Should you keep money on the sidelines?
Should you pay off debt right now?
Is the stock market a good place for your money?
Learn how savers are becoming losers right now, and what you need to do about it.
Listen to our Podcast:https://www.blogtalkradio.com/moneyripples/2020/08/13/425--savers-will-become-losers
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Hello, my fellow Ripplers! This is Chris Miles. Your Cash Flow Expert and Anti-Financial Advisor. I want to welcome you out for a wonderful show. The show that is for you and it’s about all of you. Those of you that work so hard for your money, and you want your money to start working harder for you. Now! You want to work because you want to not because you have to. You want that freedom. That cashflow. The prosperity. Today. Not 30 or 40 years from now, if you’re lucky and the market just happens to smile on you just the right way, but you want that freedom right now. You want that real life, the ability to be able to be with those you love and doing what you love, but guys, not only do you want that life of freedom, that financial freedom, but on top of that, you actually want to be able to have a life that makes a difference where you can bless more lives, because as you’re blessed, you can share those blessings with others.
And I don’t just mean donating your money and giving that away, although that’s great, but it’s actually be able to show up more powerfully as someone who is free, abundant, and prosperous, and there is where we can change the world together guys. That is the kind of Ripple effect I’m here to create. And I appreciate all you guys being here as well, because through you, I can do the same. So thank you so much for sharing this with others. Thank you again for bingeing and trying to learn and apply this. And again, thank you for those that reached out to me that said, Chris, like, I’m trying to learn how to do this better, whether you’re just, you’re trying to figure out how to get out of the rat race yourself, or you’re like Chris, like, I want to learn how to double dip on my money. Like, how do we use this infinite banking thing? Great. I appreciate all the questions and the fact you guys reach out because that’s what makes me feel like I’m making a difference in your life. So I thank you so much for that.
As a reminder, you can check out our website, www.MoneyRipples.com. You can download the eBook Beyond Rice and Beans to find ways to create more cash or find more cash now. And you can also check out other videos and blogs as well. So check that out.
So today guys, I want to discuss something that’s, that comes up a lot. Right? And I know I just got done telling you guys that right now, getting liquid, give, be able to keep your cash available is key. Right? I thought about, you know, right now is the golden opportunity. We’ve got crazy high prices in the real estate market we’ve got, we’ve got, you know, and I don’t, I shouldn’t say crazy high, but they’re higher right now than ever because there’s demand for it.
People aren’t selling, but there’s tons of people trying to buy. So there’s more demand for real estate right now. So that’s driving it up. The stock market is going nuts. Like it’s going crazy high just because they’re hoping for a virus, for a virus, they’re hoping for a virus! No, they’re hoping for a vaccine, right. To a virus. But even then the numbers are completely crazy, especially with how things have been shut down. But we’re seeing the stock market all the time high, right? We’re, we’re seeing all this opportunity. Plus with the cares act, you can even access money that was before tied up. Now you can get to it and get to it without a penalty and early withdrawal penalty. So there’s all this great stuff. Right? So I talked about how it’s opportune to be able to get liquid and get cash. But I want to take it to that next level now is that if you’re a, if you’re the traditional saver, you’re going to become a loser. Right?
Savers are losers. As you might hear Robert Kiyosaki say. Right? And this does not mean that you’re a loser if you’re a saver in the sense that you’re, you suck, right? We’re not saying that at all. What we are saying is that great. You, you got some good discipline to be able to save money or put it away or to pay off debt faster. But that’s not what’s going to create freedom because I’m telling you many of you that have already done this. You’ve had hundreds of thousands. If not millions saved up in mutual funds or in savings or whatever it might be. You’ve been debt-free, you might even barely have a mortgage, but even that’s nothing. Right? So you’re already in this position, but you don’t have freedom because you don’t have income coming from this money. You have money, but it’s not actually translating to real income, like real interest earned.
And that’s a key difference guys is that it’s got to equate to that day to day lifestyle. Now you may not have all those mortgage payments, but you still have your life. You know, when people think that they can go debt-free and just life will be wonderful. I’m telling you, it’s, it’s, it’s easier to be debt-free. I can assure you of that, but it’s not. It’s not what is all cracked up to be, and it does not generate real freedom. You still have expenses. You still have to make pay bills, even if you’re debt-free, don’t you? Well, why would you think that debt-free makes you free? It doesn’t. If anything, it just means a few less expenses or costs, but other than that, you still have to pay for everything else. So we got to find this balance. If you want to be a wise steward of your money, we’re not about being spenders. Right?
We’re not talking about blowing money, but we’re also not talking about being in scarcity as a saver where you can never save enough to make a difference. We’re talking about going in the middle with being a steward. What does steward do? Well, steward wants to get those resources working for them. A steward says, how can I make the best of the resources that I have? Money for certain, but it could be also your time, your energy, your talents, and everything. How can I use this in a way that blesses more lives? How can I use this in a way that’s actually going to, actually create some freedom for me and be able to allow me to expand my influence. They’ll expand my service to others. Right? That’s really, if you go deeper, that’s really what being a steward’s all about. It’s not just about being financially free.
It goes so much further than that. Like, that’s just like a little step in the bigger scheme of things. But here’s what I’ve noticed is that I’ve had two people in the last 24 hours, right. Both of them have, they’re both great savers, like fantastic savers. I mean, Dave Ramsey would throw them up on a poster and say, these guys do what they do. Right? you know, one of them is, you know, they’re both in the medical fields. Right? what was interesting is that one of them made a comment. He said, yeah, I’ve got some student loans just paid one off, freed up 9,000 a month, which I said, Ooh! That is awesome. That’s what it should be like. Right?. 9,000 a month is nothing to frown at it for sure. And he said, yeah, but I still got another couple hundred thousand left of student loans because you know, being a doctor is expensive.
Well I started to ask them to break down those loans and tell me about interest rates and whatnot, and the highest interest rates like around 7%. So I said, okay, that’s a decently high amount for a student loan, but not ridiculous. And in fact, the lowest one, I saw the one that made the most sense to pay off if you were to pay one off was when I had a $56,000 balance. And I don’t remember the interest rate, but I just, if for his sake, I said, let’s even overshoot the industry. It’s probably lower. But I said, let’s say it’s 7% because he was paying $715 a month for 56,000. Now here’s the thing is 7%. And he’s like, I ran the numbers for him. In fact, I’m going to share my screen so you can see what that looks like.
So for those of you watching the video, great, for those of you that aren’t watching the video. Well, you know, you’re just gonna have to, you know, follow along verbally, at least. So I put this up on the screen for him. It was a zoom call. I said, all right, you have $56,000 on the starting principle. You’ve also got this at a, sorry, that’s the wrong one. Here we go. $56,000 7% interest. I said, if you’re paying 715 a month, that’s going to take you about 8.75 years figure out the payment, right there’s about 715 a month. I said, at that rate at 7%, for $56,000, you would pay over the seven years, 19,000 of interest. His response was, Oh! Yeah, that’s bad. I said, okay, cool. Yeah. 19,000. That’s no pretty, that’s definitely a pretty penny, right? That’s definitely some money coming out of pocket.
Considering he has 56,000. He owes, but he still has 19,000 of interest to pay over the next, almost nine years. I told him, I said, what if. And he hadn’t seen the compound versus simple interest effect. I said, what if. You, instead, you mean, and he was about to get 56,000. He had enough money coming in the next month or so that they would be able to pay off that one loan. And I’ll tell you from a cashflow standpoint, right? If you’re looking at just buying a property, you know, from a pure cash on cash standpoint, cashflow standpoint, paying off this loan is not a bad idea because it would free up 715 a month, see $56,000 down. If you bought like a property with that right now, if you did different funds and whatnot, like we’ve made 8% or 10% a year, you definitely would not be making a, you know, 715 bucks a month for the next nine years. Right?
Now maybe it might, I mean, there might be a possibility that depending on the, on the investment that you’re in, it could pay more. Even if you did a property, you see you’ve got paid 12% a year, 56,000, making 12% means 560 a month. That’s not quite 715, so it’s not horrible. But I want him to see that he could pay this off of the cash coming in the next month. Or he could not pay it off. And so I show him what would happen if he didn’t, if he just left the cash growing. And I said, unless they say, you only earn 5%. Right? So it’s costing you 7%, but you’re only going to earn 5% of his money. I said, what do you think of the interest you would pay on this? He said, Oh, it’ll probably be about, I don’t know, 12,000 or so.
I said, yeah, because proportionately speaking that’s about what it looked like if 7% cost you, 19,000, well, that would mean 5%. Should only make you about 12,000. Right? Well, ran the numbers and here it is. Boom, boom, boom! Okay. For those, you guys see my screen, of course you could see this. The interest that’s earned is not 12,000. It’s nearly $30,000 only earning 5% for the next 8.75 years. So if you had that 56,000, he could pay off his loan and save that 19,000 interest for the next nine years. Or he earned interest that compounds. Right? At 5%, he earns almost $30,000 of interest. Now he still has, it still costs them the 19,000 interest, but he still gains over $10,000, extra interest doing the same thing, just earning less interest. And I said, well, watch this 7%. If you’ve even matched the interest. Boom! Now you made 45,000.
So now you’ve made about 25,000 more in interest than you would have if you had just paid off your loan. And I said, what if you made 12%, right, again, like doing properties. I said, now it’s getting ridiculous. Now it’s about $95,000. Yes. It will cost you 19,000. But would you, I mean, that, to me, that looks like an investment. If I can put in 19,000 to make 95,000 in nine years, how many of you guys would do that investment? Right? I mean, it’s awesome. Now the cool thing is I showed him. I said, well, to break, even we did about 3.4%. There it is. If you only earn 3.4% of your money, you earn about 19,000 of interest. So I said, your goal is to earn at least three and a half. He said, Chris, I could easily do that. Basically I can invest in almost anything within real estate and make at least that much.
I said, I agree. I said, you could definitely pay off the mortgage or pay off the student loan, but you may not want to. And so I said, great, you know, it’s up to you either way you win, right? The question is which one’s going to make you the most money. Right? Which one’s going to really make the difference because see, let’s think of this practically say that you did put 56,000 and you bought really two properties with that. Right? Those properties paid you a total of $560 a month or a 1% a month type of return. Well, that’s just the one aspect that’s like, what’s above the surface. That’s the top of the iceberg. Right? But beneath the surface, there’s other things happening. For example, if you bought that with leverage with a mortgage. Well, cool! Well now that’s paying down your mortgage, your mortgage balance. Right?
So that’s starting to go down at least a few thousand dollars every year. Right? So you’re probably over those nine years, you’ll probably gained, I’d say at least $25,000 to $30,000. I’m not running the exact numbers, but it’s going to be pretty close. So in nine years you’re going to gain at least 25,000 to 30,000 of equity. Even the house didn’t appreciate just because you paid the mortgage balance down and you don’t even have to pay it, your renters do. Right? So not only did you make 560 a month, but now over nine years, you’ve averaged at least 2,000, 2,500, maybe $3,000 a year. And actually I’m probably being, probably being a little bit conservative on that number. So anyways, that’s a big thing there. That’s not including appreciation. There’s appreciation now? Oh my goodness! Now, if you’ve been writing off the interest on your student loans or your mortgage, because this applies to a mortgage too. Right?
Well now you’re writing off interest as well. So even the interest you are paying, you’re writing off on your taxes. Plus if you make real estate income, you don’t get the, because of depreciation and all those kinds of things and cost segregation. You really, you can actually walk away with zero net gain, even though you’re making hundreds or thousands of dollars a month, because now you’ve got tax credits. It becomes like a tax free investment while write off the interest. So that’s a 7% student loan guys. What if this is like a freaking mortgage? So that was the other person I talked to. They had a mortgage. I said, you know, and it’s funny because like their mortgage payments are so high. Cause they’re trying to aggressively pay them off that they could even get a HELOC. You know, not, not that they were broke by any means.
They had enough money to actually pay off their mortgages now, but they’re like, no, I want to get a home equity line of credit. Maybe I use that to invest. The bank rejected it because their minimum payments were so high compared to their income. They said, no, that’s too much. So I said, as I told them, I said, listen, instead of trying to aggressively pay it off and he was paying 3000 a month to his mortgage, I said, instead, let’s refinance it to a 30 year mortgage. I’m like, I know this scares you as a saver. This will scare the heck out of you. If you refinance that for 30 years and say, you’ve got at 3%, which is not hard for him to do because he’s got great credit. Right? And right now mortgages are so dirt cheap. It’s amazing.
But 140,000 for 30 years, at 3%, his payment drops down to 590 bucks a month. As you can see on the screen here, 590 a month, that doesn’t include taxes, insurance, you know, California’s expensive. Right? But that’s still, I guarantee that’s still at least 1,500 plus dollars cheaper than what he’s paying right now. He can always take that 1,500 of cash. He can always put it in a savings account. He can put it into life insurance. He could put it somewhere where he can store it and let it grow, do his thing to where he could pay off his mortgage later if he chose to. I said, but man, you can drastically reduce your expenses. Which why, by the way, will reduce your debt to income ratio. So then the banks will say, yes, to that HELOC. Because the banks don’t want to take risk. They view you as risky as a saver because you’re trying to aggressively pay off your house.
So you made your mortgage payment, you know, at a minimum. You said, Hey, I want a 10 year loan. Let’s fix that payment. Make it super high. His payment was actually 2,300, but he was paying 3,000 a month. Right? But still at 2,300 a month, the mortgage company is looking at, or the banks are looking at saying, Hmm, no. That’s too high of payments that he’s making. That’s risky. Even though by every financial, most financial advisors standards, including a Dave Ramsey would say, that’s awesome! Good for you. That’s what you should be doing. Thanks for saying no, you’re risky. Why? Because of his income drops at all, he has to still make those huge mortgage payments. Wouldn’t it be better if you have the option to make a bigger mortgage payment, which you had a lower payment. So I said, if you’ve made it at 590 a month, that’s way better than if you were stuck at 2,300 a month.
Well, I mean, or even with tax insurance, right? Maybe it’s 1,200 a month say it’s a thousand dollars a month cheaper than what he’s required to pay. That’s a thousand dollars. He does not have to pay. If something goes wrong. See, understand that often savers will always look at a calculator and we’re just go off of emotion or based on what they’ve been taught. And it’s always been taught by depression error mentality. Remember in the depression, banks were actually allowed to call your note to due, if you had a mortgage, even if you’re on time as their payments, they could call it, due but because of what happened to the depression. They changed those rules. They said, no thanks, you need to make it easier for people. As long as they’re making monthly payments, you cannot foreclose them. You cannot call the note due and make them pay the whole mortgage balance and take their house away.
You can’t do that. And so therefore banks don’t really do that. It’s very, you don’t see that option happening too often, unless you’re buying some investment properties, that might be the case. But in most cases, the mortgages, you’re no longer in danger. As long as you make your monthly payment, you’re fine. So the rules have changed, but people haven’t changed their rules. They’re still playing by old rules and you will lose the game if you play by old rules and that’s what’s happening here. So I said, listen, you can always put the extra payment on top of the mortgage. Although I wouldn’t recommend it. I would say, put into savings until you had enough to pay it off. If that were your goal to pay off your mortgage, then do that. Great! At least you had the money in savings and it builds up some extra security in case something goes wrong. Right?
In case life happens, which never happens to us. In case a crazy virus happens or whatever might happen. Right? That’s the difference guys. And so my point to you is this. And by the way, if you run numbers on a mortgage or what they could earn, you’re earning even 8% or 10% on that same, 140,000. It’s ridiculous. It’s like hundreds and hundreds of thousand dollars of more interest that you would earn in which you would pay. But again, we’re not taught to be stewards with our money. We’re not taught to be wise investors with our money. We’re taught to play by the rules. The banks given us, the banks want us to pay off our loans as quickly as possible, which is why they keep incentivizing us with more, you know, more of that kind of crap, right? They want you to pay off your loans faster.
They don’t want you to be in debt. They want those balances down as low as possible. So you create as little risk for them as possible. But remember all the time in the meantime, they’re getting paid. They’re always getting paid. They are the best investors. If all you do is copy and mimic what banks and financial institutions did, you’d find out that you could actually be an investor too. For example, banks wants you to pay back your money faster. If you have money in an investment, don’t you want that money back too? Even if it’s paying you interest, you eventually want to get all that money back just in case. Right? Just in case something goes wrong with that company. You know, if you’re investing with somebody else investing money with them, you want them to try to pay that principal back too. Not just an interest only. Right?
You want that money back at some point. Banks are no different. They’re just, they’re just a lot smarter. And they are so smart that they’ve trained you and financial advisors to teach you for years that you got to keep doing the same old thing over and over. Save money, pay off all your debt, don’t do anything crazy, lock your money away into some mutual fund or 401k or IRA where you can’t touch it. You can’t even have access to it. And if you try to touch it, they penalize you for touching your own dang money! That doesn’t make sense. Guys become a steward. Become an investor. And get out of that saver mentality. For those of you that are there. This is the thing you need to stop doing right now. So, anyways guys, that’s my challenge. Really let this sink in because it could be the difference between you having money and you having freedom. Guys, make a wonderfu Day! Visit us online at www.MoneyRipples.com for more resources, to help you fix money leaks and get your money working harder for you, now!
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