Report Card as an Adult
This is what they do not teach you in school. Part of what we're doing here with the "Freedom Isn't Free" show is we are kind of peeling back some of the layers of things that we are not taught in school, we're not taught in mass media, not taught in everyday life. Quite frankly, most of our parents didn't teach us these things because they weren't taught these things. There's a reason the general education board, "the robber barons" as they say back in the day. I have a problem with the private system and I've got a problem with the public system. Schools don't teach as they sing, but a lot of it was started because of the private sector and a lot of the big, the wigs, the carnies, the melons, the Rockefellers, all those guys, in the beginning, saying, "Hey, we need to create worker bees for us going forward."
So that's why this is completely understood. That's why we're going to jump into some of this today. We're going to be talking about this more and more as we go forward. We got some cool people on the show last week. A couple of guys that I used to play hockey with. They're in the NHL now, Nathan Derby and Drew Miller. Then we had Wendy Patton last week as well who's the Queen of Michigan Real Estate Investing and in the middle for 30 years. We have a couple of awesome people next week. We have a couple more real estate investors and some big ones, that young guy who is crushing the game. So super excited for that. They have hundreds and hundreds of units. And I'm just super excited about what we're doing here because we've had a ton of great feedback from you. So I appreciate you for watching and joining in on this journey. But again, this is the combination, I think, of a lot of what I was meant to do, which was helping serve others, educate others on what's going on and what it's really helped me and impacted me in my life, in really growing more of what we're doing, but also getting the word out.
This is something that affects all of us. Most people don't want to talk about money, religion, politics, but those, unfortunately, are the most important things in people's lives. It affects cause they affect every area of your life. That's why it's so important.
We'll spend a few minutes on this and again, we're going to talk about this a lot as we're going forward. But these simple concepts of the things I've been studying now for 10 years, and it helped change my life and the trajectory of my life. This has allowed me understanding. This has allowed me to be quite honest when there's that time, it's unfortunate saying it to some degree. But again, if you don't talk about it, then no one can grow. No one can get better. No one can have their mind opened. I was fortunate to run into people 8 to 10 years ago that opened up my mind and it helped me realize some of these things.
I look forward to crashes. When things go sideways and go down, I look forward to that because I'm excited to grow my wealth infinitely more than when it's an up-market. There are not as many advantages. There are not as many ways to multiply your wealth when there were up-markets. You can do it. I mean, you can, but when markets go down, that's when the wealthy get truly, truly wealthy, and enscale and expand their empire. I feel very fortunate to live in this time that we do. We've talked to this a ton, your mindset, everything the economy, what's going on in your life, politics, everything. It's all up here. Everything's up here. Everything completely is in your mind. So if you think it's gonna be a bad day today, it's going to be a bad day today. If you think it is a great day, it's going to be a great day. And if you think you're going to have a great quarter, you're gonna have a great quarter. If you keep telling yourself you're gonna have a terrible year this year, you're going to have a terrible year this year.
It's like clockwork. It's just as sure as the sun going up in the morning and going down at night. It's just the laws of nature and the laws of the universe. They work in perfect harmony with each other, right? So we have to start understanding these things to start growing and getting out of ourselves, instead of being trapped in limited by fear. Napoleon Hill always talks about this. Men have two identities. They have their two selves. They have a self that lives in fear and they have a self that lives in faith and you have to choose one of those. Most people tend to live in fear. I've lived in fear many times in my life and I still battle it every day. It's a conscious choice. You have to get up and choose every single day to either to live in fear or live in faith. We have to continue understanding that. The more we know, the more we can then act on and the more and the better decisions we can then make.
The report card that they don't tell you about. The report card everyone makes a big deal about is when you're in school and when you're growing up. But that one doesn't matter. As we've now kind of see the reason I was arguing with my teachers when I was in high school, junior high, high school, and all that and especially in college. Boy, high school, and college, I started arguing with teachers. Why do we need to know this? Why do we need to know this? It just didn't make any sense. No one had any good answers. Well, you learn what you need to know on the job. And this and that. It was just like, well, why? Fortunately, I wasn't paying for college. I'm very blessed to not have to pay for college. If I would have had to - Oh my gosh! I would have been gone in a second. Just the fact that people were telling me I had to be here and no one had a real reason why. No one knew why I had to be there. Just gotta be here though. Yu gotta pay us 80 grand, a hundred grand. What return is it giving me? What kind of ROI is it getting me when someone can't explain any of that to you? It's time to start asking questions.
The ESBU Quadrant
So the report card, as I said, getting grades, it trains you to be an E right? Again, like them, love them, hate them. Robert Kiyosaki's change more lives in the financial world than you name it. ESBI - the quadrant he always talks about. School, trains you to be an E right, trains you to be up here and you're paying 40% taxes. Some people kind of come down here and the S quadrant, maybe they're a sole provider or something like that. There is some type of business owner, smart, skilled, a doctor, an attorney. Well, those people are generally paying 60% taxes. We want to move to the left side and the right side of the quadrant, right? And how do we do that? We gotta understand the financial statement, income, expense, asset liabilities, and the cash flow statement. This is where the rubber meets the road. This is where you start to learn how Jeff Bezos, Warren Buffet, all these guys pay 20% tax because they're in the B quadrant or 0% tax. Real estate investors, people who are investing, their money is working for them. They might be paying no tax because of depreciation, because of refinancing and taking money out, taking debt out and using this. Cost segregation is using that to their advantage. Then all of a sudden have excess cash instead of being trapped by the government. All the people that are having problems right now in life is gentlemen because they're over here for the most part. And a lot of the unrest you see, 10 years ago, we saw unrest in the Middle East, things like that. That was because food prices got too high. The French Revolution, food prices got too high. People didn't understand that a lot of them lived on this side of the quadrant and they couldn't afford life. That's why unrest happens 99% of the time, because of this... That's where a lot of problems in this country have been started and are now coming to a head because we chose to let the Federal Reserve and all of these people just railroad us into eating away our money. Our money is worth almost nothing now. It's worth 96% less than it was a hundred years ago when they created the Federal Reserve.
These are the true reasons. Understanding this and getting an understanding here and then going in here - we're not going to go into everything here, but getting an understanding of this is what's going to help you then spur you into action and educate yourself as to why. Where are you on this continuum? How do I learn this? What do I need to do to go to this side of the quadrant and become that person who is on the other side of the aisle? Because I'll tell you when 2009 hit, 2008-2009, I was a senior at Michigan State. And I've told this story many times before. I mean, continue to tell it until I'm blue in the face. This is one of the turning points in my life. The stock market was doing this. It was the 2008 Election in October and the stock market is just going through the floor and John McCain leaves the trail. He's going back to Congress to help pass tarp and all this stuff and help the economy. Well, I remember then thinking there's a financial game being played on all of us. There's a game being played and I don't know what it is, but I'm going to find out. And that's exactly what I set out to do 12 years ago and have done that. It still has much more to learn, much more to learn, always learning. But I figured out, "Okay, what is going on here?"
3 Types of income
Some of these base things we're going to talk about are what's happening. Again, most people focus on a report card and think they're done with life after that. "I got a great degree. I got this and that." Then they keep getting further and further into debt and they don't understand why. They don't understand why they're losing. They don't understand why they're in the rat race still. I believe you have a job. There are three types of income, right? There's earned income, there's portfolio income, there's passive income, the three different types of income. Most people over here work for earned income. They're working for the most taxed income. If you work, if you're someone who says "I worked for $200 an hour or $20 an hour, $50 an hour," you're earning earned income. You're working, trading time for dollars. You can't make it anymore because there's only so much time in the day. You were in this right here, earned income. The wealthy work for portfolio and passive income. They're working for capital gains here. Again, this is a 40-60% tax area. Portfolio is 20% tax, basically 18, 20% tax. The capital gains, long-term, short-term capital gains, whatever it may be. But generally long-term capital gains for a lot of people in this world. The paper asset - it could be flipping real estate or something like that, but generally, it's on average around the world, 20%. So they're paying this, and this is why they say - again, Warren Buffett pays less tax than his secretary or whatever, and all that garbage because his secretary works for earned income. So she's paying 20, 30, 40, 50% tax at the end of the day, and Warren's paying less. He's paying maybe not even 20, he's paying around that. So of course, he's going to make less because he earns different types of income. That's what the wealthy do. Then passive income is, again, like we just talked about, it's cost segregation. It's depreciation on your house. It's refinancing your investment, taking out the money tax-free, and keeping the golden goose who is continuing to give you cash flow every month which we'll talk about here in a second. But that's a lot of times tax is zero. If you know what you're doing, that's taxed at zero. I mean, what away again, it's not what you make it's how much you keep, right?
The Poor Person Pattern
So I want to give this quick overview. I don't want to take an hour of doing this. I want to give you a quick overview is we're gonna get into this more and more as we go on, but I want not to spark people's minds because this is what sparked my mind 10 years ago. I've been studying ever since then and learning this and have it ingrained in myself. Now, I can't think any other way. So this is what we do is what our investment company does. This is what our real estate company does. It's a family office. It's a family office and managing our family's money. Not just our families, even, but helping to manage the people around us and family and friends and to do that. It's based on this premise here. So a job, right, earned income is something that people they go to work. They earned that earned income and it's taxed the highest, right? So someone who works the job is generally the poor they go in and they just have expenses and it goes out. It flows out. Remember, this is a cash flow statement. Just imagine like another statement right here, just another square. This is your income expense. This is your asset liabilities, balance sheet, your income statement, and then your cash flow statement. So the job goes, they just have expenses. They have rent, they're leasing a car, whatever it is and it just goes out. Or they might've bought a couple of thousand dollar cars. So they had don't have any liabilities, any debt, but everything goes out. Cable, it just goes out in expenses, boom, expense, expense. That's the asset pattern of a poor person with a job.
The Middle Class
Same thing, a job with a middle-class person. Their's looks a little different. They come down into here, boom, into liability and expenses and out, because guess what they're doing, right? They've got a car lease. They've got a home. They bought, they've got jet skis. They put on a credit card. They've got a boat. They took out HELOC for kids who got a hockey tournament. That's why they're doing that. Right? So they're doing all of this because they are now in their rat race, right? Cause they've only paid attention to their initial report card and they didn't pay attention to this. The most important report card you have, which is your financial statements. When you're an adult, this is your report card. When you want money or need money, the banker gender doesn't give it to you unless you don't need it. Right. Well, you don't need it. If you understand the financial statements, most people only have this. They only focus on that and don't have a balance sheet. They don't know what the balance sheet is. A lot of people don't even know what a balance sheet is. No one has ever taught that. Right? So most people just have a P and L, they have a budget. They keep, and that's it. They're only focusing on income expenses. You can see here, middle-class, the poor, the middle class. They have either goes right to expense, or it goes into liabilities. Things they owe other people, right? So this is a liability, things you owe other people. Assets are things you own yourself, right? So you own assets. Then you owe liabilities.
The Wealthy
So then you have a wealthy person. What are they doing? Wealthy persons, they have assets. They work for assets, right? So we talk about over here, real estate, passive income from real estate. We have a portfolio, we have stocks, options, stuff like that. So you have stocks paying you dividends, rental real estate, you might have oil. You have businesses like a carwash, something like that. And then you could get into savings too, like gold and silver and cash and stuff like that. That's actually in your asset column as well. However, this stuff is providing you cashflow. That's throwing off cash flow every month. And that goes into the income column. The poor middle class. They have things that get them deeper into debt like liabilities, or they start straight expenses going out and cash flowing out. And then now you can see that the wealthy have stuff that pays them every single month. Then they would pay expenses here and it goes out. So they have stuff that's paying them, whether they work or not and it flows up. So you can see the cash flow patterns of the poor, the middle class, and the wealthy and how they do things differently. They focus on their assets. These people are focused on expenses and liabilities, things that make them poor. They keep buying more and have to work harder and harder and harder, more and more, and get three jobs. They have to pay for all these things. Now, instead of taking this and focusing on that same money they had, if they had wished we would have just gone and invested in assets and down payments for assets or something like that. Instead, they would have that cash flow then paying them each month, whether they worked or not. Then they can pay for their expenses and liabilities.
So that is, as I said, that's a brief overview, we're going to get into this more and more as we go forward. And it's like I said, part of the Freedom Isn't Free Show and freedom is about everything. It's about being a patriot to your country and being just free as an American citizen and free as a citizen of the world. But having health freedom, about having financial freedom. It's about having the freedom of thought. It's about having the freedom to roam around and go outside your house if you wish, and frequent stores if you wish. It's about every type of freedom you can imagine. It's about having freedom from your dollars, freedom of privacy, and not being tracked by people, governments, whatever it may be. So we're going to talk about a little bit of everything in this show, what we're doing.
As I said, we have a lot of guests coming up. I appreciate all of you have joined so far and have commented and talked to me about it. So I appreciate it. Hopefully, you got something out of this today. We're gonna talk about this more and more as we go forward, but this is super important. You have to have the base knowledge, the foundation of this, to understand going forward, what is taking place in the world, and why now you can start to see why people are struggling. Some people are struggling out there because they don't understand this. They've been taught your report card. If you just get good grades in school, you're set for life. When in reality, you can see that it just teaches you to have yourself work for money instead of having your assets work for you. So appreciate you guys. Let me know any questions, comments, concerns, whatever it may be. We're gonna talk a lot more about this like I said. Thank you for your time, because it's the most important asset that we have talking about assets. Time is your most important asset. So appreciate you guys. We'll see you at the next one.