April 6, 2026

What Is Your Financial Freedom Number? (And How to Reach I

What Is Your Financial Freedom Number? (And How to Reach I
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Season 1

Darrin and Maurice Shabazz break down the concept of the financial freedom number — the amount of money you need so you no longer have to work. Learn how to calculate your number, why it matters, and the strategies you can use to reach financial independence.


WEBVTT

00:00:00.080 --> 00:00:03.279
That's the ultimate point of the financial plan is the freedom number.

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Yes, you got yourself out of debt.

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Yes, you got an emergency fund saved up.

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Yes, you're now investing into the S P 500 or any index fund you choose.

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Good.

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But what's the overall goal of all of that?

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The overall goal of all of that is to make sure you have enough money so that when you're retired, you don't have to worry about working.

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The freedom number represents that.

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But I'm pretty sure a lot of you guys don't want to wait until you're 62, 59, 67, 65, 70 to retire.

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I'm sure a lot of you guys listening would love to retire earlier, and it's possible you can do it.

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Yes, everybody.

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This is your boy Darren Hardy, and I am joined by Maria Shabbaz, co-host.

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And we are the team at Financial State of Minds, a show that helps you get to that bag, manage that bag, and grow that bag as best as possible as we discuss financial and business literacy and anything and everything to do with the almighty power of the dollar.

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And this show is being streamed right now at KGPC96.9.org and KGPC 96.9 FM and available on all streaming platforms of choice.

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And today's topic: what is your freedom number and how do you calculate it?

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And of course, how do you get there?

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So I'm surprised I've not done this episode yet because this is something I'm I do for my clients a lot.

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But okay, freedom number.

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What is that?

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What do I mean by freedom number?

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I mean financial freedom number, meaning that you never have to work a day in your life again.

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You have enough money to where you do not need to work regardless of your age.

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That's what I'm talking about when I say financial freedom number.

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So, listeners, what if I can tell you guys that me and Shabazz over here can help you figure out that number?

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It's just a math number that you can calculate and that we can do it regardless of your age, regardless of your situation, regardless of if you're single, if you have a partner, if you have kids, single daddy, baby daddy, don't matter.

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Today's topic in discussion is the importance of knowing your financial freedom number.

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So um, Shabazz, I'm gonna ask you that question.

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Do you actually have a financial freedom number?

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Yeah, yeah, I actually do.

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Okay, so do you mind sharing with the audience what that number is?

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So my financial number, I calculated just according to inflation, taxes, and how much do I want to spend on an annual basis and how long do I need it to last?

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Right?

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Right.

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And what I came up with if I retire at let's say 55, which pretty much, that'd be in another 10 years, right?

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So in another 10 years, I should have this is after taxes, I would say at least just for lifestyle.

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So if I calculated pretty much like how would I want to spend my retirement?

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Do I want to travel?

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Do I want to do this?

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Which I definitely do.

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I definitely want to do some traveling.

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So I calculated that I needed to roughly around about 80,000 after that, just to live comfortably and live the lifestyle that I want to enjoy for the rest of my life and just be able to not just pay bills, but just even have extra just to do whatever I wanted to do.

00:04:04.800 --> 00:04:08.240
So that was uh pretty much a good number for me.

00:04:08.560 --> 00:04:10.000
Got it, 80,000.

00:04:10.240 --> 00:04:16.800
So you mentioned some of the factors of how you calculated it and you came up with 80,000.

00:04:17.439 --> 00:04:22.800
Um so to clarify, listeners, we're saying 80,000 net worth.

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It doesn't have to be liquid cash sitting in a savings account.

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Probably wouldn't recommend that anyways.

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But Shabazz said 80,000, sorry, 800,000.

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So well, 80, 80,000 on an annual basis.

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Oh, 80,000.

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Okay, so you are saying 80,000 annually.

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So you say you need to make 80.

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So my understanding of what you said is your investments or whatever you built would have to have you pay you out after taxes 80,000 a year.

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Yeah, yeah.

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All considering just not being me by myself, I imagine I will be a couple status, right?

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So yeah, so 80,000.

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I factored all those things in just to live comfortably.

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So if to say, per se me, my wife, basically will be able to live comfortably off of 80,000 annually.

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Got it.

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So do you know what that number is net worth?

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Net worth if we calculated it over how long I would need to last, let's say about 20 years.

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So I'm about like about 1.6.

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That's before taxes, though.

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Yeah, so I would say safely it's about 2 million for you.

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Because the rule, and we'll talk about this later, listeners, we're gonna actually break this down, or if we have time, we'll break it down.

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But if we use the 4% rule, a million dollars is$40,000, right?

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So you can withdraw safely$40,000 out of a million, and that principle of million would never go down.

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So$2 million would be your$80,000, which is what you just said.

00:06:03.439 --> 00:06:07.920
Now, you're not wrong when you say 1.6.

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The reason I upped it for you is mainly because I'm thinking about the principal never running out.

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Because that principle would then rule, it would basically pass on, right?

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You'd be able to pass it on to your kids and stuff like that.

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Now, if you don't care about that, then it could be lower.

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It can be lower.

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So when you say 1.6, you probably would have enough money for 20, 25 years at 4% draw rate.

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The principal would go down over time.

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You wouldn't leave your kids with 1.6.

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But I seriously doubt that number would be zero.

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I think I would pretty much guarantee that number would not be zero, even at 1.6 million.

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Because at 1.6 million, you would be drawing about 50, 60 ish K a year, and that's without it going down.

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Um, so if you draw a little bit more, that's like what naughty, maybe 5%.

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Yeah, whatever.

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Like wow, it goes down from 1.6 to 1.5.

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Whoop-de-doo.

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You know, you know, whoop-de-doo.

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So that's your freedom number.

00:07:10.560 --> 00:07:18.319
Your freedom number would be, I would say anywhere from at least 1.6, but for sure, confidently 2 million.

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So I kind of went ahead of myself, but that was a fun live version of what I'm talking about.

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Some people know what they need annually.

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I always think about net worth because that's how you can do it passively, right?

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And I mean true passive.

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I mean real estate, arguably not even real estate.

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I'm talking straight up dividends from stocks, maybe REITs, maybe crypto, maybe gold, whatever.

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Like true passive money to where you don't have to work anymore.

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So to answer that question, what is my financial freedom number?

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Mine's is a bit higher.

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As far as what I need, just necessities, it's actually anywhere from$750,000 to a million dollars would be like what I need to survive.

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Now, listeners, you might be wondering, well, how do you survive off of$40,000 a year if we're using the same metric of drawing 4%?

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Well, you have to think about it, listeners.

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When you are retired and you have a positive net worth of a million dollars, that means you don't owe a mortgage and you don't owe on a car bill.

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So we know that I think it's like 60% of 60 to 70% of someone's spend, that's where the majority of your money goes to every single month.

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And then a close third could be groceries.

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So if you eliminate the first two big boys, you don't need nowhere near the money that you think you may need to survive.

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Keyword is we're just talking about survival.

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So I'm pretty sure even in the Bay Area, if you have no mortgage, no car note, you don't need$80,000 a year for sure.

00:09:14.399 --> 00:09:20.399
You can probably safely get away with about$40,000 to$50,000 if it's just you.

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For sure,$40,000 to$50,000.

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You own everything, you're just taking care of just bills, necessities.

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That's all you need.

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I would say is about$750,000 to a million.

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And then what I generally say is a general rule of thumb is for every person you want to take care of, you want to add another about million to a million and a half, depending on their lifestyle.

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So for me, with my girlfriend and my girlfriend's son, I have it at about three million is is what I want.

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I don't necessarily need it, but that's what I'm aiming for is a three million net worth, no debt, nothing like that.

00:10:04.879 --> 00:10:12.399
Shabazz, if you were to thinking about your kids, what would that number be?

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If you throw in, throw in your wife and your kids, what would that number be?

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Freedom number for everybody.

00:10:17.679 --> 00:10:18.480
For everybody?

00:10:19.519 --> 00:10:21.919
Uh considering leaving inheritance.

00:10:22.159 --> 00:10:27.759
Yeah, so you it can either be leaving them inheritance or you can give it to them while you're still alive.

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Well, yeah, we probably will have to up that to around about um, I will say somewhere around about three, maybe three point five.

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Okay.

00:10:37.840 --> 00:10:38.080
Yep.

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Sounds about right.

00:10:39.200 --> 00:10:39.440
Yeah.

00:10:39.679 --> 00:10:40.559
Sounds about right.

00:10:40.799 --> 00:10:47.360
So, okay, so we're throwing all these M's around and we're throwing it around like it's not a lot of money.

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Listeners, I want to make it very clear I know there's a lot of money.

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But it's not impossible, especially if you're in the Bay Area.

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It's not like we're not walking past multimillionaires every day we're out and about.

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Like there's a ton of them out there.

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And ultimately, this is all math.

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When if I'm if you're my client and I'm sitting at a table like I just gave with Shabazz, he figured it out and he broke it down for you guys.

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But I'll reiterate, it's just lifestyle and it's just really your spend.

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So if you want to figure out how to do this yourself as you're listening to me, roughly, I'm not gonna do an exact, but roughly you can figure it out very quickly.

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Just look at what you spent for the year.

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That's a pretty good idea.

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What did you spend for the year?

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So if you're making, let's just say 80,000, I believe 80,000 is 5,000 a month before taxes.

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So let's just say we're not talking about taxes, 5,000 a month is what you're making and you're spending every penny of it, which you probably are in the Bay Area.

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So we need to find a way for you to make$5,000 a month without working a job.

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That's the goal.

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Or maybe you've done work like let's say you're a podcaster like me or you're an entertainer, you built something to where once it's built and you've sold it, that money is completely passive.

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I'll accept that as well.

00:12:12.320 --> 00:12:17.679
Um so we have to figure out me and Shabazz would help you figure out how do you do that?

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How do you make$5,000 a month passively?

00:12:21.679 --> 00:12:24.639
Well, it goes back to pretty Shabbaz.

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How many freaking episodes have we made about side hustles, increasing your income, strings of income?

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Shabazz, what's your favorite thing to talk about on this show when it comes to what's the most important thing people need to know?

00:12:37.200 --> 00:12:38.879
It's obviously credit.

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So listen to all of those previous episodes that we built together, we've baked together over these over this time, and you'll you have all this information readily available.

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That's just from us.

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I know listeners, you guys are listening to other podcasters and you guys are listening to other influencers, and there's no problem with that, too.

00:13:00.159 --> 00:13:02.159
But it comes down to simple math.

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Like, we need to help you make$5,000 passively.

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How do we do that?

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So, Shabazz, I know you're good at this.

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If I'm your client and you're trying to help me make$5,000 passively, what would you tell me?

00:13:17.840 --> 00:13:19.039
Well, it depends.

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The amount of risk.

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That's always a factor.

00:13:21.519 --> 00:13:29.519
I feel like somebody that's in there around my age, which mid 40s, I believe at that point you need to be more aggressive.

00:13:29.840 --> 00:13:30.320
I agree.

00:13:30.480 --> 00:13:36.000
And if that's the case, then it will probably be various things.

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I believe that we should invest in stocks.

00:13:39.519 --> 00:13:41.840
I believe that you should have a stock portfolio.

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I believe you should have a crypto portfolio portfolio.

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You should definitely have insurance, should be at the top of that list.

00:13:47.919 --> 00:13:48.879
I agree with that big time.

00:13:49.200 --> 00:13:50.960
And or real estate, right?

00:13:51.279 --> 00:13:59.759
So if you have that spread around between those dynamics, then yeah, you should be able to generate that passively.

00:13:59.919 --> 00:14:03.679
Like I said, especially if we're in an aggressive mode, right?

00:14:03.840 --> 00:14:04.080
Right.

00:14:04.320 --> 00:14:05.840
Not really moderate or low risk.

00:14:05.919 --> 00:14:09.519
We're doing things that are more or less moderate to high risk.

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Right.

00:14:10.080 --> 00:14:15.679
So if you're doing that, you should be able to easily, passively do about 5K.

00:14:15.919 --> 00:14:18.639
Everything that you should be doing at that point should be generating.

00:14:18.720 --> 00:14:22.639
Even saving, you should have it in a high yield savings company where you at least get 3%.

00:14:23.440 --> 00:14:28.240
So yeah, if your money is working for you in all different directions, right?

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Like everywhere your money is sitting, it's working in some kind of capacity, it should not be hard to actually generate that.

00:14:37.840 --> 00:14:38.559
That's the thing.

00:14:38.639 --> 00:14:45.200
And I think that people don't only have one vehicle where they got their money working for them.

00:14:45.279 --> 00:14:54.159
But if you got about three, four, or five arms that's constantly working for you at the same time, then yeah, it makes it relatively actually simple.

00:14:54.799 --> 00:14:55.919
Right, exactly.

00:14:56.080 --> 00:14:58.639
So it's simple, it doesn't mean it's easy, right?

00:14:58.720 --> 00:15:01.440
We're not saying that this is easy work, it's not easy work.

00:15:01.600 --> 00:15:07.120
Nothing we say on this show is ever easy work, but actually it is simple.

00:15:07.279 --> 00:15:10.000
Like Shabazz actually broke it down pretty simply.

00:15:10.240 --> 00:15:12.159
You should be having multiple arms.

00:15:12.320 --> 00:15:15.759
And before I continue, I want to roll back a little bit.

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Obviously, most people who are listening don't have what$10,000,$20,000,$50,000 lying around in a savings account, right?

00:15:26.960 --> 00:15:33.120
Like, I'm not sitting here expecting listeners to listen right now to go, oh yeah, I already have a quarter of a million dollars.

00:15:33.279 --> 00:15:39.200
So getting to$750,000 or a million or two million is unheard of.

00:15:39.279 --> 00:15:40.320
Like, but they can do it.

00:15:40.399 --> 00:15:44.320
No, like I understand, listener, that you're probably maybe living paycheck to paycheck.

00:15:44.399 --> 00:15:48.000
You may have credit card debt of$5,000 or more plus.

00:15:48.159 --> 00:15:50.480
You may have student loans, whatever.

00:15:50.720 --> 00:15:53.279
You're not in this debt-free zone already.

00:15:53.440 --> 00:15:54.240
I get it.

00:15:54.480 --> 00:15:56.480
This is still possible, though.

00:15:56.879 --> 00:15:57.919
This is still possible.

00:15:58.159 --> 00:16:03.440
Shabazz hinted at it the older you are, the more aggressive you're gonna have to be.

00:16:03.679 --> 00:16:05.600
But let's do it the opposite way.

00:16:05.759 --> 00:16:12.720
The younger you are, listener, the more you have time to assist you and you can leverage your time.

00:16:12.799 --> 00:16:19.600
So you don't have to be super aggressive working 18-hour days, three jobs, and stuff like that.

00:16:19.919 --> 00:16:23.279
If you're a college student listening to this, this is simple.

00:16:23.440 --> 00:16:26.960
Just pick a degree where you're gonna earn a lot of money out the gate.

00:16:27.200 --> 00:16:28.879
If you're a college student, it's really that simple.

00:16:29.039 --> 00:16:39.679
Pick a degree, or if maybe you're a high school student, maybe you're thinking about choosing between college or a trade school where you can make, you know, you can learn a trade or learn a skill, online education.

00:16:39.840 --> 00:16:40.399
I don't care.

00:16:40.559 --> 00:16:43.360
We talk about this over and over, and we're gonna talk about it again.

00:16:43.519 --> 00:16:44.720
Invest in yourself.

00:16:44.960 --> 00:16:53.759
Find a way to earn more money, to command more money, even if it is traditional W-2, as I've said plenty of times, I'm not against it.

00:16:54.000 --> 00:17:03.039
If you have a W-2 job where you're 21, 25, and you're making six figures, you're making well into the six figures, this is plausible.

00:17:03.200 --> 00:17:14.319
You just gotta do the things that we talked about in the show plenty of times, which is having a budget, making sure things are not going to the wants, too much wants are being spent, saving.

00:17:14.480 --> 00:17:19.200
And this can be a part of your financial plan, is that freedom numbers.

00:17:19.279 --> 00:17:23.599
That's the ultimate point, in my opinion, of the financial plan is the freedom number.

00:17:23.759 --> 00:17:25.279
Yes, you got yourself out of debt.

00:17:25.440 --> 00:17:27.519
Yes, you got an emergency fund saved up.

00:17:27.680 --> 00:17:38.480
Yes, you're now investing$200 a month,$300 a month,$500 a month,$1,000 a month into the S P$500 or any index fund you choose that fits you.

00:17:38.960 --> 00:17:39.519
Good.

00:17:39.839 --> 00:17:40.880
You understood that.

00:17:40.960 --> 00:17:42.799
You've been listening to our content.

00:17:43.039 --> 00:17:45.920
But what's the overall goal of all of that?

00:17:46.240 --> 00:17:52.799
The overall goal of all of that is to make sure you have enough money so that when you're retired, you don't have to worry about working.

00:17:53.039 --> 00:17:55.200
The freedom number represents that.

00:17:55.359 --> 00:18:08.079
We talk about retirement in this country, but I'm pretty sure a lot of you guys don't want to wait until you're 62, 59, 67, 65, 70 to retire.

00:18:08.319 --> 00:18:12.559
I'm sure a lot of you guys listening would love to retire earlier.

00:18:12.720 --> 00:18:14.880
And it's possible you can do it.

00:18:15.119 --> 00:18:16.160
It's not unheard of.

00:18:16.240 --> 00:18:19.680
You can absolutely find a way to get there earlier.

00:18:19.759 --> 00:18:24.799
Like Shabazz said, he's trying to get out the game in 10 years in his mid-50s.

00:18:24.960 --> 00:18:26.000
That's achievable.

00:18:26.240 --> 00:18:27.599
Like that's not unheard of.

00:18:27.839 --> 00:18:31.599
So, Shabazz, I know we talked about this, but let's keep going.

00:18:31.839 --> 00:18:34.799
What things can people do if they're in debt?

00:18:34.960 --> 00:18:35.920
Let's just keep it simple.

00:18:36.000 --> 00:18:42.799
Let's just say they got a few credit cards, maybe$10,000 in debt, they're making the average household, it's$80,000 a year.

00:18:43.039 --> 00:18:51.200
What can they do to start this process of getting themselves out of the debt and a goal, you know, going towards the goal of the freedom number we talked about?

00:18:51.599 --> 00:18:53.680
Okay, so this is what I would do.

00:18:53.839 --> 00:19:01.599
So if I was them and I had credit card debt of, let's say$10,000,$10,000 to$20,000, right?

00:19:02.000 --> 00:19:09.920
And I know with the amount of income that I'm bringing in that basically I can't pay that off, you know, tomorrow, right?

00:19:10.000 --> 00:19:11.519
It's gonna take some time.

00:19:12.240 --> 00:19:26.799
One of the things that I would do is I would get myself if you may already be in position, okay, because some people got credit card debt, but you know, they don't have anything derogatory, they don't have any late payments or anything negative reporting.

00:19:26.880 --> 00:19:30.720
They're paying on time, but they're just drowned in debt and interest.

00:19:30.799 --> 00:19:38.799
And they just it's so hard to get it down because they just don't have enough capital to actually pay it down at a much faster rate.

00:19:39.119 --> 00:19:47.279
So what they need to do in that scenario is get in a position to where you can get a personal loan and you can pay off those credit cards.

00:19:47.519 --> 00:20:00.559
If you're not in a position to actually get a personal loan, and usually most cases, it might be due to that your credit score is just too low because the debt is dragging it down.

00:20:00.720 --> 00:20:05.359
So an easy trick is what I would say go to places like Credit Strom.

00:20:05.519 --> 00:20:14.559
They have an account where you can add$10,000 of available credit to your credit portfolio and it reports to all three bureaus, Experian, Equifax, and TransUnion.

00:20:14.720 --> 00:20:23.440
They have one that they start you off with a$5,000 line installment credit, and it's$250 for the whole year.

00:20:23.680 --> 00:20:31.119
After the third month, they start increasing it, your credit limit$500 every month until it gets to$10,000.

00:20:31.279 --> 00:20:35.519
Now, every time you get a credit line increase on anything, it gives you points from your score.

00:20:35.759 --> 00:20:47.519
So that would automatically get you in position to where you would get an extra maybe 50 to 75 points over the time span of a year.

00:20:47.839 --> 00:21:02.160
Or if you want something that's a little bit more accelerated and you can actually afford it, they actually have an account where you could report$25,000 on your personal credit and of available credit.

00:21:02.240 --> 00:21:12.960
So if you had$25,000 of available credit to your credit portfolio and you got$10,000 to$20,000 in credit card debt, that's gonna break you down to at least below 50%.

00:21:13.759 --> 00:21:21.599
Let's just say if you're maxed out, yeah, and you're 20% and$20,000 in debt and credit card debt, that's gonna bring you below$50.

00:21:22.720 --> 00:21:25.440
Now, how much does that account cost?

00:21:25.759 --> 00:21:28.480
It is a little pricey, it's$300 a month.

00:21:28.559 --> 00:21:34.000
But the good news is that once you cancel, you might only need it for a few months just to get that personal loan.

00:21:34.079 --> 00:21:35.119
You might need it for two months.

00:21:35.200 --> 00:21:37.039
You might only need it for a month, who knows?

00:21:37.359 --> 00:21:42.559
But once you say, hey, all right, I want to pay this$300 a month anymore, they give you all the money back.

00:21:42.720 --> 00:21:42.960
Right.

00:21:43.200 --> 00:21:45.680
So it's not like you're losing anything.

00:21:45.920 --> 00:21:49.359
So you just need to know exactly what to do with your situation.

00:21:49.759 --> 00:21:50.640
Right, exactly.

00:21:50.799 --> 00:21:56.319
If you're starting from ground zero and you just I got 10K in debt, credit cards, that's all I know.

00:21:56.480 --> 00:22:08.000
It goes back to what we've talked about plenty of times, which is making Sure, you know how much money you make and how much money you spend, categorizing everything as we talked about plenty of times, you know, your wants and your needs.

00:22:08.240 --> 00:22:12.960
Get rid of all your wants or as much of it as possible and throw it all at debt.

00:22:13.279 --> 00:22:14.480
It really is that simple.

00:22:14.720 --> 00:22:21.839
Shabazz brought up an excellent tool you can use, or a company you can use as a tool to help you speed up that process.

00:22:22.160 --> 00:22:26.720
However, you do it, which again, just go to our back catalog.

00:22:26.799 --> 00:22:27.839
I can't express that enough.

00:22:28.000 --> 00:22:29.759
We've talked about it endlessly.

00:22:30.160 --> 00:22:30.960
Just pick one.

00:22:31.119 --> 00:22:32.960
Just however you do it, you do it.

00:22:33.200 --> 00:22:36.160
So, okay, Shabazz, I want you to walk with me.

00:22:36.480 --> 00:22:40.480
So now we got somebody who is out of debt.

00:22:40.960 --> 00:22:41.839
They're out of debt.

00:22:41.920 --> 00:22:49.440
Let's just say, again, average person, they're making 7080K, they're out of debt, but they got no savings.

00:22:49.599 --> 00:22:52.720
They have no savings, but they have, you know, they're out of debt, so they have a good credit score now.

00:22:52.799 --> 00:22:54.319
Let's just say they have like a 750.

00:22:54.640 --> 00:22:57.839
How do you guide that person from that point to get to their freedom number?

00:22:58.160 --> 00:23:07.039
It's a good question because I'm doing that with a few people right now where basically they had credit card debt, they got personal loans, they paid off all their credit cards.

00:23:07.200 --> 00:23:14.000
Um the best decision that they probably could make with that money instead of just spending it and it being gone, right?

00:23:14.160 --> 00:23:23.599
Now, once you're in a position and your credit score, because once you pay off those uh credit cards and that credit card debt, your your score is going to jump up substantially.

00:23:23.759 --> 00:23:25.680
Not just a little bit, a lot.

00:23:26.079 --> 00:23:30.240
And now you're in a position to where you can get more credit.

00:23:30.400 --> 00:23:32.960
I wouldn't recommend getting personal credit though.

00:23:33.200 --> 00:23:37.680
What I would recommend is figuring out some kind of side hustle.

00:23:37.920 --> 00:23:46.400
Figuring out, I mean, not necessarily even the side hustle, maybe a business that you always wanted to do, but something that's going to generate income for you.

00:23:46.799 --> 00:23:52.079
Um because now you're in a position where you can actually access business credit cards.

00:23:52.319 --> 00:24:12.079
So you can go ahead and start an LLC, you can start a corporation, even a nonprofit, whatever it is, and you can be the personal guarantor for that entity and basically get anywhere up to, I mean, we get up to 250,000 and just business credit cards for our clients, depending on the dynamics, the score, and stuff like that.

00:24:12.240 --> 00:24:14.240
But you can get anywhere up to that.

00:24:14.559 --> 00:24:32.000
And this is say, just on a lower scale, if you was able to have 50,000 to 100,000 and credit 0% for the first 12 to 18 months, what could you do with that to help you generate a good, healthy monthly income?

00:24:32.240 --> 00:24:34.960
You know, what you know, think of some things that you can do.

00:24:35.039 --> 00:24:37.759
You might already know, you know, what exactly what you can do.

00:24:37.920 --> 00:24:39.519
You might have to do some research.

00:24:39.680 --> 00:24:40.880
But guess what?

00:24:42.799 --> 00:24:51.839
When you think about it from that standpoint, what if I had access to this amount of money, what could I do with it and to make it work for me?

00:24:52.160 --> 00:24:55.440
And that is a really simple way.

00:24:55.599 --> 00:24:57.200
That's something that everybody can do.

00:24:57.359 --> 00:24:59.680
Not just some people, everybody can do that.

00:24:59.839 --> 00:25:07.839
But they would just have to be focused and they just have to be disciplined and not like I said, credit is used to make more money.

00:25:08.000 --> 00:25:10.799
Credit is not used to finance things you can't afford.

00:25:10.880 --> 00:25:13.599
That's how you got into the credit card debt in the first place.

00:25:13.759 --> 00:25:17.359
So once you get out of credit card debt, you need to operate differently.

00:25:17.519 --> 00:25:25.519
Every time you use credit, whether it's personal or whether it's business, you should be using it to where it's going to bring back some kind of return.

00:25:25.680 --> 00:25:29.279
And if it's not going to do that, then basically you shouldn't be utilizing it.

00:25:29.519 --> 00:25:31.039
And it's just simple discipline.

00:25:31.200 --> 00:25:32.079
And it makes sense.

00:25:32.240 --> 00:25:35.200
If I use credit to make help me make more money, guess what?

00:25:35.279 --> 00:25:38.400
It it puts me in a position where I'm in control.

00:25:38.720 --> 00:25:43.599
It puts me in a position where I know how to manage the debt that I have.

00:25:44.240 --> 00:25:47.759
And if you don't do it that way, then guess what?

00:25:47.839 --> 00:25:56.400
You're not in a position, because if you're actually just working check to check and your credit cards are all maxed out, then yeah, you did it all wrong, obviously.

00:25:56.559 --> 00:26:00.079
You know, but that is a simple method that everybody can do.

00:26:00.799 --> 00:26:09.599
So, one question that it popped into my head when you said all that, and I'm listening to you, the listening senior, I'm trying to put myself in the listener's shoes.

00:26:09.839 --> 00:26:12.880
So, Shabazz, they're hearing all that, and it sounds great.

00:26:13.039 --> 00:26:23.200
But what about if there's a listener or or somebody out there, or imagine it's one of your clients, and their big thing is some type of student loan debt?

00:26:23.359 --> 00:26:29.680
A lot of people are walking around with$20,000,$30,$50,$100,000,$250,000 in student loan debt.

00:26:30.319 --> 00:26:33.440
That amount of debt is gonna lower your score.

00:26:33.920 --> 00:26:36.079
So it there's no way it can be$800.

00:26:36.319 --> 00:26:38.079
There's no way it can be$750.

00:26:38.400 --> 00:26:42.319
What do you tell somebody in that scenario when it when it comes to your strategy?

00:26:42.400 --> 00:26:42.960
What do you tell them?

00:26:43.039 --> 00:26:47.039
Do you just tell them you we just gotta follow this plan, or how do you encourage them?

00:26:47.359 --> 00:26:52.559
You still, you still, it's still the same scenario still works.

00:26:52.880 --> 00:26:58.000
And it's all about adding more portfolio to your credit.

00:26:58.319 --> 00:27:00.640
Um because it's still debt.

00:27:00.720 --> 00:27:01.279
That's what it is.

00:27:01.440 --> 00:27:03.359
Student loan is just it's just debt.

00:27:03.599 --> 00:27:06.000
So you got all the credit cards paid off.

00:27:06.160 --> 00:27:08.079
That definitely is gonna increase your score.

00:27:08.240 --> 00:27:11.039
Okay, you got this student loan, depending on how much it is.

00:27:11.119 --> 00:27:12.960
Let's say, let's just take a number.

00:27:13.119 --> 00:27:16.880
Let's say you got$50,000 in student loan debt.

00:27:17.440 --> 00:27:19.519
Go to a place like Tomo Credit.

00:27:19.599 --> 00:27:30.880
They're giving up to a hundred K credit line reported on your credit, and I believe it's only, I want to say it's$69 a month.

00:27:31.119 --> 00:27:33.920
Yeah, six, I believe it's$69 a month right now.

00:27:34.079 --> 00:27:39.200
So they have a thing where they report up to$100K on your personal credit, and it's only$69 a month.

00:27:39.359 --> 00:27:40.880
So that's very minimal.

00:27:41.119 --> 00:27:45.920
And it's like I said, if you owe, add more available credit to your portfolio.

00:27:46.079 --> 00:27:46.960
That's the key.

00:27:47.119 --> 00:27:49.599
There's resources out there where you can do this.

00:27:49.759 --> 00:28:01.920
And I know it's not a solution to pay off the student loan debt, but it's a solution to get to a point to where you now you can bring in more income to where you can actually bring down the student loan debt.

00:28:02.000 --> 00:28:04.799
I mean, there's so much that you can do if you have access to capital.

00:28:04.880 --> 00:28:06.720
That's the thing that I always talk about.

00:28:06.880 --> 00:28:08.960
A lot of people just don't have the access.

00:28:09.119 --> 00:28:13.759
You guys people all the time, if you have 50 or 100,000, what could you do with it?

00:28:14.000 --> 00:28:20.480
Nine times out of ten, everybody's gonna say, oh, yeah, I can make that work, but some people can't.

00:28:20.880 --> 00:28:24.799
Surprisingly, some people have more money, some people win the lottery and end up back broke.

00:28:25.279 --> 00:28:31.359
So it's gonna, regardless of whatever amount it is, it's gonna require some discipline.

00:28:31.680 --> 00:28:32.960
Absolutely, absolutely.

00:28:33.119 --> 00:28:40.720
And just a reminder listeners, you're listening to Darren Harvey, Marie Shabazz over here, Financial State and Minds, KGPC 96.9 FM.

00:28:40.799 --> 00:28:46.559
We're talking about freedom numbers, how to get there, how to figure it out for yourself, how can we help you?

00:28:46.720 --> 00:28:47.759
Okay, so let's keep going.

00:28:47.839 --> 00:28:55.440
So, Shabazz, you again, so for a review, we had somebody who had like 10 or so K in credit card debt.

00:28:55.599 --> 00:28:56.960
They got themselves out.

00:28:57.200 --> 00:29:01.119
You helped them build business credit, start to get the credit cards over there.

00:29:01.359 --> 00:29:06.240
You mentioned that you can get anywhere from$100,000 to$250,000 in business credit.

00:29:06.400 --> 00:29:09.119
So let's just say this is an A1 client of yours.

00:29:09.200 --> 00:29:10.960
They're following everything to your T.

00:29:11.119 --> 00:29:18.720
It's been three, six months since you've been working with them, and um, now they have business credit cards of up to$250,000.

00:29:19.359 --> 00:29:31.680
They're asking you, okay, well, I have all this business credit, but I'm still not sure about how this is gonna help me leave my job or how this is gonna help me build a business.

00:29:31.839 --> 00:29:34.799
Like I just have the the capital at this point.

00:29:34.960 --> 00:29:37.519
So how do you guide this person further?

00:29:38.240 --> 00:29:44.400
Well, the one of the things is that of course it's different ways that you can leverage that, right?

00:29:44.640 --> 00:29:46.000
You can get into real estate.

00:29:46.160 --> 00:29:47.200
That's one thing you can do.

00:29:47.359 --> 00:29:52.880
You can also, depending on what they're passionate about, you can even buy into a small franchise.

00:29:53.039 --> 00:29:56.240
They have small franchises that you can actually buy into.

00:29:56.480 --> 00:30:01.359
And I think the starting entry level point is 10,000 and it goes up from there.

00:30:01.519 --> 00:30:05.119
So you can actually purchase a franchise and do some research on that.

00:30:05.279 --> 00:30:19.359
So if you just don't have a model or you don't have a good idea of something that could generate you some capital, um, I believe sometime finding um models that are already set in place, like a franchise.

00:30:19.519 --> 00:30:21.440
Some people open up a UPS store.

00:30:21.599 --> 00:30:24.000
If there's cheap franchises out there, is what I'm saying.

00:30:24.079 --> 00:30:32.240
You don't have to have do the McDonald's thing or anything like that, because of course you gotta have like the last I check a million dollars in liquid to even do that.

00:30:32.559 --> 00:30:38.319
But there's some affordable franchises that you can do if you have become pretty good at investing.

00:30:38.559 --> 00:30:51.359
Let's say you're you're day trading, you're investing in the stock market, you could take a portion of that, and if you're actually at a good rate where you actually have a good enough experience trading, then basically you could actually use that to leverage income.

00:30:51.440 --> 00:30:56.160
But you don't, there's other things you could do other than besides leveraging credit.

00:30:56.240 --> 00:31:03.839
They got prop accounts and stuff like that where they'll give you uh a good amount of money to trade in the stock market, they just have a list of rules you have to follow.

00:31:04.000 --> 00:31:15.680
So it's a lot of different things that you can do, and then you have 0% interest for the first 12 to 18 months in most cases, so you have a time period of where you don't even have to worry about any interest.

00:31:16.160 --> 00:31:23.519
So I think that in business, what a lot of people make the mistake of is people trying to go too big too quick.

00:31:23.759 --> 00:31:35.279
I see people go into businesses where in order to get this business off the ground, it's gonna cost$50,000 to$100,000 just to get the location, to get all the equipment and all this other stuff.

00:31:35.359 --> 00:31:38.160
And now you start this business and you're in all this debt.

00:31:38.400 --> 00:31:43.680
I think that people should start with something that they can do from home.

00:31:43.920 --> 00:31:53.680
Or if it's like, let's say if you're doing uh some type of food service, get a food truck, get a trailer, or get something like that, get something where you don't have to have no overhead.

00:31:53.839 --> 00:32:05.039
And then over time, once you outgrow your garage or your kitchen table or your trailer, and the business is actually generating, I have outgrown this space.

00:32:05.200 --> 00:32:12.799
Now it's time for it to get a secure location because now the business is bringing in a certain amount of capital to where it requires this.

00:32:13.200 --> 00:32:20.079
People try to go too fast too quick and go big too quick, but the demand was never there before you actually did that.

00:32:20.240 --> 00:32:22.640
And don't get me wrong, some people actually do good with it.

00:32:22.799 --> 00:32:31.519
But I think a lot of people make a mistake because they're incurring so much debt and getting it off the ground, and they don't have the liquid.

00:32:31.599 --> 00:32:33.839
They actually have leveraged credit to do it.

00:32:34.000 --> 00:32:36.559
So now you're in all this credit card debt starting out.

00:32:36.640 --> 00:32:44.799
Now you got to work your way out of that hole, and hopefully that when you open up the doors for business, that it'll actually start generating that amount of capital.

00:32:44.960 --> 00:32:48.319
But in most cases, that's usually not a good thing.

00:32:48.480 --> 00:32:54.880
So I tell people to start small and then let the growth of the business predict where you're going and when you need to expand.

00:32:55.200 --> 00:32:56.160
Absolutely.

00:32:56.400 --> 00:33:04.319
And you mentioned two ones that I'm sure people would love to be able to do real estate and investing in the stock market with business credit cards.

00:33:04.559 --> 00:33:09.279
So, listeners, you may be wondering, Darren, you keep talking about business credit cards.

00:33:09.519 --> 00:33:15.119
How do we use a business credit card to invest into real estate, to invest into the stock market?

00:33:15.359 --> 00:33:24.000
Well, if you guys don't know, there are services that will essentially you can trade your business credit for liquid capital for a fee.

00:33:24.240 --> 00:33:28.960
So if you have, let's just say one business credit card is at$50,000.

00:33:30.240 --> 00:33:42.880
Well, you can go to the service or this company and you pay them the$50,000 and they'll give you$40,000, more likely$45,000 back in liquid cash.

00:33:43.039 --> 00:33:43.920
And there you go.

00:33:44.079 --> 00:33:46.079
Now you do that for every credit card.

00:33:46.240 --> 00:33:46.640
There you go.

00:33:46.720 --> 00:33:47.839
You have the down payment.

00:33:48.079 --> 00:33:59.680
That's your down payment for your rental property, for your house you want to burr, or you basically you want to rehab it and then uh flip to sell it, a house that you want to quick flip fit, you want to do some wholesaling, it don't matter.

00:33:59.920 --> 00:34:14.480
Even in California, even in the Bay Area, if you have$250,000 in credit cards and you only have to pay a five to 10% fee, you still have enough money for a down payment for a house in a Bay Area, for a million dollar house, right?

00:34:14.719 --> 00:34:21.599
Mortgage loan, and then use that loan to flip a house, rental property, whatever.

00:34:21.840 --> 00:34:27.199
So that's how people in real estate use borrowed money to make money.

00:34:27.360 --> 00:34:28.400
That's exactly what they do.

00:34:28.480 --> 00:34:29.679
And that's just with credit cards.

00:34:29.760 --> 00:34:36.239
You can, of course, do that with actual business loans, whether they're micro or whatever the style or the type of loan it is.

00:34:36.400 --> 00:34:39.519
But this is how they're doing it in real estate right now to make money.

00:34:39.679 --> 00:34:41.280
So, listeners, you can do it too.

00:34:41.360 --> 00:34:44.480
And you can do the same thing in the stock market, like Shabazz said.

00:34:44.639 --> 00:34:50.320
You can literally take a credit card that has no interest rate, liquidate it, and do some day trading.

00:34:50.400 --> 00:34:56.159
It doesn't have to be crazy day trading, it doesn't have to be something where you're making$5,000 in a day or anything crazy like that.

00:34:56.320 --> 00:35:02.639
It can literally just be an extra$100 a day, an extra$200 a day, heck, an extra$50 a day.

00:35:02.880 --> 00:35:07.440
And that's stuff that doesn't even take either a lot of time or a lot of your attention.

00:35:07.679 --> 00:35:15.599
So you can still be working your active nine to five W-2 job, which I want to reiterate, yes, we are always pushing entrepreneurship.

00:35:15.760 --> 00:35:19.119
Shabazz just broke down how you need to make extra strings of income.

00:35:19.199 --> 00:35:20.320
We just chose business.

00:35:20.480 --> 00:35:25.599
But like Shabazz said, he's talked about creating a business that has low overhead.

00:35:25.840 --> 00:35:27.280
I'll go one step further.

00:35:27.440 --> 00:35:32.239
Create a business that's low overhead and doesn't take a lot of your attention and time.

00:35:32.480 --> 00:35:33.119
Make it easy.

00:35:33.199 --> 00:35:35.519
You can just be a consultant of whatever you do.

00:35:35.760 --> 00:35:43.280
So if you're if you're a person who's in sales, you can be a sales consultant where you work commission only for other companies.

00:35:43.440 --> 00:35:47.840
If you're in IT or you're in cybersecurity, you can offer those services as a consultant.

00:35:48.000 --> 00:35:48.880
That's the simplest thing.

00:35:48.960 --> 00:35:50.239
You can be an HR and do it.

00:35:50.400 --> 00:35:51.840
Consultants are needed everywhere.

00:35:51.920 --> 00:35:53.760
And don't let AI fool you.

00:35:54.000 --> 00:36:01.119
Companies still want people to either manage the AI for that help software or they just don't trust it.

00:36:01.360 --> 00:36:02.719
They just don't trust it.

00:36:03.039 --> 00:36:04.880
So always think about that.

00:36:04.960 --> 00:36:11.679
Like, don't let the AI push you away to think that you can't make money or your job's gonna get replaced.

00:36:11.840 --> 00:36:15.519
That's not necessarily the case, depending on what your niche is.

00:36:16.000 --> 00:36:32.800
So the whole summary though, what Shabbat said and what I'm saying is get yourself out of debt, use personal credit so you can get into business credit a lot easier, and then use business credit to help you generate more money.

00:36:33.760 --> 00:36:36.000
Do that for X amount of years.

00:36:36.239 --> 00:36:39.039
Everybody's gonna look different depending on the scenario.

00:36:39.280 --> 00:36:43.679
If you want to travel a lot more, probably gonna do it, need to do it for a little bit longer.

00:36:43.840 --> 00:36:48.719
If you want to travel only in the United States, maybe you want to do it a little, you can do a little bit less, excuse me.

00:36:48.880 --> 00:36:51.360
Like figure out that number.

00:36:51.599 --> 00:36:57.119
The number is gonna dictate how much money you need to make per month, which is what we did earlier.

00:36:57.440 --> 00:37:00.639
And that is gonna dictate how long it's gonna take.

00:37:00.800 --> 00:37:08.880
You figure out the yearly salary based off of your um number, you figure out the age you want to retire, and the presto, that's it.

00:37:09.039 --> 00:37:11.519
You figured out your number, you figured out your lifestyle.

00:37:11.679 --> 00:37:13.360
And I would do it for both listeners.

00:37:13.440 --> 00:37:22.079
I would do this exercise for your lifestyle, like the way you want to be living when you're retired, and just to survive.

00:37:22.400 --> 00:37:25.360
Just to survive, because you want milestones.

00:37:25.440 --> 00:37:28.639
You want you don't want just one big goal that seems massive.

00:37:28.880 --> 00:37:30.159
You want milestones.

00:37:30.320 --> 00:37:41.039
You should probably have a milestone of just what's the number so that I can survive off of my net worth, and then what's the number so that I can thrive?

00:37:41.199 --> 00:37:51.760
What's the number so that I can leave it for my family, for my kids, for my girlfriend, for my fiance, for my wife, whatever, whoever you care for.

00:37:52.159 --> 00:37:53.840
What is that number?

00:37:54.000 --> 00:37:55.280
That's the point of the episode.

00:37:55.519 --> 00:37:59.360
I want you guys to figure that out, and it's attainable.

00:37:59.519 --> 00:38:00.480
We just broke it down.

00:38:00.639 --> 00:38:04.079
Shabazz just broke it down how it's attainable.

00:38:04.400 --> 00:38:07.280
So let's go one step further, Shabazz.

00:38:07.440 --> 00:38:12.159
So you've helped this person get out of debt, they got a quarter million dollars.

00:38:12.400 --> 00:38:14.079
Let's just choose real estate.

00:38:14.400 --> 00:38:20.639
They chose to buy a property, it could be Antioch, it can be Stockton, it can be wherever.

00:38:21.119 --> 00:38:23.519
And now they're renting that property out.

00:38:24.159 --> 00:38:29.760
So now they're working, let's just say it's been two years they've been doing this.

00:38:30.239 --> 00:38:34.880
They've they're still W-2, now they're making 90K.

00:38:35.599 --> 00:38:38.320
And now they got some rental income coming in.

00:38:38.639 --> 00:38:41.440
Other than the property, that's their only debt.

00:38:42.320 --> 00:38:44.159
How do you guide them further now?

00:38:44.400 --> 00:38:46.239
How do you encourage them further?

00:38:46.639 --> 00:38:49.119
So the only debt they have is the property.

00:38:49.360 --> 00:38:49.599
Right.

00:38:49.760 --> 00:38:52.880
Because they took out a loan with the help of the down payment stuff like that.

00:38:52.960 --> 00:38:53.440
That's the debt.

00:38:53.519 --> 00:38:57.360
So all the debt is what you would call good debt or okay debt.

00:38:57.760 --> 00:38:59.920
So what do they do now?

00:39:00.239 --> 00:39:04.639
Okay, and they only have the so on the market is the only debt they have, no credit card debt, nothing like that.

00:39:04.960 --> 00:39:05.199
Yeah.

00:39:05.519 --> 00:39:05.840
Okay.

00:39:06.400 --> 00:39:11.760
So did they just get this uh property or they had it for a while?

00:39:12.079 --> 00:39:14.079
Let's move forward a year or two into the future.

00:39:14.239 --> 00:39:16.719
So they've had the property for at least two years now.

00:39:17.039 --> 00:39:18.639
Okay, so they had the property for two years.

00:39:18.880 --> 00:39:20.159
They have no credit card debt.

00:39:20.320 --> 00:39:22.719
So that means that they have good credit, right?

00:39:22.960 --> 00:39:28.880
Yeah, this is someone who probably has at this point, they've been paying on time for years.

00:39:29.280 --> 00:39:35.039
And now they have a credit score of they let's just say perfect credit score, it doesn't matter, at least a 780 plus.

00:39:35.679 --> 00:39:36.000
Right.

00:39:36.239 --> 00:39:37.280
On the personal side.

00:39:37.360 --> 00:39:41.360
They have some business credit now because they've been paying down those business credit cards.

00:39:41.679 --> 00:39:49.840
So my first thought, Shabazz, and you're the expert, but my short first thought is they don't have only$250,000 in credit no more.

00:39:49.920 --> 00:39:50.960
They have more than that, right?

00:39:51.199 --> 00:39:51.440
Yeah.

00:39:53.199 --> 00:39:53.440
Yeah.

00:39:53.519 --> 00:39:56.400
So what do you think they would have if they've been paying on time?

00:39:56.559 --> 00:39:58.239
What's to say they're able to somehow pay it off?

00:39:58.400 --> 00:40:03.119
They're able to pay off the$250,000 that they liquidated to buy the property.

00:40:03.360 --> 00:40:05.599
It somehow they were able to pay that off.

00:40:06.079 --> 00:40:09.679
How much credit, business credit would they have at that point?

00:40:10.239 --> 00:40:12.559
Oh man, they probably have double.

00:40:13.199 --> 00:40:13.519
Double.

00:40:13.760 --> 00:40:13.920
Yeah.

00:40:14.079 --> 00:40:18.400
I know people that actually got$500,000 or more in business credit.

00:40:18.559 --> 00:40:26.239
And they probably would have uh double, you know, because you know, see, business credit is a totally different animal than personal credit.

00:40:26.559 --> 00:40:37.119
And when they see that you have large amounts of debts and you're able to pay them off in a short period of time, they want to give you more access to more capital.

00:40:37.280 --> 00:40:44.639
They figure at that point, if you're spending like that, you probably could use some more capital so that way you could do more, right?

00:40:44.800 --> 00:40:45.199
Right.

00:40:45.440 --> 00:40:56.639
Because they love those type of portfolios because what happens is they can easily sell that debt on the market because it's a good account, it's good, it's what they call good paper, right?

00:40:57.039 --> 00:40:58.079
Or a paper.

00:40:58.159 --> 00:41:00.960
They got different grades for the paper that they actually sell.

00:41:01.119 --> 00:41:03.679
So for a bank, it's a good investment.

00:41:03.920 --> 00:41:12.960
So at that point, what they can do is they can get access to more capital, and what they can do is get purchase more real estate, right?

00:41:13.599 --> 00:41:16.880
So at that point, income property, right?

00:41:17.039 --> 00:41:17.280
Right.

00:41:17.440 --> 00:41:22.480
Depending on what your model is, it might just be multiple unit, fix or flip, Airbnb.

00:41:22.559 --> 00:41:27.760
There's several different areas that you can get into, but you have the capital to do it now.

00:41:27.840 --> 00:41:33.039
So it's it's all about making doing your research and just making sure that they're good investments.

00:41:33.280 --> 00:41:33.599
Right.

00:41:33.760 --> 00:41:38.800
Yeah, what I was thinking is depending on how long this is time this is taking place.

00:41:38.960 --> 00:41:43.840
So I said two years, but let's just say this is five years down the road, ten years down the road.

00:41:44.159 --> 00:41:47.519
Pretty much what you said, acquire more real estate property.

00:41:47.679 --> 00:41:49.599
And you can even 10 uh, what is it called?

00:41:49.760 --> 00:41:56.639
1039 exchange or 1038 exchange, or exchange the property, sell the first property you had and do exactly what you said.

00:41:56.800 --> 00:42:03.119
Sell that property, even if you don't make no money off the property sale, you can sell it.

00:42:03.360 --> 00:42:09.519
I'm pretty sure your tax attorney will find a way to where you don't have to pay no taxes on the sale of that property.

00:42:09.599 --> 00:42:11.199
You're not coming out of pocket at all.

00:42:11.360 --> 00:42:19.440
And then you exchange it, and then you buy the what you said, the duplex, the triplex, the quadplex, um, the property like that.

00:42:19.679 --> 00:42:30.880
You have the money either from the sale of the house or you can keep that house and like Shabbat said, liquidate the business credit cards again, and then now you have a quadruplex somewhere.

00:42:31.039 --> 00:42:34.960
We were talking about California, but of course you guys can invest outside of California.

00:42:35.039 --> 00:42:36.480
That's definitely a possibility.

00:42:36.719 --> 00:42:44.320
And now you have this property making passive income for you, or as almost close to fully passive income as possible.

00:42:44.559 --> 00:42:52.400
And then you're still working your job, you're still working your 90K job because the real estate is only taking you 10 hours a week.

00:42:52.559 --> 00:42:59.199
You're able to start a site consulting where you're working 20, 30 hours a week and you're making 40, 30k off of it.

00:42:59.360 --> 00:43:02.719
So now your salary is at 120, 130K.

00:43:03.119 --> 00:43:06.960
130K salary, positive assets.

00:43:07.679 --> 00:43:10.320
What can you not invest in, Shabazz, with that?

00:43:10.719 --> 00:43:13.519
I mean, the possibilities are unlimited at that point.

00:43:13.760 --> 00:43:21.440
But I want you to explain real quick for the people that don't know, listeners that don't know, what is a 1031 exchange?

00:43:21.840 --> 00:43:38.000
1031 exchange is where you sell an investment property that you have and you sell it and you use the proceeds of that investment property to invest into an investment property that is equal value or higher value.

00:43:38.800 --> 00:43:40.559
And why would somebody do that?

00:43:40.880 --> 00:43:46.159
Essentially, they do not have to pay taxes on the sale of the house.

00:43:47.039 --> 00:43:51.679
So if you have profit equity, it's a hundred percent profit.

00:43:51.840 --> 00:43:54.880
The equity at that point is a hundred percent profit.

00:43:54.960 --> 00:44:11.519
Um, and then even if you don't make money, which is what I said in this example, let's just say you're break even, you're still not paying taxes, and you found a way to acquire a higher or more valuable piece of property without either a down payment or yeah, without a down payment.

00:44:11.679 --> 00:44:15.039
The down payment came from the sale of the house that you paid no taxes for.

00:44:15.360 --> 00:44:25.840
So this is what they do in real estate and this is how people start with just in-law units or condos and they find themselves owner of a 100 unit apartment complex.

00:44:26.079 --> 00:44:29.599
They just they're we're literally telling you guys this is what they do.

00:44:29.840 --> 00:44:30.719
This is what they do.

00:44:30.800 --> 00:44:36.880
And that's assuming they start off like they said with this person had 10K in credit card debt, this is how they did it.

00:44:36.960 --> 00:44:40.559
And it may take them five years or so may take them 10 years or so.

00:44:40.639 --> 00:44:44.239
It just really depends on the income you have and how disciplined you are.

00:44:44.559 --> 00:44:46.239
But people do that all the time.

00:44:46.480 --> 00:45:06.159
And I believe if you can do well it's not an exchange when you sell your primary residency and then you use that to buy and you use that to buy another primary residency or you just keep it you still get a$250,000 tax deductible if you're single and a half a million dollar tax deductible if you're married.

00:45:06.719 --> 00:45:08.639
So what am I saying guys?

00:45:08.719 --> 00:45:15.599
I'm saying real estate is the best space to go into if you want to save money on taxes.

00:45:16.079 --> 00:45:20.239
I'm going to ask one more question and go ahead and close it out with that one.

00:45:20.800 --> 00:45:27.119
Now you basically explained that you do this to basically get away from capital gain tax.

00:45:27.280 --> 00:45:30.400
My question is capital gain tax expensive?

00:45:30.800 --> 00:45:32.960
Yes especially in the state of California.

00:45:33.199 --> 00:45:43.039
In the state of California pretty much it's well let me clarify there's short-term capital gains tax and there's long-term capital gains tax.

00:45:43.280 --> 00:45:55.360
Your goal is to go for the long-term capital gains tax the short term is when you sell an asset and you profit and the sale happened within the first year of acquiring the asset.

00:45:55.519 --> 00:46:07.119
That is short term, that's the one we all want to avoid because they will take half they will take half in the state in California they'll take half I would actually say 55% just depends on your income level.

00:46:08.800 --> 00:46:15.360
Long-term capital gains tax is a fancy way of saying ordinary income tax.

00:46:15.840 --> 00:46:20.639
So that's what you want to aim for so that's why you want to hold your property for a year.

00:46:20.719 --> 00:46:24.559
That's why I said in the example they did a year or two or something like that.

00:46:24.719 --> 00:46:39.199
So they will sell the property they will have long-term capital gains tax which is just ordinary income let's just say they profited$50,000 or they're just going to be taxed at whatever$50,000 income rate they are.

00:46:39.440 --> 00:46:44.159
So we said they're making$120 plus$50K,$175K.

00:46:44.400 --> 00:46:54.719
So they're probably getting taxed it's gonna it's gonna hurt a little bit it's gonna be about somewhere in the high 30s maybe even the 40s percent if you're in the state of California.

00:46:55.119 --> 00:47:08.639
But again if it's real estate you can write off literally everything everything about that real estate can be written off the fix up the maintenance just everything it can be written off of the lifetime of the property that you've owned it.

00:47:08.960 --> 00:47:27.599
We just hit 50 minutes that quick so we're gonna have to wrap up the episode you guys but I will close it out like this we've talked about so much or I've talked about so much on this show about getting yourself out of debt, making a financial plan, investing get to that bag, manage that bag, grow the bag.

00:47:27.679 --> 00:47:38.639
There's a reason why I have that tagline it's because you're using all those three to get to your freedom financial number or your goal whatever that is whatever that is.

00:47:38.800 --> 00:47:50.400
And I'm not here to tell you what that goal is that's something that you need to talk to yourself or if you have your partner talk with your partner about and develop that number and once you have that number that is your North Star.

00:47:50.719 --> 00:48:03.039
That is when you know okay I have enough money to where I can stop or I can do whatever the heck I want or most importantly listeners why I'm obsessed about money as you guys know I bought my time back.

00:48:03.360 --> 00:48:12.159
I have whatever amount of options I choose to that is what the freedom number is and why it should be important to every single person.

00:48:12.400 --> 00:48:43.920
It's your number so you can buy back those eight hours a day 40 hours a week one third of our life is spent working basically that's the point of the freedom number so I hope listeners you enjoyed this you do your own calculations please drop a comment if you're watching this on YouTube or anywhere tell me what your freedom number is what do you think it is and if you need help feel free to reach out to us on Financial State of Mind you just saw that we're able to do it for an imaginary client so we can do it for someone like you.

00:48:44.159 --> 00:48:59.199
So thank you guys for listening this has been your boy Darren Harvey joined by mind where we help you get to that bag that bag throw that bag as best as possible while talking about financial business that we're state anything that we need to do our