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  • (upbeat music)

  • - Okay I'm here with Alexandra

  • and we're doing another Millennial Money.

  • And very excited about this program

  • so thank you for tuning in.

  • This will be one of 10 and we don't know

  • which order they're comin' in so.

  • What are some of your questions when people say

  • get out of debt, what comes to your mind?

  • - When people say get out of debt, I think about

  • credit card debt, the student loan debt,

  • all that negative debt that people use

  • for shopping and personal things.

  • - And is your idea of debt good or bad?

  • - I have a very negative idea or connotation towards debt

  • and that's because that's what we were taught

  • in the school system and the traditional education system,

  • that it's not so great.

  • But because I have, I work here and I have these resources

  • and I've gone to your seminars,

  • I understand that debt can be powerful

  • and it can be used in a good way

  • and it can generate you money.

  • - So for those listening, debt is

  • a four letter word for most people.

  • There are many people in my position,

  • so called financial gurus who say live totally debt free.

  • And there's other people who say cut up your credit cards.

  • And you know that's good advice for certain types of people

  • so you should definitely cut up your credit cards

  • if you don't know, you can't control your spending.

  • You should definitely.

  • But I don't know how people live without credit cards,

  • I don't know how you can check into a hotel,

  • rent a car, or go shopping, go out for dinner, you know, so.

  • But you should cut up your credit cards

  • if you're a shopaholic, that's good advice.

  • And the other thing about debt,

  • there's good debt and bad debt.

  • So this is gonna be the lesson today,

  • is there's good debt and bad debt.

  • And if you only have bad debt,

  • which I classify student loan debt as bad debt.

  • The main reason it's bad debt is

  • because it's the worst possible type of debt.

  • You see if I get into trouble as a business man with debt

  • I can declare bankruptcy and I'm clean.

  • But the trouble with student loan debt, you can't do that.

  • You know, it hangs around your neck

  • for the rest of your life.

  • So if you're a student, you shouldn't take on

  • student loan debt unless you absolutely 100% guaranteed

  • that you will commit to graduating.

  • Have you seen a lot of kids drop out of school?

  • - Oh yeah.

  • - And so the problem with student loan debt

  • is a person has to know what are they going to study.

  • - You know I have two friends, they're both medical doctors.

  • And they came out of school with $500,000 in medical debt,

  • I mean in student loan debt.

  • But they paid it off in five years

  • because they're medical doctors.

  • They had high paying jobs.

  • And so they delayed having families and all this

  • and they're whole objective was

  • to pay for becoming a doctor.

  • But I think you have friends who have

  • no idea what they're going to school for.

  • - Yes I have this friend and she's changed her major

  • like three different times, from business to now nursing

  • and it's a lot of money and she still has no idea

  • what she wants to do and she tells me,

  • she's like Alex I want to change my major from Nursing

  • but I'm already practically done

  • and I can't pay back this debt

  • so she's stuck with the nursing career

  • and she doesn't even like it.

  • - You know when I was your age, like I think I said earlier

  • is that my classmates were making like 110, 120,000 a year.

  • Which is not much money, but for my generation

  • if I made 20,000 that was a lot of money.

  • Do you know what I mean? Is this out of proportion?

  • So we were the highest paid graduates in the world

  • and my starting pay was about 47,000 a year.

  • My classmates were making three times as much as me.

  • But it's a choice we make,

  • I didn't really want to do what they did so.

  • I had to join a labor union.

  • As ships officers we had to join the MM&P,

  • Masters, Mates, and Pilots.

  • Which meant we were labor union guys.

  • So labor union guys make more money

  • and nothing personal but I don't want to be a union member.

  • So I joined Standard Oil of California

  • as a shipping officer and then

  • I didn't have to join the labor union.

  • But I only got 47,000 a year, that was the difference.

  • The difference is standard oil was still sailing

  • and a lot of those labor union jobs are gone

  • because the pay got too high.

  • - You know what I mean, so there's always a good and bad

  • and it's hard to understand that when you're younger

  • but I knew when I was 22 years old,

  • I didn't care if they paid me 100,000 a year,

  • I wasn't gonna join a union, it was just principle.

  • My father, poor dad, was head of the teacher's union

  • and for what I saw (laughs) I didn't want to be a teacher,

  • I didn't want to be a union member,

  • so it was kinda youthful exuberance on things.

  • But anyway, today it's harder because you don't know

  • what is this mysterious high paying job.

  • And even lawyers today are having a hard time

  • because they don't need that many lawyers

  • which is a good thing and there's artificial intelligence

  • which is replacing a lot of the high end jobs.

  • Like even accountants today, they don't need accountants

  • because artificial intelligence can do

  • a lot of the work for them.

  • So that's why for your generation,

  • student loan debt I would say is possibly

  • one of the most important things you need to decide

  • before you take on the debt.

  • Number one are you going to graduate?

  • And number two what are you going to graduate as?

  • - [Alexandra] Exactly.

  • - Any comments on that, anything you want to talk about?

  • - So my dream and passion

  • has always been to be an entrepreneur.

  • But when I started studying it,

  • I told my dad it was the last thing I would ever do

  • because I thought that what they were teaching me

  • was what I was gonna be doing on a day-to-day basis.

  • But these teachers don't, aren't actually practicing

  • what they're teaching and so they give you

  • this wrong conception of what you're studying

  • and reality is the traditional education, it's obsolete.

  • What mattered back then does not apply

  • to how you're gonna run your business now.

  • - You know today, if I was in your position,

  • you know I was pretty clear when I was about 15,

  • I wanted to sail the seas, I sailed huge ships

  • you know throughout the world.

  • But that was a dream of a kid, you know.

  • By the time I was 22, I was tired of it, you know.

  • I didn't want to sail the world anymore.

  • So I understand you know what it's like to keep,

  • what they call it is finding your way in life, right?

  • - [Alexandra] Yeah.

  • - That's not easy.

  • So I commend you guys and that's why we're doing

  • the Millennial Money is because as these programs progress

  • you're gonna find out, in my opinion,

  • you guys have a harder road to go through than I did.

  • For me it was really easy, there was a lot of jobs,

  • economy was booming and all this.

  • And it was easier so you guys have got to be smarter, okay?

  • So as far as the subject of debt,

  • there's good debt and bad debt.

  • Again it goes back to the financial statement,

  • income, expense,

  • asset, liability.

  • So debt falls in here.

  • So I'll review, let's say I'm gonna buy

  • you know everybody says I'm gonna buy a house.

  • And everybody says my house is an asset.

  • That's not true, your house is a liability.

  • I don't care if you put no debt on it or not,

  • a house is a liability.

  • Same as if you have a car.

  • A car is a liability and the reason for that is

  • as we've talked about earlier,

  • the six words that are basics

  • of financial education, financial intelligence,

  • income, expense, asset, liability.

  • And the two other words are cash flow.

  • So when you look at the average person

  • to have a job, money comes in here,

  • they pay for their house, and the money goes to a bank,

  • through a mortgage, so it's not an asset

  • because the cash is flowing out, so it's a liability.

  • So the definition of liability,

  • does it take money from your pocket?

  • And for an asset does it put money in your pocket?

  • So when I have a rental property here,

  • it puts money in my pocket.

  • So if I live in the house it's a liability

  • because even if I have no debt on it,

  • I still have taxes, depreciation,

  • repairs and upkeep, insurance and all this.

  • When I rent a property, I've done a good job buying it

  • and structuring it, every month it sends me money.

  • So I started off when I was 25,

  • I had a little one bedroom condo

  • and it put 25 bucks in my pocket,

  • it was a start.

  • So this was good debt, you see,

  • the debt also went out and paid

  • but it also put $25 in my pocket.

  • So net, net, I was making money from my little house.

  • So today my wife and I own 6,500 of 'em.

  • And every month 6,500 houses put money in my pocket,

  • my people who live in 'em love me and all this

  • because they have a place to live.

  • But all of this comes from debt.

  • So we don't, we have they're

  • 100% financed there, it's all debt.

  • So this is good debt.

  • And what makes it good debt is

  • are the two most important words,

  • cash flow. Does that make sense to you?

  • - [Alexandra] Yeah.

  • - Any comments on this?

  • - So numerous people my age actually think debt is horrible

  • and you just showed us a perfect example of cash flow

  • and how debt can generate income.

  • And many entrepreneurs use this formula

  • to make money on a day-to-day basis.

  • - So what most people do is they have student loan debt, SL,

  • and that debt is going out this way.

  • You know it doesn't put any money in your pocket.

  • You can say well I have a job,

  • well there's still you working for it.

  • So I don't work for any of this money here,

  • I do this job once, set the deal up.

  • Every year I add more and more and more in it,

  • I'm borrowing money from here,

  • it's coming here, and going this way.

  • So the debt is putting money in my pocket

  • and bad debt is taking money from my pocket.

  • So the problem is, if you're gonna use debt

  • you've got to be much smarter than this person here.

  • You've got to be very, very smart.

  • That's why I took real estate classes when I was 25

  • and I've never stopped taking real estate classes.

  • Because you buy a piece of real estate

  • and you make a mistake, this turns into a liability.

  • And this, if I get, the renter leaves the place,

  • this goes here that fast and the cash flows that way.

  • And it's going out of my pocket.

  • So it has nothing to do with real estate,

  • nothing to do with the car, that there was student loan.

  • It has to do with these two words here.

  • So good debt again, is debt when I borrow for this

  • and it puts money in my pocket.

  • If I had a car and I borrowed money from it

  • and somebody rented from me as an Uber driver or something

  • and I put money in my pocket it would be an asset.

  • My wife and I have a boat and you know most boats lose money

  • but our boat makes money because it's in a charter,

  • you know people rent my boat all the time.

  • So it has nothing to do whether it's a boat,

  • student loan debt, a house, a car, or whatever.

  • It has to do with these two words here.

  • And so most of the time,