I am not one who typically calls out anyone out of the blue, especially someone that I respect and call a friend. But, when someone is giving some not-so-good advice to his many students, I have to say something.
In today’s podcast, I will be calling out (not by name) a very respected real estate investor whom I have had a couple of finance-related conversations with and have disagreed with him on his approach.
Listen as I debunk his advice. Want to see how your money can grow passively?
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Speaker 1 (00:00):
Hello, my fellow Ripples. This is Chris Miles, your cashflow expert and anti financianal advisor.
Speaker 2 (00:07):
Chris Miles was able to retire twice by the time he was 39 years old, but he’s not content to just enjoy his own financial freedom and peace of mind. Chris wants you to have your own ripple effect so you can live free today. He’s not the financial advisor you expected. He’s the non-financial advisor you deserve. He’s jumping behind the mic right now, ready to make waves. Here’s Chris Miles.
Speaker 1 (00:37):
One more show that’s for you. Those that you work so hard for your money and you’re not ready for your money, start working harder for you right now. You want that freedom. You want that cashflow today, not waiting 30 or 40 years from now if you’re lucky, but you want that life today so you can live that life that you love with those that you love. But it’s not just about getting rich, although that’s awesome too. It’s about living a rich life because as you are blessed financially, you have the greater capacity and means to bless the lives of those around you. Thank you for tuning in today guys. Thank you for being a part of this ripple effect because I can’t do it without you and hopefully I’ve been able to add value in your life as well. If so guys, hey, leave a review.
(01:15)
I would love you to do so. Leave a review on iTunes or YouTube, like subscribe or whatever it might be, but please leave us a great review if this has created any value for you at all, please do so today. Alright, so I want to talk about some, now I’m going to preface this person is a friend of mine. This person is a great, awesome coach. He’s been great in the real estate space, so I’m taking nothing away from him that way and really even the advice that’s been given, not all of it, in fact, most of it I would say I agree with. Okay, so I’m going to just focus on a few key points. There’s a lot of points here, but I’ve seen him post this a lot of times and even talk about this one-on-one and personally and him and I have even had a time, a little interchange about some of these tips here because here’s the truth, when you have people that are successful in a certain realm, many times people might think they want to listen to them in other areas too.
(02:09)
For example, I wouldn’t take marriage advice for me necessarily. I’ve learned a few things, but I’m not saying I’m the best guy for giving you marital advice. In fact, don’t take any of my advice at all if you don’t want to. Financial great investing, awesome. When it comes to that stuff that I’ve actually experienced and done and I’ve helped others do too, and I’ve replicated it many, many times, that’s a whole different story than trying to ask me about, for example, macro, even macronutrients, right? Micronutrients, macronutrients and doing health stuff. Hey, I love that. Health is probably my second love, but you know what? I’m not that great business leadership. I know some things of course, but again, I’m not saying I’m like the authority in these areas. I know it just enough to be dangerous. I’ve known some things that worked for me, but I’m not saying that take all my advice in every aspect of my life, take the advice of something that you actually do.
(02:59)
Well, this guy has gone more of the coaching route. He is amazing at teaching coaches how to do what they do, and so I’m taking nothing away there when it comes to his own personal financial type of opinions. They’re just that they’re opinions. So I want to talk about these because they’re not uncommon. In fact, it’s almost like he took this out of the book of the Millionaire next door. Sometimes I wonder, and maybe he did. So anyways, so he talks about the top 10 financial rules that can make for money that’ll change your life for the better. Here’s the interesting thing. Not all of these are financial rules, so I think that’s kind of interesting. For example, one of these rules, he puts his walk at least one mile every day. Well, I agree with that, but I wouldn’t call that a financial rule.
(03:38)
You might say indirectly it helps you with wealth, but I wouldn’t call that a financial rule when it comes to how you use your money walking, not necessarily the same thing, right? I mean, he even talks about reading books every day. I totally agree with that too. So a lot of the things outside of the financial realm that he’s telling you to do, I agree with, but sadly, two of these 10 aren’t even financial rules. But it’s funny because when you speak with confidence, everybody loves it, right? So let’s talk about number one. He says measure your net worth every month with your significant other, like your partner or spouse, and set a net worth goal. Now, his perspective is that net worth is more important than anything, right? I kind of agree with this one, to a level, to a degree, cause and effect.
(04:20)
Understand that net worth, which is measuring your assets minus your liabilities, right? Things that you own versus the things that you owe on. You subtract those out, you get your net worth. Now, he says you should be tracking that every month, and I agree, I do agree with that. It could be a slow process, but here’s what you want to see. You want to see that pattern trending upward, but it’s not the cause. I would actually propose this instead is that cashflow, your income minus your expenses and having that being positive is more important than net worth. Why? Because what happens when you have positive cashflow? What happens when you have money left over every month? It goes one of two places. Either it goes to savings. This is assuming you don’t blow it. Obviously when you have more money every month, that’s because you didn’t spend it, right?
(05:02)
So you’re either going to add it to savings, which improves your net worth, or two, you pay off a debt, you maybe put extra on a debt, which also when you pay down a debt, improves your net worth. So it’s the income and mindset, your expenses, that cashflow, that profit that you have in your life that then creates the positive net worth. So I would just say focus on the cause rather than the result. I do both. I track both, just so you know. But I know he’s all about net worth, net worth, net worth. No, because here’s the problem. If you do some of these other rules, he’s talking about doing his net worth could drop even if he has positive cashflow. I’ll get into that, why that could actually happen in a little bit. Here’s one that I actually do agree with this.
(05:39)
This would be much like a richest man in Babylon type of rule. It says on every dollar you receive, pay your taxes immediately. Tithe 10%, save 10%. He says live on 40%. Now, live on 40% can be pretty tough. If you’re a high income earner, this is easier, but this could be pretty dang tough if you are making 50,000 a year to try to live on 20,000 a year. It’s not very realistic, especially given some of the rules he keeps saying later on. I think that’s an ideal. And so I’m not saying that you can do that, but I’m just saying that that’s not realistic in many, many cases, especially given certain circumstances. But I do like overall, yes, I like to tithe 10%. I do that every time I do that, even before, heck, I even do that before paying taxes, even though taxes might come out first, but the money that I do get, 10% I do tithe on, and then yes, 10%, I think you should save at least that much.
(06:32)
I would even argue maybe it’s 10% for savings, but I would even argue towards 20 to 30% to savings, still trying to leave you at least 60 to 70% to live on. So that’s my basic premise. That’s the ideal. I’m not saying it’s possible in every month, and I’m not saying it’s possible in every situation right away, but that’s what you would want to work towards. Now, number three, this is the one I probably have the biggest beef with right here. In fact, you know what, I’m going to come back to that one. I’m going to save that one for last. Okay, let’s go to some of these other ones. Number four, he says, only use a credit card for online purchases. Never a debit card. Get one with cashback rewards and pay it back in full every month. In general, I like this. I do like to use credit cards for online purchases.
(07:13)
I do like either rewards or some kind of rewards. I have a Delta card where I get sky miles and things like that. Awesome. I think that’s great. I know not everybody agrees with this because you talk to a guy like a Dave Ramsey, he’s going to hate this, right? But I do like using that, assuming that of course, like he says, you pay back in full every month. So this one I do agree with. I think that’s a good point to talk about here. Number six, I’m going to skip the ones that are non-financial. He says, only pay cash for your cars, either $5,000 or up to 8% of your net worth every five years. Never finance or release a personal car. This one I’m going to have to say I definitely don’t agree with. Okay, first and foremost, have you seen what cars look like now at $5,000?
(07:56)
Now, this rule might’ve been great a few years ago. Several years ago. Yes, you can buy a cheap car for 5,000. I’ve looked, I’ve got kids that are teenagers. We looked for cars at the $5,000 range. There are pieces of crap that can barely even run themselves. I would not even trust my child to be in that kind of car. Now, I’m not about trying to buy kids brand new cars. I’m not like that at all. I want them to pay their own way. I want them to be able to cover their own things like I had to do growing up. That being said, trying to go a 5,000 or 8% of your net worth, where does that come in? Okay, so let’s say it’s 8% of your net worth. Let’s say your net worth is say, $10,000. Does that mean you should only get an $800 car?
(08:33)
Now, it might not be that your cashflow is in a bad position, right? Because $10,000 net worth, it might be that yes, you’ve got debt, maybe you had student loans and things you’re paying back on and you’ve got a few things you own but maybe don’t own a house yet. So you don’t really have that. You might not even have savings, but the savings may not be enough to really pay. Maybe it’s barely enough to pay your student loans, but that would be unwise to use all your savings to pay off your debt, so to say, 8% of your net worth or $5,000. That’s a little bit too rigid in my opinion. I like where he’s going with this because here’s the overall principle that you should do is don’t buy something you can’t afford, right? That’s the overall principle I do agree with. But what happens is many times people get stuck on the numbers and it’s nice to have numbers.
(09:16)
I get it because it’s easy to have a benchmark, but those numbers need to be individualized to you. And so when he’s saying pay $5,000 or 8% of your net worth, what if your net worth is a hundred thousand dollars? Which by the way is pretty good if you’re not a homeowner, it’s really good. Most people that have net positive net worth, usually because they own a home and it appreciate it without them doing anything, but it doesn’t change the cashflow of their situation, it doesn’t make them any better off. I know plenty of people that have decent net worth but are cash poor. They couldn’t even afford a car payment even though they have a half million net worth. Well, would that mean they should buy a $40,000 car? Well, not according to him because if they have to finance it because maybe they don’t have enough cash to do it, they have to finance it.
(09:54)
Well, that would be bad because they don’t have again, enough money to do it. Well, maybe that 500,000 is all equity in their house. It’s not cash in their hands. No, you would not pay cash for that car. So that’s where there’s some limitations there, okay? I just don’t agree with that, even though I like that he’s trying to create something measurable. I do like that part. It’s not possible. And by the way, never finance or lease a personal car. Guess what I do? I actually finance the car. I actually bought a car and got a loan on it for 3.9%. It was a three year car loan. Now it’s a higher payment because it’s a three year term, so it is a little higher payment, but 3.9% I know I can make money on that all day long. I will finance that because I know I can make more money with the rest of my money elsewhere, even if it were 7%, I still know I can beat that 7%.
(10:40)
Now, do I always like to carry a car loan? No, I don’t. But here’s the problem I have. A lot of times when people make a lot of money, they start creating rules, especially around debt. They’ll say things like, you know what you don’t need? You should pay off your debt right away. You should be debt free. But what they don’t say is, well, on my journey there, I leverage debt to help me get to this point, and then they pay off their debt because then I have more money than they know what to do with. But then they’re going to try to accuse you and say, well, you should be debt free. You should pay off your debt. That’s what I did. No, you leveraged debt and then you went and got debt free. And some people have bootstrapped it fine, whatever. But if you’re a wise steward of your money, not if you’re, you’re going to blow money and spend or gamble it, that’s not cool.
(11:23)
But if you’re going to be a wise steward of your money, leveraging banks is not a bad thing, especially if the interest rates aren’t that bad. And yes, as I said, seven or 8% is not that bad, and especially if I know I can make more than that, I’m going to do that each and every day. So that’s what I mean by that. Now, do I always have debt? No. Sometimes if you just have enough cash, and this is my case too, you have enough cash, you’re like, well, I could go invest it, but I just want one less bill to pay. It’s just more convenient. Yes, the number’s work in my favor and not pay it off, but I’m just going to pay it off so there’s one less bill I have to deal with, right? Still, you could try to have that automated and it comes out and it doesn’t even mess with your life at all.
(12:00)
So anyways, I don’t think you should never. I think the whole thing about never lease or never finance, I don’t think that’s a good rule in every situation. There are some times you can get 0% leases or financing. It may not 0% right now, but there are incentive programs just like I got the 3.9% in today’s current higher interest rate environment because they’re trying to incentivize people to buy cars. Now, if it got ridiculous, if it were 18%, you bet you I’m going to recommend buying cash if you can or try to pay it off as quickly as possible if you can’t pay cash for it. So again, case by case, principles always rule. Principle of the matter is don’t buy a car you cannot afford, right? But the rule is that’s more of a rule. A principle is a rule, but the guideline about trying to put numbers on it, not so much, okay, I’m going to stop beating that dead horse for now, but it’s going to come back later.
(12:49)
I’m going to tell you why. Number seven, stop renting and become a homeowner asap. In general, I agree with this, but I don’t, okay? I actually think renting can be okay. Now, like the point I made earlier, yes, because there can be appreciation where you do jack squat that can help you be in a better position, but I’m going to put a huge but on this, there are times and markets and seasons where renting is better in many markets right now, renting is better than buying a house, and that’s okay. It’s okay to rent. I know plenty of guys that are multimillionaires right now just renting. They cashed in all their chips. They said, I’m not going to be in the market anymore, especially if they’re in California. They don’t trust the market anyways, but they cash in their chips and they’re just renting. That’s fine.
(13:32)
If you want to be more mobile, you want to not have to feel so rooted in one place. Renting can be a good option, give you more flexibility, especially if you know that your life might be in flux. There might be some transitions. Maybe you’re single, you might be married later on, you might just want to rent rather than own. I’m not saying you couldn’t own while you’re single too. That could be a good thing as well. I’m just saying it’s not as cool as what people think it is because here’s reality. When it comes to owning a house that owning a house, guess what? There’s a lot of responsibility. You got to fix your own crap, at least when you’re rent. You don’t have to fix anything. You don’t pay all this extra money. You might pay a little bit for certain things, but when things break down, like when my basement f flooded last year, we paid over a hundred grand to repair my basement.
(14:11)
If I were renting, that wouldn’t have had to be me. I wouldn’t have to pay that a hundred grand. It would’ve been the owner. So for me to have to come out of pocket, that was expensive. General maintenance and upkeep is much more expensive than just the house payment. So even if rent was a little bit more per month, there’s a good argument for why you might rent instead. It’s a lot less headache, a lot less responsibility, and if you’d rather focus on other things in your life than your house and all the things that come with it, that’s a good argument to go rent. Now, I love the fact that being a homeowner doesn’t allow me to grow my money, grow my wealth, especially when you sell the property, not so much when you’re in it. Just having the equity when you sell the property, when you have that money in your hands, that can be awesome.
(14:50)
It can be a great way to supercharge and boost some money that you could leverage to create more passive income. But again, don’t let that be the case. If you’re paycheck to paycheck right now, you shouldn’t even be worrying about owning a home. Now, you might want to shoot for that, right? I’m not saying you shouldn’t shoot for a home ownership, but I’m just saying if you’re paycheck to paycheck, and I’ve seen several people say, well, I want to be able to buy a home. Why? Well, because that’s the American dream, is it? Is it really? Because you can rent and they’ll still let you paint your walls sometimes, okay? What’s the American dream really about? Ownership. Okay, cool. But the truth is, when you die, guess what? Do you own that house? Nope, you don’t. So again, I look at things as stewardship, not just ownership, right?
(15:30)
So again, I’m not saying you shouldn’t have home ownership. I’m just saying there’s a good reason to not have a home ownership too. Number eight, he talks about moving savings from low interest banks at 0.1% to high interest savings, savings accounts, duh, good advice. I agree. Carry health, auto home insurance and choose plans with high deductibles. Also, something you’ll hear me talk about a lot, even the Wealth Accelerator Academy, right? I’ve talked about that in one of those sections. That’s all great. Let me come back to the point. Now, the number one point that I have a big disagreement with, and it’s this one. This is going back to this number three. It says, says on the portion you save, so you’s talking about the 10% that you were supposed to be saving, right? On the portion you save, invest 50% into real estate, okay?
(16:11)
20% into the stock market. He says s sp 500, specifically the stock s and p, the index, and he says, and never sell it is what he says. And he says, keep 20% in cash, put 5% into physical gold and 5% into high risk, high return, speculative investments like crypto, other individual stocks, et cetera. I have a horrible time with this, and him and I actually talked about this because, well, let’s be honest. I had to tell him that the returns he thought he was getting in the stock market were false. I was like, that’s actually not the returns you’re getting. That’s not the case. He was spouting out things like Dave Ramsey had said. I was like, no, no, no, no, buddy, I respect you. You’re amazing business owner. But here I’m going to disagree because the stock market does not average 12% a year.
(16:59)
It just does not happen. Even the ones he’s recommending, it does not happen. And even people that do know the stock market will even say that’s wrong. Just like they tell Dave Ramsey. No, that’s not true. The market does not return that high. The SB 500 as you know, only average, it’s only been averaging about 8% a year. Now, if you throw in dividends or reinvested, it might add a 1.6. You might be at nine point a 5% a year if you’re lucky. It could be lower, might be slightly higher, but you pretty much are not getting 10 or 12% a year. That’s the truth. Okay, so he’s saying 50% in real estate. Of course he does love real estate, but to put 20% into the s and p 500 and never sell it. Well, for what purpose? What’s the whole purpose of buying the SB 500 to never sell it?
(17:43)
Is this somehow going to become part of your investment portfolio? Maybe. And again, I’m not opposed to having money in the market by now. Individual stocks, I mean 5% and speculative stuff. Sure, that’s okay, as long as it doesn’t destroy your path. I’ll come back to maybe some rules or some guidelines that could change there, but again, put 20% in the cash. That’s great, but only to some degree, unless that 20% is going to go into things like buy more real estate, but just to only build up cash 20%. Eventually you’re going to get to a point saying, I’ve got enough cash and that’s going to redirect and move. And for some of you, if you’re just starting out, you might put a hundred percent into cash into a savings account and just start there. We talk about infinite banking, which could be part of that savings account type plan.
(18:23)
That’s liquid and money you can be using to build up an emergency fund and then later invest too, assuming you have enough in your emergency fund. But to say that you’re going to put 20% in the stock market, 20% just in the s sp 500, then another 5% of the speculative stuff. Well, in my opinion, the S sp 500 is speculative zero control zero whatsoever. Again, I’m not opposed to it, but if I were to go into something like the SP 500, I’m going to wait for a market crash. I’m going to wait for a good couple years of down before I say, now it’s time to buy when nobody else wants to buy the stock market. That’s when I like to buy. Same thing when he talks about crypto, individual, individual stocks. I put this all in speculative. They are speculative. Same thing with crypto.
(19:04)
Great. It’s starting to roar up around $50,000. Again, awesome. That doesn’t mean I want to buy some. Now, that’s why I bought after it crashed, I would buy it then. And by the way, no, I did not buy after the last crash. I didn’t trust it. Even then, I don’t trust that’s going to be a big money maker from this point forward. I could be wrong, but that’s the speculative thing. I do have still some Bitcoin in my possession, but again, not a focus, right? So I’m not going to tell you that you should be not doing this. But for someone who does know real estate really well, I would definitely be much more confident in doing real estate more than 50%. Again, you could try to be diversified but’s. What I’d say, here’s the exception to the rule. When you’re starting out, there’s different phases of your wealth you’re trying to grow.
(19:49)
Remember, many of these people, when they get to a certain point in their life and their wealth, they start speaking from that perspective there, but not where you are right now, where you are right now, if you’re not out of the rat race, if you’re not work optional, if you don’t have enough passive income to be able to quit your job, the focus should be on buying real asset backed, like real estate backed cash flowing investments. You should be focusing a lot of your money there. Emergency reserves and cash flowing investments, trying to diversify into all these different areas to try to build it up. And by the way, I like gold, physical gold and silver. I like those kind of things too, and have some metals, but that guys, you want to get to that first phase, which is getting out of the rat race.
(20:27)
Now, once you’re out of the rat race, once you’ve got more than enough income coming in that you could quit even if you decide not to quit, once you get to that point, then you can start diversifying in some different areas. Maybe you might put a little higher percentage in some speculative things to grow your money in different ways. Maybe again, I’m not a big risk taker. I’m probably more conservative than almost all of you because I put zero in the stock market right now, and the only time I want to put money in the stock market is after it’s tanked. And even then it’s speculative, a very small percentage of my wealth, and I’m at the point where I’m out of the rat race. I’m in that next phase. So there is a time and a place for doing these kinds of things, but individual stocks, I typically stay away.
(21:01)
I’m not saying it’s bad. Hey, we’ve got people, even clients that will still do that. I’m just saying get yourself out of the rat race first. Focus there, accomplish that objective. Then diversify and build your wealth in some other places where if you lose money, it’s not going to cripple you. You’re still going to be okay. That’s kind of what I would say is my general blanket advice in general, right? It is focus first on cash flowing investments. Then later diversify to build wealth in other ways. So anyways, I thought it was interesting because again, just because somebody’s good in their field doesn’t necessarily mean they’re good in all areas of their life and that all this stuff is good. It’s okay to disagree with them. And so again, I think this guy is a rockstar. I love him. I love his stuff and everything.
(21:44)
I think he’s the coolest person ever, but there’s some of these financial things I see that I wonder if it’s really him saying it or he just learned it from somebody else that’s more like that. Dave Ramsey, saver financial advisor mentality. That’s the kind of thing that I try to question and look at. So overall, he’s got great points, but those few things about owning and versus renting your house about whether or not you even can finance a car or how much you should be able to buy a car in cash, as well as investing your money in the markets, especially when you’re gambling in those markets, I tend not to agree with as much. So you can decide for yourself. These might be those kind of suggestions he gave you might like, this is just my own 2 cents. To kind of give you a different perspective and to kind of show you that even though I was a trader in the stock market, I have a different perspective.
(22:30)
I actually traded in the stock market more than he has, and I still won’t want to put money in the stock market. So that’s just my own personal thing. I’m not giving investment advice here. There’s my disclaimer for everybody. I’m not giving investment advice, but the biggest thing I want you to do is keep educating yourself. Listen to different perspectives and do what’s right for your money and yourself and your life. Guys, if we can help you in any way, you can always reach out to us through money ripples.com. Go and make a wonderful prosperous week. We’ll see you later. Cashflow your income minus your expenses and having that being positive is more important than net worth. Why? Because what happens when you have positive cashflow? What happens when you have money left over every month? It goes one of two places. Either it goes to savings. This is assuming you don’t blow it. Obviously, when you have more money every month, that’s because you didn’t spend it right, so you either going to add it to savings, which improves your net worth, or two, you pay off a debt, you maybe put extra on a debt, which also when you pay down a debt, improves your net worth.