https://www.listennotes.com/e/13137c6d8aa3419f8dd3c7b2ea4033be

What if the very place you're trusting to keep your money safe is quietly using it to make a fortune while tossing you a little bit of pocket change and a few fees for your trouble? Listen, if you ever felt like your bank is making more off of you than you are of them, and you wondered whether the money is actually safe in a savings account, you know, or is it costing you something, this episode's for you. Because today I'm going to pull back the curtain on what banks are really do with your money. And trust me, once you see how the system actually works, you might want to rethink who's getting the better deal, you or them. Curious. Would you ever hand your car keys to a valet and let them Uber all day long with your car, collect the fares, and then charge you for parking?

No.

Well, that's basically what you're doing when you deposit money in a bank account. All right, let's figure this thing out so you understand what's happening with your money, how to make sure it's safe, and how to make sure it's working for you more so than the bank. All right, so let's just break down real quickly. How do the banks make money first? Because what happens is we are in what's called a fractional reserve banking system. What that means is that you think that when you go and deposit $1,000 in the bank, that is just sitting there in the bank account safe and sound. So, like, when you need to walk into the bank and you want that thousand dollars back, they just go to the back and grab your thousand dollars and give it to you. That's not really the way it works, because the bank is in the business to make money, and they make loads of money, but the only way they make money is, is by using yours. So under the fractional reserve banking system, what happens is that the bank literally only needs to keep 10% of your money in the actual bank. That's called a reserve. The rest, they get a chance to use it, they get a chance to loan it out. So what happens is that you put $1,000 in the bank, they keep $100 aside as a reserve, and then the other 900, they get a chance to loan it out. And they loan it out at far greater interest rates than what they're paying you. Because let's say the thousand dollars is in a savings account and you're getting, you know, 0.2%, but they're loaning $900 of that thousand dollars out at 6%, at 7%, at 8%. Okay, it's a completely different kind of system, but it is that churn and that difference that creates the profit in the bank. Now, here's the kicker. If we just say. Let's just change the numbers. Let's say that we use 0.4%. If you put $1,000 in at 0.4%, that thousand dollars is going to earn you $4 in a year.

Okay?

So they're paying you $4. But let's say they turn around and loan out $900. Then, remember, what happens is that that $900 gets loaned out. Someone comes in and puts the money in, and they get a chance to loan it out over and over and over again. And literally, they can loan it out almost 10 times. That's $9,000, because they're leveraging your money. And if they did that at 6.5%, that first year is five and a half, $585. So that's the comparison. This is kind of the way that this whole thing works. It's like giving your dog to a neighbor for safekeeping. And they take the dog and they enter it into dog shows. They rake in thousands of money using your dog, and then they toss you a squeaky toy as a thank you. All right, this is the thing that I think we need to understand is that that's the game they're playing with our money. And I'm not. Look, I'm all for it and say I get it, but most people don't understand that's what's happening with the money. They think that the money is just sitting there. It's not. It's. It's moving. And it's the only way that they make money. Now, there are other ways they make money. Fees, credit cards, those kinds of things. And we'll talk about some of those. Those games so they understand. In fact, let's talk about the credit card side of it next. Because banks love it when you live large on borrowed money. Because why? Because borrowed money makes them money. They don't make money paying you. They make money when we pay them. And they make money by putting money in the bank, loaning it out so we pay them and they can use that. So imagine this. Credit card rates right now are 20 to 30%. If you make the. The minimum payments, then all of a sudden, what ends up happening? Let's just say that the average balance right now is about $7,200 on credit cards as of the filming.

Okay?

And. And these folks are carrying $7,200 in a balance on an, on a credit card. Now, the average credit card rate right now is 21.4%. After five years at that $7200 balance, they've made $11,785. Okay, this is how they, they're able to buy these big office towers and these big buildings and everything. If, if you don't pay, if you pay the minimum payments and you keep, keep paying the minimum payments. Let's say after 10 years, that's $42,000. You see how this magnifies? After 40 years, it's 16 million. It's crazy, but you think about if that's the average credit card balance, how much are they making when you start to put that average across all of us? Now, I'm not saying that it's bad. I am saying that, hey, we got to be careful about debt because obviously at 20, 25%, we can't get ahead financially. But. And if you're carrying a credit card balance, destructive debt, as we talk about it in the wealth priority ladder, I need you to get out of it. I want you on a debt payment plan. I need you to get out of it. Because all you're doing is putting money in the bank's pockets, in the merchants pockets, and not in your pocket. I need your money to work harder for you than you did for it. And you cannot get it up underneath you until you take control of it. And so if you're carrying those balances and you're only paying minimums, the bank doesn't just make money. It freaking builds empires. You're building a financial bonfire and they're roasting marshmallows on it. That's pretty much it. Okay, that leads me to the other way. They make money, and this is the backdoor kind of profit center for them. And that is fees, you know, because, yeah, they're making money on using your money. You're paying them interest on the use of the money. When we borrow money, whether it's mortgages, credit cards, other loans, car loans, all that stuff. But they also charge us on fees. If I want to get a printed statement, if I want to use an atm, if I want to do that, the average monthly fees are $13.95, $14 a year, charging you for the privilege of using your money to make money. Then you think about the overdraft fees. Overdraft fees. Banks make nearly $5 billion they made last year in overdraft fees. First off, let's talk about this. This means that we're financially not responsible. We are living beyond our means. We don't have control of it because overdraft, meaning that I overspent, I didn't know how much was in the bank account and I put money out and now they're going to charge me for it.

Okay?

There is no excuse for overdraft fees. If we have the proper plan in place, if we have the proper systems in place, the proper behaviors and processes, we should never be hit with overdraft fees.

Okay?

But in the banking industry, it's a $5 billion revenue line item. And then you take that and you say, let's look at the ATM fees. The average ATM fee is $4.77 sense. If you go out of network. Now, I don't even own an ATM card. I refuse to use them.

Okay?

This is, it's crazy what, what can happen. But we don't think about, we just think about convenience. We go to the atm, I need the cash, and we do that. It's like, it's like charging rent for your couch and paying a toll every time you sit on it, okay? You're giving them the money to do the things that they can do with their, their business. But yet if you need to use the money, get at the money, they charge you 12 ways from Sunday. All right? I don't like it. I don't like it. Part 3. When I start to look at this, the other thing is fines, okay? This is not where they make money. This is where they get caught, okay? When we look at it, there are banks, you know, we think that they work in our best interest and many of them don't. They work in their profits interest, they work in their shareholders interest. And if we start to look at what kinds of fines these banks have been hit with, we start to see some of this. Now I'll tell you where I think you can put your money and where I put my money, I'm going to give totally upfront with you. But I want you to understand the banking process, the banking system, so you can make an informed Choice. For instance, TD bank got fined 3, almost $3.1 billion for anti money laundering issues, okay? Citibank, $400 million for unsafe and unsound practices.

Okay?

I don't want unsafe unsound practices with my money. Regions make $191 million for shady overdraft tactics. Okay? Goldman Sachs, $1.4 million for failing to properly report trading. I mean, these are just a drop in the bucket. Let's not get to Wells Fargo for opening up all the bank accounts. Without customers permission. There's so much of that out there that I want us to not just be ivory eyed walking in and saying, it's a big bank, I can trust it.

Okay?

If banks were students, they'd be in detention for cheating on tests, Literally. And the problem is that they're cheating and they still get named class president. This is a problem. Okay, let's talk about safety for a moment and then let's talk about what I think you can do to kind of navigate all of this.

Okay?

The illusion of safety. Is your money really secure? Now you might be thinking, well, my money's in the bank. You know, it should be secure. And indirectly it is. You know, there is this thing called FDIC insurance, federal deposit insurance. It covers up to $250,000 per depositor per insured bank for each account ownership category, if you will. Now here's the catch. If you have more than 250,000 in any one category, then anything over that is just not insured. Now this is insurance. Should a bank go out of business? So this is a very different kind of thing than thinking that your investments are insured. If you buy investments through a bank, the value of the investment is insured. It's still volatile to the market and, and price the market. It's. If the bank goes out of business and you have deposits in there, they'll insure that up to $250,000 of deposits. So, so if you have more than that, you are at risk. In fact, when I work with, I work with a number of large companies, sit on their boards of directors, and you know, some of them, we have many millions, tens of millions of dollars. Well, we spread it out on a, on a variety of banks and, and insured in different ways to make that happen. You know, think about this. It's going back in 2008, the collapse of Washington Mutual. Some of you may, may not even know that it ever existed. But Washington Mutual was one of the big banks and it was the largest bank failure in US History. Now deposits were insured, they were protected. But there was a fair number of deposits that were in excess of the $250,000 limit. And those were lost.

Okay?

So you need to understand that this is like having a safety net that stretches only so far. And beyond that, you're on your own. So it's about being smart with that. And when you're building up your emergency fund or your peace of mind fund as we call it in the wealth priority ladder, if that fund starts to exceed these limits, you need to think about maybe I need to put a portion of it into another bank and now I've doubled the limits or do it in a different way. So, because remember, the peace of mind for the emergency fund is there for your safety. And if it's not safe, then it won't be there for your safety. Now, hopefully, and it doesn't happen often, the bank doesn't go out of, out of business, and we don't need the insurance. But it's like that seatbelt, you're happy you wore it if you needed it, and if you didn't need it, you're happy you got home safe. So this is one of those things that you want to have the insurance and hope it never happens, and you hope you never use it. All right, then the other thing is, is fraud protection. And what is, what does the bank do for you? This is something that I'll tell a story about this in a moment because I think we got to be careful about what they actually are going to protect us against the bank. We think that the bank will always protect us from fraud. But you know what? Frankly, I think you need to think again. There is an Electronic Funds Transfer act that requires them to reimburse unauthorized transactions. But that's where the gray area is.

Okay?

If you're willing to transfer money to a scammer, say someone posing as your bank, they actually considered it as authorized and the banks won't refund you. I literally had this conversation with someone where they were, they were traveling out of the country on vacation and they got, they got a text notification or a call from the bank or so they thought. They ignored the call, had a second call, ignored the call, third call, ignored the call, fourth call, picked up the call and they said, looks like we've got a wire that's about to go out for $1,000. We want to make sure that it's proper and it's okay before we send it out. And they said, no, we're not sending a wire out, we're on vacation. And they said, oh, okay, so we need to lock down your account. And so they went through a process to lock down the accountant. As part of that process to lock down the account, they literally, they had to log into the account and at the time they got the author the six digit, you know, authentication code and gave it to the person. Now the call came in that had the bank name on it, so they presumed it was the bank and gave them the six digit code. And they said, no problem, we've got your Account locked down, you're safe. Enjoy your vacation. Well, all of a sudden things started bouncing and they couldn't figure it out. And they called the bank and they go, we never called you. We never did it. And your, your account has been completely cleaned out. So what happened was these scammers had the name come up on caller id and when you. They gave them the six digit code, they were able to log into the account and clear the whole account out over a couple of days. And here's the, here's the rub, here's the problem. The bank basically said, you know, on the website, and when you get that six digit code, it specifically tells you, do not give this to anyone, including someone from the bank. But because they gave it to someone. Hey, y' all, I just want to let you know that my book, Building youg Money Machine is out. And it debuted at number four and number 24 on the USA Today bestseller list. Number four in business, number 24 of all books, all titles, all genres. It was big time. So if you have not got your copy of Building youg Money Machine, then the first question is, why not? The second question is, when? And the third thing is go to YourMoneyMachinebook.com, grab your copy, then give me the information from your, your book so I can make sure that I give you some special gifts, bonuses and wealth resources to accelerate your path to financial freedom. Let's get to the foreign. They said it's an authorized transfer. You authorized them to transfer it, even if you didn't know that they were transferring it. There will be no reimbursement and they lost everything.

All right?

I don't want that to happen to you. You got to understand what, what protections might be in place and what protections might not be in place. I mean, if I get a call from anyone, like I get calls because of my investments, where they'll say they want me to vote, proxy vote on an investment, and they have these proxies every year type of a thing. And I literally. It sounds rude and it might be rude, but I said I speak to no one about my investments. So thank you very much. Don't call me again. And I hang up. I don't discuss it. I don't. And they'll send me the proxies and I'll do it on my terms. If someone calls you and says they're from a credit card, they're coming from a bank account, they're from your investment account, then you get off the phone and you call them. You don't Call the number that they called from you, call a number that you're familiar with and then you'll know whether truth or lie. All right? All right, so what does this mean for you? Here's some mindset things that I think that you need to think about and some tactical moves to make because I think that saving money is the right thing. Saving it in a bank might be a responsible thing to do, but responsible doesn't mean smart.

Okay?

So I want you to start to look at things and not treat the banks like they're some sacred cow. The truth is you're just a savior, you're a source. So real safety is a result of control plus growth, plus access. And so what we want to do is think of our money as a boomerang. So it should go out there for us, gather more and bring back a whole bunch of friends with them. That's how our money's working harder for us than it did for them. And so when we choose to put money into an account, whether it's brokerage, bank or otherwise, we need to make sure that the money is going to do the things that we want it to do, the way we want to do it, and to keep us safe and growing over time. So one of the things that I do, and we'll talk about the tactical moves here, is that I actually don't have money in any banks. I don't have a bank account at Citibank Chase, B of A, any of that. All of my money is frankly in credit unions. And I don't have complex financial structures that need, you know, letters of credit and those kinds of things that a lot of credit unions may not do. But a credit union is a different kind of institution. They also have insurance, but they're primarily member driven, not profit driven and their fee structure is non existent or much less than the bank. And it is a membership type of organization. Plus, quite frankly, I like supporting credit unions that are community based, I like supporting local businesses and I have a personal relationship with my credit unions where I can literally call them up and say, I gotta do a wire, I gotta do this. And they'll do things for me, they'll help me out, they'll move things around, they'll make things like I had. I was moving some money to make an investment and it got transferred into the credit union and the credit union automatically puts a, a ten day hold on the money before they release it. And which meant that it would take me 10 days to get it, get it released into the investment, which was Going to delay, get an investment. I just called my contact at the bank up, I said, hey, what's the possibility of getting this release? She goes, give me five minutes. It'll be free for you to use. That's why I do it, relationships and that kind of thing. But here's the other thing. When you look at tactical moves, the other things to consider is that one, to diversify your accounts, make sure that you're keeping your balances under the FDIC insured limits across different banks, across different ownership categories. Think credit unions. Check out credit unions. I think that they're a phenomenal place to put money with low fees, better returns, better, better, you know, better, you know, customer based perspectives. So they're going to look at it from that perspective. All right. Second, I think use high yield savings accounts or money market accounts. Right now they're offering 4 plus percent. It'll go up, it'll go down depending on what's happening up with the interest rates. But right now they're, they're pretty good. Now we're talking about our safe money. So I want it fully liquid, I want it fully insured and I want no fees on it. So I'll put things in a high yield savings account or I'll put it in a money market account, fully liquid. Now some of these money market accounts will limit the number of withdrawals you can do in a month. But if it's long term money, safety money, you're not using it as a checking account, so it shouldn't be a problem. Be careful of money market funds. That's different than a money market account. Money market funds is actually an investment and you do have some possibility for value adjustment there. So be careful about that. The other, the third thing that I would look at is to make sure that you have your own self directed brokerage account or retirement account. I wouldn't do it at a bank, I wouldn't do it at a credit union. My credit union would love to get my investing. They'll never get my investing because there's two problems with it is that I think that they have a conflict of interest. One, two, they have a limited population of investments that they can offer me. So if they have only five investments and they have more than that, but just say five investments. But where I'm at, I have 105 investments, I'm better off with 105. And so I'm going to separate out my banking from my investing. So open up the self directed brokerage account, the retirement account I use, you can use Schwab, Fidelity, Vanguard, any of those discount brokers. Just avoid brokers that gamify investing because that gamifying investing creates a dopamine hit that creates emotions in the financial choices. And that never works out well. So I got most of my stuff. My major portfolio and stuff is at Fidelity and Schwab are the two primaries that I have.

Okay.

And this will allow you, if you look at self direction also, you may put it in index funds, ETFs. You might be able to go into real estate, other things to make that happen. Number four, I want you to automate all of this. Automate your transfers to savings, your transfers to investments. Make it completely brainless and consistent.

Okay?

Once your peace of mind fund is, is fully funded, then you'll move to doing your investing. Follow the wealth priority ladder and make it happen and do it that way.

Okay?

Follow a process, make it automated. Remove the friction, and the money machine will build over time. Money, you know, wealth is, it's a behavior. It's less about the math and the money and more about the habits and the behaviors. And if we can automate the behaviors and habits to make it easier with less friction, we'll get there a lot faster and a lot easier. And so I would automate all of the money transfers. And if you're looking for a way to automate in a cool, cool way, I did a special episode on Automation. We'll hook it up here so you can go through it. I walk you through why, I walk you through what, and I give you access to a tool that I've been testing out that I actually love. Think about a drag and drop decision tree where the money comes in and it automatically transfers for you without you having to worry about it. It's easy to set up. And we'll give you, I'll give you a code. They gave me a code to give you 25% off for the first month. So we'll make sure that we hook that up below with the right link and test it out, see what you think. All right? And then the action step that I have for you is this. Before I close this out, and that is I want you to pull your last three to six bank statements. I want you to highlight every single fee you had. And then as you understand the fees that you're paying, hopefully there's none. And. But if there's some, ask yourself what you could have done if you had invested that money instead. And then look for alternatives to move your money in a place where you don't get Hit with fees all the time. Remember, the average ATM fee out of network is almost $5. The average monthly fee is almost $15. And so you could be saving 20, $30, $50 a month. And put that away towards your emergency fund, towards getting debt paid down, or towards your financial future. All right, listen, banks aren't evil. They're just really good at making money off of your money. That's it. And the real question is, are you making the most of it? So I'd love to hear from you. What's the most ridiculous fee that you've ever paid? And if you're ready to flip the game and build your own money machine, then get in the game with us. Stay on this journey with us. Subscribe to this channel. Share this channel out. Let me know. Ask your questions, and let's do this together, okay? We'll get your money to go out there and work for you instead of working for the banks, okay? Because when your money starts to work harder for you than you do, that's when you get a chance to live a life by choice.

All right.

Till I get the chance to see you in in the next one. As I always say, always, always strive to live a life that I'll lose you. See you in the next one. Cheers. 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 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.