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Hey everyone, welcome to another wise money tools video. Glad you could join me today. So I got something kind of fun to talk about let's see if this is kind of interesting to you. So what if politicians were stocks? Now the question is, would anyone want to own them? One thing about Wall Street is they like predictability, and very little change. In fact when news hits the street, and there's even the slightest change in perception of the near future, markets get jittery, and you see a sell off. We saw recently with the threat of tariffs being upon China, and that trade war. It didn't take much to create a sell off in the market. And this can happen when earnings are lower than expected.

A company like Boeing has an airplane problem. It can happen when interest rates rise, or even threatened to rise and hundred other threats to the stability of the markets. Wall Street wants a stable market and outcomes as predictable as possible. So again, here's an interesting thought. What if our politicians or even political issues were traded like stocks? So let's play a little financial game, we're gonna pretend that you can invest in politicians or a political issue as if it were a stock. How often are politicians right or a political issue as good or as bad as portrayed? Let's take a broad look at one particular issue that seems to be on the tip of tongue and has been going on for many many decades now. And this is our global climate change.

So now you've got a chance to be a stockholder in climate change issues. How do you think those who are pushing this narrative would survive as a stock company? Remember investors want honesty, real numbers, solid productivity, predictability, and reliability? Well, let's go back a few years. In fact, let's go back to my high school years. I know as a long time ago, quoting from an article that was just printed a few months ago, Tom Harris, who's the executive director of the international climate science coalition, wrote this and it reads, Time magazine's January 31 1977 cover feature how to story how to survive the coming Ice Age. Did you hear that the coming Ice Age, it included facts, such as scientists predicting that the Earth's so called average temperature could drop by 20 degrees Fahrenheit due to man made global cooling.

Dr. Murray Mitchell of the National Oceanic and Atmospheric Administration warned readers that the drop in temperature between 1945 and 1968 had taken as one sixth of the way to the next Ice Age temperature. Now I distinctly remember when I was in high school, we kept hearing about global cooling, and how crops in the very near future would freeze, and we'd all starve to death. Well, the article goes on global cooling gain considerable traction with the general public. But then, instead of cooling, as along predicted by manmade climate change advocates, the planet started warming again. Now something had to be done to rescue the climate change agenda from utter disaster into the quote. This is about the time that Al Gore entered the scene to his dad was a senator and helped out get elected.

So let's pretend you're an investor in this political position of global cooling. First off, like a good investor, you'd want to see some solid data to prove the upcoming Ice Age. At the time, there was a consensus of science, that all signed off on this event. Sound familiar? There always seems to be a consensus. And now they're another term thrown about in addition to consensus, it's settled science. Okay, it's 1977. We have a stock investment decision to be made based on global cooling. You've got some honest politicians and scientists and consensus that cooling is inevitable unless we do something fast. So you bet on global cooling, that is going to happen? How could you go wrong. So you buy in you now own stock in global cooling?

So you sit on your stock watching for temperatures, they get cooler. One day it rains really hard, even starts to sleep and you think, Oh, good, it's coming. Then you see snow, maybe three or four weeks earlier than normal. You get excited, you're gonna make a killing, then something happens, something that the consensus did not see or predict, the planet starts to warm. Oh, no. What are you going to do? Should you sell? Is it just a warm front? Are you about to panic? So you hold on believing the politicians and scientists would lie. You saw that the day to yourself and you done some homework. However, the stock you bought ultimately turns out to be a disaster. Seems It was a big hoax and a bunch of lies, trying to get rich off global cooling.

The global cooling stock would have made Enron look like a bunch of honest guys. Well, turns out, as you know, is a huge scam promising that global cooling was on the way and there was no way to stop it without a massive changes. The data, the consensus the settle science all was just a big scam. So the same politicians needed a new face a new story. And this is where how Gore comes into play. He had new data, new science, new consensus, he showed through his science and evidence that the Earth was not cooling. It was warming. Oh, what a bummer you think. It was actually warming. I was sold on this cooling garbage.

However, now we've got a new stock to invest in the opposite of cooling is now warming. So al brings in the science his scientists has so much credibility that he even wins a Nobel Prize. How even got President Clinton to fund and authorize the President's Council on sustainable development. Wow, that must have all the credibility needed to make this stock a no brainer. It's got to be a winner. Forget the science on global cooling. That was irrefutable. And certainly without dramatic lifestyle changes would come to pass. Now we got the President on board. This stock has to be a good one. Look at all the resources time to buy in, right.

I mean, we've got a bunch of honest guys who've proven science Nobel Prize winner, and Al Gore even has some movies to show what's gonna happen when the earth warms, seas will rise. Glaciers will melt. You're really convinced that this stock is got to be a sure winner. I mean, what else do you need to know? So millions just like you buy in a stock source. For years the face of global warming Al Gore preaches his sermons and more people in politicians buy in. The stock is a high flyer. The numbers look great. Global warming is a foregone conclusion. Then something happens again. The earth quits warming. Oh, no. What's going on? We go from Sure, no doubt global cooling stock that built billions from investors as a big lie. And now we've got invest your fears that global warming could be another scam.

A few years later, it's confirmed. Global warming didn't happen. It was a scam. Your stock goes into the dumpster and you lose again. How gore and his movies fade away. And if you watch one now you'll notice something really interesting. We're living in the exact time frame that the sea should be covering parts of Florida and California Glaciers gone. Oceans should be several feet higher. Some city should now be scuba diving sites. Miami should be underwater. But guess what they're building in Miami. It's the largest mall in the United States. And it will have a massive indoor waterpark ice rink 6 million square feet costing 4 billion dollars. It's being built right in the area where the ocean should have swallowed up the land according to global warming scientists.

The global warming stock like the global cooling stock. Once again, loses investors billions of dollars and investors lose it all. Those investors who thought the stock would be their future retirement and bet on Al Gore and now they're just basically greeters at Walmart. Millions lost. They trusted Allen, the science invested their heart and money, have nothing to show for it except a movie ticket stub from one of his movies. You can keep the ticket stuff for your scrapbook. So one day you can show your kids and grandkids, how dumb it is to invest in politicians and political scares. So who profited? Did you know The Al Gore is worth 150 million dollars now. Not bad. So the politicians and global scams never panned out.

Bernie Madoff is beside himself wondering how these crooks get away with it. And then they go retire in their mansions and fly around in their private jets. Well, since cooling didn't work and warming didn't work, another issue arises. And politicians grasp it like bees to honey, the politicians and scientists get together to form another stock company. This time, let's not be so specific. Let's issue stock and just call it climate change. This way, we don't care if it gets warmer, cooler, or simply natural Earth changes we win. Will issue this stock based on data consensus and best of all settled science. We get a bunch of politicians to push it and the stock will soar will build some scare tactics. In fact, we can get some newbies in Congress to say that we only have 12 years if we don't get this huge investment fast. If we don't scare people, now they might not invest. If people ask where 12 years come from, we'll try to avoid the specifics.

We should also add that planes need to quit flying air conditioners need to be replaced in every building. Cars need to be electric, politicians will need to raise trillions of dollars needed. But they'll be set, they'll be able to run the entire country, this stock can't fail. There's not an argument that can be made as long as we can show some kind of global change. And since this has occurred ever since the earth was formed, has to be a winner, a big time winner. So here you are, you may be old enough to have gone through both the global cooling and global warming hoax like I have, are you going to invest in the climate change hoax as well. They're counting on your money, your tax money that is without it, the earth won't make it. And it's got just a little more than a decade. It's all about the money. It's the greediest system that has been corrupted by scam artists and line politicians for years now.

So now getting back to my original question, if politicians and issues they push were actual stocks, so would you invest in the current politicians? Even some of the new ones on the scene? Are they worth investing in? Do you think they're promoting truth that you can rely on? How about those running for president in a few months? You know, some of the names? I gonna say them here. But if you looked at them as a stock, you looked at their history, their honesty? Do they change their position? Are they pushing lies and scare tactics? Are they on a climate change bandwagon?

Have you seen enough money lost in these issues in your lifetime? Who would you invest your money in? Or would you see these politicians have little to no accountability? They can flip-flop on issues when it suits them to change their side. They can literally lie to us and deceive us and scare us. They tear down what has made America the best country ever. And then ask for you to buy stock in them. If you really analyze their stock, like Wall Street investors who want reliability, honesty, predictability, who is worth investing in? Okay, since we don't invest anything, but our votes in these guys, all I can say is I hope you invest your vote in the right place.

I hope you enjoyed this conceptual view of politicians and politics. If they were like stock, I'm not sure any of them could get us to invest. What do you think? I'd love to hear your comments below. And as always, if you have any questions, tune to questions at wise money tools.com. If you want to do a strategy session, click on the link choose a time we'll have a little conversation. Don't forget to subscribe. And until next time, take care.

How big are you thinking when it comes to your money?

Are you prepared to take the next step in investing?

Picking up from where we left off.

Everyone, welcome to another wise money tools video. Last week, we kind of dove in a little deep on some numbers for real estate investing, and we want to pick it up from there. So what we're gonna do is talk about how to use the banking system as part of your real estate investing. Okay, so now let's do something kind of interesting. So we've looked at an all cash buyer. And we've looked at a buyer who's using bank leverage. But if you recall, when we started this, we were talking about an investor who basically had $250,000 in cash right now. So what a more aggressive investor might do is take the 250, and actually buy 5 homes, leveraged with bank money. And let's see what that looks like.

So now they take basically 50,000 per home down payment, get a bank financing. Now their annual rental income is just about $90,000 a year, expenses of $4,500, the mortgage just about $79,500. And so now they've got a net operating income of $5,700. And if we look at the total appreciation from that, and net income, it's basically the same as buying one home 15.29%. Okay. But now if we have a future sell here, and we've got an appreciated value, let's just say that home goes, I don't know how many years in the future this is, but it goes from 240,000 to 350,000. Maybe it's the next 10 years, seven years, 12 years, who knows.

But that means there's equity appreciation of $110,000 per house. So an all cash return on investment would be about 45%. So what that means is if I walked in, and you put $240,000, down on the house owner free and clear, and then it grew to 350,000, my equity would be 110,000. And that rate of return or return on investment ROI, about 45%. Okay, but if I leverage that, and again, I'm buying five houses. And now my leveraged ROI is over 200%. This is where using leverage and multiple homes starts to really make a meaningful difference in your wealth. So now we've got over $550,000 in equity between the 5 homes, and our ROI or return on investment on the multiple Homes is over 229%.

So the moral of the story is, once you determine what kind of investor you want to be, that might give you a sense of how it aggressive you should be with your capital, and whether or not you should use leverage or not.The shorter this duration, the worse if you will, you're going to find financing, the longer the duration, the more probability that you're going to have some pretty significant returns to accumulate your wealth. Okay, so that is a quick down and dirty 30,000 foot overview. But I was really interesting to go through these numbers the other day with this client of mine. Because I know they really wanted the property but we wanted to make sure we assessed it right, they ended up the property got bid up.

And so basically what would happen if they wanted this property what they would have had to pay even more, which would have brought their ROI down their cap rates down. And they probably ended up dodged a bullet on this one. But what I hope they and all of you get a sense of is whether or not you should use leverage or not. Now the next video we're going to do we're going to take kind of this same scenario, but we're going to plug it into whether or not we should use the banking system as part of this process. And whether we should use our banking system financing availability to pay cash, or just use the down payment and see how that all works out.

Okay, in the meantime, if you have any questions, shoot them to questions at wise money tools.com will answer this as quick as I can. Make sure you subscribe. If you ever want a strategy session, just click on the link below and set up a few minutes where we can have a conversation together. And the meantime you have a great week and I will see you next week. Until then, take care.

Hi everyone, and welcome to another wise money tools video. I've been thinking about doing this real estate video for quite some time now. But a few things happened over this past week or so that has really kind of spurred this. And I kind of want to get this out there because I think it's really critical, a lot of you might be interested in investing in real estate. So it's, one of those things that's going to help you at least, kind of figure out the kind of real estate buyer, you want to be the risk maybe that you're willing to take, and then how all the numbers work out.

So I'm going to be going back and forth here with my Excel spreadsheet. As we start talking about some numbers, so don't get dizzy. This is just a 30,000 foot overview. These numbers aren't you know, perfectly in order just to give you kind of a sense of what you're looking at, and maybe some rate of return and cap rates and all that good stuff. The first thing I think critical is you got to identify the type of investor you want to be. And by the way, I've got some notes here because I want to make sure I hit everything. So forgive me as I'm looking down here. But there's basically two types of investors if you will, the first one is just a cash buyer, you've got cash sitting on the sidelines, you want to buy a piece of real estate or rental property. And so you basically just invest all your cash, no mortgage, you own the property free and clear. And then you just have expenses, taxes, insurance, and so forth.

Then we've got to calculate what that means in terms of a rate of return or what's commonly called a cap rate in the real estate world. cap rates also in stocks, you know, when you're buying companies, capitalization rate is really what it stands for, but it's called cap rate, or a lot of people just refer to it as cap rate. So there's your cash buyer, then you have what's called a leveraged buyer. This is where you're using banks or some sort of financing, in addition to what down payment you might have to put. So this is where you're trying to put in the least amount of cash that you have to and get the most amount of financing for leverage, if you will, so that your rate of return can potentially be enhanced. Okay. So let's go over just a couple things you've got to have a good handle on when it comes to real estate, let's first talk about equity.

Now, equity is the difference between if you have a mortgage anyway, the difference between what you owe what it could sell for, okay, equity is always the value that you're going to get if you sold the home. So if you own the house free and clear, and you paid $200,000 for it, now it's worth 220,000, you have equity of 220,000. But here's the important thing to understand about equity. Equity gets a zero percent rate of return every day, weekend and week out year after year, forever and ever. Okay, now, let me kind of give you a sense of how that actually works. A home's value has no bearing on the mortgage that you carry, the only way you get any equity out of a home is what the market is willing to bear.

So if you have a $200,000 house, and you have a $200,000 mortgage, you basically have zero equity. If that house appreciates in value $20,000 now you have 20,000 in equity, but it didn't matter if you own that house free and clear. Or if you had a mortgage up to the eyebrows. Equity was only produced by market value. So I'm probably getting a little in the weeds here. The point is, is that the only thing is going to create the equity is the market appreciation or if you do have a mortgage pain down your mortgage, but the home itself, its market value has no bearing on how much mortgage or no mortgage that you have asked Hello. Little more than then I wanted to do on this quick little thing. But anyway, okay. Now there's some factors that you got to consider about money. OK, so the mortgage, this is often called OPM or other people's money.

This is the lien or the cost that it's going to take for you to use someone else's money, the down payment, often referred to as the skin in the game. So most mortgages this today, if it's a conventional mortgage, you're going to need about a 20% down payment to buy a home by a half million dollar home, you need $100,000, okay, then we got to factor in if this is a rental with a rental or lease rate is going to be for your income. And then we want to factor in expenses. So all those things go into this bucket, if you will. And we've got to figure out is this a worthwhile investment. Once we know what we're paying, what the rent or lease income will be, what our expenses will be, if we're going to carry a mortgage or not, then we can start to compute and figure out cap rates or our rate of return, or our rate of on investment. Okay.

So what I think is good idea is to look at real estate, no different than you would look at a stock for instance. So using Warren Buffett as our example, because we love the way he invest. When he looks at a business. He looks at it based on cap rates rate of return, what we also call payback time, he does the same thing with real estate. Now, just because he has cash, this is what's really critical, especially right now in our current economy, just because he has cash does not mean he's going to be an investor. Okay, he's still a very patient investor, waiting for prices to meet his criteria, if you will. So one of the first things you want to assess is this a good time to even be buying into real estate. Are you getting paid for the quote unquote, risk that you're taking? And if not, then maybe the best thing to do is to still sit on the side lines.

So again, just because you have cash, doesn't mean it's going to be working for you better if you happen to be buying into a high priced economy, and then it adjusts. Okay. So using really strict rules of rate of return or payback time, is just absolutely critical. So what are your investing rules? What is it that would intrigue you to invest your money, what rate of return seems reasonable for the risk, and again, assessing where you are in your particular area, in terms of what the market is willing to bear See, right? Like right now Canada is out of control, you'd be lucky to get a two or 3% cap rate there. And what that means is, if you invested $100,000, you'd be lucky to get 2 or 3%, or 2 or $3,000, in return on that hundred thousand dollars, so that cap rates are just ridiculous.

Now, just for those of you who may not understand where a normal cap rate is, or you'll find that most investors like real estate at about a 10 cap, which just basically means again, $100,000 invested, these are getting $10,000 a year off of that investment. That's a good rule of thumb, maybe you'll take a little less, maybe you want a little bit more kind of just depends again, on what's going on in the markets and so forth. Okay, so oftentimes, when markets get peeking out like they are, you'll hear analysts talk about the new norm. And I remember this back in the 90s, with the.com, boom, and people were paying huge price earnings ratios.

Basically, a lot of times like Yahoo at one time was, you were paying 2,600% in more than the earnings were actually they didn't have any earnings, they just had to pick some kind of number, but basically 2600 times earnings. So in other words, if Yahoo was making a buck a share, people were paying 20 $600 for that share, and at a buck a share over it would take 2600 years to get your money back. So obviously, they were counting on some appreciation there. Anyway, the idea is, we want to definitely be looking at what's normal. And if we're getting convinced that the new normal is worth buying into. And I don't again, I don't know what it's like in your area. But in real estate that can happen often where people are saying, well, we used to be able to get 10 or 11% cap rate. But now the new norm is 5 or 6% cap rate, that's where it gets a little iffy, because we're convincing ourselves to buy into investments or real estate.

In a situation, that's not all that productive for us in the long run. And when eventually things come back to the mean, that's what can hurt us. And that's what happened to those who were buying.com, those who were buying a lot of real estate, and subprime mortgages in 2006, 2007 it all came back to the mean, and there's a lot of people who got hurt. So don't let a new norm for you. Because oftentimes, there really isn't a new norm, it's just got to adjust back to the mean, hats at some point. Okay, so let's jump into a few numbers here, just so you can kind of see what I'm talking about. So we're going to assume you've got quarter million dollars to invest, and it's sitting there in cash. And again, the first thing you have to determine is, are you going to be an all cash buyer use no bank financing? Or are you going use bank financing and leverage your cash.

So thisjust actually happened with a client of mine, they sent me an email and said, Hey, we're looking at this piece of property, it's a rental property, can you kind of give me your opinion. And one thing I always tell our clients is we're happy to help them look at and look through these numbers, we don't want to tell you what to do. But we definitely want to be if you would like us to be a second set of eyes, just saying, hey, this looks good. Or maybe here's some things to be concerned about. Anyway, so this is a real life situation, they were faced with this rental, that was $240,000. And the monthly rent was $1495. So the annual rents on this would bring in $17,940 a year. And we're just estimating between insurance taxes, maintenance utilities, this is probably a little low, but $1,000 for that.

And again, the older the home, and you might need to be setting aside a lot more for maintenance and so forth. Anyway, so the net operating income or in Oh, I was $16,940. So the cap rate on this, basically, this is just taking your net operating income, and divided into the price you're paying was 7.06. So right off the bat, you could determine Okay, this is a 7% cap rate 7% rate of return, is that worth the risk? Is that worth being called at midnight, because the toilets clogged or the roof, you know, getting a leak in it. So you got to kind of say to yourself, hmm, if the median is where so many investors are at 10%? Is this worth getting into at 7. So now one of the other factors we need to put in there is what could potentially happen on equity appreciation.

So if all this did was never, if all we did was buy this house, take the rents and and have some expenses along the way and earn 7% we'd have to determine if that's worthwhile, but we've got a one other factor and that is homes typically appreciate in value, get this equity appreciation through and 3%. They're just for fun. It's probably about right, some homes around the country or 5%, summer less excusing three, that means that over that year's period of time, we're gonna pick up $7200 in equity appreciation. And if we add that to the net income, then we've got a total appreciation plus net income of about $24,000. Now all of a sudden our return on investment which is cash plus equity is closer to that 10%. But here's the danger, you say okay, I can get 10% between cash and equity, but you're relying on that property to increase in value. And it may or may not.

So that's kind of a risky proposition to assume that that's going to happen year in and year out for as long as you on the property. So now that's a cash buyer. Okay, so what if we became a leveraged buyer, in other words, we're gonna put down a minimum amount to say 20-25%. And we're gonna borrow money from a bank and finance the rest of it. So that would look something like this. So again, we know the numbers, we're going to pay $240,000. But we're this time over here, we're gonna mortgage $192,000 closing costs about $6638. So we're going to bring $54,000 to the table, the mortgage payments going to be $1325, or annually $15900. So now our cap rate on cash invested is 2.11%. Again, equity appreciation is where we're going to get a little bit of leverage, because we've put a lot less money down.

Now all sudden our ROI on cash and equity is over 15%. So we do a little bit worse, because we've got more costs when it comes to financing. But we do a little bit better, because we've got less money in there. And the homes appreciating again, whether we have a mortgage or not the homes going up by that $7200. So if we think we're gonna get some equity appreciation, then leveraging our money into a home can make a lot of sense. Again, if you think that that's going to happen, but that's the risk you take when you're relying strictly or for the most part on equity appreciation, because the numbers just don't look all that great with a mortgage at these mortgage or excuse me at these rent rates. Okay, we went a little long there, but this is good stuff. And what I want to do is continue on the next video, our conversation here.

If you have any questions, make sure you shoot them to questions at wise money tools.com. If you want to do a strategy session, click on the link below and set up a time to have a conversation with me for a few minutes. Never miss a video, so make sure you subscribe. And in the meantime, you have a great week, and I'll talk to you next week. Take care.

Well, hi everyone, welcome to another wealthy and wise video. And today we're going to kind of talk a little bit about education and capitalism and hopefully, finish up this series. They're pretty quick. And just the other day I watched an interview a college student on this financial channel. She's leading this group of students in this big protest. Now, she was an admitted socialist, and basically herder group have three demands. Yes, I said that right? The man's here they are free college for everyone. All student loan debt forgiven, and a $15 minimum wage for those who work on the campus.

Now, since this was a financial channel, we have to touch on some of the more ludicrous of her demands. When asked how to pay for it, she basically said to take it from the 1%. And as we've talked about, the 1% are already paying a vast majority of all the taxes, she said there are 85 billionaires that should be paying the tab. Now keep in mind that student debt alone is $1.3 trillion, which has been loaned to the students by banks and other financial institutions. And where did the banks get the money to make these loans? Thay get from depositors. Who are the depositors?

Well, that's you and me, are you willing to give up your savings to let everyone out of their student loans. Student loans weren't created, created out of thin air, maybe be backed by the government, but it's still your money. Now, the host mentioned that the top 85 wealthiest, all put together are worth about a trillion dollars. What happens if you take everything that they have away from them, then what 1% of the taxpayers paid 543 billion or 39% of all the income taxes already, and now she wants them to cough up more so that she can have a free college education?

So how do the rest of her demands get paid for? If just one of the demands takes all the wealth out of the country? All you did by stealing from the richest 85 people is scooped a cup full of water out of an ocean of debt and future expense. Okay, so purely from a financial perspective, this is absurd. But I kind of wanted to hit this from a different angle. It's really pretty simple. Who do they think they are? To put these demands on hard working, productive citizens of this country? Were Where did we fail these kids to haven't even enter into their wildest dreams, that they had some kind of right to demand that the wealthy pay for their education?

Didn't they get the lecture in life about stealing from others, that they should be working hard, being a contributor, and making their own way in this world? Did these parents really raise kids to believe that they had any right anyone else's money, no matter how much they're worth. I wonder if these parents would stand by if the government came to take everything that they had, or more than they needed? You know, you don't need two cars. You don't need a house with three bedrooms, you can live in a little apartment with two. I was a little more than annoyed and frustrated with this. I'll just call her a little brat. Demanding and dictating who gets what.

And then every pump kid gets the privilege of having everything they want for free. I mean, I came from zero and not as. When my wife and I got married, we didn't have any money. And it was only by hard work and innovation and struggle, that we got anywhere. And we learned something. I just think this takes a lot of nerve. It's just like her walking into a store and demanding her grocery cart be filled with food, because she has a right to eat. How do you think that would go over in the local grocery store? This is exactly what they're doing. They just go around about way of doing it. They get the government involved to say, just take it from the one percenter, you know, the ones who have so much money, they certainly can pay for my college education.

You know, back in the day, when I was young, parents, banks, oil children. Now they get put on a pedestal, and they lead movements. It's crazy what's happening. The more she cries that it's not fair that they are that the wealthy people should be paying for college education. The more the media pays attention to her, the old media would say, Come on, girl wake up. We're not going to give you any news coverage, other than to show how ridiculous you are. You need to earn your way in life like the rest of America has been since its founding. Where do you come off saying that anyone, no matter how rich they are, oh, you have free education.

What makes us more surprising is that the very rich and wealthy that she wants government to take from and give to her likely became wealthy, because they provided goods and products that hurt and her family by hope that they shopped at Walmart before, or bought something from Amazon or Apple, or use the internet to get on Facebook or Twitter. In other words, it's because of capitalism. And the fact that these wealthy people did something good for her family, the country, and possibly the world that grew their wealth that she now wants to take. Without capitalism, she had no one to steal from for education, and in fact, may not even have a college or university to go to in the first place. She may be plowing the field and raising food just to survive.

So this kind of goes back to the previous video, where we need to tell these kids First of all, when it comes to someone else's finances, you ready and start of your business. Secondly, you have no right to ask for it, let alone demand it. Mind your own business. And if you want to build your own wealth, then go serve someone with something that they want or need, and quit telling them to give you their money. If you hate those who are wealthy, quit buying stuff from them. That's how you can vote with your dollars. No one's going to force you to buy from them. And no one's really going to prevent you from being anything you want to be.

What socialism does is nothing but discourage anyone from growing a business for fear that all their hard work, sacrifice and risk will be taken from them and taken from them by an overreaching government that has a bunch of spoiled little kids who think they have a right to it. Okay, so when we talk about student loan debt, I think one of the things we can do is talk about these universities. I mean, good grief, these universities have a ton of money. If instead of these protesters whining about the rich paying for their education, to probably how to turn to the universities and saving What are you doing with all this money?

Harvard $36 billion in their trust fund, Yale 25 billion, University of Texas 24 billion, Princeton 22 billion, Stanford 22 billion, Massachusetts Institute of Technology 13 billion, Texas A&M 10 billion, Northwestern University 10 billion, University of Pennsylvania 10 billion, University of Michigan 10 billion. I mean, here's billions of dollars that are paid. I mean certainly a lot of people donate to these colleges and universities. But man these first demands should be Hey, colleges, quit hoarding all this dough, you know, lower your tuition fees so that maybe we can all afford it. I wouldn't be surprised if her grandparents and great grandparents were a little embarrassed by the demands that she's putting on the citizens of the United States. And specifically the wealthy and productive to pay for her college to prefer give her student loan debt and to pay her minimum wage.

If she were to go to work. It's probably too busy protesting even work and she needs someone to take care of her in that regard as well. Sad part is we're not teaching these kids important lessons in life, and the way they come across demanding these things. It's just really sad. Well, that's it for this video. Again, your comments if you have a question send into questions at wise many tools.com. Hopefully you're enjoying these. In the end.

It's stirring some thought and conversation in your families and with your friends and neighbors because we got to get this thing back on the right track because we need to figure out how to get more politicians who will give us more freedom and not take away and given to the demands of these kids and others by the way, as well. So that's it for this video. Till next time. Take care.

Part 6 of the 7 part mini-series

Part 5 of the 7 part mini-series

Learn how to create your own circle of competence

Well, Hi everyone, and welcome to another wise money tools video. I'm gonna kind of do a little bit more in depth discussion, kind of picking up from last week. And we're gonna talk about what's called the circle of competence. And don't get, you know, too scared away from the title, it's not that big of a deal. But when it comes to investing, it's easy to notice that most people invest way beyond their understanding. It's not that they can't understand or are incapable of understanding. They simply haven't put in the time or the effort or the interest maybe to understand.

So Warren Buffett calls this circle of competence that everyone needs to have. And it's the idea that you only invest in what you understand. My guess is if you're an investor in mutual funds, as an example, I bet you dollars to donuts that you have no idea what the top 10 holdings are in that mutual fund. Right? Then I'd go one step further, let's suppose you do know what the top 10 holdings are. And my next wild guess would be that you don't understand the business model or the cash flow of those companies. Now, what you and sadly millions of others have done is given up control, hope that your money is doing better than you could do yourself. One thing I love about Buffett is he wants to give you the confidence that what he does, it really isn't that difficult, anyone can do it.

He also says that you would be better off having a punch card of sorts. Now a punch card, let's just say it has 20 investments on this punch card that you make in your lifetime. And in other words, you really don't need that many investments to build your wealth beyond what financial advisors and mutual funds can do for you. You may only need four or five at 22 do really well. The others could maybe fall short fall flat, you'll still be much wealthier. The great thing about investing is you don't have to know everything about everything, you can be focused on one sliver of the choices out there. You might like real estate, or businesses or stocks or even lending, it can all be good. The critical component is that you understand it. Let me give you a few steps to follow that might be helpful when you search and research investment opportunities. With a little tweaking, you can take the same steps and apply them to any investment opportunity.

However, since it's easier to define the steps using the stock market, that's what we're going to assume is your investment of choice right now. We can again focus on real estate or whatever just as easily. So here are the 5 steps to incorporate your circle of competence. First, look around, take a mental snapshot of where you spend your money. This might be the first place to look for companies you like and maybe understand. I don't know, maybe you shop at Walmart or buy clothes at Macy's, you might like to shop online at Amazon, fly with Delta or united eat at McDonald's or Chipotle. You might like Apple or Microsoft, you might ride Harley's or love Ford's or Chevy's. Anyway, you get the idea. The first place to look is in the world that you live and breathe in? Where do you spend your money?

Now that you have a list of these few companies, let's start to look at what they do. First off, are you capable of understanding the business it? In other words, is this too hard to grasp how they make money as an example, a new internet stock comes out, you like what it does, but you have no idea how the business runs or makes money. So what you do is you throw that into the to hard pile, and you'd move on. And don't worry how big that too hard pile gets. In fact, you want a big to hard pile, because that means you're going with companies that you really understand. For decades, Buffett stayed away from tech companies because he simply couldn't understand them. In fact, his best buddy is Bill Gates, you know of Microsoft, but he never could buy Microsoft stock because he didn't understand computers. Pretty simple concept. Once you find the few that meet your criteria, you're starting to build your circle of competence.

Now it's time to dive into the numbers. Now for this video, I'm just going to highlight them, we're not gonna dive too deep, I'll save the deep dive, if you will, for our investment course, when we can really get after it. What is so awesome about technology and the internet is we can pretty much Google and get an output almost instantly. But here's what you want to know, kind of at a 20,000 foot level, you want to know the sales, the revenue, the income, whatever you want to call it. This is the amount of money that company brings in, then you want to know its expenses, how much does it cost the company to keep the doors open and produce their product and take it to the end customer.

Then you want to know the earnings? How much is left over after you subtract the expenses from the income. And you want to know their debt? How much debt does the company have. And if they took all their earnings to pay it off? How long would that take? Next, we want to know how much the earnings are going to grow each year, at least the last 10 years, we want to take a look at to get some sort of a trend. Then we want to look at what's called the cash flow or the free cash flow. At its essence, this is what the company actually gets to keep and invest to grow or buy other companies. Cash Flow is where the rubber hits the road, so to speak, because it's the true income of the company.What they do with this cash flow is important to are they wise in spending or investing the cash flow.

And finally we want to look at or know the liquidation value. So I'm awesome, also called the intrinsic value, or book value. This is what one share would be worth if they liquidated and sold, maybe the stocks sell it for $100 a share but its liquidation value is $50 a share. We kind of want to know this because that's kind of our worst case scenario. If we can buy it at or lower than or close to liquidation value, then we're in a pretty good situation of never losing money. This is pretty much the first few steps and the numbers had don't get overly complicated right now, because we're just kind of laying the groundwork. As a general rule, we like companies with consistent earnings of 10% growth every year for the last 10 years.

You want to kind of set your standards high at some point, but you kind of get the idea of where we're starting. Now the fourth step is to learn what you can learn about the management. This is kind of the hardest part, integrity and honesty, you're hard to come by these days. This is what we're looking for in management. Often times, you can read through the annual reports and to the shareholders. Then these are typically written by the CEO. And that gives you a good feel. We want to see if management is straightforward on their mistakes. And don't exaggerate their successes. As a comparison model, read Buffett's letters to his shareholders. These are kind of the gold standard when it comes to how honest to report should read. And you can download every letter Buffett has ever written with just a quick search, it'd be really beneficial to read several of them years and years ago as well.

This will give you a sense if 5 years ago that the company said they were going to do this or that if they actually did it, or were they just blowing smoke. Again, if you ever feel uneasy or see something that just doesn't quite add up, or maybe you feel like they're hiding something, throw it in the too hard pile. When we feel good about the company we're buying, we understand it, most likely use it, then in some way, we're going to be comfortable once we see the numbers and the management, then the last step is to buy with a margin of safety. And we've talked about this on several videos. But in a nutshell, you want to wait for a price to have what's called margin of safety. If I calculate that a company based on earnings and cash flow, and how it's grown through the years, has a value of $50 a share, let's say I want to buy this company with a margin of safety.

That means I'll likely wait for an event or a market drop or recession that drives that price down to $25. About half of what its value is, that's a good margin of safety price. Now, this doesn't happen every day, and it requires patience to wait for that price to hit your margin of safety. If it doesn't, you may never get to buy this company. And that's just too bad. Okay? Now, these are the basic five steps that Buffett's use since the 60s, and have proven to work through good and bad times. This is why he has those two rules. You've heard them before. Rule number one, don't lose money, rule number two, refer to rule number one. In the end, it's all about your circle of competence and buying with a margin of safety. You don't have to speculate, turn your money over to advisors who don't follow these principles.

Most advisors just give your money to mutual funds anyway, funds do not operate on the Buffett principles. It's more like just buying a bunch of stuff speculating rather than investing. If they did the Buffett way, maybe they'd be sitting on the sidelines with a boatload of cash like Buffett is right now, about 100 and $5 billion. Most mutual funds are fully invested at least 90% of the time, or with at least 90% of their capital. So that's it for this video. I know that was a lot to take in. If you have any questions, shoot them to questions at wise money tools.com, I'll get them answered just as quick as I can. Again, this is going to be in our investment course we're gonna go into more detail and it's gonna be much more advantageous for you in that investment course.

But in the meantime, subscribe, stay with our videos, watch them all you can, we're gonna have a lot more good stuff coming out. If you want to have a strategy session, click on the link below set up a time we can have a quick conversation about your situation. And that's about it. Until next time, take care.