049: The Cost of Your Financial Miseducation
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Today we’re diving a little deeper into the importance of financial literacy. Do you remember growing up learning anything money-related when you were in school?
Is this a trick question? Heck no! From your glowy-eyed Pre-K days all the way until you were graduating college, some of us spent more time understanding the quadratic formula than the tax quadrant.
I’m guessing a lot of our Cashflow Multipliers listeners haven’t either.
It makes you think, right? Like there was no Personal Finance 101, but there was a home education 101. We love baked good, but that class was definitely not a prime opportunity to teach us how to file taxes.
We grew up the traditional way. Go to school, get good grades, and a job that offers a matching 401K or higher.
And don’t forget to save your way to retirement!
The only way we knew how to truly “adult” was through the obligation of trading our time for money. We had no idea that novel, life-changing, financially freeing options were available to us– like the holy grail of passive income. 😍😍
Unfortunately, this narrative is far too common. You struggled for a long time, trying to get your finances in order and it’s been hard. The system has told you one thing, yet, you know that there’s another way and you’re tired of scrolling and seeing others’ success. You want to know where they started and how they got there!
We get it, and it’s not a secret that many Americans struggle with understanding finances, and unfortunately, the problem is only getting worse around the country. 😕😕
Did you know that 34% of Americans can’t answer at least four out of five basic financial literacy questions on topics such as mortgages, interest rates, inflation, and risk according to FINRA, Financial Industry Regulatory Authority? Meaning they lack the ability 😨 to understand and effectively use financial skills.
You may not know it, but these are skills some of us take advantage of, such as personal finance management, budgeting, and investing. Without these skills, Americans struggle with everyday tasks like paying bills on time, as well as larger goals, like planning for retirement or buying a home.
Insane, right?! These are life-changing practices. It starts with understanding a budget and progressively moves to buying a home. These are the basic building blocks of success– and everyone should have the right to access them.
We’re seeing this play out right now in the millennial generation. A survey by Lending Club that surfaced last summer discovered that 60% of millennials who make over $100,000 a year claim to live paycheck to paycheck.
Case and point: Your financial miseducation is costing you. In more ways than one. Even the most high-income earners are living paycheck to paycheck, in 2022! You would think with all this technology and resources, this statistic wouldn’t be as horrifying as it is, and yet, here we are.
And to add to all of this, let’s consider the disappearing act of the middle class. It’s no secret they have been getting squeezed out for quite some time. Why? Because it’s getting more expensive to stay in the “middle.” So if they’re not solving their financial miseducation–their only other option lies below the poverty line.
Okay, enough of the doom and gloom, let’s turn this around with ways we can change this for the better. Have we said anything that sounds like a path you’re afraid to go on, or down currently? Have no fear, the Kitti Sisters are here. You work hard for your money, so don’t let the unknown scare you from making changes to help you regain your financial literacy and set goals for yourself. ✨
You may not have learned this in a school setting, but here at TKSU, the Kitti Sisters University, you’re officially enrolled in Financial Planning 101. So let’s break out the syllabus, and maybe a calculator, and let’s dive into the top five foundational things you can start doing to take control of your financial education today. 🙌 🙌
Learn the Difference Between Assets and Liabilities
Let’s kick things off by understanding the difference between liabilities and assets. Pop quiz for homeowners, is your home a liability or an asset? 🤔
Most people might say asset because of the genius marketing done by banks, they convince you your home, car, or any other large personal property is an investment.
As for the rich, they don’t define their home as an asset, but as a liability. They believe, and rightfully so, assets should bring money into your pockets. Not take. And too often we see homes drain people of money. Even if you own your home outright, you still have to pay for the taxes and maintenance, which is just money flying out of your pocket each month.
This is why the disappearing act of the middle class really isn’t that much of a mystery. They’re struggling to buy a home as the housing price has outpaced their earnings and made them poorer, not richer.
We have a common phrase around here, WWTRD, What Would The Rich Do? Because the reality is, they’re obviously doing something different to live differently. Take rental properties for example. If you own a rental property, that can be an asset. How? Because it puts money back into your pocket.
The renter is paying rent which covers the cost of the mortgage, maintenance, taxes, and more. This also explains why the top 10% of richest people in the world can increase their debt but not exponentially increase their assets. They use debt to buy assets that create more wealth. ✅
Debt to create assets? Don’t worry, we got you here: Actually, Debt Is a Good Thing.
Learn to Leverage
Next up is leverage. We have talked extensively about leverage and the power it holds when it comes to your assets in previous episodes. Basically, leverage is where good debt and your return on investment intersect. You just need a little leverage lovin’ to get you there.
This wouldn’t be a true university class if we didn’t leave you with a little homework, so be sure to check out the linked episodes below all about leverage (if you haven’t already): 👇👇
Focus on Cashflow
Our third point today at TKSU is the friendly reminder that cashflow, not cash is king. Back when we were starting out, there was so much we did not know about real estate or investment. Our journey was long, windy, and often dusty (depending on how many homes we were in the middle of flipping). We did a lot of things wrong.
And you can blame that on our financial miseducation. Trust us, you’re in good company if you’re still trying to figure it out. Back in the day, we thought the thing that was going to help us the most was appreciation. In fact, we had no idea that a rental property can actually produce cash flow.
Yeah, that’s how far behind we were. We’re on the- House-flipping-to-podcast-hosts-for-passive-investors-pipeline!!!
The two biggest reasons why you want to invest in cashflow producing assets is 1️⃣, it will help provide you with an additional stream of income. Which, we love around here. And 2️⃣, and most importantly, cash-flowing assets such as multifamily apartment buildings tend to have a great relationship with inflation.
Your building wants to go wherever inflation is going. Thus, as inflation rises, so does the value of these assets. This makes it a great hedge for inflation.
Grow Your Wealth by Being Tax Efficient
Next up for your financial freedom crash course, getting to know tax hacks. 😉😉
Yep, we’re a big fan around here of knowing the ins and outs of paying virtually 0 dollars in taxes by the time April comes around, but we do that with careful consideration, a paper loss, and an amazing tax consultant. We’ll get to more of that in sec.
The impact of taxes on your wealth has been described as if you’re walking up an escalator that is coming down. It takes a heck of a lot more effort. Work smarter, not harder.
For most of us, we always believed that paying taxes is a necessary evil commanded by Uncle Sam when you decide to live on his territory as a US citizen– but that’s actually not true. The government uses the tax code to direct people to do certain things. For example, invest in affordable housing, clean, renewable energy, and adopt a child.
And for those who qualify, investing in apartment syndications may be a tax-free endeavor for a lot of people. This is one of our favorite parts of the deal. For example, for every $100K invested you can get back typically $70-$100K paper loss in a year which can be used to offset tax liability on ordinary income and capital gains.
Of course, we do this under the guidance of professionals who know the real estate tax world better than we do. This means you absolutely need to as well, always consult a professional.
We have talked extensively about taxes and how you can leverage your assets to work for you come tax season. And honestly? We’ll probably never shut up about it. These are the foundational building blocks of growing your wealth and getting up the escalator a little bit easier.
Make Your Own Financial Decisions
Finally, the biggest secret to starting your financial freedom is to stay confident. 🤓🤓
Remember when you were younger and everything you did was based on what other people were doing? Whether that was an older sibling or whatever tween celebrity you idolized at the time– you were too young then to know what you know now: it doesn’t matter what other people think of you.
Confidence is key when it comes to your knowledge about money. After all, you let others make your financial decisions for you, right? A broker decides how your money should be invested, a bank tells you what interest rate is worthy of your money, and you let news alerts tell you what’s trending in the world of investing.
It can feel overwhelming and that feeling is what’s holding people back from being financially free, and fulfilled. The system is designed to be confusing and riddled with different steps to achieve one goal. And they built it that way on purpose so you give up control and leave it to the hands of so-called “professionals” who reap enormous fees by keeping you in the dark about your own finances.
This isn’t the plot of the latest Marvel villain, this is happening in modern-day 2022 and the years leading up to it. This knowledge can empower you and your origin story to make a change and gain confidence in your financial literacy, manage your own finances, and build a safer, more equitable financial future.
Why are we sharing this? Because we believe every person who is serious about gaining control in this part of their life is built to thrive, not just survive. ☺️
So, what’s it going to be for you? How do you take these foundational lessons and turn them into actionable steps?
Enter 👉 the Kitti Freedom club. We would be honored to play a small part in helping you achieve your financial freedom for ordinary people like you. This doesn’t have to be complicated, you just need to get started.
We’re just a couple of girls, asking our friends and followers a simple question: what are you going to do today to make these financial systems work for you? 🤔😉
GET ME ON THE KITTI FREEDOM CLUB
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