An Excellent Approach On How, When And Where You Should Invest

Hey, it's Mark Pitolski, the land geek with your favorite niche real estate website, www.thelandgeek.com. and we are back with our favorite financial mentor. But before we get to our favorite financial mentor, I'd be remiss if I didn't properly introduce my co host. You know him, you love him. The professor, the brain. Scott Todd from Scott todd.net landmodo.com if you're not automating your Craigslist, your Facebook postings, posting domination.com thelandgeek learn anything about anything. Investor ninjas.com Scott Todd, are you ready to get smarter?

Mark, let's just, let's just roll, man. Like, we just gotta go. We gotta talk to Todd.

Yeah, this is Todd Trester again. Look, he's been like, we rarely have guests. Come on. Second time. This is Todd's third time. Because ultimately he is the financial mentor that we all want. He's the uncle you wish you had. He's the dad you wish you grew up with. That would literally. If you had this guy literally in your life every single day, you'd be not only just smarter and wiser, you'd be a lot wealthier. So, I mean, selfishly, I'd like to talk to him every week, but we can't because he's a busy guy. But Todd Tressner, welcome back from. For the third time, you're the only guest that has been on our podcast three times now. How are you?

I'm honored, I'm honored. I had no idea I had that notorious position of the third arrival. So good to be back. Thanks, guys.

Yeah, no, it's great. It's great. And you know, Todd's been featured in npr, Market Watch, Forbes, Smart Money, Wall Street Journal. Finally, he's on something prestigious like the Over Passive Income podcast. So good for you, Todd. All right, Todd, so let's just get into it because Scott and I, and you were talking before the podcast just about investment vehicles. So from time to time we'll hear about like a bitcoin. Should I be investing in bitcoin? Should I be investing in, you know, ATM machines? Should I start looking at multifamily? Like, where do I even start? And what would be your, your first sort of gut level response to somebody coming to you say, todd, where do I put my money?

Well, you first have to start with your goal, right? I mean, if you want to build wealth, you can look at the research and see how wealth is built. And the data is unequivocal. Most wealth comes from first business Business, entrepreneurship, creation of business. Second, it's real estate, and then third, it's paper assets. And paper assets is usually only over an entire lifetime of saving and investing and compounding. And that creates a normal amount of wealth. If you want greater than just normal amount of wealth, you know, basic financial independence, then you're back to business, and then primarily in real estate. So if your goal is wealth, that tells you where to focus, and it doesn't fit in any of the investment vehicles of the day. And that brings up one of the first myths that we deal with, which is that people think building wealth or getting rich is all about some magical investment. You know, like you want to find Microsoft in its infancy, you want to get Bitcoin back when it was 0.001 per bitcoin or what they were called, and on. And those things obviously can happen to the rarefied few. But that's not how you build wealth. There's a thing I like to play with, which is this idea that how can you structure the wealth planning game and achieve your goal in 999 out of a thousand lifetimes? So in other words, if you want to build it so reliably, so certainly that you're going to get it in this lifetime, because it would happen in almost every lifetime that you could ever live, you're not going to go for these, you know, extreme investment ideas in hoping that you hit a long shot. It's for people that I guess don't really believe that they can create wealth. And so they have to believe in investment long shots.

I love it, Scott.

Todd, you know, I think that that's a pretty good point, right? Like, I think a lot of times, all too often people, they want to achieve wealth, and so then they're like, okay, well, let me go, I need to have my own business. Okay, well, and then they sit down. I mean, I fell into this trap for a very long time. I said I'd sit down, I'd be like, I would start brainstorming businesses. And another businesses I brainstormed were anything anybody was doing, it was always like that next level stuff, right? Like, oh, well, this doesn't exist. And then all of a sudden you're dealing with earth moving stuff. And I think a lot of people think that wealth has to come from these businesses that, you know, are new to the world, like a Facebook and Amazon or something like that. And the reality is that you can build a very nice wealth creating business doing things that other people are doing as well, obviously, like, you know, like bring your own skill set to it. But like, you don't have to start off with like the next Facebook or the next Amazon. You can mold into that, but start something that's going to start producing some cash for you and then build on top of that.

So, Todd, if you were talking to a recent college grad and they come up to you and say, hey, financial mentor, I really want to build wealth, but all I have is this college degree. And I keep listening to these podcasts, these guys like Scott, Todd and Mark, and they keep talking about passive income and owning a business, but I don't have the resources or I don't have this or I don't have that. What would you sort of say to them? A good start.

So I get this question a lot, which is, if you have $1,000, what should you invest in? Right, your first thousand. It's kind of the equivalent question, which is always, you should invest in your earning capacity first. That's going to have your highest compound return. And so you want to create your earning capacity because ultimately what you do is it's the spread between your income and what you spend creates your savings, which you then invest. Now, when you get. A complication, I can bring in, what's wrong?

We lost you there with the Internet freeze up. Can you just say it one more time?

Sure. So why don't I just start from the beginning again? Are you going to edit it or what?

We don't edit, but.

Okay, well then I'll pick up where I left off then. Yeah, yeah, if we don't edit. Okay. So anyway, what I was saying is you want to invest in yourself first and your earning capacity first, particularly when you're young, because that has the highest expectancy or the highest lifetime value. You want to multiply your earning capacity rapidly. So invest your time, invest your money in your own earning capacity and then don't increase your spending. At the same time, don't increase your lifestyle expenses. That allows you to start saving. So like we talked earlier about doing a business, you don't have to do a business to build wealth. You can earn a lot within, you know, conventional, you know, employment, right? You just have to be really good to where you stand out and you have a high demand skill that will earn high income. So like, I have quite a few clients in my wealth building course. They have, you know, very high incomes to 300,000 in W2 jobs and they're doing quite well. And if they love their work, no need to change it, right? So there's a lot of different ways to skin this cat. But to answer your question, if you're young, you're just getting started, focus on your earning capacity. That's going to have your highest compound return.

Scott.

Todd, you know, Mark, I think it's really cool because I get to see my kids at an age where, like, I remember getting started, right? Like, I remember getting going, launching my own boat, financial boat, if you will. And, you know, it's really cool to see, like, your kids do it and, like, pick up where you've left off. For example, like talking about passive income, you know, like, I never knew anything about passive income when I was 17, 18 years old. It was like this mythical thing. And to hear my kids talk about passive income or whatever, I think it just creates this better experience. And Todd, like, what happens if, like, where can someone go to or where should they go to if they don't have that family environment that's teaching them about, like, the passive income or, you know, the financial management senses that they need, like, how do they, how does someone go and develop that?

Well, you learn, right? So these podcasts, books, you just expose yourself differently. If you don't have the family exposure, right? What you're talking about is a family that exposes you to it, and it's your goal. Then you have to expose yourself in different ways, right? So there's. Fortunately, nowadays it's easier than ever. I mean, you've just got tons of resources, many of which are free, you know, between the. Just tons of podcasts out there on this topic. So you can get your university on wheels and just listen to these things while you're driving and commuting and, you know, doing the dishes and going for a jog and working out. I mean, you can just inundate your mind with tons of this information, start sorting it out and at least exposing yourself to, you know, I don't think there's much of family advantage, actually. You know, it's like families could help, could hurt. You know, I think you just got to focus on what do you want, what do you want to create with your life? And then how do you go about deliberate practice? The concept of deliberate practice, to constantly grow your knowledge base on this topic that interests you or this thing you want to work toward, and so you just consistently learn more. You apply it, you apply careful risk management as you apply it so you don't blow up financially in the process when you make the inevitable mistakes that come with the early stages of doing it. So you carefully manage risk. You keep learning, you keep applying you get better and better and eventually you do.

Well, yeah, absolutely. You know, it'd be great, Todd, if somebody wrote a book and it was just a very simple concept like how much money do I need to retire? I wish somebody wrote that book.

Oh, wait, what a coincidence that would be. I just happened to have done it.

You just did it. It's the second edition, correct?

Yeah, correct.

Okay. So in that book, can you kind of just outline for us what are the major points that we're going to learn about and how much money do we need to retire?

The conventional model is broken, right? It's just one model. It's an asset based model. Right. And so that's how conventional financial planning approaches this idea of how much money do I need to retire? It's kind of built into the question, how do you. How much money do I need to retire? Well, you actually don't need money to retire, you need cash flow to retire. Right. Because financial independence is cash flow exceeding your expenses. So money is sort of like this first thing, right? You build this pile of money and then you convert it to cash flow, otherwise by liquidating it and amortizing or investing it in cash flow producing assets. So it's a little bit of a misnomer, but that's how everybody looks at it. So that's why the title is that way is they think how much money do I need to retire? It's really how much cash flow. Which takes us to the second model. So the first model is an asset based model, right? That's conventional retirement planning. Then there's another model I teach called the lifestyle model. That's how you completely change what your numbers look like by focusing on your values first, what life you want to create, and then figuring out more affordable ways to create that lifestyle. And it's not about living without, it's about isolating what you really care about and what your values address. So that's the second model, which is lifestyle planning. And then third model is cash flow. So you build a cash flow based model. And I was the one that developed that. The whole thing behind the cash flow based model. I retired at 35, which anybody looking at the video of this can see. I'm gray haired and much older guy. And so it was a long time ago. And so I knew that I couldn't do an amortization equation. I couldn't do a conventional asset based equation because they're not stable at anything past 30 years. And really about 20 years, they're not stable. So the way for people to Think about this is it's like a mortgage in reverse, right? So like with a mortgage, if you have a 30 year mortgage, every payment you, you pay down just a little tiny bit of principal in the beginning and then it keeps getting more and more principal, right? And if a 15 year mortgage, it pays down more principal in the beginning and accelerates even faster. That's why it's a shorter amortization. Well, it's the same thing in retirement planning, except it's way more dangerous because nothing's stable, right? Your expected return isn't stable, the future isn't stable, inflation isn't stable. All these things are unstable. And so you don't actually have a stable equation. So when you get these little bits of amortization over prolonged periods on an unstable equation, the whole thing blows up. And so that's why I teach also the cash flow based model. So what happens is each one of these models is like a different way of understanding the issue. See, the fundamental issue is that you're trying to put capital at risk and never outlive your assets with an unpredictable future. It's unknowable future. And so there's no absolute determinate way to do that. Despite what everybody teaches, there's no perfect way to do it. And so these three models give you the tools you need to do it reliably and safely. So that was it in a nutshell.

Scott, Todd, what are your thoughts?

Cash flow, baby. That's what it's all about, isn't it? Cash flow. Now, Todd, do you see a lot of people that want to like transfer the risk and like good people, like consider an annuity if they're trying to transfer the risk or is like, at what point would I want to trigger an annuity? Or think about like investing in annuity.

You have to look at the math on the annuity and you also have to look at your goals, right? So it goes back to what I was saying. So first of all, we have to make a distinction between ASPIA or single premium annuity, which would be a conventional annuity, where you're annuitizing an asset, and then a variable annuity, which is basically an insurance wrapper around, like a conventional mutual fund product. And so we could call that good annuity, bad annuity if we wanted to get in dangerous territory here, right? So a conventional annuity, what they were originally created for, I will characterize as the good annuity. And that does have a functional purpose. I teach a concept in the book called Buckets of Risk where what you can do is you can create your primary spending, right? The stuff you have to have to live. Food, shelter, utilities, you know your basics. And then you create what you call your low risk bucket, which could be annuity with a couple different life insurance companies. It could be fully paid off real estate, right? You could have a piece of property that you own free and clear that rents. There's different things that are extremely safe cash flow assets that you're not going to outlive the revenue off of. That those become your low risk bucket that covers your core spending. And then what that does is that allows you to have a higher risk bucket, which can be more conventional assets like stocks, bonds, all these other things that vary with time. And then you can have a slightly more aggressive spending equation on them than you would do if you had to self annuitize your own assets, which is what people do. You can have a more aggressive spending equation because if you blow out, it's not as important 20 years, 30 years into your retirement on those variable assets, as long as your low risk bucket is still intact. Did that make sense?

Yeah.

Okay, I just want to make sure you could follow me. There was a lot in there, but that's the buckets of risk model and it ties into a proper application of annuities. I had some doctors in. There's a medical group out in the West Coast, Kaiser Permanente, and I was shocked because we did the math on their annuity program for when these doctors were retiring. And the annuity program was quite good. The math worked really well. And these doctors were finding that they were better off taking the annuity than taking the lump sum payout from the retirement plan and trying to self annuitize. And so you kind of have to look at the math, you have to look at your goals, you have to look at how you're structuring the whole portfolio. There's not like this pat answer, but I will say that there's the good annuity and the bad annuity. And I have a book out there, Variable Annuity Pros and Cons, and that talks about the bad annuity, which is variable annuities, which are typically sold because they have high commissions, but they're not usually a first choice investment for most people that they're sold to.

You know, that kind of gets me to my next question. Todd, There is so much, and we were talking about it earlier. You can listen to podcasts, you can read books. There is an abundance of financial information out there. What heuristic can we use order to differentiate between the Wise and the time tested solid financial advice versus the financial advice that might make you tear your hair out and kind of, you know, throw something on the floor like, I can't believe this is out there for people to digest and ultimately get hurt by.

Yeah, I think it's tougher than ever. There's, you know, obviously an information explosion. You know, we've got just as the advantage. There's tons of podcasts out there. Well, there's also a lot of podcasts by people that don't really know what they're talking about. They think that they might be well intentioned, but they don't actually have deep financial expertise. There's a lot of people writing blogs that are in that situation where they're well intentioned. They're good people. They don't, they're not malicious, they're. They just don't have deep financial expertise and they're writing as if they're experts. So it can be tough to sort people out who genuinely know and genuinely have the consumer's best interest at heart versus somebody who has an advantage that they're trying to take. One way you can do it is you can look at how people monetize. I think that's very important. So for example, we had touched on Infinite Banking before the conversation and we're like, oh, it's the third rail. We don't want to go there. Right, but you can look. And almost everybody promoting Infinite Banking sells whole life insurance. Gee, what a coincidence. At some level they're connected to whole life insurance. Well, there's probably a reason why. Right? So you might want to look at their motivation for promoting it. If they're selling whole life insurance, you know, these things, again, you just want to look at like my, I'll give you another example. My Variable Annuity pros and cons has the worst reviews of any book I have. And if you want to look at what the one star reviews are, they're from insurance salesmen. They get pissed when they read that book. They do not like it because it tells kind of the inside scoop on variable annuities and why they're not appropriate for most people. And these guys are trained differently, right? They're trained by the insurance companies.

They're not bad people.

Right. They're trying to make a buck. They're working their job and they're trained by the insurance company. They know the party line, they know the company line, but they're not really financial experts. And so they're out doing this thing thinking they're doing a Proper thing. And along comes this guy named Todd, and he writes this little tiny book that basically blows up the product and says who it's appropriate for and why. It's not appropriate for most people who it's sold to, and they don't like that. Right. And so, again, you just have to kind of really be careful who you take advice from and look at how they're compensated. I sell education, I sell books. I sell courses. All I sell is education. I don't sell any investment products, so I don't have any axe to grind. I'm here to serve with education.

So that's a very. That is a very clear heuristic, is basically, look at the back end. If they're selling an investment product, take what they're telling you as information with a grain of salt, and always try.

To find the negative opinion. I mean, come on. There's a negative opinion for everything out there. There's negative opinions about me out there, right? I mean, everybody's got an opinion about something, right?

Everybody loves Scott Todd, which is annoying. We'll find somebody.

They don't trust me. Not in flight school, not when I'm pushing them off the ledge. They don't like me.

That's true.

I mean, you could take stuff that's really not even controversial. Like, if you look at my how much money do I need to retire? Book, it's really not controversial. I mean, it's all based on math. It's all based on research. It's not making anybody. There's no controversy to it. It's. It's pretty much straight up. This is the way it works, right? It just shows another level of the knowledge. And there's people who will go in and they'll give it one star and they'll just take it apart, you know, and it's like, okay, you know, I. I mean, go ahead and, you know, it's just the way it is.

There it is. There it is.

You know, Mark Todd talked about. Todd talked about, like, the. The power of the microphone, right? Like, you just said that, you know, anybody could go start with a podcast. Anybody could start a blog. And that's one of the cool things about the society that we live in today. But then I think you really have to stop and really think about, like, who are you getting your advice from? Right? Like, there's people out there. You know, there's people out there that are doers, okay? They're like, in our. In our business, they're land investors like us, and they're doing it that's cool. Then there's people that they don't do it. They're, you know, like, maybe they used to do it, but they don't do it anymore. They haven't done investing or real estate investing in years. Why? Because they've transferred over and they're like teaching. They're not doers anymore. They used to be doers. They're former doers. And then you have the wanna doer, right? Like you got the wannabe guy and the wannabe guy wants to be, he wants to be the educator. He's trying to do the deal, but he's not really successful at doing the deal yet. But he's trying to be the educator. So it's the wanna do it right. Like, and too many people, too many times people wanna take advice from people. They're faking it until they're faking until they make it right. I see this with like food bloggers, you know, like the clean eating people. Oh, make this, do this, do this. It's like, dude, do you even know? Like, oh, do this and you'll lose weight. I'm like, do you guys even know, like, what you're preaching is legit? It may have worked for you, but how can you go educate a mass group of people? Like, you have no experience with nutrition. What are you doing? You're gonna kill people.

Yeah. So I mean, as an example, I spent 20 years coaching people one on one before I produced any books or, you know, info products or courses. 20 years in the trenches with people one on one. The thing about coaching is people don't pay you week after week, month after month, unless it's working. And so you have to get pretty decent at it. You have to get material that will actually produce a result. And so that's very different from somebody that's standing up at a podium and talking to a large crowd and, you know, everybody applauds and it's all looks really impressive, but it may or may not work, you know, so you have to understand practically what works, what doesn't.

Yeah, no, absolutely. Which reminds me that today's podcast is sponsored by flight school because we know it works and we have the proof it works. In 16 weeks, we can literally transform your life and have you start creating real wealth, as Todd had mentioned, because we're going to help you create a land business that actually uses assets, that cash flow. We're buying these assets 25, 30 cents on the dollar. We're getting our money out on the down. We're within six months of the down and then we're making a car payment. We're getting that passive income every single month. No renters, no rehabs, no renovations, no rodents. I make it sound really simple. It is, but it ain't easy. And so go up that mountain with Scott Todd quickly, safely and efficiently. He's done it thousands of times. And learn more about flight school, thelandgeek.com training. So, Todd, we're sort of at that point now in the podcast, where we want to ask you if you're Tip of the Week, a website resource, another book, something else actionable for the art of passive income listeners to go improve their businesses, improve their lives. What have you got?

Ooh, I wasn't thinking in terms of that. Well, I mean, I can get my website, which is financial mentor.com you said give that in terms of a tip of the week. Be wary. Okay? This is. Yeah, be wary right now. This is a bubble that we're in right now. This is a bubble era. All assets have risen to. I mean, every day I look in, the stock market's up higher and higher and higher. You know, we're recording this February 11, 2020, just to date it. And there's a lot of signs of just bubble territory right now, whether it's valuations, whether it's. Scott Todd and I were talking off camera before this began about the symptoms of what's getting published and what people are writing and what people are saying. It's just got this vibe again of bubble time. Everybody's sort of coming out of the woodwork again. And the fact that the markets go up every day, stock market goes up every day, that is not natural. Right? There's no cyclicality to it. There's no in and out. There's no up and down. It is just straight up every single day. And that's not natural. And there's a reason it's occurring. And it has to do with the Fed pumping massive liquidity to through the repo market. The Fed, back in the early part of or middle of 2018, reversed their interest rate policy and they went to a negative real interest rate policy. And when they did that, the repo market froze up around September. And when the repo market froze up, they started dumping hundreds of billions of dollars into the repo market to maintain liquidity. So that didn't engender a, or cause a financial collapse. And so they successfully staved off the financial collapse. But then that if you look at the asset prices from that point forward, they jumped. And they're jumping every day. And it's because of all that liquidity they're pumping through in the short term markets. So just be wary, be wary. Do not get caught up in this. Be prudent and don't be standing naked when the tide flows out.

Yeah, absolutely. So, Todd, how would we profit from the inevitable recession? And how bad do you think it could be?

You don't want to try to profit from a recession. Recessions are one of these things. Major market downturns are one of these things where he who loses least wins. So it's not. You don't look at it as an opportunity to profit. You just try not to lose and you try to keep your capital intact. So when we get to times that have a more sound financial footing, that's when you're ready to move forward again.

All right, Fantastic. Scott. Todd, what's your tip of the week?

Mark, Check out this, this, this link I just put in the chat, and I know we'll make it available in the show notes. It's. It's a pretty cool app. It's a phone call translator. So basically what you could do is you can download this app, you can dial in and literally have a phone conversation with another party, and it will convert their language into your language. So it's like having a translator on the line with you. So imagine I wanted to talk to somebody I don't know, another country or even in another language. I can do it all right from this pretty cool app. 18 cents a minute, man. Talk about commerce on a different playing field. Check it out.

This is really cool. You know what's cool about this? You can use this in a bottle. So, yeah, if you're using like, like a chatbot on Facebook, you can start hitting the whole world and, and speaking in their language.

And it's live. It's live conversation. So, I mean, like, you're having a conversation, it translates it live, as I understand it does.

Yeah. I haven't tried it out, but also, you can. They actually will give you some test calls. You can try it out. It's pretty cool.

That's amazing.

This is really cool. See, Todd, aren't you glad you came back, man?

I'm so glad I got the tip of the day.

Yeah.

The company, like, how would you guys say it?

Ling.

Von X. Lingvanex. Lingbex. Lingbenex.com linguistic translator with a lingua. Lingva. Linguistics.

Lingbanex. Yeah, Lingbanex. So we're rolling with it.

Wow. Well, I want to just say my tip of the week is, you know, just Become more and more educated. Go to the financial mentor.com and I mean, there is so much wisdom on that site and I'm sure we'll have Todd back again because there's so, I mean, it's just, it's just endless. Todd Tressiter, this whole subject is endless. And I want to thank you again for coming back, being, you know, the favorite guest of the Art of passive income podcast, which you think it'd be somebody in real estate, but it's, you know, just, you know, that fact of here's the three ways we build wealth and simplifying it, making it not so complex for the audience and just age old wisdom. Someone who's, who's age old age. Well, no, but you've done some stuff too and you know, it's hard earned wisdom for sure. And it's just all the books on the site are great and just thank you again. So anything that we should have asked you, financial mentor.com Todd, that I didn't ask you?

No, no, Just one thing we were talking about off camera was just this idea of assets and what assets should you use and not use and understanding stuff. But we can do it for another conversation.

Okay, Fantastic. Scott. Todd, are we good?

We're good, Mark.

All right, again, I want to thank the listeners and just remind you the only way, the only way we can get Todd Tresser to come back for a fourth time is if you do three little things. You gotta subscribe, you gotta rate, you gotta review the podcast. Send us a screenshot of that review to supporthelandgeek.com we're gonna send you for free the $97 passive income launch kit course as well as the latest wholesaling course, how to double your money 30 days or less. All right, Todd, you know what's coming up next. Ready?

Yeah.

All right, one, two, three. Let freedom ring.

Mark, I think I have the secret.

What's the secret?

The secret is when we start, I'm not telling anybody what the secret is. I'll tell you what the secret is. We're just gonna keep going on a roll.

Okay? All right, we got it. We got it. All right, thanks, Todd.

All right, thanks a lot, guys.

Thanks.