27. THE POWER OF YOUR NET WORTH WITH LANCE JOHNSON

SUMMARY KEYWORDS

net worth, rentals, people, assets, money, clients, liability, pay, build, interest rates, real estate, lance, vacation rental, building, tax, work, wealth, bigger, advantage, future

SPEAKERS

Intro, Adrian

Welcome to the get rich, slow podcast. This is the stuff we and our expert guests Wish we knew a decade ago to get the most out of our financial life will provide you with insight into wealth building activities and practices that can expand your net worth exponentially. get insight from top professionals who will reveal how to build wealth the long way, work smarter, not harder and identify your financial blind spots. With over 25 plus years of experience as licensed real estate professionals and a long track record of winning for their clients. Robin Adrian will teach you what it takes to be an everyday real estate millionaire.

Welcome back future millionaires to the get rich, slow podcast. My name is Adrian SHERMER. And I’m joined today by my co hosts, Robert delavan. Good morning, and Lance Johnson. Good morning. Good morning, guys, today is very special, we’re kicking off what will be a series of videos that circles around a core concept that is near and dear to all of our hearts. And that is really just the basics of of net worth building and growing net worth. And then expanding from that forward into many of the avenues of expertise that we have available to us, we’re gonna bring on some guests that are specialists, experts within their fields, and teach you this is gonna be a big block of education, there’s an extremely high value in the knowledge that’s gonna be passed on here. And we’re going to talk to folks who have been doing this for Gosh, I think most of our our guests are going to be decade plus experience in their given fields.

Oh, yeah. Just a decade. By decades, not years, right. Yeah,

yeah. Once you break into the 10 year chunks, you know, that someone’s reached that point in their career. I mean, expertise takes a lifetime, right? It’s a constant state of improvement that makes you an expert. But once you’re on the road for this much time, you might be pretty good at picking up the signals on you know, what’s best and, and what might bite you in the butt. So the three of us are gonna explore this in depth and take you along for the ride.

So the Oh, and we probably should mention, so Lance, you’re on decade you’re pushing number three,

aren’t you? Yeah, I’m one of those guys now. 28 years in the business around everything up to 30 years. So I’m the wily coyote, but you started when you were 12? Right? Yeah.

So um, so let’s let’s dive in here. The the key on this episode is, you know, the power of your net worth. And the goal of this podcast is to kick this off this this series. So in the financial advisor world, Lance, will you just explain in general terms, the focus of this today’s fun podcast, which is an individual’s net worth?

Yeah, thanks, Rob. Um, so I tried to build everything down to a very simple basic scenario. So, you know, ROI, his tagline is building millionaires that by being brilliant at the basics, so whether you play sports, whether you’re in school, there’s always statistics that are followed. The one statistics that you want to file follow is building network. Where are you today? And where are you going in the future? So that’s the one statistic I look at to see the health of my clients. So real basically, what is net worth? a net worth is assets minus liabilities. That’s it. So you break down assets. Rob, give me some assets that you’re familiar with.

So of course, real estate, right? The equity in real estate specifically outside of the liability, which is the debt, but then also, you know, people have cash in the bank, people have cars, people have you know, RVs motorhomes toys, you know, all those things. Yeah, right. Well, um, you know, there’s, I mean, I have a watch on my, on my wrist, right? So Joey, you know, so many things, art it gets, there’s a whole universe of things, right? Those are assets to me.

So we break those down into some different sub components. So let me put it in terms of a house. We have what we call non qualified assets, which are not necessarily tax advantageous. So that would be things like a checking account, a savings account, a brokerage account, there’s you have to pay interest, dividends, taxes on interest, dividends, capital gains and things like that. I refer to those as the foundation of your net worth The foundation of your financial house. And so we’re trying to build a sturdier, better, bigger, fancier house, if you will. Um, then you add on that term real quick, non Yeah,

modified what’s qualified for what?

So non qualified just, when you have qualified, there’s some tax advantageous this to that investment versus non qualified is, you know, you’re either paying the interest that accrues the the dividends that it pays the capital gains that you have to pay when you sell. They’re, they’re considered non qualified, non tax advantageous, that’s not a term that we use in the financial, you don’t necessarily hear very much outside of that. Um, then there’s qualified assets. So Rob, we just went through a process of establishing a qualified asset for your company right.

Now, my 401k plan for a company,

Roth IRAs, yes, HSA is, you know, things that give you, you know, tax deferring those interest in dividends, or there’s either a tax freeness to them later on in life like a Roth IRA. So we compartment ties, those retirement assets that have tax advantageous pensions, things like that, as a qualified asset. And then we have real estate assets. Right. So whether it’s rentals, home, things like that, now a home can be, you know, a real estate that you make into a rental, it can be a personal asset, it could be, you know, a real estate asset, and we can put them in either category, I tend to put home in a personal asset, but, and then you have vacation rentals and rentals. And you know, in the future, we’re going to go into that as a separate podcast and advantages those things. And then you have personal assets, like what you talked about jewelry, you know, tools, art, you know those things. So, when we look at that, and you look at how to build wealth, it’s usually a percentage of your income. But if a percent of your income are going into those personal assets, those personal assets, the question is, are they making money for you in the future? Or are they they wants versus needs. So that that that total makes up your assets. And then you have liabilities. And when you have liabilities, you have things like credit cards and student loans and car loans and mortgages and rental mortgages and things like that. So the idea behind a net worth is the net worth takes into consideration all the things that amount to what you’ll be statistically recorded on. So you know, how well you building up assets? You know, the the checking the savings? How will you build up your retirement long term assets, your medium term assets like rentals, Roth IRAs, how well you’re paying down debts? how well your tax efficient with these investments? So that’s going to be a whole separate podcast in the future about what’s is it better to save money in taxes today versus the future? That’s a great question.

So your net worth is a snapshot of today of everything that you would consider the current value of an asset minus the current value of everything that you owe the liability, right. And obviously, you want that number to be as high as possible,

right, you want your essence to be as high and your debts to be as low as possible. So I think you bring up a really, really good component, Rob, and time in networth, has to deal with time a snapshot in time there. And so what happens is, when I look at evaluating other advisors, when a client comes in and meets with me, I’m kind of curious of what they did five years ago to now and how did they utilize that time to build their net worth? That’s where I get a lot of clients is sure they might have been good in one aspect of the business. But there’s so many different aspects. Just looking at the net worth, I can see what they did well and what they didn’t do well over time. And time is one thing you can never go back and get. So what I’m looking at for every client is how are you utilizing time to build this network so that money makes money for you and you don’t have to work as hard? And how quickly can we do it over time.

I feel like the that concept that you said right there is the time that you can never get back and then leveraging it moving forward. That is probably its own episode all by itself because we could literally Talk about specific things that you’ve seen an experience that were huge fails. And then conversely huge wins. Yeah. Yeah. And that that’d be actually a lot of fun. But yeah, for the why, why are you gaining the wealth? What’s, what’s the driver behind it?

Yeah, right in and you can break each of these components down in each for each client, you know, somebody could be doing really well for retirement. And there were $2 million, but they feel like they have no money today, now that sometimes, you know, it’s great in the future. But with Corona, will there be a future, you know what I mean? So there’s this balancing act for each client. And at the end of the day, I just want to make sure people understand how to move their numbers, so that they don’t have to keep working harder, they’re going to be working smarter, and by working smarter, which means they can do the things they want, but not have to work hard all their life. And that’s the concept and when do you want that time to be?

So what are a few examples of I mean, we’ve definitely defined an asset, but what are a few examples of a good asset to build?

Well, the reason you and I became friends, you’re in the real estate market is, um, as a financial advisor, I’m not all just about stocks and bonds, a very pro component of real estate being part of building your net worth. Right. So to say the least, yeah.

Yeah, yeah. I, and I’ve talked to other people have had this experience with you. And I, it’s interesting how much people walk away with, they just think it’s gonna be like, you know, all points and percentages and guidelines like that. I thought it was a much more interpersonal process. I mean, we talked a lot about when I came and saw you most recently Lancer over the, you know, past months, you know, goals, personal life goals, not just financial goals. I mean, it’s all the same thing, right? your financial life is your personal life in a lot of ways. This is not just a cash grab to grab wealth. And we talk about private wealth and the art of private wealth, and how do we teach that and pass that on to people. And it’s, again, it’s not so that you can get, you know, go to a nicer restaurant, necessarily, unless that’s your thing. But it’s so that you can you can do the things that you want to do in life and the things that bring you joy. And you put a lot of focus on that for me.

Yeah. So you bring up a very interesting point, a sexy point, if you will. So for me, it’s not about me telling you what to do with your life. It’s about me educating you about your choices so that you can live life the way you want over the time you have. Yeah, you see what I’m saying? So, so who am I to tell you as hard as you work for your money? Who am I to tell you what to do with your money, I think you should have some goals, some bucket list ideas, some things that you want to accomplish, and then we reverse engineer your game plan. And at the end of the day, when you fast forward, 10 years from now, you will get a much better win if I encourage you to make the right decisions, and you make the decisions. And you get the education and the knowledge so that when you look back, you live the life the way you want it to be. That’s what my job is. So for you, for some people, maybe they want all real estate and rentals or vacation rentals, right people, you know, they work for Nike, there’s no better company than Nike, they work for Intel, Intel is their thing. And they work for Apple, great company, right? It doesn’t matter. You get to choose what you want it to be. There’s many, many different ways to build wealth. The Millionaire Next Door talks about the people that don’t spend money on fancy things. And those people that you see every day that never drive a new car, never have a new suit, never. They’re multimillionaires, right. There’s a whole books written about it. And so there’s many many, many different ways. The question is, what’s your way? And so yeah, when we look at the net worth, it’s broken up to focus on many different things. And we will be able to work on those in different components and then we just focus on the things that’s best for the client.

I love speaking of that, so what are some typical assets that you see clients owning before they come to you? And what do you tend to steer them towards as good assets Tom,

so obviously, you get a job, you you know, some people are having kids later now so you’re you’re starting to see people Buy Houses before they even get married. You know, yeah,

we have a number of clients recently that we picked up in our group that have assets and they’re not married, they have a lot. We are seeing a little bit of a trend where millennials don’t necessarily with house prices being so exorbitant You know, when I came here and date myself, but in 1992, that right near in the Bethany area, that golf course there, Claremont, there was a street of dreams. And you can get a 5000 square foot house in 1991. For $450,000. For house Street and dreams house for 450. That same house is now three and a half million dollars. Right, right. And so it’s crazy a $450,000 home is in the Portland metro area is almost a starter home standalone. Yeah, in less than that it’s a townhome. So we’re seeing that. And so what you’re seeing is the millennials and not trying to label them, but they’re not necessarily looking to tie themselves down on a real estate as much. So there’s, you know, I see less people coming to me with homes, but generally homes would be one asset that they have already purchased or the family have purchased, right when they get their first job. And that’s kind of cool, but it seems like less and less, there’s a slight decrease in those percentages of people coming with first time homes,

do you do you find that say that Nike, Intel, you know, big corporate? Did they are they pretty heavy in like, employee stock? That sort of thing? Usually when they come to you?

Um, yes. Depends on I mean, you know, different companies performed, it depends on the performance of the company over the last couple of years, six, or seven away. Okay, um, but yeah, it’d be, they’re generally educated better about participating in the corporate benefits, if you will, okay. And so we see those, you know, employee stock purchase plans, they’re getting our issues instead of ISOs. They’re partaking in 401k at a higher percentage than I’ve seen in the past, all those types of things.

And I get a definition there, Lance or essence, I says, Yeah, let’s say that again. RSU is ISOs. What are we talking about?

restricted stock units, versus incentive stock options, versus n q O’s. And that’s just an evolution of stock options, and QoS, or non qualified stock options, and cue SOS? Cool, um, something to unpack

at a later. Yeah, yeah, their stock options? And would you count in there also, the, like, profit sharing is a method of different methods of profit sharing, essentially. Yeah. So

401k will have a profit sharing component in their programs, some of them, some of the bigger companies. And so they’re getting benefits of that. And it seems like people are getting educated on that. And those companies that we allude to the bigger companies, you know, they pay pretty decent, and so the overall income is a little bit higher, and so they’re able to take advantage of that stuff.

Yeah, it’s interesting, I feel like there’s a bit of a resurgence of that. It’s like pensions died. And then for a little while there, they were, like, here’s a ping pong table in the lobby. And then now they’re kind of like, okay, people are getting educated. And they actually they want these things. They they’re concerned about, you know, their future and what else the company can offer, not just in the break room, but you know, to help them grow their wealth. Yes, yes. Absolutely. So then the next the next piece of net worth, right, is the the liability, the negative side. So, Lance, how would you define a liability? And what are some negative liabilities? You know, that that to build, and can you see any liabilities to your advantage? So, you know, good and bad, right? That’s, that’s what we’re going for.

Yeah. So a couple things. I mean, people are going to buy cars. And so right now, you know, should I definitely, yeah. Should I, you know, take advantage of 0% financing, why interest rates are so low. Rob, you were faced with some of that stuff? No, I take advantage of a business scenario where you get some tax write offs. And so sometimes electric gets some tax write offs there. Right. And so you can use leverage to not use up your cash reserve if the interest rate is so low and it’s on a business. So there are some strategical scenarios where you can reduce your tax liability at a high percentage rate federal and state. And, and, and not use all your cash but get some tax write offs if you have to buy a car. And like I said is there are people that are faced with where they have to there’s, there’s a want versus a need. Right? Right. Right, if there’s a need, and there’s a way to reduce your taxes, but pay for it over time, so you can put more money into retirement assets. Those are some strategical cash flow items that would help build your net worth. Okay, that’s one, two, obviously, being in the real estate age, if I could put a down payment on a appreciating asset, and the interest rates are low, and my cash flow allows me to pay it down, then, you know, you’re gonna get, you know, that’s going to be its own 234 part series of the podcast of how to take advantage of rentals. So it seems like engaging you in a mortgage, and the efficiency of a mortgage for each client, buying real estate, which has gone up consistently over time. Right? That seems like a very good option. And I’ve had, I have a very cool story about that I tell clients about a person I met, who went bankrupt at age 50. And when I met him at age 72, he had 160 rentals over a 22 period of time, and it was just I met a medic jack Anna. Yeah, but he literally went bankrupt and had his last $30,000 other than his home. Investments, and and how we built, you know, 160 rentals, by flipping homes and stuff

like that. I think a lot of people would think if you bottomed out at 50, the best days are behind you. And you just need to get into survival mode. And it sounds like there’s a lot more that can be done.

Yeah. I mean, I mean, ever since World War Two, when interest rates after world war two interest rates were at their lowest points prior to the new low. And as interest rates, Rose, people build wealth, you know, and over the last 67 years, and all the way through the way, it’ll be like, Whoa, real estate, overpricing still went up. So I mean, it’s just a hard asset. We’re not making any more land, right? Where the global warming, we’re actually losing land. Right? So land is gonna be a commodity. And what you build on that land smartly, is an important component. What I what I personally put all my money in, in real estate, know what I have a significant portion. Yes. And I think balance, it’s like, it’s like asking a client to eat broccoli every day. And that’s all they ate. Broccoli is a very good food group. But there’s a reason why there’s five food groups. In investments, there’s five investment groups, and I wouldn’t put all my investments in one egg. And I wouldn’t eat only broccoli for the rest of my life. It’s the same thing, right?

So what I’m what I’m hearing is from a liability standpoint, which is basically for the layman, money you owe for which so the bad things would be like consumer debt, credit cards, you know, those things where you’re imperii, living outside your means to use to utilize those, the good things are connected to like mortgages connected to an asset that’s actually appreciating. And I would say maybe somewhere in the middle, but probably more on the bad side would be like auto loans where it’s on a depreciating asset. The only way that’s good, is if you actually saved more on taxes by a purchase, which is more of a business owner thing than say, an employee, as a necessity, right? lending borrowing for a necessity, right? leveraging a liability for something that is going to contribute to your wealth. If I’m driving to work instead of biking, I might be a little less sweaty, I might do better at my job. I don’t know.

Right, right. So I mean, you can break it down a couple things. When when your liability is not tied to an asset. Generally, the interest rates higher, there’s less tax advantages to it. You know, it’s a short term need. And so people need to figure out how to manage that appropriately, or consolidate and so forth or pay it down quicker. So there’s all slew of strategies like a snowball effect on your short term debt. You know, refinancing understanding the rules behind it, but general rule of thumb is if if you have unsecured debt, the interest rates higher and it has a lot of damaging effects to your building your future net worth Because you’re paying down that it means you can take less advantage of, of tax advantaged stuff. And taxes is one of the you know, once you pay a tax bill, it’s very hard to go back and get that money. Right. All right, it’s gone. Yeah. So, so I spend a lot of my time educating clients about what their tax liabilities is going to be in the future, hence why, you know, we own a tax company, because we get dragged into conversations around that. And tax efficiency becomes the number one driver of building network, if we’re paying, you know, taxes are like a liability, and it drains you from the ability to pay taxes. So it’s educating

people at the bottom of the bucket that you’re trying to port fill, it’s

Yeah, it’s one of your biggest expenses. So we have to educate clients about, you know, how do you want? How do you want to play this game? And and how do we minimize taxes?

Yeah, that’s great. And this all ties, right, this is the same, it always ties back to some fundamental, and that’s right now penny saved is a penny earned, it’s as good if you can say $5,000. In taxes, it’s as good as making $5,000. So attacking it from both ends, and being, you know, fanatical about cutting costs on the things that that don’t matter to you, you know, we already touched on it. If you’ve got something you really care about, if you like, collecting a few guitars, or you got a you want your card or not. So you want to have that, that depreciating asset in your garage. There’s no problem with that. That’s not at odds with the idea of wealth building. It’s not an all in or all out, but you pick your things. And then ideally, you attack, fanatically attack things that subtract from net wealth. And that’s and lean into things that build it. Right.

Yeah, I want to go back to Rob’s question, because we only got to one component. So obviously, real estate, I’m a big proponent of it with interest rates being as low as they are with the terms that they have now, even though real estate is high seems exorbitantly high right now. You know, the question is, if it’s held for a long term, and you can manage cash flow, and somebody can pay for it, then that’s still a smart liability. And with people getting paid more and higher, and their networks growing, we have this ability to use dividends to pay down that quicker. And I think it’s I think real estate, Vacation Rentals rentals are still from an asset class are still a good asset class to be part of, you know, there’s always times in the stock market in the bond market in interest rates in real estate, there’s better times to buy. So one of the things I’m doing is if people want in, and they’re feeling too, that the prices are too high, you know, the world works in averages, so the law of averages, and we’re above that average in real estate. So when that law of average corrects itself, and real estate goes down, I’m preparing clients to buy in at that point in time. So we’re saving in other areas, getting their networks really strong. So that, Adrian when you look at qualifying for a house, you know, they’re going to be as strong as you can be to put in the best offer at the right time. And we just preparing for people, there’s always a time a good time to buy right now, time to sell. But people buying now still can make money. Right?

So the last questions I would have for you, Lance is if you could give one piece of advice to our listeners in terms of building like that strong foundational net worth, you know, assets higher than liabilities and growth, squash the liabilities grow those assets, what would it be?

So if you’re starting out, you know, look at getting a house, you’re not wasting money. And on rent, right? Yeah, Andre, and so forth. Even if you had to have a smaller house, a starter home that you know, you’re not going to be there three years from now, I I wouldn’t go for a bigger home, I go for a smaller home. And you know, that would become a good rental. So if you’re going to get into home, you’re getting into a home that would ultimately become a future rental for you. But continue to do it with low interest rates to obviously, any 401k that has matching, profit sharing. You got to get in as soon as possible because that’s free money to you. And there’s tax advantages and you get to choose whether you use a traditional 401k or a Roth

but please maximize those, those vehicles, will you will you dumb that down for us like, like, just give an example of somebody making $50,000 a year and a flow. Okay.

So, um, you know, we have established some 401k is for clients. And, you know, the employer was gracious enough to build what they call a safe harbor plan, which means in order to allow the in order to allow the 401k to allow the owner to maximize his contributions, he has to build what they call safe harbor plan, which means there has to be at least 4% matching to that to the rank and file. And so, if he does that, then he’s not limited or she’s not limited to their contributions. So a lot of people we put a safe harbor plan well, that 4% might mean that you have to put 5% as an employee to get the benefits of the employer matching 4% that 4% is free money. And, and if that

exists, free pre tax money, too, right? Yeah.

Well, it’s all it’s pre tax. Right? So if that exists, where in the world do you get free money? Yeah. Right. So we’re not robots.

So So let’s say somebody makes $100,000 a year, right. And the employer, which I am one, and you’ve built this system for me, says, I will give you five if you contribute 5% of your own money. So five $5,000. Now your income is $95,000 instead of 100. From a tax standpoint, right, but in addition to that, now the employee or is going to give you $4,000. So by saving five, you now have a nine for that year in your retirement account. Is that accurate? That’s correct. And you got taxed on instead of $100,000. You got taxed on 95?

Correct. So like the biggest no brainer, I mean, just stupid, no brainer to not do it. Right. Yeah,

it seems, it seems like you never would pass up that money. And that would, that’s a great example where somebody else’s make building your personal net worth. And that exists in a lot of employers out there right now,

right. And just I mean, I’ll put you on the spot. This is not scientific, but what percentage of people don’t take advantage of that of your just your typical employee,

if they’re educated, you know, it, it depends on the business. So if the business pays a bunch of, you know, minimum wage stuff, minimum wage, people won’t, because they don’t have the cash flow to do it. Um, and that gets the issue. And so if I find that that group makes minimum wage with a family of two it their cash flow crunched in Portland, Oregon, and but he’s still got to try to figure out how to take advantage of that. Because that is, again, free money. If you know, you’re working at Nike and Intel, and you’re an executive, obviously, that’s not going to be as much of a cash flow crunch. So they pretty much take advantage of that. So as much as we can find things like that out for any, any type of client, and they’re not taking advantage. I mean, I love to manage your money, but I can’t beat that free money. And so I would very much want to be having them take advantage of that as that

for a vote of confidence that you wouldn’t even suggest they move out of that, that it wouldn’t

be valuable. Yeah, it wouldn’t be fiduciary responsible. You tell somebody to not put money in that when it’s free money. So we would always 100% of the time guidance to that scenario. If that was all they could do. That’s still a great benefit to them. Right? It’s free money.

Yeah, I’m free money that isn’t taxed while it’s being invested to and that’s statistically grows, right. I mean, it’s, it’s more than the 4%, obviously. Yeah. Well, you could do the fourth picture.

Yeah, I mean, this is where some of the planning comes in. Somebody on the lower end of the income scale, doesn’t pay as much taxes so they may want to put their contributions their 5000 in a Roth 401k. But the the matching might be pre tax, and now you got the benefits above and we can, you know, that’s a whole separate issue down the road as far as all the rock Yeah, yeah. The other thing I want to touch upon is and Rob knows this about myself. I’m a big proponent of vacation rentals. One of the reasons for it is you per day, rental rate is a little bit higher, you know, I use a property manager. So I don’t have to I don’t have the time to do it. Some other people that have more time, they they can do it themselves if it’s local. So you have options. But anytime you can have a rental, or a vacation rental, and somebody else is paying your mortgage, and that acid is growing over time, and there’s limited land resources, and why like the vacation rental is yes, there’s a little bit of use, I can use under the tax laws, right? I like that, you know, and

it’s a nice perk, it’s if you got some stocks or bonds, you look at them and go Google there. There’s more money there than last year. But it’s pretty cool if you can go and jump into your investment.

That one time I talked about that I met at the end of his life. That’s what he did. He built rentals, vacation rentals, 160 of them, he was making a boatload of money at age 72. Yeah. Because two thirds of his rentals were paid off by other rentals. And he was just bringing in money left and right to that. I mean, he made more money at 72 than he did when he was running somewhat of a successful plumbing business. He was a gracious guy, so he always had a great heart. So always fix things for friends for free. But yeah, it was it was impressive watching and the watch him snowball that into at 50 having zero rentals to having 160 rentals 20 years later, that was just amazing to me. Yeah,

I can echo as someone who my job is literally analyzing financials, you know, I’m Lance and I, we have a lot of overlap in that. And you start to pick up patterns, right, you start to realize that, that within certain groups, there’s there’s certain patterns that happen. And one of the big paradigm breakers for me was realizing that there are certain items that I would have thought this is a luxury item, a beach house seems like the kind of thing that someone buys when they turn, you know, 65 they’re retired and you know, they they cash out, and they finally get that beach house and they get to own it. And then what you learn in the reality is that a lot of people who have that appearance of well, I got three vacation properties, those are businesses that they’re running, that’s not you know, it’s not just a luxury item that then sits idle, you’ve got to put it to work. And obviously, there’s increased costs, right, there’s greater wear on a vacation rental we can we can chip into to how it was all breaks down. But you know, owning properties and appreciating asset and yeah, if you got even just covering your mortgage, you know, you’re getting paid because you took the risk. And it’s not that different in my mind. You can correct me if you think I’m you want to disagree, but to getting a loan and starting a business to running a restaurant downtown or you know, whatever it may be that you’re going to leverage yourself. Even the biggest companies in the world are borrowing money, because they know they can make more money off of it than the rate of interest that they’re paying. And a vacation is no different from that in my mind.

Yeah. You bring up an interesting comparison. You know, the risk of running a restaurant business today is much much riskier than owning a good point, Penny, rental on the coasts, even if there was a potential tsunami.

Yeah, if your restaurant goes under what do you I mean, unless you bought the building, right, which again, it’s just real estate. You don’t get anything but a bill and you know, maybe you can declare bankruptcy. If your vacation rental doesn’t work out? Short of you know, yeah, exactly. Tsunami conditions or something, but obviously get a good insurance, we’ll dig into that too. There’s ways to cover yourself. If it doesn’t work out, you can cash out your chips, and you can generally breakeven, you know, more often than not we see profit, it’s fairly rare that someone loses money in these situations, you really have to not do your due diligence and, and kind of, you know, be the victim of some really, truly terrible luck to

not sufficiently positive. Yeah, statistically in the past. In the past, he if you had it rented the big differentiator there is that you alluded to, was that there are some people that look at that vacation, that vacation home, as their personal vacation home, I look at it as a vacation rental, and I will rent it just I would rent my own place. Just as well as other people would to use it if I could more. And I just treat it as not my personal home. It’s It’s It’s a rental, it’s a business and right. So that’s the difference and we don’t have personal pictures up there. But I know which place I’m going every time I go you know, every time Go to that rental. Right? Yeah.

Okay, well, fellas, this one a lot to unpack here. Lots of future episodes.

Can I summarize in a sense of obviously, we have to you have to track your net worth, that’s a whole nother episode. Yes, but focus on obtaining appreciating assets. And basically what I’m hearing from you, Lance is start steering away from depreciating assets. And, and obviously, the liabilities that go through them. And is that is that a reasonable enough summary? Like the baseline, you know, peanut butter and jelly that that the average person can eat?

Yeah, I mean, the baseline is know your net worth now, no, you know, plan out what you what you’re doing, what your net worth would be. So we can track it. That’s what we do in financial planning. And then, you know, what decisions can we help clients make, that would improve that net worth, at a faster rate, and that’s what we try to do in our financial planning meetings is, I don’t want to say predict the future, we just want to improve the statistics that your net worth will grow by using utilizing good decision making. And then over time, if you make those good decisions, you’re gonna have a higher net worth.

So the Let me see if I can say on correctly, creating millionaires by being brilliant at the basics is the right I nailed it. Let’s end it there. Thank you, Lance. Thank you, Adrian. Lots to unpack here. Yeah, I’m looking forward to our next one. We’re gonna I think we’re gonna add probably more episodes as we go, this is gonna

be so much for form for the rest of the next few months really, of content is going to be rich in in what you can in you becoming rich. Yeah.

It’s awesome. Thanks for being part of this. It’s great to be part of like a series that could educate people on the basics instead of I hope we dumbed it down enough to make it so people can take nuggets for it. This was a lot of fun. Appreciate it. Yep. All right. Thanks. Thank you.

We’ll see you guys next time on The get rich slow podcast. Thanks a lot.

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