How To Prepare For The Great Melt Up

Hey there, real quick before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience Live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. What if I told you that the biggest financial crisis isn't a recession or even a stock market crash, but something even more insidious? And it's unfolding right now. If you've been feeling the pinch of rising costs or worried about the value of your savings and an uncertain economy, well, you're not alone. As the government debt is hitting record highs and interest payments are slowing past a trillion dollars with a T, we're on the brink of what's being called the great melt up. This isn't just an economic headline. It's something that could literally impact your finances, your future, your freedom to live the life that you want. And in today's episode, I'll break down what the great melt up means, why it's happening. More importantly, how do you protect yourself from the effects of it? By the end, you'll have actionable steps that will secure your finances, that will get you to stay ahead no matter how intense the economic storm that might come is.

All right. Now, from the intro, you might sit back and go, oh my God, this is another one of those fear monger shows. No, it isn't. This is about a real conversation about what really going on that I'm hoping to shed some light on so you understand what is going on from a government standpoint, from a spending standpoint, but more importantly, how that affects the economy, how that affects you, how does it affect prices of goods and how we get a chance to live? Because there's this thing in recent years that's been termed the great melt up and it is quietly surfacing around the economics, the economists and financial experts, which I guess they stand around the water cooler having these conversations. But unlike past economic warnings, this isn't about some temporary downturn or some typical market cycle. Instead, what it really is reflecting is an escalating problem. I mean, it is an unprecedented level of government debt, rising interest payments that could have lasting implications on the economy and your everyday finances for a long time. Now let Me be really clear, this isn't about political sides. This isn't about Republican, Democrat, any of that. Because when you look at what has happened, it has been for decades and it didn't matter Republican or Democrat. In fact, in recent history, there's only been one presidential administration that had a surplus and that was Bill Clinton. Okay, for, for a handful of years, the rest of them all ran at deficits, which was contributing to the deb. So this isn't about political lines. This is about the economics of how the government operates. But more importantly is how those economics trickle down to you and what you can do about it to keep yourself safe. Okay, so let's just, let's talk about what this is and I'm going to show you some graphs and some things to demonstrate or at least illustrate some of the things. So the United States government.

They take in revenues and they take in revenues primarily from taxes. That's their revenues. In fact, if I go to.

One of the charts that I have here, you can see income taxes is the largest, is the largest contributor to revenues of 2.8, $2.18 trillion with a T. Okay, the total revenues projected to be $4.5 trillion. This is for last year. But the payroll taxes, which is Social Security and all that stuff, is 1.6 trillion. And then we have corporate income taxes of, you know, 419 billion. And then we have some other taxes here. Okay, the government debt is. When you sit back and see what's happening, you've got as, as they're showing here, $4.5 trillion in revenues, but six point, we'll call it 2 trillion in expenses and spending. Well, how do they pay for that? They borrow. Who do they borrow from? They borrow from us, you know, individual citizens in the form of bonds and that kind of thing. They borrow from foreign countries. They, they do that. But that's what creates this debt, the money that is owed to other people by the US Government. And, and that debt, just like any other debt, has an interest charge to it, annual interest cost. Now our debt has gotten so large that, that the debt, the interest cost on it has now itself surpassed a trillion dollars. Okay, so you, you start to look at and say, if I am just paying interest of a trillion dollars, how do I get and dig into the debt of 33 trillion? I got to pay the interest and I have to pay the debt down. This is something that is going to come home to roost. This is what's called, this is what we're talking about. If you look at the historical debt over a hundred years, this is what it looks like, okay, is that, that you've got debt that, you know, for a while was, was relatively consistent up until the 80s. And then in, in 1984, you see that it, it took a pop, okay, Tom. And then settle down a little bit for a moment right around 2004, in the early 2000s. But then once we got hit with the recession of 2008 and everything, it literally almost went vertical. Okay? So the level of debt right now is at a little over $35 trillion. The last, the last number I gave you was from last year. So it's going up every single year. And so we need to understand that that's the thing that is happening. But more importantly is this idea of how the government is being run. And I'll explain how this all trickles down. And what does this have to do with us, our portfolios and the things that we're doing. And so if you look at what has historically happened, these.

The red, the red line is the spending. Okay. The blue line here is the revenue. Clearly, clearly, y', all, there's a gap between spending and revenue, and the spending is greater than the revenue coming in. If you look at these, these little gray lines here, this is the average.

Revenue. So it's all down here. And the average spending has always been above it. And when we look at what is going on here, okay, this gap between spending and, and revenue is widening. At least it's projected to widen over, over the years, okay? Because this is where we are. And, and we can see it now, what the numbers are. They are. The point is, is this, okay, now, now this is, this is me putting, putting my, my, my, my dad hat on, if you will. But, but here's the thing. If you and I were consistently overspending on our.

Lifestyle and not bringing enough money in and covering the rest with debt, sooner or later we're going to end up bankruptcy. Sooner or later we're going to end up with so much debt we can't get out from under it. This is why I think we've got an issue here, because the Federal Reserve is sitting back saying how, you know, how are we paying this debt? $1 trillion in interest. If you look at, if you look at the, the magnitude of the.

The debt compared to all the other expenses, look at this. So the biggest expense, one of the biggest expenses that we see is Social Security, then defense and Veterans, then Medicare, and then here. So the top expenses, interest is one of them. So if interest cost is One of our top expenses, how are we getting out from under it? So one, somehow we have to stop the bleeding. We have to stop now. The challenge is when you look at the programs that the tax revenues are paying for. And I'm not. Like I said, I'm not. This isn't about politics. It's not even about policy. It's about economics. But we only have two ways to fix this problem. Well, we have more than two ways, but two ways. The two general ways, if it was you and I, the only two ways we have is make more money, spend less, or do both at the same time. Okay, well, the only way the government makes more money is to tax more. And the only way that they spend less is to cut. Okay, the challenges, the effect of taxing more creates an additional expense that's going to end up being passed through to the individuals. And now they bear the burden. Now I, I can hear y' all right now. All the billionaires can pay for it. I gotta tell you, if you do the math, there isn't enough to fix this problem. So it isn't a billionaire problem. It is, it is an economic problem that is a national problem we need to think about. Okay? Now the other side of it is we spend less. Well, what are we gonna do? Cut Social Security, Cut Medicare. At that point, we're starting to cut some of the core programs that we have in place for our citizens. And, and so it becomes a bit of a problem. So what is the answer? The answer that you will hear people say is they'll borrow more. Well, at some point, your debt and your interest becomes the biggest expense on, on your budget. Well, that's not sustainable. They say, okay, well, the government can print money. Okay, so, so they'll print money. We saw them do this in the pandemic and for years keep the interest rates low and print money. When we print money, money's more available, there is more spending. What does that do? It drives prices up. Okay. This becomes a challenge. If we start to, to do that, we start to create inflation again. And, and so where I'm, where this whole melt up is coming from is, is that we have a pot, a really good possibility of having inflation come back in. Not for any other reason other than them trying to, the government trying to right this ship and get that interest cost down and get the debt paid down. And in order to do that, they say, well, let's, we'll print more money to make that happen. Well, that affects us. And therein lies the melt up. And what can Happen is in that process, we can find ourselves in a period of stagflation where inflation is soaring, but the economy is stagnated. Okay? And it's excessive spending, it's the inability to curb prices and the rise in prices and the persistent government debt. Now the other side of it is instead of stagflation, we just experience inflation and it costs and we have hyperinflation. And we've seen countries like Venezuela and Zimbabwe that have hit with hyperinflation, which literally wipes out economies, savings and that kind of thing. So this is, this is what, it's what it's all about. Like I said, this isn't about politics. This is about economics. If you and I operated our world the way that, that the government is doing it, we couldn't survive for the long term because we don't have the ability to print money. I mean we could, but that's called counterfeiting. Okay? So this is the challenge that we're up against. Now can we fix it? I don't know. I don't know. The government needs to change their tune, change the way they do things in order to fix it. It is a problem that is slowly getting so far out of control, I'm not sure how they get that, that, that train back in the station. Okay, but just like I say with my, my clients and along control the controllables and there are things that you as an individual can do to protect yourself in the face of any kind of occurrence of this. It could, it could happen. It could happen down the road. Years from now. It could be in 2026, it could happen. I'm not making that prediction. I'm just saying that the math doesn't. Math. If you take it out long term, we gotta look at it from that perspective. So there are some things I want you to do that will put you in a better position to protect yourself. Should we start to see some of this down the road? Now some of it I talk about in my book building your money machine. The following. The process of the wealth priority ladder that's in chapter 12 of the book is hugely important because remember, everything that I teach is about how do we get you to safety first, an unshakable foundation, and then move you to growth second. And this is what, what I want to talk about with respect to your stuff. So the first thing is this. You have to be investing. If we are saving and we're just putting even in a high yield savings account now there's going to be a portion of what you have put into a high yield savings account because we need that liquidity. And you'll see why that, that is important in, in a moment. But, but you have to be investing, you have to be in the game. Otherwise you will not keep up with the prices. If, if I'm investing in stocks and I'm investing in, in real assets and we get into an inflationary time, typically the value of those assets will go up at the same time. That means that our investing will move with it. So face with what is going on. If we put ourselves into a fixed income situation of just savings and now we have big inflation, the interest that you're getting on that savings isn't going to be, have the same purchasing power. You are losing money. Now we're going to do that in some situations for our peace of mind and our emergency fund. But the rest of it we want investing. So, but the first things first is, is step one is you have, you have to be investing, you have to be in the game. Okay? Step two is that you need to diversify your investing and your income. Okay? Investing and income. Diversify your investments so you're not beholden to a single investment, a single type, a single thing. So diversified, A diversified portfolio of investments. Now I tell the folks that I work with, we start off with ETFs, index funds and that kind of thing because it's easy to diversify. It's liquid and we have a proven history. And you can spread it across investments and different stocks, bonds and real estate. But they'll be further diversification as you get more and more into it. For instance, precious metals, gold, that kind of thing, real estate, those kinds of things will come to play. But the, and commodities. So, so the, the first thing is that you must have a diversified portfolio. No matter how big, how, how small your portfolio is, make sure it's diversified because when certain assets or investments go bad, you'll have others that will offset and hopefully they will all grow over time. But without a diversified portfolio, you are, you are at a much greater risk. Should some of this start to happen in the portfolio, there may be a, a position. Now this is, I am not giving investment advice here because everyone's facts and circumstances are the same. Your age, stage and circumstances are different. But there's a point where you start to Investigate not only ETFs, index funds and things like that, low cost, low fee, but look at other assets like treasury inflation protected securities, what they call tips, government bonds that are designed to protect investors from inflation that you might put in There you're probably not going to have a huge amount of the portfolio in there, but there are something that you can put in there. You'll probably look at also commodities, gold and silver that will tend to hold their value during inflationary times and then then also from there in the diversification. I want you to also think about real estate. Now real estate is typically higher up in the wealth priority ladder with, with what we're doing. But here's, here's why I think real estate is important here. And I, and I hear it, should you rent, should you buy? And if I just look at the mathematics and I have a tool that's a free tool if you want to.

Grab it. It's a home rent buy calculator where you get a chance to compare what would be the difference between buying a home or renting a place and investing the difference. If you put home buy in in the comments, we'll make sure we get it over to you. It's totally free. But when you look at the just the numbers themselves, the potential is this, is that it may make sense to rent on the surface and, and I will tend to agree with that. Now buying a home is a long term decision. I've done other episodes on this. This is not something that you buy a home and you're going to get in and out of a home in two years because the friction cost to get in and out of a home, sailing costs, commissions, that kind of thing, market exposure, all that stuff is way too high. So if I'm buying a home, it's a seven to 10 year decision. But one of the cases for buying versus renting is the fact that during an inflationary time, real estate tangible investments will hold their value, retain their value and move with it. And so historically real estate has kept up with inflation and property values have risen. If I'm renting during inflationary time and not owning, your rent is going to rise. But if I own the property on a fixed loan key fixed loan, then my mortgage will stay the same. The value of the real estate will tend to go up and do it from that perspective. Okay, so and during an inflationary time there the argument, an additional argument for owning real estate is the fact that it will hold its value during that time, whereas if you're renting you are going to be subject to ren increases during that inflationary time unless you have a long term lease or anything like that. So this is a time to also focus on real assets that, that come into play. Now this the other thing which is really not an investing, but it is a safety thing, is your liquidity. Okay? This is the time to make sure that you have the cash reserves in place. We call it in the wealth priority ladder and in my book, building your money machine, a peace of mind fund. Yeah, I get it. Proponents out there saying three to six months, they call it an emergency fund. It's not enough. Nine to 18 months, put it in a high yield savings account. I get it. During an inflationary time, you're losing money. But the money that you put into that account isn't to make you money. It is to protect your assets. So we put it in a high yield savings account and we have the liquidity. Should there be a downturn, an issue, we need additional cash. It is there for emergencies, for our peace of mind to take care of things if there's a job loss, any of those things. This is a time to make sure that we're building the cash reserves in order to keep us, our family and our future safe. Okay? So number four is, is liquidity and building, building that. Number five is to avoid and eliminate high interest debt, but just debt in general, destructive debt for sure. Okay.

In other words, we're not living on credit cards. We're not doing what the, what the government's doing. We are going to avoid debt. We're going to, especially rising interest rates. It becomes much more expensive. We don't want variable date credit card balances, variable debt. We don't want to have credit card balances that we're carrying. If I'm going into mortgages, I want fixed rate mortgages because variable rate mortgages will get much more expensive as, as we go through it. So I'm going to avoid, I'm going to avoid debt and I'm going to start eliminating destructive debt, lifestyle debt, which means that indirectly you have to manage your, your costs, your spending. Okay? Unlike what the government's doing, you have to manage it, you have to look at it. If you do not have a financial plan in place, it's time to get one in place, y'. All. Okay? It's one of the things that we do in our money machine master master plan that we do with our clients. We build it out and we build and we test it and we look. If inflation goes up, if the market goes down, where it's, what's your spending? What are your goals? What's your income? What happens if your income drops? What? We test it a lot of different ways. We run what's called Monte Carlo simulations for you and run the reports and do all of that. So, so it's important for you to do that and have that in place to make sure that you're safe. So getting yourself out of debt, if you have yourself in debt, student loan debt, credit cards, you need to get on debt payment plan. Okay? Even if you're not doing one of the master plans, it's important to get on a debt payment plan. You can go to melabraham.com no debt. Get the Excel template, get the free training, it's totally free. Put your debt in there, get on a debt payment plan. Like I said, this may start to happen, it may not. But you know what? Getting yourself out of destructive debt is always a good thing. Okay, then, then number six, number six, educate yourself. Don't put your head in the sand, okay? This stuff's going on in the background. You get to, you get to navigate during this environment in a way that gives you the control. So look, I have been through, I'm 63, so I have been through recessions, I've been through, through pullbacks, I've been through corrections, I've been through wars, I've been through. So I've watched money go in and out and up and down and all that stuff. And I'm still here. I'm still here. So I get this. And at the same time, whatever is happening is just setting the ground rules for us to play the game the proper way. I want to give you the rules to play the game the proper way and keep you safe. I don't sell investments, I don't sell insurance, Okay? I just want to make sure that you're safe and that you're moving towards your dreams. One of the biggest things is to raise your financial literacy during economic uncertainty. This is huge. And not get so caught up in any of the politics or any of the stuff that is going on. Okay? Don't allow them to stir up the fears. There are processes, there are systems, there are principles that have survived the test of time and they will hear too. But I need you to put them into your life.

As much as this great melt up may sound intimidating, when you take a proactive approach, you can literally build a resilient financial future. Okay? It doesn't have to impact you or infect you. Yes. High government debt, rising interest payments at the government level, deficit spending, if you will, inflationary pressures, all that stuff's likely to continue. It's the way it's been. But by taking the steps that I give you here to diversify, limit debt, to focus on Real assets to protect yourself, to educate yourself to navigate these uncertain times. You'll be in good shape. Okay? Remember, the great melt up isn't about fear. It's about awareness. It's about prepare, preparation. It's about understanding. It's about understanding the trends. It's about protecting yourself. It's about you taking control and mastering your money. Eliminating the financial stress so you can live a life of choice no matter what is going on in the broader economy. I hope that this helps. I hope that shed some light on what's going on with respect to, you know, when you hear things like deficit and debt ceiling and all that stuff. Okay, but how it relates to you, how does it impact you? So you can make the right choices, the right decisions to take care of yourself, take care of your financial future, take care of your family, and build the legacy that you are. Put here to Bill. All right? I hope that this helps. I hope that you found this valuable. I'd love to hear from you and I'd love for you to make sure that you're on this journey with me by subscribing to the show and sharing the show out. All right? Would you do that for me? And in the meantime, I hope to see you on the road to your financial freedom. And until I do, always, always strive to live a life and I lose you.

Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group. Now by going to melabraham.com group and I'll see you there.

And that's it for this episode of Building your money Machine where we help you learn how to master your money, eliminate financial stress and and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast, or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.