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Speaker 1: This is the biggest financial mistake homeowners make, and most

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Speaker 1: people lock it in for decades without ever question it's now,

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Speaker 1: paying off your home feels like the responsible move, It

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Speaker 1: feels like security. But what if that feeling is costing

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Speaker 1: you far more than you realize When you pay off

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Speaker 1: your house, what exactly are you winning? Now? I'm sert

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Speaker 1: my career inside markets and ballan sheets, watching how real

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Speaker 1: wealth is built versus how people are told to build it,

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Speaker 1: And by the end of this video you're going to

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Speaker 1: see that there's two very different financial games, and paying

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Speaker 1: off your house often puts you in the wrong game.

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Speaker 1: So let's go all right, we're jumping right in and

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Speaker 1: we are going to break down one of the biggest

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Speaker 1: sacred cows in wealth building. We're going to talk about

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Speaker 1: your home. We're going to talk about real estate, and

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Speaker 1: we're going to change it the frame in a way

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Speaker 1: that you maybe haven't ever really thought about this. So,

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Speaker 1: first of all, should you pay off your home? Should

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Speaker 1: you pay it off early? Should you take a fifty

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Speaker 1: year mortgage and drag it out, pay two extra payments

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Speaker 1: per year to pay it off in fifteen years? Apply

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Speaker 1: extra principle. Whatever you're going to do. Should you pay

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Speaker 1: off your home? Ever? Should you pay it off early? Well,

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Speaker 1: so to really answer this question, it's not should I

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Speaker 1: pay it off? Yes or no? Okay, So that's binary thinking.

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Speaker 1: Let's destroy that right now. You're never going to get

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Speaker 1: ahead in life with binary on off, yes, no thinking.

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Speaker 1: The real question that you should be asking yourself because

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Speaker 1: the quality of your life comes down to the questions

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Speaker 1: that you ask. The real question that you should ask

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Speaker 1: is should I pay off my house? But more importantly,

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Speaker 1: why why would I want to? Now? From coaching now

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Speaker 1: sixty five hundred students or more, I've come up with

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Speaker 1: typically three reasons why you might want to pay it off.

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Speaker 1: So let's break those down. So reason number one you

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Speaker 1: might want to pay it off is security. So if

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Speaker 1: I don't have a house payment anymore, if my house

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Speaker 1: payments free and clear, I no longer have to worry

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Speaker 1: about that monthly payment to the bank, then I feel secure. Okay.

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Speaker 1: That's one. Number two would be cash flow. So some

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Speaker 1: people say, well, if I could pay off my monthly

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Speaker 1: payment and I no longer have that payment anymore, that

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Speaker 1: means I'll have more more disposable income that I could use,

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Speaker 1: So I have more spending money, more purchasing power, whatever.

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Speaker 1: So maybe it's a cash flow thing, or maybe the

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Speaker 1: third reason why we want to pay off our home

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Speaker 1: is because of equity. We want to build up the

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Speaker 1: equity the asset value that we have there. So it's

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Speaker 1: not should I pay it off yes or no, it's

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Speaker 1: why would I want to? And then we can start

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Speaker 1: to break down each of these questions separately. You follow me, Okay,

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Speaker 1: let's dig in first, and let's talk about security. So

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Speaker 1: the payment illusion that we have. So again, right, if

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Speaker 1: I can pay, if I can get rid of my payment,

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Speaker 1: if I can pay it off early, apply the experts

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Speaker 1: to whatever, pay it off in twenty years or thirty

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Speaker 1: years instead of fifty the payment illusion. But what do

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Speaker 1: I mean by illusion? Well, let's think about this clearly, okay.

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Speaker 1: So first of all, we have one, two, three, four.

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Speaker 1: Let's go to five different actually monthly payments that I

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Speaker 1: have on my home. So number one, the first big

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Speaker 1: monthly payment that we're discussing right now is my mortgage payment. Right,

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Speaker 1: I have to pay the bank every single month for

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Speaker 1: you know, thirty years or however long the mortgage that

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Speaker 1: you get. Number one. Number two, I also have to

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Speaker 1: pay taxes, so I have to pay property taxes every

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Speaker 1: single month on my property that I own. Number Three,

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Speaker 1: I have to pay insurance, so I have to keep

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Speaker 1: my property insured, you know, if catastrophic loss happens. I

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Speaker 1: have that. Number four, I have my utilities, so you know,

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Speaker 1: I have electricity, water, gas, things like that. Number five,

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Speaker 1: I have some maintenance, right, so every month I have

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Speaker 1: to pay these if I want to stay in the home. Obviously,

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Speaker 1: the mortgage. If I don't the bank takes it, it

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Speaker 1: takes it. Number two tax. If I don't take it,

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Speaker 1: the state takes it. Number three insurance. My mortgage company

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Speaker 1: might require that or I need it for a catastrophic loss.

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Speaker 1: Utilities and maintenance. I suppose you don't have to pay those,

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Speaker 1: but the house won't be inhabitable if you don't. Right,

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Speaker 1: you need electricity, gas, et cetera. Okay, The reason why

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Speaker 1: I want to point this out is this payment illusion.

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Speaker 1: So if I pay off my mortgage early, then I

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Speaker 1: have no more pay so I feel secure. But what

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Speaker 1: you're really saying is if I get rid of that

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Speaker 1: all of a sudden, I feel way more secure. The

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Speaker 1: reality is I still have to pay all of these,

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Speaker 1: so while maybe I take my payment from three thousand

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Speaker 1: maybe down to one thousand, the point is I still

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Speaker 1: have to come up with money every single month just

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Speaker 1: to stay in my house. So then it's not really

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Speaker 1: a question of security. I still have to come up

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Speaker 1: with money every month. The question is how much money

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Speaker 1: do you have to come up with, which really takes

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Speaker 1: us to the second reason why you might be considering

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Speaker 1: paying off your mortgage early, and that's cash flow. So

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Speaker 1: now that we're on the same page, you have to

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Speaker 1: pay every single month to stay in the home, whether

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Speaker 1: you have a mortgage or not. We're clear on that. Now,

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Speaker 1: the question is how much do I have to pay

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Speaker 1: to stay in the home? Okay, so for cash flow,

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Speaker 1: let's look at this a little bit differently, and for

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Speaker 1: this illustration purpose, I am using the California median home price.

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Speaker 1: So I don't know where you live or what home

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Speaker 1: prices are, but I'm in the Fornia. So we're going

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Speaker 1: to use the California home median value, which is eight

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Speaker 1: hundred and seventy three thousand dollars. It's pretty crazy. And

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Speaker 1: we'll use just a typical loan seventy five percent loan

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Speaker 1: to value. So I put twenty five percent down on

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Speaker 1: my home where I have twenty five percent equity, So

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Speaker 1: I have about a six hundred and fifty thousand dollars

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Speaker 1: mortgage payment. Let's say I have a four point nine

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Speaker 1: percent interest. I got it a couple of years ago.

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Speaker 1: I'm sure we'll see those rates again here, not too

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Speaker 1: far in the distance. And I got a thirty year

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Speaker 1: fixed down. If you're outside of the United States, you

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Speaker 1: don't have thirty year fixed you have adjustables. Sorry for you,

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Speaker 1: but you can change the math to make it work

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Speaker 1: for you. So let's say in this example, my monthly

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Speaker 1: in payment is about thirty four hundred dollars, all right,

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Speaker 1: So in this example, now let's say that I want

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Speaker 1: to pay an additional three hundred and sixty five dollars

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Speaker 1: per month down. It's about ten percent, So I'm going

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Speaker 1: to make an extra ten percent payment so i can

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Speaker 1: pay off my loan early. Well, let's run this through

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Speaker 1: the math. Let's run through a couple scenarios. So option

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Speaker 1: number one, I am cutting down again three hundred and

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Speaker 1: sixty five dollars a month, and basically what I'm saving

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Speaker 1: is the four point nine percent interest. So if I

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Speaker 1: keep the money for three hundred and sixty five dollars,

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Speaker 1: I have to pay four point nine percent on it.

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Speaker 1: If I pay it down early, the money disappears. It

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Speaker 1: just goes into my equity. It's locked up for twenty

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Speaker 1: thirty years, however, long left that my mortgage, so it

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Speaker 1: disappears into my mortgage. But I don't have to pay

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Speaker 1: the four point nine percent, But really I do because

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Speaker 1: the loan is amortized for that. So even though I'm

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Speaker 1: paying extra principle, unless I actually go through and refinance

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Speaker 1: my home, which I may not want to do because

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Speaker 1: I might get a higher rate. Unless I actually go

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Speaker 1: through the hassle of that, even if I pay extra principle,

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Speaker 1: my payment access stays the same. So really what I'm

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Speaker 1: doing is I'm hoping that I'll just pay my payment

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Speaker 1: down sooner. But let's take a look at it option

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Speaker 1: number two. So let's say that I take the same

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Speaker 1: amount of money, this same three hundred and sixty five dollars,

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Speaker 1: but instead of putting it down into the black hole

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Speaker 1: of my home mortgage, let's say that I put it

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Speaker 1: into a high yield interest to count, I put it

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Speaker 1: into treasuries making five percent, which is more about the

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Speaker 1: saying that I'm making. Now, let's say that I put

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Speaker 1: it into a dividend stock. Let's say I put it

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Speaker 1: into something like I talk a lot about, like STRC.

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Speaker 1: You can buy that in a brokerage. Right now. It

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Speaker 1: pays ten point seven five percent, So I'm saving the

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Speaker 1: four point nine percent over here, but I could make

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Speaker 1: ten point seven five percent. What does that mean. Let's

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Speaker 1: break down the mouth. Well, if I took this three

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Speaker 1: sixty five and every single month instead of putting it

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Speaker 1: down on my mortgage, I put it into this at

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Speaker 1: ten point seven five percent, within twenty years, the interest

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Speaker 1: on the three sixty five ten point seventy five is

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Speaker 1: enough to cover my mortgage payment. So in twenty years,

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Speaker 1: I have enough cash flow coming in from this to

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Speaker 1: effectively wipe out my mortgage payment, effectively pays off my

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Speaker 1: home for me. Technically, I still have the mortgage debt,

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Speaker 1: but there's enough cash flow coming in from this investment

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Speaker 1: to make that zeroed out. But that's only the beginning.

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Speaker 1: Because if I go out to thirty years, or let's

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Speaker 1: say I go out to forty years, because of the

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Speaker 1: law of compounding, in forty years, it's enough to equal

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Speaker 1: sixty seven thousand dollars a month of income. Let me

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Speaker 1: just circle that sixty seven thousand dollars a month. But

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Speaker 1: my pain was only thirty four hundred. So option one,

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Speaker 1: sure I could put the other extra three sixty five

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Speaker 1: per month into my home. It disappears into the black

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Speaker 1: hole of my equity, and yes, I'm effectively saving four

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Speaker 1: point nun percent. Kind of maybe if I were to

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Speaker 1: refine it to my home. Or number two, I put

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Speaker 1: it into an account like this, an income account that

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Speaker 1: would effectively make enough income to cover my payment for me,

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Speaker 1: but ultimately it could grow enough to provide a serious income.

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Speaker 1: Now the beauty is is that continues to come in

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Speaker 1: year after year until the day I die, and when

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Speaker 1: I die, my kids can have that income, and when

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Speaker 1: they die, my grandkids could have that income versus just

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Speaker 1: paying the home doown. Okay, that's number one. So now

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Speaker 1: let's look at maybe the third reason why you might

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Speaker 1: want to do this, and this is really the equity game.

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Speaker 1: So homes provide equity right over a long period of time.

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Speaker 1: It's like a savings account, right, I'm paying down into

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Speaker 1: it every month, and so my equity is growing. So

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Speaker 1: a lot of people might recommend just buy your home,

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Speaker 1: and like I said, just you make that payment every

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Speaker 1: month and then it's like that that retirement account for you.

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Speaker 1: But let's take a look at that. Now. There's a

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Speaker 1: couple of things that I like to point out here.

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Speaker 1: Number one is inflation arbitrage. So the benefit of having

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Speaker 1: a mortgage is the inflation arbitrage. So if your payment

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Speaker 1: is locked in for five years or thirty years, it's

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Speaker 1: fixed at today's dollars. But because of inflation, I can

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Speaker 1: have the arbitrage, meaning that you know how it's we

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Speaker 1: might say like it's one hundred thousand dollars, but in

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Speaker 1: today's dollars that would be like And that's because as

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Speaker 1: the government continues to print more money, the dollars are

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Speaker 1: worth less and less and less. So in five years,

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Speaker 1: in ten years, in twenty years, the dollars will be

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Speaker 1: worth less. So let's say again back to that hypothetical

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Speaker 1: payment of about three thousand dollars. Three thousand dollars maybe

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Speaker 1: a lot of money today, but in ten years from

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Speaker 1: now or in twenty years from now, three thousand dollars

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Speaker 1: will be much less. So that's the arbitrage. Today it's expensive,

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Speaker 1: but inflation makes it cheap for me in the future.

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Speaker 1: That's one benefit. But we have this capital immobilization trap.

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Speaker 1: But as I said, like, even if I'm paying into

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Speaker 1: my house payment early to pay it down early, the

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Speaker 1: money is locked in there. It's like a black hole.

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Speaker 1: So it's immobile. And so we want to have our

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Speaker 1: money mobile because the faster we can move our money,

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Speaker 1: the more we can make. If I can get one

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Speaker 1: dollar to do two jobs, or three jobs, or five jobs,

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Speaker 1: I can build my wealth two times, three times, or

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Speaker 1: five times faster. And so the capital becomes immobile in here.

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Speaker 1: And that's a trap. But then also we have time asymmetry,

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Speaker 1: and so what we want to think about with our

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Speaker 1: capital and getting to do multiple jobs is using it

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Speaker 1: in different time all right, So what do I mean

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Speaker 1: by that, Well, let's say option number one. I can

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Speaker 1: continue to put this three hundred and sixty five dollars

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Speaker 1: into my mortgage. We talked about this kind of a

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Speaker 1: black hole. Doesn't really change my paym unless I want

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Speaker 1: to refinance my home. But option one, I could take

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Speaker 1: this three hundred and sixty five dollars and I could

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Speaker 1: put it into the S and P five hundred instead

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Speaker 1: of paying my mortgage down sooner, I'm putting the S

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Speaker 1: and P five hundred. Now, if we look out over

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Speaker 1: the last several decades, the SMP five hundred averages about

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Speaker 1: seven percent. I know it's a little bit higher in

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Speaker 1: recent times, but this is a long average over decades

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Speaker 1: seven percent. Now, if I continue to do that over

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Speaker 1: the say, thirty year timeframe that I'm making my house payment,

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Speaker 1: I'll end up with about four hundred and fifty thousand dollars.

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Speaker 1: So I'm putting the three hundred dollars into an account

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Speaker 1: every month instead of putting down my mortgage, and I'll

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Speaker 1: end up with about four hundred and fifty thousand dollars

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Speaker 1: of equity. Okay, that's pretty good. But again, I have

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Speaker 1: other options. I could put into options that give me

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Speaker 1: something higher than seven percent, something like bitcoin. Obviously, you

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Speaker 1: know I love bitcoin. It's been the best performing asset

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Speaker 1: in history and fifteen ten five three years. Over the

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Speaker 1: last three years, it's about a seventy percent compound annual

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Speaker 1: growth rate. Really, we call it about a fifty percent

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Speaker 1: compound annual growth rate is what we've seen in more

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Speaker 1: recent times. Not going back too far. The number is

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Speaker 1: way too big, but that number might seem unrealistic moving forward.

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Speaker 1: So let's cut that number in half. Let's call it actually,

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Speaker 1: let's call it twenty percent. Now, if we take bitcoin

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Speaker 1: and we put the same three hundred and sixty five

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Speaker 1: dollars a month into bitcoin and it compounds not at

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Speaker 1: fifty percent, let's say it compounds at twenty percent, that

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Speaker 1: number would be closer to somewhere between eighteen to twenty

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Speaker 1: two million dollars. So again, if I'm playing the equity

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Speaker 1: game and I want to play with my balance sheet

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Speaker 1: and the growth, then I don't want to put it

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Speaker 1: down into my mortgage that's only making four point nine percent.

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Speaker 1: I would want to put into something higher, like the

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Speaker 1: S and P five hundred at seven percent, or like

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Speaker 1: bitcoin at twenty four and I could do half and half,

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Speaker 1: I could do whatever. But now you see, when we

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Speaker 1: instead of asking the question should I pay off my mortgage,

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Speaker 1: we say why would I want to pay it off?

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Speaker 1: And then we can start to break down each one

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Speaker 1: of these. Now I will just say that these are

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Speaker 1: financial reasons. The first one we talked about was this

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Speaker 1: feeling of security, and so that's more of like an

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Speaker 1: emotional reason. Typically, we buy a home for emotional reasons,

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Speaker 1: like I have a home for my family and my kids.

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Speaker 1: It's a pretty bad financial decision, but it wasn't a

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Speaker 1: financial decision. It was a home. It was more of

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Speaker 1: an emotional decision. I wanted a home for my family

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Speaker 1: to grow up in. And so I can't really break

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Speaker 1: down all the emotional decisions. But from a financial standpoint,

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Speaker 1: you don't really have the security like you think you

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Speaker 1: do because you're still going to be making four of

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Speaker 1: the five payments. Even if the ptending mortgage number two,

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Speaker 1: you're not going to really make more cash flow versus

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Speaker 1: other options that you have, and your payment doesn't really

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Speaker 1: change anyway unless you refinance it. And then number three

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Speaker 1: the equity game. Sure, I can pay it down to

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Speaker 1: save the four point nine percent, but if I could

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Speaker 1: invest for seven percent or invested for twenty percent, I

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Speaker 1: actually end up way ahead. All right Now, Like I

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Speaker 1: said at the beginning, I know this is sort of

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Speaker 1: like a sacred cow. This is the home, this is

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Speaker 1: the real estate. This is the way that we build

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Speaker 1: wealth right around the world, in America especially, But really

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Speaker 1: what this is is the collapse of the default. I

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Speaker 1: talk about build or be built. That's the philosophy that

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Speaker 1: I build my life on, which is we either intentionally

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Speaker 1: build the life that we want or we just live

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Speaker 1: a life by default. And so most of us are

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Speaker 1: just sort of running through these pre programmed tracks and

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Speaker 1: we're not really thinking about it. And that's through social conditioning.

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Speaker 1: We were taught to go to school, get good grades,

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Speaker 1: say for retirement, contribute to a four oh one k

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Speaker 1: or to a home for twenty thirty forty years, cross

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Speaker 1: our fingers. Hopefully we have enough. But we have to

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Speaker 1: understand that we're playing by old rules in a system

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Speaker 1: that's changed. As I talk about all the time, the

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Speaker 1: answers have changed, and so the industrial air school system

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Speaker 1: that we were brought up in and the industrial ara

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Speaker 1: tools that we were given no longer apply in this

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Speaker 1: new system. In this new system, we have rapidly late

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Speaker 1: stage inflation, rapid inflation where wages are not keeping up

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Speaker 1: with the rate of increases of your cost of living.

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Speaker 1: And so we have to find a way to survive

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Speaker 1: in this new system, and the old rules aren't going

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Speaker 1: to work. And we also want to think about the

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Speaker 1: outcome that we want, not the default outcomes. So the

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Speaker 1: default is again we just save, just close our eyes.

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Speaker 1: We save over a long periods of time and we

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Speaker 1: hope that there will be enough on the outside. But

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Speaker 1: strategy is about engineering, engineering the ideal outcome that I want,

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Speaker 1: and then working backwards. So then rather than thinking, well,

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Speaker 1: I guess i'll just pay off my home early, why

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Speaker 1: what are we trying to achieve? And then once we

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Speaker 1: determine what it is that we want to achieve, the

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Speaker 1: question then becomes, well how do I get more of that? Well,

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Speaker 1: if what I really want is more cashul, well how

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Speaker 1: can I get more cash ful? Well? If what I

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Speaker 1: really want is more asset, more equity, well, then how

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Speaker 1: can I get more equity? And then how could I

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Speaker 1: take the more equity and turn that into more cashual.

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Speaker 1: That's another question that we can get to at some point.

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Speaker 1: But most finance advice is designed to keep you out

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Speaker 1: of trouble, not help you win. Right, So, most financial

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Speaker 1: advice is all about safety and protection. And again, in

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Speaker 1: that old world, in that old system, that was okay

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Speaker 1: we used to be in an equity based system up

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Speaker 1: until nineteen seventy one, But in a debt based monetary system,

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Speaker 1: the old game of trying to play it safe is

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Speaker 1: not going to cut it if you want to win.

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Speaker 1: But the real takeaway is what game are you actually playing?

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Speaker 1: And again, most people just haven't really thought through this.

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Speaker 1: If I came over to your house with a new

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Speaker 1: game and you've never played it before, I'll say let's

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Speaker 1: play this game, and you say, sure, let's play. But

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Speaker 1: what is the game? What are the rules of the game,

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Speaker 1: what's the objective of the game, what are the mechanics

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Speaker 1: of the game. Who are the other players of the game?

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Speaker 1: And you'd ask these things. Most people haven't really stopped

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Speaker 1: to think about this in their own life. So when

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Speaker 1: it comes to should I pay off my home earlier

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Speaker 1: or not, well, I don't know. I can't answer that

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Speaker 1: question for you, but I can answer it with a

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Speaker 1: question what game are you actually playing? What are you

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Speaker 1: trying to achieve? And once you determine what it is,

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Speaker 1: do you want this safety of getting rid of one

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Speaker 1: of your five payments? Do you want the increased cash

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Speaker 1: flow of when that's paid off? Do you want more

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Speaker 1: equity faster? Once you can answer the question of what

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Speaker 1: is that you're actually trying to achieve, what game you're

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Speaker 1: trying to play, then we can figure out the next step,

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Speaker 1: which is how do we get more of those things? Now,

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Speaker 1: this is the engineer. As I say, revenue is what

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Speaker 1: you earn, but wealth has to be engineered. It's why

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Speaker 1: six figure earners are sixty percent of six figure earners

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Speaker 1: are still living paycheck to paycheck because a high income,

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Speaker 1: high revenue is not enough. You have to then turn

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Speaker 1: that into wealth. That's the engineer's mindset and it's what

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Speaker 1: we teach inside the Wealth Operating System. How we can

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Speaker 1: stack these systems to build wealth much faster, investing in layers,

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Speaker 1: getting a dollar to do three jobs, five jobs, ten jobs.

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Speaker 1: And I'm gonna be going live for three days teaching

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Speaker 1: you the wealth OS system right from this stage coming

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Speaker 1: up January seventh. I'm going to put a link to

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Speaker 1: it down below, put a QR code here on the

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Speaker 1: screen if you want to come check it out. I'm

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Speaker 1: only doing it one time this year. Typically I only

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Speaker 1: do this in small in person events, but I'm going

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Speaker 1: to bring it all to you live directly from here.

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Speaker 1: Check it out. There's a link down below. But either way,

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Speaker 1: think through, what game are you playing? What am I

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Speaker 1: actually trying to achieve? And how can I get more

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Speaker 1: of that? And that's what I got right to your success.

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Speaker 1: About