Website Link: SimplePassiveCashflow.com/ROE

Transcript

1a) I’m going to be talking about why you should not pay off your student loans

2b) At the end we will be giving you access to the return on equity calculator so you can really start to dissect how much assets are putting money into your net worth at the expense of some major and minor debts.

I'm going to Start very simply that this is essentially an arbitrage of interest rate.

Some debts like credit card consumer debt at 6-20%+ are obviously hurting you more than you would be able to reasonably invest.

For starters we are going to assume that a stable investment in a 10-20% a year baseline. Sure I have seen deals out there inside and especially outside of real estate yield higher than 20-40% a year but we are going to disregard that as our standard that we compare to because I consider that gambling.

Some people are wondering well I invest in bonds are very stable funds that make a much lower yield. And for those people I would say you need to expand outside the retail realm for better non RETAIL returns. This is the problem with institutional investments AKA retail garbage... mostly found in the cafeteria 401k options.

But what about student loans that are between that 3-7% range?

Well 3-7% is less than what you could reasonably expect to invest in a standard non-retail investment product such as a rental property. And therefore you should not pay off the debt and invest and make money on the arbitrage.

This is what banks do. They play this arbitration game to make money. There is some risk on an individual basis but when banks get scale (as you should too buy buying more diversified assets) the risk is taken out and you grow your net worth more.

Lets talk about the obvious notions people have:

"I just want to feel comfortable and be debt free" or "All debt is bad" - The wealth do not care about the amount of debt but what they do focus on is the cashflow and the impact to their net worth. In this case by not paying off the debt and buying assets that make our net worth greater than in the end. As far as cashflow keep listening to this channel because we will keep talking about this concept of prudent cashflow as opposed to the buy low sell high mistake that most investors go after.

2) If you went to school you likely follow rules a bit. We are not say totally neglect your debt but merely pay the minimums so you do not go into default. But still yes this goes against everything society taught you. And I'm sorry for those "upholders" out there. Those people who come to a complete stop at every stop sign even when no one around you.

"Look at stop sign"

3) if you don't believe me just run the numbers on you own. Numbers don't lie.. people do

If you took that money they you would have paid down that student debt and saved up 20k to buy a rental and then took the cashflow/tax benefits. mortgage paydown/equity growth, and appreciation you get from that property then your net worth would be far greater than if you merely chased the good feeling of being of paying off your loan.

4) Inflation in this country. How else are we going to pay off these government entitlement programs but with higher taxes and inflation. Everyone gives our country a lot of crap about our running debt ticker

"oh the debt" OH my

But our country is smart because we know that by keep racking up our debt and pushing it to the future means that in the future we pay our debts with future dollars. This basically makes our debts less by extending out the payback period.

Think about it if you borrowed 30k from you friend 30 years ago which was the price of a house back then you lock in that payment and pay it off today with 30k. When now that house is worth 150k today!

Be smart and use inflation to your benefit. I call this inflation caused debt decay.

CTAMID: If you like that (got value from that) please click that "like button" below and support the channel 😁

4) Where is all this going?

4a) Hey guys don't just go off what makes you feel comfortable or what society wants you to do. Think for yourself. And I admit I made these same mistakes myself by making extra payments to my student loans and mortgage principal. But as I got smarter and started to learn the secrets of the wealthy I found that it was a mistake.

Only take financial advice from those who are financially free and focus on buying assets that make you money.

CTA Before I let you know how to get this video’s bonus/easter egg/giveaway…. if you like this go to the SPC podcast and go to SimplePassiveCashflow.com subscribe and click the like button - I really appreciate it

Hosted on Acast. See acast.com/privacy for more information.