, he's charging way too much. And secondly, I wouldn't do that. Like, I'm like, that's just paying the insurance agent triple the commissions. That's why he's telling you put in 3 quarters million because he gets paid more.

Steve: Mhmm.

Chris: Like, I would back it off to do, like, no more than 250, 300,000 a year and start putting it that way. It's like like, do it gradually over time versus just dumping it in. Keep more in the bank for right

Steve: now. Right.

Chris: And, and so he did. You know, that was that was the thing. And he found out later it was actually his situation. Right? Right.

And that's that's the thing you'd be aware of. So, like, even if I use life insurance, I'm not saying dump in that million bucks in there today.

Steve: Mhmm. You

Chris: might be dumping in a regular amount. And based on cash flows, you can kinda figure out what that looks like. Yeah. Banks still could be good, but I would diversify among banks. I even do online savings accounts.

Like, I got one with Capital One as a performance three sixty. Mhmm. Pays currently 4.3% as of this month. Better. I mean, it's not as good as what I can get on my life insurance side, and I have to pay taxes on that, which suck.

But at least it's paying something more than my point 1% credit union. Right? So there's different ways I would diversify based on how you can play the interest rate game. But just just don't park it all in one bank. You know?

Even the big banks, everybody's like saying, oh, the big banks are gonna be the safe ones right now. They're the ones gobbling up. But Just like Lehman Brothers. Just like just like They're big.

Steve: Just like Lehman Brothers.

Chris: Yeah. They're big. Yeah. Too big to fail. Right?

Yeah. I mean, granted, there's something to that. But at the same time, you just never know. Right? I mean, who's to say Signature Bank or Silicon Valley Bank are gonna be, like, the worst, you know.

And the fact that they say, oh, there's only three. Although there's every week, there's new banks failing. I mean, I I just heard last week, there's a big bank in California. I can't remember what it was called, but that one is getting bought by a bank that's 40 times smaller

Steve: Mhmm.

Chris: Than it. Like, a local regional bank in Southern California is buying this big bank that failed. Right? I think it was, like, number 45 on the list of biggest banks in The US. Mhmm.

It's still happening. Right? So that's why I'm saying, like, it's hard it's a hard game to play. It's I I wouldn't bury it in my backyard Mhmm. For that matter.

Right? And I wouldn't I wouldn't even say, like, oh, I'm gonna just do a store in crypto. I'm gonna store it in gold and silver, which you could do. And I do buy gold and silver, but I buy the bullion just as, like, a little insurance policy against bad inflation.

Steve: Mhmm.

Chris: Right? Same thing I can do with crypto. Right? I can do the same thing there too. But, again

Steve: One's got a little more variability than the other.

Chris: Yeah. So, I mean, for me, it's mostly just been banks, live insurance, and then I put do a little extra protection with, like, you know, gold, silver, and then a tiny bit of crypto that I haven't sold off yet.

Steve: Why Whole Life? Like, what are the benefits of Whole Life?

Chris: The benefit is it's guaranteed. Minimum pays at least 3% a year, which is still better than most banks anyways. And that's if they don't pay you a dividend. That's just the guarantee. The other reason is, like I mentioned, like, they're they don't fail.

So they're in the last the Great Depression. Like, there was 35,000 banks in 1929. After the Great Depression, there were 13,000 banks.

Steve: Mhmm.

Chris: So they got cut by almost about 60%. Yeah. Insurance companies, life insurance companies, four failed. Right? That was it.

And even now, since then, there's been other things put in place. I don't think there'll be as big bank failures nowadays because there's better things put in play. Same thing with life insurance companies. They have what's called light what's called reinsurance that they buy up on themselves. Mhmm.

So they have an insurance company, which is rare if they ever do fail, a reinsurance company will step in and cover all your cash as well as your death benefit too. So it covers everything to make sure that either one, another insurance company buys it from you, or two, they'll just cover it till you die and then they're done. Yeah. So they have insurance. There's like FDIC, but they actually have money.

Steve: You know?

Chris: So that's that's one reason. It's like it's like it's safer, pays higher returns, it's tax free, and it's liquid. I can still use it. But, again, the caveat is it's designed the right way. Don't just buy the one from State Farm.

Don't even buy every infinite banker that's out there because, we have mutual friends that are an infinite banking business that will charge you double the cost than you should be paying. So be careful of that. You gotta be careful.

Steve: And if I remember correctly, also with infinite banking, there's, an additional umbrella. Right?

Chris: Right. Well, that's the reinsurance companies. Right? They they can cover you.

Steve: I'm talking about, like, you know, God forbid, you're you run over somebody.

Chris: Oh, you mean, like, you die?

Steve: Well, no. Because you die. I was thinking

Chris: Or liability? Oh, yeah. Yes. Okay. Yeah.

Yeah. There are a lot of benefits. I was trying to be negative on this. Come on, man. Yeah.

Like, you know, it it's true. Like, in most states, it's a 100% protected from lawsuits and creditors, which in the real estate game is huge. Yeah. Or any any business owner for that matter. Right?

Because if you get sued and somebody wins, they can get to your bank accounts. They can take liens off that. They can get your home equity somewhat. Mhmm. They can get to almost everything but a four zero one k and life insurance.

Right? Those are the only two places you can really be protected is right there. So you can have millions in life insurance, and even if they win, they can't put a lien against it.

Steve: Right. And then, you know, you're talking about how you're the anti, financial planner Mhmm.

Chris: Right, or financial advisor. Which one was it? Anti financial advisor.

Steve: Anti financial advisor.

Chris: People don't like me using financial planner because I'm not one. You know? Yeah. Go figure.

Steve: So one thing that we were you're you're talking about, like, you know, the stock market going up down and and the financial planner generally or financial advisor generally says, you should buy this, you should buy that. It's always the right time to buy.

Chris: Dollar cost average.

Steve: Dollar cost average. Right? Yeah. But then you look back. How, and you're saying, like, you know, your dad.

Right? He saved his whole way. Like, my parents did the same thing. They saved their whole way.

Chris: Yeah.

Steve: And then they maxed out their four zero one k. This and that. And there's some people that say you can't save your way to wealth. I mean, my parents did. Uh-huh.

Right? But you look at the people that put money into the stock market and how many millionaires that creates.

Chris: Yeah.

Steve: And you look at real estate, how many millionaires that creates. I mean, so many millionaires have been create I believe, from from, you know, whether they're watching our show, BiggerPockets, whatever. A lot of millionaires being created through real estate.

Chris: Yeah. Right?

Steve: But the only people becoming wealthy on the stock market all live around Wall Street.

Chris: That's right. Right? Yeah. They're making money off of people putting money in the markets.

Steve: Yeah. Off commissions. Yeah. Right? So you wanna talk on that?

Like, why we're like, for someone, you know, maybe this for snippets later on, like, why real estate versus the stock market?

Chris: Yeah. It's because I was all stock market. I was actually against real estate in the beginning. Right? Yeah.

Why? Because You were

Steve: the guy I would call us, like, hey. Do you know do you have anyone that'd be interested in diversifying real estate? He's like, no. We're not doing real estate.

Chris: Like Yeah. Don't like, real estate's fine, but this is where you should be putting your money. Yeah. Right? And and I I was guilty of that.

I mean, not because I mean, that's just because that's the way you're trained. You're literally trained to be a salesperson. Right? Those licenses that you get doesn't make you a financial expert. Those licenses you get just give you a license to sell.

Mhmm. Right? That's all you're able to do. You're selling mutual funds or insurances, and that's it. Yeah.

And I did both. You know? And, so the the problem is and I know there's people that even even in the real estate space or coaching space will debate me on this because I had one debate me on it recently. He said he's like, oh, no. No.

Most people make their money in in the stock market. I'm like, what? He's like, well, those people that were millionaires that had all had real estate, the thing is most of it was just their own home. He's not wrong. Right?

There I mean, when you look at the millionaire stats, you can look them up. There's about 25,000,000 millionaires in The United States. Mhmm. So about 8%. Every one of them has owns real estate.

That's true. Yes. He's right. Some of them just own a property in California, and they're middle class, and they just happen to be net worth millionaires because of that. But most of those people still have multiple properties.

Steve: Mhmm.

Chris: And it comes after your question. Right? Where do they make the money? Because, yes, there are a lot of millionaires and billionaires well, I'll say multimillionaires that have money in stocks. Most billionaires just have their own stock.

Mhmm. Right? Multimillionaires will put their money in other people's companies and stocks, but that's is that the cause or the effect?

Steve: Right.

Chris: Right? And I believe what you believe in that way, which is if you're looking for somebody who's starting from zero and they're trying to get too wealthy to millionaire plus status, real estate's the best way to do it. You could be accidental with real estate and still make it. Right? There's there's plenty of people we've seen that just buy their neighbor's house or whatever, and then they somehow become million net worth millionaires.

Yeah. You can accidentally do it in real estate. You cannot accidentally do it in the stock market. No. I mean, okay.

You could, but it's not likely. It's really not likely. You are more gambling. Mhmm. So when people say, like, oh, well, stock market's the way to do it.

No. Like, that's people after they made the money. Either it's in business or real estate. Those are the two best places. I've seen it.

If you can have both, awesome for you because you're more likely to become a millionaire than anybody in this country right now.

Steve: I look at stocks as legalized gambling.

Chris: Yeah. Right? It really is.

Steve: You get to and you feel like it's like the blackjack table, like, because I was involved in this decision Mhmm. Right, I saw this is gonna go up, so I bought it. Right? We disregard all those that went down. Yeah.

I knew this was gonna go up. You feel good about it. Mhmm. And there's a whole thing. Right?

Like, Tony Robbins' book, Money Master of the Game. Mhmm. Like, man, how does this illusion I was about the stock market after reading that book? Yeah. Like, every mutual fund not every mutual fund.

Maybe 90 plus percent of mutual funds. Mhmm. They're just scams. Like Yeah.

Chris: They don't even they don't even make market returns.

Steve: They don't like, they'll they'll they'll say it's making this return Mhmm. But they don't calculate, like, all their fees and commissions all out of it. So, yeah, like, the value of this stock has gone up, but disregard, like, the one and a half percent management fee that we took out every year. One and a half percent compounded over thirty, forty years. Pretty significant.

Chris: That's half of your money right there. Yeah. Yeah. With that that that compounding interest rule of 72 worked now against you. Right?

Steve: Right.

Chris: In fact, Fidelity actually came up with their numbers. Millennials. Right? 84% of millennials will pick what's called the target date retirement funds in their four zero one k. 84%.

84%. Yeah. And I'm pretty sure I didn't make that up on the spot. 78% of the time, I do make up statistical. No.

Kidding. I think it's eighty four eighty four eighty six. I'm going on the low end. I think pretty sure it's 84% of Fidelity. Millennials will pick their target date retirement funds.

So if they predict that their retirement date is gonna be 2055, well, cool. Fidelity has this nice easy button you click that says retirement target date fund 2055.

Steve: Yeah.

Chris: Right? Well, that's what most millennials are picking. I went and looked at the numbers. I said, let's look at the last ten years compared to the S and P 500, which isn't that great either.

Steve: Mhmm.

Chris: Let's compare that to what Fidelity's funds have done. Well, the S and P 500 in the last ten years from 2013 to 2023 did a 10.1% return. The Fidelity target date funds, all those retirement funds did 8%. Mhmm. So they were 2.1 less

Steve: than

Chris: the stock market. The average stock market, just so you know, the S and P 500 only averages about 7.7% in the last thirty years. Yeah. So do the math. If let's just say it's 10% less.

Right? That means you're not making 7.7. You're making closer to, like, five and a half. Mhmm.

Steve: But

Chris: wait, there's more. Because you just said those those fees, there's also a point 75% fee that comes out of that. Mhmm. So that leaves them with about a 5% return or less. Yeah.

So you're making less than 5% a year. But all the financial advisers are telling you, oh, put in 12%.

Steve: Mhmm.

Chris: Compound that over forty years, and that's how much you'll have. And, oh, inflation is only 2%, which is bullcrap. So that's why everybody comes out with wrong numbers. That's why everybody who saves the sad thing is everybody gets blamed for not saving enough. Mhmm.

But the truth is they're saving just fine. They're just saving in the wrong places, and they're given overpromise, under deliver results, but the financial advisors won't put the blame on themselves. Right. They'll put the blame back on you. It's like, well, history says this, and this is what it is.

No. It's not. What they actually walk away with is way less than what you claim it is. It's a it's a lie.

Steve: How do we fix that? Get out.

Chris: Now we can't make investment legal recommendations here. That's my disclaimer. Right? But the truth is, like, you can stop saving in those plans. You can save elsewhere.

You could go do real estate.

Steve: Mhmm.

Chris: Here's the other thing. If you're a business owner, you're in real estate right now, well, why are you investing in everybody else's company? Why are you investing in somebody else's stock and not your own? Mhmm. That should be your number one investment anyways.

You have control over that. That's not as much gambling as it is as trying to hope that even if it's Musk. Right?

Steve: Hope

Chris: that Musk makes some great calls. Even though Tesla is, like, over a 100 times its value, people are like, oh, I love it. They're like, okay. Well, that can come down.

Steve: You have Why don't we have to convince the people that are listening. How do we convince the people that aren't listening? Right?

Chris: People aren't listening to this?

Steve: Like, how do we con like, how can we get this message out there? Right? Like, stock market is a scam. Like

Chris: I'll here's what got me out from being a financial adviser because it was imagine, I was my pocketbook was tied to this. Right? This is one reason why I have my show for that very reason. Mhmm. The problem is this, is that if I look at evidence and that's what got me out.

Like, it was one of my friends that was that left his, financial advising business that, actually, I hired him into. Mhmm. He left my business to go do real estate investing with his dad, and all of a sudden, he's making this money in four months even. I was like, what? You're making money on flips and stuff?

Like, come on. That's too good to be true. I know what the return should look like. Real estate only goes up 3% a year, you know, all

Steve: that kind of crap.

Chris: Right? Well, he finally just asked me. He said, Chris, how many of your clients are financially free where they don't worry about running out of money? And as I was honest with myself and I looked at all those clients, I realized, well, none of them. They all worry about running out money.

Even the retired ones still think they might outlive their money. Hey, Chris. How many of you guys' financial advisors are financially free? Because you guys should have it figured out. So how many of you are free not off the commissions, but actually doing these mutual fund investments?

And when I was honest with myself, again, I looked around the office, like, mentally speaking. There's over a 100 guys in my office and a few women. There was guys working there since the late nineteen seventies. Old guys that should be retired could not retire. And even worse, even today, like, I I mean, that that woke me up a little bit.

Right? But then today, I I I go to mastermind groups. I go to one mastermind group in particular for financial advisors. The top the best of the best, guys that make millions of dollars a year in that business. Once a year, I go to that event.

There's always at least one guy that will go up to me and say, hey, Chris. How can how can I retire like you did? Like, because I can't do it. These are the guys advising you. Shouldn't that be a shouldn't be evidence.

I mean, the fact that four one k bounce average four one k bounce is less than a $100,000 even for retirees. Well, was that because they're not saving enough? You know, was Dave Ramsey right along? Everybody's a spender? Nobody's a saver?

No. Because 52% of people actually contribute to the four zero one k plans. So that means majority of people are actually savers, not spenders. So you have all this misinformation out there. The only people who can figure it out is, like, actually look at the evidence.

Yeah. Are people financially free? No. It hasn't worked for years. And then what makes you think it's gonna work?

It it just hasn't.

Steve: Yeah. That's pretty depressing to to hear. And, like, yeah. I mean, you look around, fortunately, you know, for our sphere of influence, like Yeah. From real estate, that's pretty well.

Yeah. Yeah. If you don't

Chris: make millions, you're like, oh, do I suck? Yeah.

Steve: I I remember we had one prospect. And I don't know if we talked about this last time you're on the show, but I had a prospect. And it you know, they're looking for a cash offer. Yeah. And then, you know, the guy that was going to appointments, like, yeah.

You know, I was talking to him and, you you know, he's a Wells Fargo financial adviser. And I was like, make sure we never ever use Wells Fargo for for financial advice. Because if you're selling your house for cash to someone like myself, it's not because you make great financial decisions.

Chris: That's right.

Steve: Right? And I was like, I was mortified that if a person trained in finances is selling the house to me for cash.

Chris: Yep. Yeah. That's the thing. Watch where people make their money. Do they make it from their profession,

Steve: or

Chris: do they make it from investing? If you wanna make money investing, follow investors. Right. You wanna make money in business? Great.

Follow a good successful business owner. But that's why I hate when people say, well, I knew this rich relative or this rich neighbor that was a dentist, and I decided to follow them for money advice. You realize that dentists really don't know much. I know because a lot of them are our clients. Right?

And they're good, smart people. They're very intelligent, but they'll admit themselves. They'll say, I don't know anything about money. I'm asking you because Right.

Steve: I just don't know. Because they're great in one field doesn't mean they're great in another field.

Chris: You got it.

Steve: And then, you know, talking about, like, don't get advice from financial advisor. Get Yeah. Financial advice from someone you trade places with. So I I had someone send me, a video. Mhmm.

Right? And it was this lady who was just blasting on Arizona. Right? And he sent me these videos, like, how do you feel about it? I was like, well, I don't take advice from people I would not trade places with.

Chris: That's right.

Steve: And given how she presented herself, no desire to replace this with this lady. Mhmm. So something else that you remarked on was you've helped over a thousand people cash flow by over $300,000,000 in the last thirteen years. Yeah. That sounds like an outrageous number.

Chris: It sounds outrageous. Right? But

Steve: So what's the story behind it?

Chris: Well, it helps that I've been doing this since 2010. Yeah. So it gives them time. Right. You know?

But, the story is about the average has been about 34,000 a year Mhmm. Right, in the first year alone, and then that increases year after year. So I'm not even counting the increases for a lot of these people.

Steve: Mhmm.

Chris: The story is either we help people find and free up cash and or we help them create more passive income. Mhmm. So we get their money out of prison and get it working for them. Right? Freeing up cash, I mean, even, like, business owners, I mean, taxes.

I mean, almost every time people are overpaying taxes. If you're a business owner, you're pretty much guaranteed you're overpaying, because there's always things that get missed. Right? Even like debt, like, I'll tell you in the last recession, I stopped teaching people how to get out of the rat race because I was in it. So instead of teaching about passive income, I start switching more to freeing up cash, finding money.

Steve: Mhmm. A lot

Chris: of times, it was, like, through debt consolidation. Like, right now, if you got credit cards, they're skyrocketing interest rates. You may not even know it. Mhmm. You know, should we be paying those things off versus investing?

Right? Should we be finding ways to consolidate? Even if it means a HELOC, that's going up. I mean, now, usually, I wouldn't recommend that. Occasionally, it might make sense.

Sometimes, it doesn't. Mhmm. You know? Sometimes, it's refinancing your 3% mortgage to a 6% mortgage. I've had people actually do that and improve their cash flow there month to month, and then they can take more money and invest it and actually net higher passive income cash flow.

Steve: Right.

Chris: So that's really what we're doing. So just trying to strategize with what the money you have, how do we get it to produce more with less?

Steve: So you're you're evaluating, kinda like digesting their entire situation. Mhmm. And once you review the entire situation, now you're optimizing the situation.

Chris: Yeah. We're seeing what's our cash flow look like month to month. Mhmm. We're looking at what's on their balance sheet because, honestly, net worth means crap. It doesn't it doesn't mean squat unless you actually make income from it.

Right. Right? I mean, who cares if you have 3,000,000 net net worth? Nobody puts on their tombstone. Ultimately, it's like, how's my life changed today because I have that net worth?

Yeah. So it's really about how do we improve that cash flow to the point where you have more than enough passive income to cover those expenses and then some. Right?

Steve: Can you give us, just for the people that are listening, you know, just one or two common scenarios that they might be able to take action with today?

Chris: Yeah. Like, for example, I mentioned, like, getting money out of prison. Right? Mhmm. The the biggest thing we find is that most financial advice is all about giving the money to the banks and the financial institutions and less to you.

Mhmm. Right? For example, your mortgage. Pay off your debt. Right?

And they're like, hey. Somebody even asked me the other day. He's like, should I just pay extra payments on my mortgage? What do you think about that? He asked me that on a podcast interview.

Mhmm. I was like, I wouldn't do it. Alright. I if I wanna pay off a mortgage, I'm gonna pay off with one check, and and that's it. And that's and that's still if I have more cash than what I have.

Right? I wanna do with one check because my cash flow doesn't improve if I pay extra to my mortgage. Mhmm. Well, you save thousands a year. Who cares?

You know, if I save thousands of life that I can make thousands more investing at a much higher rate anyways. Mhmm. So for me, paying off my mortgage could be a dumb idea. Right? Not for everybody, but for some.

So we look for ways, like, is there equity there? Like, where's that net worth? Where's that money locked up? Is it in mutual funds? Is it in IRAs and four zero one k's?

Can we have money self direct that and then go move in other places? You know? Do you have properties right now that are actually got a low return on equity? You know, we get a lot of real estate investors that are like, oh, I'm doing real estate. I'm doing great.

I'm like, my cash flow's awesome. Then we we look at it like I had a guy in California that he had you know, he's making netting about $200 a month Mhmm. But he had 700,000 of equity in that property.

Steve: Yeah.

Chris: So he's making a point 3% return on his equity. Mhmm. I was like, dude, we can get that 10 that 700,000 out. Go do an exchange on that sucker. And even if it made 10%, that's 70,000 a year versus 2,400 a year.

Mhmm. And it took him years to figure it out because, you know, he's he's raised by very conservative Asian parents. Right? They said, like, no. You you pay off everything.

You save everything. You don't do anything. You lock it up in prison. Mhmm. Finally, after a few years, he's like, wait a minute.

I could actually take this money out and invest it.

Steve: Mhmm. Yeah.

Chris: That's what I've been saying. He started, like, buying, like, the Southeast, like, Louisiana and places like that. Now he's raving about it. He's like, this is the best thing ever. Like, yeah.

California sucks for one. But two, like, yes. Get your money working harder for you. Right? Get it get it leveraged.

And so that's the kind of thing we look at. You know, even people have have retirement accounts. Can we get it out? Can we minimize taxes if you're not 59, get it to work for you, and then you can retire sooner. Right?

Things like that.

Steve: So we had, Alex Quezada on on the show, and he was talking about how he has his self storage. Mhmm. And, he planned on keeping that property forever. Mhmm. Right.

He's like, when I bought that thing, when I bought that sucker, I knew I was gonna keep it forever. Mhmm. And then he joined a different mastermind, and they're saying things like return on equity. Yeah. And it's like, holy cow.

Return on equity on this thing is not very good. Mhmm. So he sold it and bought something else. Yeah. So can you explain the concept of return on equity?

I know you just gave the formula for it, but can you explain the the principle behind it?

Chris: The principle is when we talk about stewardship

Steve: Mhmm.

Chris: Is how do we make more with less? Right? I mean, like you said, like I mean, calculate it, it's easy. You take you take the annual income and annual profit, I like to take, divided by the equity that's in the property. If for me, if it's not at least 7%, well, I'm gonna wanna move it.

You know? Right. And there could be other reasons too. I'm selling properties in Alabama right now that have a, you know, 11% cash on, you know, return on equity. But problem is that they just suck because we hate the property manager.

I'm not the property manager, by the way. But, but, you know, it just it was just it was one of those things where you said, you know what? We can still move it. It appreciated enough. We got more equity.

Let's move it out and move it somewhere else, do more of a lateral move. But when you have that equity, right, that's that's money that's potential. Now you could sell on something forever. There's nothing wrong with that if you're already at the point you have more than enough money coming in that you can't you don't even know what to do with it. Yeah.

Most people aren't at that place yet.

Steve: Mhmm.

Chris: So if we can take that extra equity and get it to perform better, right, it's it's it's no different like anything else you do in business. If I can take my money to make more money, that makes sense.

Steve: Right.

Chris: So if I can take that equity and be able to make more with it, just like that guy going from 2,400 a year to 70,000 a year conservatively, that's a good move. Right? That that should be a no brainer. Mhmm. Unfortunately, emotions get involved and it doesn't become a no brainer for a lot of people.

Steve: Yeah. Well, emotions, programming.

Chris: Programming. Yep. That helps too.

Steve: Yeah. Like, we were told I mean, depending on the culture, I could pay down all your debts. Mhmm. Right? That's the culture I came from.

Chris: Yeah.

Steve: Right? And so it's hard to to to move when what you were programmed with your whole life. So, let me get you hypothetical here. Right? The guy that had the 700 k in equity on his property.

Mhmm. Why not just do a cash out refi?

Chris: He could've. We would've put him in a negative cash flow situation with that property

Steve: Mhmm.

Chris: And then do and then then he'd still make positive cash flow. So he could still net positive, but we ran both scenarios.

Steve: Okay. So it's not to both. Sell your property because you have equity. Right. It's if you do a cash out refi, what's your cash flow situation like Uh-huh.

There? Or if you sold this property and took the 700,000 Yeah. And put it elsewhere, what kind of return you can get on that 700,000?

Chris: Yeah. It it I'll tell you, the most popular thing that everybody kept asking me was that very thing is, well, can I just do a cash and refile on my portfolio? You could. Well, let's run the numbers. And then the numbers always ended up being worse than just selling the property.

Right. And, and that would and that's hard because when you get mentally stuck on something, right, just like you're saying, like, you get stuck on no debt, no debt, that becomes your narrow focus. Mhmm.

Steve: Right?

Chris: That's why financial advisors can't see outside the alternative space because they they just they can't see anything past mutual funds. But same thing here. If you can start looking out what's the actual end goal, what do you have these properties for in the first place?

Steve: Cash flow.

Chris: Cash flow. Well, let's get that. Let's get you that, that very thing you want. It might just look different strategy wise than what you originally thought it would be.

Steve: Yep. So anything that we have not talked about yet that is important we should be talking about whether it's 2023 or what's on the horizon?

Chris: When? That's a big question. Who knows? Let me think. No.

I'm good. You're good? Yeah.

Steve: Alright. So, I think what's the last thoughts you wanna leave the listeners with? Guys, you know, again, if you're seeing value if you're getting value from the show, it'll help us a lot. Subscribe on YouTube. It was a five star review on Apple.

We were trying to help as many people as we can. We're not charging you guys for the show, so the cost to you is to help us reach more people. So, last thoughts I'd like to leave everybody with.

Chris: That I like to leave everybody with? Yeah. Yeah. Be prepared. Right?

Like, that mean, we're talking about asset protection, but, really, like, this is about how you can hit a home run. Don't be fearful of the future. Like, I look forward just like you did in 2020. In 2019, we're all talking about the recession coming anyways. Right.

Steve: And

Chris: then it got delayed. It just got pushed back. Right? Be looking forward to that, and don't wait for it. It doesn't mean that you stop and just wait for whenever it crashes, then I'll do something.

Mhmm. You can keep doing things along the way, but remember, look forward to it with faith versus fear.

Steve: Mhmm.

Chris: I think if you do that and you start to have clear eyes, stop listening to what the if you listen to the masses, just listen to them to know what you should not be doing. Right. I think that's the big key.

Steve: Cool. Perfect. If someone wants to get a hold of you, what's the best way to do that?

Chris: Go to moneyripples.com, or you can also go, you know, check out our podcast on I tube I tube u tunes. You can check out our podcast on YouTube or iTunes, the Money Ripples podcast. We got lots of stuff there too.

Steve: Do they have do you offer any kind of consultations, like, for, like, you know, for example, that return to equity situation? Do you do do you do stuff like that?

Chris: Yeah. Actually, even easier, you can go to moneyripples.com. There's actually a passive income calculator there. You can put in your numbers. It's, like, 10 questions and find out pretty pretty conservatively how much more cash flow or passive income you could be having in your situation right now.

Steve: Alright. Perfect. Thank you so much. Thanks. Appreciate it.

Thank you guys for watching. We'll see you guys later. Out to Steve train. Jump on the Steve train. We real estate disrupt