Everything You Need To Know About The Housing Market w/ Jaspreet Singh EP 1313

We assume that the reason why we're not successful is because we don't have the right tool set, when in reality for most people is we don't have the right mindset. It's not a tool set issue, it's a mindset issue that so many people have where if you have the right mindset, you'll realize that the tool set is right in front of you. Yeah. And you just gotta be.

Welcome to the School of Greatness. My name is Lewis Howes, former pro athlete turned lifestyle entrepreneur. And each week we bring you an inspiring person or message to help you discover how to unlock your inner greatness. Thanks for spending some time with me today. Now let the class begin. So do you think there will be another kind of housing crash like there was in 2008? What do you think is happening right now? Where do you think it's going to be heading in the next year? I want to talk about the housing stuff for a little bit with you.

So that's a very good question and the reason why is because there's a lot of scary stuff happening out there. inflation is still near record highs.

What's it at right now?

Our last report was 8.5%.

Do we think it's going to keep going up?

Well, we'll get into inflation a little bit. We have our GDP, our economy, which is slowing down. We've seen two quarters of economic slowdown. Our market, stock market is way off its highs. Now real estate is starting to slow down. Interest rates are starting to go up. And this has a lot of people wondering now, what's going to happen to the housing market? Like you said, are we going to see a repeat of 2008? And the reason why that question is asked so much is because 2008 has really left a huge impact on so many people's lives because you have a lot of people that are still paying the price of the 2008 aftermaths today.

Really?

Yeah.

Because a lot of people took out loans and they had to give up their home. They bought all these homes, right? They had to foreclose on them, the banks.

Losing your home is not an easy thing to do. And that, I mean, it's traumatic for a lot of people. that's something that's very difficult to stays on your credit score for seven years. So this is what people are really worried about. Is something like that going to happen again? And the first thing that I want to say, because there's a lot of headlines, a lot of news stuff in there, that this is not a repeat of 2008. So let's understand that.

It's not, because it's not a housing bubble crisis like it was then.

Yes, it is not the same as 2008 because 2008 was a financial crisis. started by the real estate market. Right.

And it's funny because I just watched the Big Short a few weeks ago. Again, I love that. Beautiful movie. And to see like the analysis of people forecasting and no one believing because they're like, oh, the banks are going.

To like bail it out. But then it's crazy. So 2008 was the real estate market that trickled down to the rest of the economy. This is more of an economic issue that could then trickle down into real estate.

So it's very different.

Interesting.

Which is where-- that was a real estate problem. This is an economics problem. The economy problem, which could affect real estate in a big way.

Gotcha. So, you know, I think your readers, viewers already know this, but I'd like to go backwards to understand where we're going forward.

Yes, yes. Look at the history and see where the future is gonna go.

History doesn't repeat itself, but it does rhyme. I like that.

You said that last time. History doesn't repeat itself, but it rhymes.

So in 2008, or before 2008, what happened? Well, there was four major factors that led to the 2008 housing bubble bursting.

Okay.

The first was something called ninja loans. No income, no job, no asset loans. So you don't got an income, you don't got a job, you don't have any investments. You walk into the bank and you say, Hey, I want to buy this $200,000 home. Can you help me? And they'll say, Sure, you don't need a job. All homes keep going up, so we will give you the money. Then the next thing you say is, But I don't have money for a 20% down payment.

It could be 10%.

Well, they said it's 20%.

Oh, in your first home, it was like a 0%.

You could go 0% mortgages. So it was like a boom of 0% mortgages. But even beyond that, there was this push for actually 110% LTV loans. Meaning, if you wanted to buy rough numbers, $100,000 home, Not only would the bank give you the $100,000, they'd also cover your closing costs, they'd also give you some moving costs, and then give you a free TV so you can move in because home prices never go down. See, the banks are in the business of making money, and their mind was, the more money we lend out, the bigger commissions we get, and if home prices keep going up, well, we'll just give you a little bit extra cash, and then a couple years down, home prices will go up and we'll be okay. So now you have no income, no job, no asset loans, ninja loans, 0% down. But what happens then if you don't have a good credit score? Well, that was where we had this huge subprime lending issue where banks created programs to help people who had bad credit scores, subprime credit scores, that you could now qualify to get a home. So your subprime, your no income loans, no income, no job, no asset loans, the 0% down, But then you say, that's a big monthly payment. I don't want to pay whatever, $1,500 a month. And that was the fourth factor, which was adjustable rate mortgages. There was a big push for ARMs, adjustable rate mortgages, which meant that let's just say typically that this home would cost $1,500 a month for you to purchase. You might not be able to afford that or maybe you don't want to pay that. The bank might say, well, how about we give you a low teaser rate for the first few years, So you only have to pay $900 a month. So you get a low interest rate for the first few years. So you can afford the house.

So you can afford the home.

And now once you're in the home, it's your problem. It's no longer the banker's problem, right? Because the mortgage agent, they just get paid as soon as you sign the paperwork and then they walk away. So now you get this low teaser rate and there's two aspects to this because now you who is buying the home, you don't have that financial education because it's a tool without the financial education where now you don't understand how an adjustable rate mortgage works. you don't understand that in a few.

Years, mortgage is doubling.

It's going to readjust. And so if mortgage rates go up, or even if they don't go up and they stay the same, your payments are going to increase. And so all these things happen together and everybody was making a ton of money. Homeowners are making money because now you bought a home for $200,000 and now it's worth $250,000. You feel great. Bankers are making money because they're lending out loans, they're handing out loans like crazy. Wall Street is making money because then the extra factor was in Wall Street would take these loans, chop them up, package them up into their own investments and sell them off. And then you saw the big short.

They're talking about packaging all these B loans, making them A loans or whatever.

Yeah, exactly. And then the insurance companies got involved. So it just kept getting bigger and bigger and bigger. So everybody's making a ton of money off of the real estate market and it's no big deal. And then comes the year 2005. 2005 came, this was the first year that there was concerns about the housing market. Ben Bernanke, who was then the chairman of the Federal Reserve Bank, came out openly and said, what real estate bubble? There is no real estate bubble to burst, meaning how can there be a real estate bubble bursting because there is no real estate bubble? That was what he said in 2005. Well, 2006, we started to see home prices start to go down a little bit more and now people are starting to get underwater on their homes. So the pitch was, if you took this adjustable rate mortgage, well, if in a few years you can't afford the payments, no big deal, you can just sell the home, walk away with some cash, or you can refinance and we'll try to give you something else that way you can manage your payments. But the caveat, which many people do not understand or they didn't know, was that it requires your home to be worth more in the future, or at least the same, that way you can refinance. If you bought a home for $200,000, Then comes a few years later and you're trying to refinance and now you owe $190,000 but it's only worth $180,000. You go to the bank and you say, Hey banker, I can't afford the payments. They readjusted. You told me that I could refinance or sell. What do you think I should do? Well, then they say, oh man, so I just pulled up the numbers. Your home is not going to sell for more than $180,000. So we're not going to refinance you because you're underwater. so you're going to have to figure something out on your own. Now you can't sell it either because if you wanted to sell your home for $180,000 and you owe $190,000, you need to bring $10,000 to the closing table, which most people in this situation did not have. So what are you left with? You can walk away or get foreclosed on. So this then became a much bigger issue because then we started to see some foreclosures and this built a huge house of cards, which people didn't realize because now we're just talking about the housing market. But this then became an everything issue because Wall Street was then gambling on the housing market, mortgage backed securities. There was all these things that we were talking about where now Wall Street was double dipping, creating all these new investments based off of people's mortgages, creating all these, I mean, I can't emphasize enough how many different investment scenarios and things that they created. and so now when the base layer, which is the housing market started to collapse, the whole house of cards started to fall down. And I'm going to say this now because I think we're going to talk about this later on, but this is where you have to be financially educated and be aware, because sometimes the media and people in power will lie to you in your face to keep you calm. Because if I remember the date correctly, I believe it was May 17th, 2007. Big day because Ben Bernanke, the then chairman of the Federal Reserve Bank, who remember in 2005 said-- Two years prior. Two years prior said there's no housing bubble that could burst. Came out and said that the subprime housing issue will not trickle down to any other parts of the economy. It is contained to the housing market. So you don't need to worry about the economy. He said that openly in 2007.

And then a year later.

And then a year later the whole thing imploded. Crumbled. The whole house of cards came crumbling down. So now that was what caused 2008. It was a real estate issue that trickled down into the rest of the economy. Today, our real estate market is very different. People have equity in their homes. Very few people are buying homes with 0% down, nothing like 2008. Adjustable rate mortgages are not as popular, although they are growing in popularity now. Because mortgage rates are going up, adjustable rate mortgages are making a big comeback, but they're not out there to the extent that they were before 2008. We don't have the same subprime lending. And so it's a very different housing market. People have equity in their homes, people have skin in the game, and many people have a 30-year fixed rate mortgage. Meaning, if interest rates go up and you have a 30-year fixed rate mortgage, it doesn't affect you as long as you still have a job because your job can continue paying off that mortgage. So different situation. However, this is where now we have to look at the economic issues because if you lose your job because the economy is going down, now you can't pay your mortgage. And if that happens on a broad scale where people don't have the ability to pay their mortgages, now you can see how that would then trickle down into the housing market. So that is the concern and this is where you have to dissect what's actually happening in the economy. Now of course, nobody can predict what's going to happen and I do not recommend anybody trying to trade what could potentially happen? Be an investor, look for opportunities, be a long term investor. If you find a good opportunity, buy it and hold for the long term. Don't try to trade or try to predict what's going to happen in the market. What I want to talk about is what is possible. That way you can make sounder and better decisions for you and your money.

What do you think is the worst case scenario and the best case scenario?

So let's go right into the housing.

Market over the next couple of years.

So let's I think if we go into the economy, if I answer that question, the economy, it will by default answer the question in the housing market. so in the economy, it's a weird situation where our economy is slowing down because of high inflation. So 2020, 2021, the Federal Reserve Bank.

And pump all the money into the economy.

We print a lot of money. This devalues our dollar, causing the price of things to go up. So now your rent is more expensive, your groceries are more expensive, your gas is more expensive, your airfare is more expensive.

Why do they do that? Knowing the price, everything's going to go up. in price.

See, you said knowing they will go up in price.

Right.

In 2020, they said the opposite. When they were printing trillions of dollars through things like the PPP lending program, through the stimulus program, the concern was not inflation. It was actually deflation. Because in 2020, when the economy shut down, the concern was the prices of things are going to drop. We don't want that to happen.

Because no one's spending enough. Is that why?

No one is spending. And so deflation is a very bad thing for the government. It's great for people. because now your savings become valuable. If you make 50 grand a year and you have deflation, your 50 grand can buy you a whole lot more because the price of things drop. But it's bad for the government because today our government has something like $31 trillion worth of national debt. And so if deflation were to happen, that means their debt, their 31 or so trillion dollars is now more expensive. And so the payments become more expensive.

So we're paying for their mistakes. Yes, the American people are paying then for the debts of the government.

Yes. The United States government does not make money. They generate revenue by taxing you when you work hard.

And they print money.

They print money and then you pay the price of inflation. So the government, there's no such thing as free money. The most expensive kind of money is free money. Because now look at the cost now. It's the price everybody pays. through inflation. So free money is the most expensive kind of money. And so in 2020, when the concern was deflation, they started printing money through stimulus programs, through bailout programs, through money printing programs to fund out, you know, whatever they wanted to do. That was when the money printer opened up and you said they knew inflation was going to happen. No, they did not.

How can they not predict that, though, knowing that you're going to give all this free money out isn't Inflation, let me rephrase that.

Either they willingly lied to the American people or they're just completely ignorant. But these are some of the smartest people in the world. I mean, they're Ivy League economic school graduates. Right? I mean, these are very supposedly smart people who said that this was going to happen. Now, what's interesting is a lot of people predicted this. Like, I talked about this very openly on YouTube. I said, look, this is what's going to happen. 2021 came. Inflation is transitory was the like the phrase where inflation started to go up. And I kept saying, hey, don't expect it to be transitory because the Federal Reserve Bank doesn't have some fairy dust to make inflation magically come down. Right. How are they going to do that? They're still printing money. Inflation is going to get worse. And when inflation hit around 6% in August of 2021, it that was slightly lower than where it was previously. And that was when they said inflation has peaked. We're all good now. But now it's on its way down. Now it's at 8.5%. And so it was quite, I mean, it was a long process, but this is where we have to understand that either they're lying or they're completely ignorant. And now we don't want to assume, I mean, you shouldn't want to assume that they're lying to you, that would create a lot of chaos. They're ignorant. So again, we want to be financially educated. Why is it that in actually let me mention this because this is interesting. In 2007, when Ben Bernanke said the subprime market will not affect any other part of the economy, did he not know any better? I mean, I think most people who were aware, financially aware at that time, could have looked at a spreadsheet and said, hey, this is a big issue. Ben Bernanke actually spoke about that after He was done being a federal reserve. What do you mean? And he said that I was asked not to say anything because I could not incite panic. I didn't want to incite fear.

So that's what he said.

This is what he said. So he essentially lied.

Essentially, because they don't want to create panic.

Wow.

Now, keep spending the way you're spending. Keep living your lives. Don't worry.

Everything's gonna be okay. I mean, like, look, don't save a little bit more. Don't, you know, they're just like, I just keep spending. I know, you know, you got to be careful, because I'm not trying to be a conspiracy theorist, but like, look, The Federal Reserve Bank are made up of highly educated people to think that money printing, printing trillions and trillions and trillions of dollars, I mean, on the low end with the Federal Reserve Bank and government spending, on the extreme low end, it's $6 trillion. To think that that's not going to create lasting inflation is insane. And so either someone's lying or they're completely ignorant as to the way that money works. And so, you know, these are the things that I've been trying to talk about on YouTube to get people educated. But this is where now the question is what's next?

So what's the worst case scenario?

So worst case scenario, I mean, this is the worst, worst, worst case scenario is you face some sort of currency crisis, hyperinflation. I mean, that is not rare. Yeah. But let's focus in on now, what is the worst case kind of possible scenario? Likely, in terms of the economy. So, the inflation problem is still very high and this high inflation is contributing to a slowing economy. Now the Federal Reserve Bank is working to fight inflation. They're doing that through raising interest rates and they're doing something called quantitative tightening where they are pretty much giving back some of the money that they printed over the last few years. So they bought up a whole bunch of bonds, mortgage-backed securities, they bought up a bunch of treasury bonds as a way to stimulate the economy. And so the Federal Reserve Bank has built up this balance sheet of almost $9 trillion of assets. So the Federal Reserve Bank doesn't have cash, like they don't have a pile of cash anywhere. They have to print $9 trillion to buy up these assets over the last number of years. And now what they're doing is they are finally starting to sell them off. Now, they're not selling them off very quickly. They are selling them off a little bit slower than what they expected, but they are starting to sell them off now to help free up some of this inflation. The second thing that they're doing is raising interest rates because when you raise interest rates, it makes borrowing money less attractive, which creates less inflation to help cool down the economy. Like the Federal Reserve Bank wants a stock market crash. Really? The Federal Reserve Bank wants real estate prices to go down.

Has the stock market crashed yet fully?

Well, it defends what you mean by crash. So if we go just by, now it's funny, I'm going to say technical definitions because nowadays technical definitions seems like they can change. Don't matter.

Yeah, yeah, don't matter.

But traditionally the definition of a quote unquote crash would be something going into a bear market, meaning that the stock market has fallen 20% off of their highs. We saw that happen. And then we have also seen stock market rise since then. So the stock market is very volatile. It has gone down. And the Federal Reserve Bank wants stock prices to go down. They want real estate prices to go down. And they also want unemployment to go up. They want some people to lose their jobs.

Why?

They want wages to go down. And this is going to sound very bad, but they've also made this very public. So the reason why they want these things to go down is because it's a way to cool down the economy. That's why they are raising interest rates. So when the Federal Reserve Bank raises interest rates. There's two things that they're looking at.

And when they're raising interest rates, they're doing that on the housing market or.

Whether they raising it. So they're raising something called the federal funds rate, which is overnight lending. So essentially think of it as when you go and get a mortgage from the bank, you're buying something from the store. You're getting the retail price. The store, in this case, the bank gets a wholesale price. They get a discount price, right? They're buying it in bulk. So the banks can borrow money at a cheaper rate and then they lend it out to you. So when banks have to pay a higher rate, then they're gonna have to charge you a higher rate. Just like when stores have to pay a higher rate from their wholesaler manufacturer, they have to pay it more down to you. So when you buy from the bank, when you get a loan from the bank, it is the retail price. So the Federal Reserve Bank does not affect-- How do you get the wholesale price?

That's the Federal Reserve Bank.

So this is now the Federal Reserve Federal Funds rate that the Federal Reserve Bank controls. Can an individual get it at wholesale? That's what I'm trying to figure out. No, we cannot. So we get-- unless you are a bank, you're not going to be able to do that. So the Federal Reserve Bank gets to control these things and then they impact mortgage rates, which then impact spending. So when the Federal Reserve Bank raises interest rates, so when the Federal Reserve Bank raises interest rates, now you're going to have to pay a higher price to get a mortgage. Now that affects inflation, which can also affect the housing market. So the Federal Reserve Bank is looking at two things when they're determining what to do with interest rates. they're looking at inflation and then they're looking at the general economy. When inflation is high, that's more fuel for the Federal Reserve Bank to continue raising interest rates to fight inflation. But in order for that to happen, there's a second factor that they look at. They're looking at the economy. They're looking at things like unemployment rates. They're looking at the strength of the economy. Because if people have jobs, well that means then we have a strong economy. So it's Ammunition that the Federal Reserve Bank is okay to go and keep raising interest rates because if it was flipped where we have a super high unemployment rate, people don't have jobs, the economy is crashing.

You said the government wants that.

So the Federal Reserve Bank wants people.

To lose their jobs.

They want people, they want a lower unemployment rate, sorry, they want a higher unemployment rate, meaning they want some people to lose their jobs and they want wages to come down because that will help cool down inflation. And it's a very weird thing. You're gonna go search it on Google because they've said this, because you're gonna think, Justine, what the heck are you talking about? No, Jerome Powell has openly said this where the labor market is too tight. It's too strong, meaning too many people have jobs. They want wages to cool down.

They've said this very openly where-- I.

Want people to get paid less. Exactly. They don't want wages to keep rising at this rate because they're worried about something called the wage price spiral. I'll talk about that in just a second. So they don't want wages to keep rising. And on top of that, they're looking at this economic data, comparing it against inflation, and that's going to help drive their decision about interest rates. And so if people have jobs, wages keep rising, that means interest rates are.

Going to keep going up.

They're just going to keep going up and they're going to keep doing that until more people lose their jobs, until wages stop going up, and then that will hopefully bring down inflation because now we've let's talk about this wage price spiral very briefly. because this was a big thing that happened in the 1970s into the early 1980s where you made money but you struggled to survive because inflation was high. So now you went to your boss and you said, Hey boss, I need more money. And your boss said, well, I don't want to lose you, so their boss paid you more. Even though you're not doing more, you're not producing more value, the boss is paying you more just because it's more expensive to survive. So now you're getting paid more money.

So the business has to go earn more somehow. The business has higher costs. Or they're losing margin.

Right. So now you have the money to go out and spend, but then the business then has to start charging more money because- To their customers. To higher costs. Yeah. So now the price of things go up. Now the price of things go up, you go back to your boss and say, Hey look, that rage wasn't enough. I need another raise. Now it starts to create this spiral and this is what the Federal Reserve Bank wants to avoid by breaking that by saying, We don't want wages to keep going up. We want to break this inflation thing because we want to raise interest rates to stop this whole inflation mess. And so one of the things they want to do is they want to see more people have lesser wages. They want to see a little bit higher unemployment. They want to see the stock market come down. They want to see real estate prices cool down because that cools down inflation because that's their number one issue right now.

I guess that people will, I mean, It'll eventually happen because if employees are like, I need more and more money and the company's like, we don't have any more money to give you, they're eventually going to leave or they're not going to be able to pay them.

And they have to shut the business down.

Something has to break. Something has to break.

The business has to shut down. What's going to break first? Is it going to be the housing market or is it going to be inflation? Is it going to be the stock market? Is it going to be inflation? Because the Federal Reserve Bank is going to keep jacking up interest rates based off of the economy and inflation until inflation comes down. or until the economy goes up. Or so do you see what I'm saying? Like inflation's gonna come down or the housing market's gonna break where now it's the Federal Reserve Bank. You have to look at their intentions. I know I'm kind of scattering around because there's so many different aspects here, but the Federal Reserve Bank today, and this can change, today says that their number one goal is to bring inflation down to 2%.

And it's at 8.

It's at 8.7% right now.

They wanna bring it down to 2.7% by when?

They haven't said that. They wanted as soon as possible.

And how high do you think it could go? What's the likely worst case scenario of how high it could go? Before it drops.

Let's talk about history, right? Because in the early 1980s, if you wanted to go and get a mortgage, you were paying upwards of 18 to 19% to get a mortgage. Oh my gosh. Today we're talking about 5.5% to 6% on a fixed rate 30-year.

So still the lowest.

We'Re still historically extremely low. It's a lot of room to grow. Now, if mortgage rates went from 6% to 10% next month, the housing market's gonna crash.

It's gonna go down. The costs are gonna go way down.

There's no alternative because no one's gonna be able to afford those homes because home prices are so high. And the reason why they're so high is because people have been able to borrow more money at a lower interest rate. And so this is where now it goes back to the question, what is going to break first? Is it gonna be inflation or is it gonna be the housing market? and you can replace housing market with stock market, with crypto market, with the economy. It doesn't matter. And this is the dilemma that the Federal Reserve Bank is facing. And this is where their goal and what they say is we're going to have a quote unquote soft landing where we're going to raise interest rates gradually enough where we can cool down inflation without crashing the housing market, without crashing the stock market, without creating too much of a problem. Like they do think the housing market is going to go down. They do think that we need to see stock prices go down. They do think that we need to see unemployment go up slightly. that wage growth has to slow down. However, they don't think it's gonna create a massive crash. Right. So that is what they're saying. Now, the question is what is going to actually happen? Right. Because this is where. What rhymes?

History.

Exactly. History runs. So this is where you want to pay attention now, obviously, to what's happened in the past, but what's actually going on. And this is where now you can dive a little bit deeper into the data, because now if you're looking at the housing Market, you're gonna say, okay, Interest rates look like they're going to keep going up unless the Federal Reserve Bank completely does a 180, which is also possible. That's why it's so hard to predict and why I do not recommend trading because six months from now the Federal Reserve Bank could say, you know what, inflation is no longer number one priority. It is the slowing economy. We're going to cut interest rates. We're going to pump money into the economy. You could see the stock market and real estate prices crash upwards. I mean, just think about it.

If tomorrow mortgage rates- We're talking about the stock market in 2020. Exactly. They started printing, it's like everyone started buying and- It went up.

Real estate went through the roof, especially in LA. Think about if tomorrow mortgage rates went down to 2.5%, what would happen? Everyone and the moms are going to want to buy their home. They're going to say, oh, we're waiting. Now we're going to go take advantage of this opportunity. We're not going to wait. And now home prices will go up. There's going to be no inventory or it's the same issue, right? this is where you have to understand that you cannot try to perfectly time or predict what's going to happen, but you can understand the different scenarios where the Federal Reserve Bank today says that they want to bring in interest rates up to bring inflation down. What is going to help them make that decision? Well, they're looking at inflation rates. They're looking at the economy, the economy meaning our economic slowdown, and they're looking at unemployment rates. So the fact that today unemployment rates are quote unquote extremely low or the lowest ever in 50 years. And the fact that our economy is not slowing down that much based on that, well, they have more ammunition to keep raising interest rates. Well, the more you raise interest rates, what's going to happen? The more the housing market gets hurt, the more the stock market gets hurt, the more the economy gets hurt. It's very obvious how it works in the real estate market because now you have to pay more money to buy a home. Well, it works the same way in the stock market and in business. You're a business and you want to go borrow money to finance operations, to finance growth, to buy some new machinery, you have to pay more money to do that. Well, if you're going to have to pay more money to do that, you need bigger returns. If you need bigger returns, you need to be able to sell more stuff. If you need to sell more stuff, you need more people that have money. The situation right now is people don't have that discretionary money because they're spending so much extra money on things like rent. Gas. Gas. Gas prices have come down, but it's still significantly higher. Right. So this is the situation where the.

Root and rent inflation, rent seems like it's going up too, right?

Rents are about 20 to 22% higher now than where they were a year ago.

Housing costs- Around the USA.

Around the USA average, right? In some instances, some cities, it's more, some cities, it's less. And this is where you just have to, I mean, understand these are the options. And this is where people start to panic. They start to freak out and they assume that I need to make a rash decision today because oh my god, this is going to happen. I need to sell my home, I need to buy a home, I need to do this, I need to do that because this and this might happen. But something else could happen. So you don't want to make rash decisions. This is where you want to understand what's going on. Take a deep breath, calm down and first understand that the real estate market, if you're focusing on that, moves much slower than the stock market. Moves slower. It moves slower. and that nothing happens overnight. So you want to be aware of what's happening. And to give you an example of that, when the 2008 crash happened, stock prices collapsed in 2008 and they bottomed in 2009. So in 2009, the stock market started to go back up. Real estate prices really started to get hard in 2008. They continued to go down in 2009. It continued to go down to 2010. It continued to go down to 2011. and then they bottomed in 2012.

Took four years.

Four years. So real estate prices bottomed in 2012 and in 2012, the stock market started hitting new highs. So the real estate market moves significantly slower than the stock market because you can't buy and sell a home the way you can buy and sell a stock. Takes more time. You can buy and sell a stock in a second. So people get emotional, they get excited, they get scared, they panic. Whatever the emotion is, you can do that in a second and that can cause massive swings up and down in the stock market versus the real estate market. It could take months to sell a home, maybe even a year. And so it moves significantly slower. And that's what you have to understand about the real estate market.

So we're starting to see, it seems like prices are going down, you know, in the real estate market. At least I'm seeing, if I go on Zillow in LA, because I'm just curious about the market, you'll see homes that were up there for a few months and now they're cutting prices. You see homes that have been there for three, six, seven months now.

Yeah.

That aren't moving. So then now they're dropping the price because they don't want to keep paying the mortgage on something that they're not going to live in it. And we're starting to see it happen a little bit. So if history is rhyming and the stock market's been kind of crashing, it seems like for the last, whatever, six to something months now, is this now, okay, we're seeing this a little bit and it's going to keep going as we go into the next year or what? could history teach us about potentially what could happen now? So you want to keep your eye.

On the Federal Reserve Bank and you want to keep your eye on the economy.

If inflation keeps going up.

If inflation keeps going up or rather if the Federal Reserve Bank keeps raising interest rates, that is the better indicator that you want to keep your eye on because if they keep raising interest rates, that means mortgage rates are going to keep going up, which will make housing more expensive. So I'll give you a quick example. If in the end of 2021, you wanted to buy a half a million dollar home, you could put down 20% which is $100,000 meaning you would borrow $400,000. Now you could borrow that $400,000 at 2.8% for a 30-year fixed rate mortgage in 2021 and so your monthly payments would be like $1,650 a month for that half a million dollar home. If now today you wanted to buy that exact same home with no modifications, no upgrade, it's not going to cost you $500,000 it's going to cost you about 20% more which is about $600,000. So now if you put down the same 20%, you're not putting down 100 grand, you're putting down $120,000, which means you're no longer financing 400,000, you're financing $480,000. Now back then, you were able to finance the 400,000 at 2.8%. Today you're going to finance that $480,000, close to 6% on a fixed rate 30-year mortgage. So you're borrowing more dollars at a higher interest rate. Back then it cost you $1,650 a month. Today it's going to cost you about $2,850 a month to borrow the $480,000 for the exact same home. So you went from paying $1,650 a month to $2,850 a month, which is about a 70% increase in monthly costs on the exact same home, assuming no modifications, no upgrades. That's kind of unsustainable unless there's more money coming into the markets, unless you keep having a way for people to keep affording that. And this is driving the issue now, is how much higher can it go? Because if you keep raising interest rates, what's going to happen? Your cost to buy the home are going to keep going up. So unless you have a 70% raise in your monthly salary, it's going to be much harder for you to afford that higher cost to buy that home. So that's the situation that we're in right now. And like you were saying, it's driving this kind of shift in the housing market where you have a lot of people who want to buy a home saying, I can't really afford the same home anymore. I don't want to live smaller, so I'll just keep the same house that I'm in right now. I'll keep renting, I won't sell, I won't move because I don't want to pay this higher price. And this is where, you know, the question is again, what's going to happen next? If we keep raising interest rates and the monthly cost keeps going up, well, it's going to become more expensive. And the $2,850 that I mentioned, it also does not factor in the higher property taxes you have to pay. and the higher insurance because your property taxes are based on the value of your home. So when you're buying a $600,000 home versus a $500,000 home.

More, you know, the property tax, yeah.

You have higher property taxes. You're insuring a more expensive property. So your costs to own this home are significant, I mean, almost double what they were a year ago, month to month. And that's where it becomes, I mean, it's not rocket science to see why less people can buy homes today than they could a year ago, just because the cost to buy a home has gone up so much.

So, who is it the right time to buy a home for? Well, is it the right time for anyone?

Yes. Look, okay, if you want, now, we got to understand that are you buying the home as an investment or are you buying the home to live in? Because those are two different things. And a lot of people get this confused and I'm gonna explain why. I really want to get into that because that's one of the biggest misconceptions in America, I would say. When you buy a home for yourself to live in, we're told It's the biggest investment of your life to go big.

It's not a good investment for a lot of people.

It is not. You should buy a home because you want to create memories there.

Lifestyle, environment.

Exactly. And because you can afford it. You should not be trying to time the market with the home that you want to create members in. The biggest thing is going to be, can you afford the home and do you want to live there? Now, to answer that question of can you afford it, there's three different things you want to ask yourself. Can you afford the down payment? Can you afford the monthly payment? And can you afford the move-in costs? Because that gets overlooked a lot because now when you want to move into this home.

Furniture, moving, all this stuff.

Exactly. First you have the closing costs and then it's the cost of furniture, the cost to move in. And then when you want to move in, you gotta upgrade, right? Because now you want to have a nicer kitchen, you want to finish the basement, you want to have the new appliances and furniture is not cheap. and so you want to make sure you factor that in before you can move. Now, if you can afford the down payment, you can afford the monthly payment, and you can afford the moving costs, and you find a home that fits your needs, go out, buy it, get a 30-year fixed rate mortgage. Don't worry about it because now you can afford it. If interest rates go down, just refinance.

Get the lower monthly payments.

Don't stress about it. Right, because you can refinance in a couple of years. If interest rates go down, you can always refinance because if you're trying to time the interest rate market, you never know what's gonna happen. Just refinance if they go down. So that's the main thing you need to know that if you wanna buy a home, don't try to time the market. If you can afford it, hey, go out and buy it. Everyone's saying, well, what if home prices crash?

Then I can buy then?

Sure. But what if they don't? What if they go up by 20%? Waiting and timing, yeah. It's the same thing, right? When you talk about investing your money in any asset stocks, the best advice is, Time in the market beats timing the market. This is what every fundamental investor says. So now if you're trying to buy a home, why are you trying to time the market? It's not even an investment. Are you gonna wait to buy your shirt until you see cotton prices come down? You're not looking at that. If you like the shirt that you buy and you can afford it, go.

Out and buy it. Now, what's your thoughts on, you know, Grant Cardone always has this famous line. He says, Live where you rent and rent what you own. You know, it's a great line, it's a great pitch.

If you want to own a home, there's nothing wrong with that. Just understand that it's not an investment. For a lot of people, for a lot of people, the freedom of owning a home and paying off your mortgage is all that you want. You just want to have that stress-free life. And this is where it comes down to your lifestyle, right? Do you want to live big? Do you want to live large? You want to have all the luxuries and the nice stuff and you want to go for it all and you're willing to take that risk? Then yeah, don't put all that cash down into a down payment and tie yourself down into the home, rent, take the down payment, invest it in your business, invest it somewhere else, that way it can grow bigger. But if your lifestyle goal is, hey, you know what?

I want a great space, I want to have family, I want to have memories.

I don't care about all that fancy stuff, then go out and buy a home. There's nothing wrong with that. And this is where you just have to understand. Like, I'll give you a personal example. We have an office for minority mindset companies, market briefs and all that. I rent it. We could easily buy the office. You don't own the office. I don't know the office space. I'm paying $4,400 a month plus utilities and all that.

Michigan's cheap, man.

It's cheap rent in Michigan. It's still a lot of money. So we're paying, what, 50 grand or so a year in rent? Treasure, sure. And I could go out and buy the property. But why don't I? Well, if I wanted to, it's probably, I don't know, let's just say it's a million dollar building. If I wanted to buy the building, I got to take $200,000 from the business and go out and buy the property, then I can own the building and then see some return. The average real estate return, somewhere between 7% to 10% a year. Okay? If I took the $200,000 and reinvested it back into market briefs, my financial newsletter, I'm trying to get a better return than 10% a year. And so for me, in the business sense, that's why I'm renting because I know that I can get a better return by investing that money back into the business to grow the business. and this is where you just have to understand the goals in your lifestyle and make sure your actions are aligning with your goals and your lifestyle goals. Because if you say, Hey, I want to live large. I want to have the nice things. I want to have a big investment portfolio. But at the same time, you have Gucci, Louis Vuitton, you have a Beemer, but you have no investments. Your priorities in the wrong place. Sell the Louis Vuitton, sell the Gucci, sell the Beemer. Go on and start investing your money. Start building your investment portfolio if you really want to be wealthy. So you can't speak out of both sides of your mouth. you've got to figure out what you want and just make sure your lifestyle aligns with that because a lot of people try to push this, this is the right way to do something. But that's not the case. I mean, if we just take a step away from finance for a second and look at, for example, health, many people say this is the diet you need to have. These are the exercises you need to do. Well, there's so many different things they can do and at the end of the day, it's eat healthy and exercise. Right? And now you can dig down deep and find what's right for you. But at the core, it's eat healthy and exercise. In finance, it's very similar. You could say, invest all your money into real estate, don't own your home, invest it all into real estate, buy as many rental properties as possible. Some people would say, you know, buy in stocks, do this, or build a business. At the end of the day, it comes down to live below your means, invest the difference. Right, right. Eat healthy and exercise, live below your means, invest the difference. That is at the core. and then you can get down to the nitty gritty. Like, that's what I talk about, right? Because I'm interested in that and that's where I try to learn more. But I also don't try to say that this is the only thing that you can do because your goals are different than mine, your background is different than mine, your risk tolerance is different than mine. And so you're gonna wanna make different investment decisions than me, which is why I don't try to say, this is what you need to do. I'll say, hey, this is what I do. This is how I invest in real estate. This is how I invest in stocks, but what you do is gonna now depend on what is interesting to you, which is why the financial education is so important. Because I'm not trying to, I don't want to lead a herd of sheep.

Right.

Right. I want you to be educated that way you can make smarter decisions for yourself, but make an educated decision. Because the issue that so many people have is we assume that the reason why we're not successful is because we don't have the right tool set, when in reality for most people is we don't have the right mindset. It's not a tool side issue, it's a mindset issue that so many people have where if you have the right mindset, you'll realize that the tool side is right in front of you. And you just got to be able to harness the power of that.

So what's the best case scenario then for the housing market in your mind over the next 12 to 24 months?

Well, the best case scenario really depends on who you ask because if you ask somebody who wants to invest in real estate to buy a home, you're gonna say the best case is real estate prices crash because now I can come in and buy at a discount. But I think what you're trying to get at for the economic, right, if you're looking at it from we want a strong economy, we want a strong real estate market, the best case scenario is the better is our bank can continue to raise interest rates slowly, interest rate, sorry, inflation comes down drastically and the economy doesn't get hurt. That's the best case scenario.

Say it one more time.

So interest rates go up slightly.

So from eight and a half to no interest rates. Interest rates from a Five and a half to...

So mortgage rates, those are mortgage rates different than the Federal Reserve Bank, federal funds rates. So five and a half to maybe six, six and a half.

We don't really go up on mortgage rates.

Interest rates is different than the mortgage rates. Right, because the Fed, remember, that's mortgage rate is retail. The interest rate is... What's the interest rate? Right now?

The interest rates, we're rubbing around the.

Two to two and a half percent range right now. So it goes up to three percent. Ideally, ideally no more. That would be best rates. So mortgage rates, interest rates don't really change. And we see inflation come down magically and we see the economy not slow down. So that's best case scenario. If you look at it from an.

Economic perspective, what do you think could happen if you're like, you know what? If I had to make a great prediction.

Well, Louis, look at this, man. You print the most amount of money in the history of time in 2020 and 2021. We're talking about, you at least $6 trillion at the very low end. You print this money injected into the economy. Now you're trying to take this money out. You're trying to burst the bubble that you created without crashing the markets, without trying to crash the economy. There is a cost to free money. We are paying the price for that through inflation. So now if the price of everything has gone up so high, people are struggling to pay their bills. They can't buy more stuff because inflation is so high. And we're already seeing the economy slow down. We've seen six months of an economic slowdown, which Technically, traditionally, before 2022 would be considered a recession because before 2022, if you saw two quarters of GDP, meaning economic decline, that was defined as a recession. This year, we're deciding that that's not true. We're going to look at other factors, broader factors.

So if we go one more quarter, do you feel like they would say, okay, now we're in a recession?

I don't know. They might try to kick the can.

Down the road and say, yeah, no, it's not true.

It's one of those things where, you know, when did we start saying that inflation is not transitory? It was very late. So it was November of 2021 that we said inflation is transitory. It was around March or April of 2021 that we said it is transitory. What's transitory mean? Transitory means a short period of time, right? It's going to come and it's going to go because the original thought was we'll see a little bit of inflation in 2021. It'll go away. It'll go away by the end of 2021. Well, that clearly did not happen. Then it said it'll go away by the middle part of 2022. that clearly did not happen. We're breaking new highs in the middle part of 2022. Now they're saying that it'll be gone by the end of 2022 to the beginning part of 2023. So that's one side on the inflation side. Now on the economic side, it's we don't want to say anything. We don't want to create fear or panic because people have jobs, the economy is strong. However, if you dig deep, you can start to see all these like red flashing warning signs that, yeah, potentially they could just blow by. But you have a lot of warning signs on saying, hey, look, like the inflation is still extremely high, gas prices are still high. We have an economy that is slowing. We've been seeing unemployment numbers start to go up. And these are the things that you want to pay attention to. And even unemployment, if I can mention that for a second, there's difference between unemployment, which is reported, and what's quote unquote real unemployment. So I don't want to get too technical, but when you see these headlines for what unemployment is, this is something called U-3 unemployment. And what that means is it looks at a specific set of unemployment numbers, and this is what they're reporting. Because now if you say, what does somebody unemployed mean? you might say somebody who doesn't have a job. But what about somebody now who's an engineer? You used to work at a great engineering company, but you got laid off and now you're working at McDonald's because you can't find another job. That doesn't qualify under that. Or what about now if you are a full-time worker, you're working at, I don't know, you're working at a factory, you had a great job and then your factory is doing layoffs and now they've cut your hours to part-time even though you want to work full-time. because the factory is struggling. That doesn't count in this data. As unemployed. That doesn't count yet.

So none of that data is recorded here.

But those aren't the stablest jobs, is what you're saying. It doesn't have to be stable. I mean, we could talk about doctors, we could talk about engineers. It's just a matter of what it's a definition of unemployment.

So the U3 is not looking at that.

U3, all it's looking at is- Fully unemployed. Well, let's define it. What it's looking at is, you don't have a job and you haven't actively been looking for a job for the last four years. Sorry, four weeks. So what that means is let's just say that you lost your job and you decided that after four weeks that you no longer want to continue looking for a job. Maybe you want to stay home with your kid. Maybe you're taking care of a parent or relative, whatever. So after four weeks, you stop looking for a job. You're no longer considered unemployed under U3. so you're no longer in that data. So there's another thing called U-6, which does look at this. It looks at things like if you are underemployed, you're an engineer working at McDonald's, but you want to be an engineer. You are a factory worker or any type of worker. You're a doctor who used to have a full-time salary, but now you're working part-time. It doesn't really matter what the career is. It's looking at somebody who's not getting the full employment that they want. You are somebody who is more than four weeks out of looking for a job. All these things are looked at in U6, and if you look at U6, it tells you a little bit of a different story than U3. So this is where you have to be, again, right? It's being able to understand data a little bit better. Now, I'm going to do a little bit of a pitch here because this is one of the things that we try to talk about in market briefs, is this financial news and understanding what's actually happening because this gets a little bit complex. And I don't want to go too into depth because I don't have a whiteboard to diagram it all out, but it gets a little confusing. And this is where headlines don't tell the full story and you want to be able to dig deeper, but it requires that financial education and that willingness to learn. And if you don't want to spend all the time doing that, that's where Market Briefs, which is my financial newsletter, completely free, breaks it down into a fun, witty and easy to read email that way. Now, even if you don't understand this, we explain it that way anybody. anybody can understand, even if you don't have any sort of financial education, because these are the things that most of us are never taught. We're never told this. You read the headlines saying unemployment is this, and you assume that that's right. But what is unemployment? You have to understand these things, and this is where, you know, understanding this level of finances becomes so much more complex. Because we're never told this.

So if you could predict the next 12 to 24 months of what you think is going to happen to the housing market and the economy.

Sure.

Look, your best case, what you think is gonna happen.

I definitely think that our based on.

All this information, I do.

Look, our, our economy has a lot of trouble ahead. We are not out of the water. And the question is, when are we going to see the price of that? There.

I mean, look, have we paid the biggest price yet?

Absolutely not. Really?

It's gonna get worse.

Our inflation issue is not going away, and either we're going to kick it down the road.

Further, we might pause it for a little bit, but then it's, yeah.

Either the Federal Reserve Bank is gonna kick the can down the road because they're gonna say, you know what, unemployment is rising, it's a bigger concern than inflation. So we're gonna stimulate, we're gonna pump and that's gonna create a bigger bubble. Geez. Or they're gonna start fighting it now and we're gonna start paying a bigger price right now because this inflation problem is not going away. The economic slowdown will probably continue because of this inflation issue. And the person who's gonna decide what's gonna happen is the Federal Reserve Bank. So the question is, are we gonna pay the price now or are we gonna do it later? If we do it later, it's gonna be a bigger price that we have to pay then. If we pay it now, it's gonna be painful, but not as painful as later. So this is the situation that we're in where the economic slowdown is a real concern. Inflation is a real concern. You don't wanna panic because nobody makes good decisions out of panic or fear, but you wanna understand this, that we're not shocked 12 months down the line where if the Federal Reserve Bank stays true, and they keep raising interest rates, they keep doing quantitative tightening, and they push the economy into a deeper recession that you're not like, nobody saw it coming. Because that's what they said about inflation. That's what they're going to say about the economy too.

Because they don't want to put fear into the world. Exactly. Just like they said in 2005, about 2007.

Exactly.

So what are you personally doing to prepare for the next, for when that happens with your own money and assets? And are you Saving money cash. Are you investing now?

Yeah.

Real estate, all that stuff. And what do you recommend someone to do, whether they're an employee or maybe they have some extra cash?

Sure. So I would say, you know, this is a lot going to depend on you because I'll be very personal with what I'm doing because I'm an entrepreneur, so I look for different types of opportunities than somebody else might. So if you are an employee, there's going to be different opportunities for you. If you're a business owner, there's going to be different for you, for an entrepreneur, there's different opportunities for you. So I invest my money in five places. I invest my money into my own business. I talked about market briefs. I invest my money into real estate, invest my money into stocks, invest my money into crypto, then I invest my money into physical gold. This is the order that I invest my money into. This is my type of diversification. Now, I understand what's going on and I do have some cash. I always have some cash put aside for, like, you know, things going wrong, Investments. I always have some cash putting aside there. And what I've been doing is I passively invest my money, meaning no matter what's happening in the markets, whether the market is up, whether the Market's down, it's automatically every month.

You have a certain amount going in.

And this is happening into stocks, into crypto and into physical gold. That does not change. That never changes. so I get paid, money is automatically invested no matter what. Then in the past, I've had my more active strategy where I would take money and actively go out and buy real estate, actively going to buy stocks. And in this situation, I'm looking for good deals, meaning a good price. So I haven't been doing that as much recently, not because of what's happening in the market, but because I see more opportunities for me in the entrepreneurial business side. So I've been investing money into market.

Briefs like I talked about, hiring more.

People on your team, building infrastructure. And then I'm also working on a tax firm. So I'm going to talk about tax for one second, if that's okay. Because it's a very interesting thing happening right now because going off of inflation, President Biden just signed something called the Inflation Reduction Act.

Was it 80 billion or something?

It was a huge, it was a huge, huge, I think it's even bigger than that. 80 billion is just, the IRS.

The IRS.

So the tax side.

So they're hiring, they're investing 80 billion in the IRS to start auditing more people essentially, right? To start trying to get more money from people.

And that's only one part of the Inflation Reduction Act. So let's go big to go small because the Inflation Reduction Act is supposed to reduce inflation. That's what the name says. I'm laughing because it's kind of silly because how do you reduce inflation? You spend less money because the government has spent so much money they didn't have. which caused money printing.

You tax more people, bro. You collect more.

Exactly. So that's how do you now pay off all this debt? Remember, the government doesn't make money. They tax you, they tax me, they collect taxes, and then that's what they use to pay off their expenses. Now, it's not surprising that the government is running into an issue because they have 31 almost trillion dollars of national debt that they need to pay off. This is not fixed rate debt, so as interest rates go up, their payments on this debt go up as well. so we talked about what happened in the housing market, imagine that on a $30 trillion level now, so the payments are getting bigger. So what does it mean? Well, if they have this pool of money, either they're gonna need to inject more money into the government, the Fed has to print more money, but they can't do that anymore because of inflation, or they're gonna need more tax dollars. So that's one of the reasons why through this Inflation Reduction Act, one of the things they wanna do, which is one of the most like financially interesting topics, is they want to invest very heavily in billions of dollars into the IRS to help them beef up and collect more tax dollars and past tax dollars. Now, I do want to clear up some of the false information out there because the act is working to hire 87,000 more IRS workers.

That's crazy.

It is crazy, especially considering that today there are about 80,000 IRS workers.

There's a double.

Yes, and no. So the 87,000 people that they're hiring are not all IRS agents and they're not all being hired today. They're gonna be hired over the course of 10 years. And the whole idea is, this is what they say. Again, this is what they're saying. What might happen is it could be a little bit different. So I wanna be just completely transparent because I don't wanna mislead people. I want to make sure everyone's fully understanding what's happening. You have about, what's scheduled is about 50,000 or so people in the IRS are scheduled to retire over the next 10 years. So these 87,000 people are supposed to replace them and beef up the agents that are actually gonna be doing the auditing to go and collect more money. Now, even if 50,000 people retire, that's still adding almost 50% more people to the IRS. Who are they going after? Well, they say the wealthy, the super rich. And, There's about a thousand billionaires in the United States. Do you need tens of thousands of people to go after them?

No.

So you go a little bit deeper. Now again, what do we look at? History. I'll look at history to answer the question. Because they keep saying that we're not going saying it's not in the bill, it's not written anywhere. This is what they say that we're not going to go after middle income people or anything like that. Well, in 2021, 50% of of IRS audits were on people earning less than $75,000 a year.

Come on.

50%. 50%.

How do they know? How do they-- is that public information?

Go search it on Google. Google has a lot of information.

50% of the audits were on people that were making less than $75,000 a year.

Under $75,000 a year.

Wow. And why are they doing that?

Well, probably because if you're making less money, you're not going to have the resources to hire a good accountant and hire a good attorney to represent you, so it's a little bit easier. Less cost, I mean, it's just easier, right? I mean, you're maybe less financially savvy than somebody who's making half a million dollars a year or $2 million a year because now you probably have more resources to defend yourself, so that's a bigger fight for the IRS. And you're probably more protected because you have good advisors who've told you what to do.

Because now let's say you're making-- you-'re.

Following your taxes, you're doing all the right steps, and maybe-- if you make a million-- once you start making a lot of money, like if you're making over a million dollars a year, You're not trying to play the game of trying to hide $10,000 because now you're already under scrutiny. Yes. The IRS is trying to see you do something wrong. And so if you try to get $10,000 under the table, it's a bad idea because you already know you're being watched.

So you're trying to, you do everything by the book.

You're trying to do the best. And you have good advisors to guide you to do everything legal so you can pay the least amount of taxes possible legally. Now if you're making 50 grand a year and you have a side hustle making you $1,000 a year, you might take that in cash because you might say, this is a grand a year. Yeah. It's just the reality, right? taking pictures at people's weddings, you're doing whatever, you're making some cash and you're just doing it under the table.

And the IRS wants that thousand bucks.

And this is one of those things where it's not surprising because if you look at what's been happening over the last couple of years, this has almost like been a foreshadow of things to come because you remember over the last couple of years we've seen this new rule on Venmo, right? On Venmo transactions where they want all Venmo transactions over $600 or something like that, where now if you're, you know, let's say you're a photographer and you're taking pictures at your friend's wedding and he pays you $700 and Venmo has to report that, they want to know that. They never said why, but now you're starting to see all these things start to add up where if you're doing these small things, you know, it's just like things starting to fall into place where, oh, no wonder they started wanting all these details for this. No wonder they started really going after cryptocurrency brokerages. No wonder they really started doing all of this stuff. maybe creating a digital dollar because they want to be able to see every transaction, which means they want to be able to tax every transaction. Of course, I can't validate this, but I mean, it's just like puzzle pieces starting to come together. And so this is where the tax thing, why is it so important? Because of inflation, because of the national debt. The government needs more tax dollars to be able to go and fund their payments. And so what are they going to do? Well, they're going to try to find the easiest hanging fruit. Is it going after a billionaire? Probably not, because the billionaire is going to say, Come after me.

I have my resources, I have my.

Army, I have my accountants, they've got everything. We have everything there, everything is documented because we want to play by the books because we know you're already watching. Now, I'm not saying that everything always is right, right? There's of course exceptions to this, but this is where you just have to understand, you know, they say that they're not going to go after anyone making middle income whatever.

But after you go, after you look at the thousand or so billionaires, okay, you gotta look at everyone else. I mean, so this is again, right?

That's what we would have to.

And you got 80, 000 people working on it.

It's like, all right, it's just looking at history, right? I mean, this history is the best indicator for what's coming. I keep saying that. I'm sure your audience is getting very bored on the way of me saying this, but, I mean, it's what the best indicator. Yeah. Because I can't look into the future and see what's going to happen, but I can look in the past and see what has happened. and I see that, hey, this is what happened in 2021. This is what's been happening because this is just the situation. And so for me, I've also seen a big difference between good tax advisors and bad tax advisors.

Is that why you're starting a tax firm?

That's why. Because I, you know, it's the entrepreneurial mind where when I get scammed, I get screwed over, I get, you know, these things happen. It makes me want to find a new solution. that's how I started a minority mindset. I got scammed when I started a minority mindset. I got screwed over when I started my vent planning company. I got completely screwed over my first real estate investment deal. Pretty much every part of me had to do with something really bad happening. So I had a really bad tax advisor. He was really just an accountant who filed my taxes and was never on time. And I got this call. It was horrible. It was just a mess. I got a call from my accountant one day. I'm in the office. This is right before my morning huddle. So we have a 9:30 a.m. morning huddle, calls me, I think it was like 8:45 in the morning, I'm in the office, says, Hey Jaspreet, how are you? I said, Good, how you doing? He says, Hey listen, I need you to do me something. Can you wire or send the IRS $100,000 by the end of the day today? And can you also send about $15,000 to the state government by the end of the day today? I was like, what? He says, Sorry, we had some miscalculations, we did something wrong, we missed this, and you need to send this by tonight. And I was like, geez. Are you serious? He's like, oh yeah, one more thing. You're probably gonna have to pay a penalty on this as well. Oh my gosh. And this is a completely true story. Like, when was this? This is not, I mean, this is less than a year ago.

Oh my gosh.

And so it's, I mean, it's- that's painful. It's very painful. And so I'm like, okay, like, I was very frustrated because I'm like, what did I do wrong? Like, what are you talking about? He's like, you didn't do anything wrong. And I was like, well, if I'm the one that has to pay this and I'm the one who has to pay the penalty, Something's not right here. And so I paid it, then I fired him pretty quickly. Right. Because that's not the way I like to do business. I want everything to be clean, but I also want people who care about what they do. And he was a cheaper accountant. I got what I paid for. And so I went on the hunt to find a top-of-the-line accountant. And I pay a lot more than what I used to. However, The situation scenario is extremely different because he has a very different personality about a different persona. And the way it works now is one, he manages all my books on time and handles schedule. So every month he meets with me and he shows me, Hey, Joseph, here's your profit. Sorry, we'll start from the top. Here's your revenue, here's your expenses, here's what your expenses look like, here's how they changed, here's your profit, here's your tax liability, and here are the things that you can do to limit your tax liability. That's cool. Here are, you know, three recommendations or whatever that we believe based off of what's happening right now to legally limit your tax liability. And he has given me so many interesting ideas because the tax code is over 2,000 pages long. And you need, I'm an attorney. I studied a lot of tax. It takes a lot of knowledge and education to understand and read the tax code, but then things keep changing all the time. Like even this Inflation Reduction Act is changing corporate tax structure. So you need somebody who literally Eats, breathes, and all they care about is tax. And this is this guy, right? And I'm like, dude, like, this is amazing. Like, I love this because I don't have the time. I don't want to spend my time thinking about taxes and all the cash flow stuff. I want to build my business. And so I got to know him, got to build, see how we worked. I really liked it. And after a number of months of working with him and seeing him in action, I was like, hey, man, like, you have nothing on social media. Can we work together? Like, let's like, he's very good at what he does, but I was like, let me work with you. I think we can create a lot of things here because there's a lot of small businesses that need what you have to offer because there's a lot of small businesses who have bad accountants who all they do is file their taxes. And you need a tax advisor, especially now as we're gonna see a big change. You need an advisor who's gonna guide you on what to do with your money, how to document what you do, like just to make it completely seamless. that way you don't have to stress about it. Right. And he was like, I'm down. So over the last couple of months, we've been working to build this together. It's not launched yet. We were just talking about it 'cause it came a conversation, but that's something that I've been really working on. That's cool. So, you know, if you're listening to this and you want a good tax advisor, just email me team@theminiorymindset.com or send me a DM on Instagram, Minority Mindset, and I will connect you. But these are, I mean, this is where, What am I doing? I like entrepreneurship. I like this stuff because it gets me excited. It's the way that my brain works. It's the way that gives me my purpose, right? And so I do that. I like investing in real estate. I like investing in stocks. I'm passively doing it in stocks. But right now I just see more opportunity for me to invest in things like market briefs, to invest in things like this tax firm because I see the opportunity. It's fun. I have a blast doing it. I get to meet really cool people. So, you know, it's just, it's a matter of now what is that lifestyle? Now if I didn't, if I wasn't an entrepreneur, what would I be doing? Yeah, I'd be stacking up cash to find good investments either in the stock market or the real estate market or to buy a startup because it's very accessible now thanks to the internet, thanks to all the crowdfunding sites out there. And I'd be passively investing. Like I would not change that.

So, I mean, I think everybody should be doing this. You can put a hundred bucks a month away into stocks or into an automated account that is investing for you.

Did you know if you're 21 and you start investing $100 a month and you never change that and you just get a 10% return on your money, which is the average stock market return, and you do that until you're 65, you will retire a millionaire.

Come on.

We're talking about less than $4 a day.

100 bucks a month.

100 bucks a month.

Automatic.

Automatic.

Going into an index fund.

And you just keep trying to match the market, right? Doesn't mean you're gonna get 10% returns every year.

But over the long term, decades, he will, yeah.

That's what the historical stock market return is. Now you can just plug this into a calculator and you'll see that the $100 a month from 21 to 65-66, you will be a millionaire. But if you don't start that until, let's say, in your 20s, you don't care about money, you're all partying, you're not having a good time, in your 30s you're trying to get a good job, trying to figure things out, and.

Now in your 40s you're like, I.

Gotta put it, I gotta put it, a thousand bucks, a couple thousand bucks. It's very different. If you're 45 and you're putting a $100 aside at the same 10% return, when you retire, you're gonna have $100,000. Not a million, not even half a million. We're talking about $100,000. It makes that big of a difference because time is such an important factor.

I'm such a big fan of doing this. I started doing this when my late 20s. I actually got a whole life insurance in my late 20s. And my dad was in life insurance, and so I learned about it a lot as a kid. but I started, I bought my own policy, I think, when I was, like, late 27, and I keep buying more whole life insurance. But I started doing the automatic payments from my checking account right into an index fund every month. So now, when I was in my late 20s and my, like, early 30s, and it's, you know, in seven or eight years, it's been just compounding and growing, and it really starts to grow. And as you earn more money, you can say, I'm gonna put 200 bucks a month in or 300 bucks. and really put that extra money in automatically so you don't even see it, you don't think about it, and you know you're going to be making money for the long haul.

Exactly.

100 bucks a month.

It's so simple and there are so many apps out there that make it so easy that don't even charge you a fee that there's really no excuse not to do this. And you just set that up and that never changes. Yeah.

Now, one of those top apps for people.

I use M1 Finance. M1 Finance, M1 Finance is easy to use. You know, there's tons of them out there. Do your own research. They are a sponsor and affiliate for Minority Mindset, full disclaimer. I'm not getting paid to say this.

Here, but do your research.

There's a ton of apps out there. What are the other apps? What are there a few others that you consider?

For dollar cost averaging, honestly, like you.

Can do something like FTX does that. So like Acorns, I've heard. Acorns does something where you can start with the dollar. So they like round up your change. Yeah.

You invest that.

Yeah, there's, I mean, if you go to theminoritymindset.com, because my team is literally.

Doing reviews of this.

It's not all that stuff. Yeah, I don't know all of them off the top of my head because I use what I use. But if you want reviews, just go to theminoritymindset.com, we have dozens of articles over there on that. Awesome. But that never changes. Has to be invested forever. Okay, and then on the active side, now this is where you can understand you a little bit where maybe you want to invest in real estate, Maybe you say, I hate that idea. Maybe you want to invest in individual companies. Maybe you say, I hate that idea. But this is where now you can also start putting some extra cash aside to be invested. So this is money where you're looking for a good opportunity. And the percentage of how much you're going to do is going to really just depend on you. Some of you are going to say, I don't even care about that. I just want to passive and never have to worry about it. Fine. Some of you are going to say, I'm passive, but I want to be in the game.

I want to be more involved.

I know what's happening. Some people like that. Yeah, I like that. And so now you put in some cash aside into, you know, maybe it's a bank account or whatever and you have some cash sitting here waiting to be invested. Maybe it's waiting to be a down payment for a home or you're waiting for just a good buying point in the stock market, but this is where you're doing your research right now and you're trying to find the right opportunity where now you just want to take this cash and go out and actually buy something. And again, right, this is assuming you're not an entrepreneur and there's different opportunities for different people in different stages of their life. And this is just understanding you, where you are in your life, if you want to be in the entrepreneurial side, building your own business, if you want to be in the, I want to invest in real estate side, or I want to be in the stock market side. It's just a matter of personal preference, because at the end of the day, we try to make investing so complicated, but it's, literally means invest the difference. And that's ultimately the solution to becoming wealthy. no matter what market you're in, no matter what economy you're in, no matter where in the world you're in, that is the simplest solution. Now you can get as nitty gritty as you want, but once you understand.

That, you have the formula to become wealthy. If you guys are loving this, make sure to leave a comment yes below. If you want more with Jaspreet and myself, comment below. Make sure to follow Jaspreet on his YouTube. We'll have it all linked up. Leave a comment if you want to learn more about becoming financially free in the future. with Jasper Dee. My man.

My man. Thank you for having me on, Lewis.

Thank you so much for listening. I hope you enjoyed today's episode and inspired you on your journey towards greatness. Make sure to check out the show notes in the description for a full rundown of today's show with all the important links. And also make sure to share this with a friend and subscribe over on Apple Podcasts as well. I really love hearing feedback from you guys, so share a review over on Apple and let me know what part of this episode resonated with you the most. And if no one's told you lately, I want to remind you that you are loved, you are worthy, and you matter. And now it's time to go out there and do something great.