Your Money Questions Answered... Money Mentoring Over Coffee

 It's time for another exciting episode of Money Mentoring Over Coffee, where we get down to the nitty-gritty of all things finance and provide you with expert advice. We've got interesting questions pouring in through our hotline at AskMelNow.com, and we're ready to tackle them all. 

Get ready for a no-holds-barred conversation about financial security, emergency funds, and so much more. This episode is all about making sure you’re properly equipped to handle your money and stay on top of the financial game.

Whether you're just starting out on your financial journey or you're a seasoned pro, there's always something new to learn when it comes to personal finance. So, sit back, relax, and let's dive in!

If you've got questions of your own, make sure to hit me up on my question hotline at AskMelNow.com.

IN TODAY’S EPISODE, I DISCUSS: 

• Should I pay off my credit card with a HELOC?
• Investing in private lending with a personal guarantee
• Divorce and money issues can haunt you
• Is doing a franchise a good idea for investing?
• The importance of communication when it comes to money
• Where should I be putting my emergency fund?
• Buying a house with roommates
• Is it better to save for retirement or a house?
• My thoughts on student loans
• And so much more…

RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:

• Building Wealth in a Recession
• Creating a Wealth Mindset For Success ft. Brad Bizjack
• Creating Wealth & Freedom Through Acquisitions ft. Nick Bradley
• Your Financial Advisor May Not Be Telling You the Truth!

TAKE THE FINANCIAL FREEDOM QUIZ:
Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com 

OTHER RESOURCES:
7-Day Money Plan Workshop: https://www.TheMoneyPlanWorkshop.com
Affluent Entrepreneurs Private Facebook Group
https://www.melabraham.com/group/

CONNECT WITH ME:
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Transcript

Mel Abraham  0:00  
Welcome to this episode of the Affluent Entrepreneur Show. This one is a special one. This is one of my favorite things to do. And this is a Money Mentoring Over Coffee. This is where I got to talk to each of you and answer your financial questions, your money questions, your business questions, even your life questions. So this episode is one of those q&a episodes. Enjoy it. And if you have questions that you want me to answer to bring you on live even go to askMelnow.com And I'll see you. In this episode. This is the Affluent Entrepreneur Show for entrepreneurs that one operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth. So you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom. Because that's what it really means to be an affluent entrepreneur.

Mel Abraham  1:08  
Welcome to this edition of Money mentoring over coffee. Hopefully we'll have some questions coming in some things to talk about. I see people let me know where you're coming in from say hello. If you're on Facebook, do me a favor, put your name in because sometimes it comes up as Facebook user and I want to be a little more personal than that. So Charlotte is here. Awesome. Awesome. So so good to be here. Yesterday. Yesterday, I got a chance to celebrate with my beautiful bride her birthday and we're celebrating again tonight. She actually says that. It's a big birthday. So therefore she gets to celebrate the whole month. I don't know you let me know you should be able to celebrate the whole month. i My guess is I know what the answer is going to be from y'all. But that's okay. Hello from London, one of my wife's favorite places. One of the gifts that I gave her for her birthday is a trip to Scotland. We're going to Scotland in October. So those of you that know places that we should be seeing in Scotland, let me know. Because we've never been so. Alright, so here's the thing. I want to be able to answer some questions for you. If you have money questions, we just the market just closed. It was kind of a crazy week. Powell spoke and interest rates went up a little bit. And so so things may be happening for you. I don't know we're in February now. So that's where we're staying in Edinburg. So we're in February now one month of the year is gone. Where are you at? Where are you at on your financial goals? Where are you at on your goals? Where are you at in your business? Where are you at in your relationships, your health, all those things? It's time to start looking at these things and say, Hey, am I on path? Or do I need to make some changes. And in really start to to move some things in, in a different direction. Look, we always have the opportunity to adjust. In fact, I had I did something this morning. When we were talking about this whole idea of success, success is not something that just lands on top of you. Success is something you create and you carve out over time, that is something that that step by step, all of a sudden you have those successes that come into play. Whereas too often we think that it's just something that that just happens, it happens because we're on a path it happens because we're we're willing to learn it happens because we make mistakes. Trust me. I've met a lot of mistakes. And if you don't think I've made mistakes, talk to my wife, she'll she'll give you a list of them. So I'm in. But the fact is, is that the greatest lessons come out of those mistakes. I've lost more money than some people will make in a lifetime. But I've also built it back up and we've surpassed it and so I learned some lessons, the things that I teach the things that I talk about, with respect to money and finances and, and investing and, and building businesses. Most of that came from my screw ups most of that came from the scars and the bloody nose and the skin knees that I got because I screwed it up. So listen, if I had to pay for it once there's no reason for you to pay for it. That's why we talk about these things. And so these sessions when I go live are a time for us to have a conversation if you have things that you want to talk about success business money, then you let me know post the questions in there. Drew's in our Thank you drew man. So post the questions in there, and I'll make sure that I answer them if you are on Instagram ran with me and you have a question. And you feel like coming on live with me. You know, click that want to go live? And I'll bring you on. All right, we'll have a conversation around it. I've got some questions that have come in that I have, I have a separate I have a separate tape site called AskMelnow.com where you can go and submit your questions and I collect these questions and I'll do these lives and and start to answer some questions and and the question is, a lot of them are money related, but they don't have to be money related. I get some that are around business, entrepreneurship, achievement, you know, productivity, living your fullest life, those kinds of things. That that come into play, and, and everything. So I'm totally totally game to have those those conversations and see what we can do. Alright, so let's do this. I've got some questions come in high interest interest. I think it's a high interest credit card debt, use a HELOC to pay it off. Morgan low winners, I low went low and hurts. Hope. Hopefully I did let It's Morgan. I did get that right. So should you use a HELOC to pay it off? Here's here's the thing. Okay. First things first, if you have high interest debt, interest credit cards, or you're carrying credit card balances, I want you to understand and you probably do, if you're carrying it, because you're seeing it you're experiencing it is that that we are in a rising interest rate environment, the Feds just raised the rates and other quarter percent. That means that your credit card balance, the interest rates on the credit cards are going up, they're going to be well into the 20s which means that it's going to get more and more expensive for you to pay off those. Those credit cards now the challenge is this is when you swap a credit card balance for a home equity line, what you're doing one of the things you're doing yes, you're gonna probably reduce the interest rate. However, at the same time you are swapping unsecured debt. Okay, credit card is unsecured meaning that it's not attached to any assets and they can't go after the assets. And you're swapping unsecured debt for secured debt because now it's going to be against your home. Now, if you can't make the payment, they can foreclose on your home. Not only that, you're usually swapping short term debt for long term debt, which makes it almost more affordable. And you kind of go, Oh, I'm okay because the payments are down. But what ends up happening, if we don't pay that thing off is now we just extend and keep building the debt that is now secured by the home. And or that is got a different payment structure because it's a longer term payback. So I'm not a huge fan of it. Here's what I'm going to tell you to do. Morgan, if you don't have this already, and you can let me know if you do. Do you have an actual payment plan in place right now that is formal that you are doing it now I don't mean formal the credit card. I mean with you, with you, if you don't, I want you to go to Mel abraham.com forward slash no debt, Mel abraham.com forward slash no debt, you're going to download a free spreadsheet, okay? That you're going to be able to put in all of your credit card debts, and the payments and the interest rates and you're gonna be able to play around with which is the best way to get it paid off the fastest, this cheapest. And it will spread out all your payments and tell you exactly what to pay each month. And there's a short training video where I explain the whole thing to you. I want you first on that type of a program. Second, I want you to you I want you to make a call to your credit card companies and negotiate the the terms of your credit cards, they are negotiable. Now, if they don't at the very beginning, want to negotiate, then you escalate it. Let me talk to someone else. Let me talk to someone else or you call back. I actually did an episode on my podcast on my show on YouTube. Look for it about negotiating with your credit card companies. So before I put anything against a home, I would negotiate and I would set up a payment plan and then the third thing I would do is I'd start looking at my expenses and say what can I cut that I'm actually not using and use that to start paying these credit cards down. So hopefully that helped a little bit Morgan but I'm going to try and get you to to avoid putting it against the house. Okay, let's do this. Right. How do you feel about 100k investment that pays one 1% per month that also has a personal guarantee with it. Drew tell me is the personal guarantee on on their side, I'm guessing you get a personal guarantee with it. This is a real estate, this is in real estate where you also hold a first position on the underlying real estate. So you're a lender, you're a lender, I do these types of investments all the time drew. So what what Drew's talking about, I think, and you'll he'll, you'll let me know is that he's making a loan. Again, he's becoming the banker, he's putting a mortgage on a property. He's getting 12% interest rate 1% per month, and he's getting a personal guarantee free tea from the owner of the property, I kind of do these things all the time. The question really is, what's the loan to value related to it so and for those that don't,

Mel Abraham  10:59  
that are new to this, when I say loan to value, let's say that the property is worth $200,000. And he puts a loan on it of $100,000. So 100,000, over 200,000, that means it's a fifth 50% of the value is in the loan. So so that's a 50% loan to value. Obviously, the higher the loan to value, the more risky the investment is, if if Drew's making this investment of 100,000. And the loan to value is down at 50%. It's a $200,000 piece of property, he makes a loan at 100,000. The property itself could go down by 50%. And he could still get his investment out by foreclosing and selling the property. And so the lower the loan to value, the lower the risk Plus he's got a personal guarantee T I've done these things. So I think it really depends, but I I kind of like it and correct private lending. Yeah, that's what I've done that we can talk more about that drew but I think that it's it's totally some I've got a couple of them right now that they just pay me every month, every month. So cool. All right. Let's go back to this question. financially fit divorce. She says, Can we talk? Can we talk live about divorce and money? We can chat. Okay, tell me what it is. Hey there, how are you?

Pam Freeman  12:28  
Good. How are you?

Mel Abraham  12:29  
I am doing well. Yeah, I'm gonna have to repeat what you say. So everyone here on Facebook and everything? Is there. So So first off, let's let let everyone know who you are.

Pam Freeman  12:42  
My name is Pam Freeman. I'm a certified divorce financial analyst. I've met you before through growth day. Yeah. Yeah. Always, always excited to hear what you have to say about everything financial.

Mel Abraham  12:54  
Oh, absolutely. Thank you. Thank you. So. So tell me what's going on.

Pam Freeman  12:59  
So well. I mean, we're having lots of follow up, I have had a divorce case. It's not my case. It's a friend of mine, as it was also a CDFA. And six years after her, Boris, her husband has filed bankruptcy. She never changed the warranty deed on her house. And now she might lose her home.

Mel Abraham  13:23  
Yeah. So so

Pam Freeman  13:26  
we've been talking a lot, not just about the numbers, but about the follow up of when you make a decision to do something financial, whether it's splitting from a partnership or splitting from a relationship. It has a component you gotta follow up.

Mel Abraham  13:42  
Well, so so this is this is huge. And for those of you on Facebook, let me explain what she just said she's she has a client or someone that she's working with, that went through a divorce, and they went through a divorce. And in the divorce, they do a property settlements. So someone gets part of the home, someone gets the business. So it gets these assets, so they do the settlement. The problem with the divorce in a lot of cases is that there's a lot of legal things in there. And if you don't follow through with it properly, to make sure that everything is clear and clean, you stand to have a problem and this person didn't follow through on the house to make sure that the x was no longer on the home. And the X six years after divorce is declaring bankruptcy. And now this home is getting tossed into a bankruptcy that it should have never been in and and here's where I see this. And this is not just with divorce. I see it when people decide, I just did an episode on on should I get a trust and living trusts and those kinds of things. And so what the tendency to is that I see things where we make half the move. We don't make all the move. We create the living trust, but we don't put the assets in the living trust so we don't get the protection or we don't have the The benefits of living trust, we get a property settlement for the divorce. But unless we get the AX off the property and get the loans modified, or something, you have a problem, because here's what's going to happen. And I've seen this happen also where I, I, you know, I'm not, I'm happily married 1213 years, she told me that divorce isn't an option murder is, so we're good. And so, so someone gets divorced, and the other person takes the home and there's a loan on the home, that is actually a loan in both parties names, and they don't rewrite the loan, they don't get the loan redone. Well, down the road, the person that got the home has been paying the mortgage, but then they decide, I'm not going to pay the mortgage, I can't pay the mortgage, and it goes into default. Now your name is still on the loan. And the divorce no matter what the divorce settlement says, They don't govern what the bank does, and the bank has to you got to you got to do something to make sure that you're not still obligated for things that you think you cut the strings on.

Pam Freeman  16:18  
Otherwise, duration, well, I got, I've got another couple a couple of years ago, wife moved in to your husband's house. So he had the house is separate property. But she didn't know anything about separate property. So she moves in, and he had put down money on the house. So she agreed, because lots of couples have informal agreements with each other. She said, hey, I'll pay the mortgage mortgage until it's equal to your down payment. And then we'll start splitting the mortgage. Five years later, they get divorced, she claims the house is separate property. And she only got back the principal portion of those mortgage payments.

Mel Abraham  16:59  
Look, I, here's here's the thing. And this may sound so unromantic, and I am an I am, I'm a hopeless romantic, I've got a great relationship with my bride and everything. But there is there is a financial structure to your relationship. And the tendency is to push that financial conversation either off or allow one person to handle it or not, it's one of the one of the biggest things that I I will tell couples is that I want you to have conversations around money doesn't mean that you all have to be so intimately involved unless you want to. But my wife and I talk about the money all the time. And, and so like it or not a marriage or relationship, especially when you're cohabitating or you know, are married and living. There's a financial arrangement to it. And so you can't, you can't just automatically assume that well, because we're married, we don't have to worry about that stuff. Now there's the reality of life. And so I think we need to, to be aware of that. And especially if you're coming in second marriages or third marriages or you got kids, there's there's something to to have a conversation doesn't mean that you have to do anything, but the worst thing that we can do is not have the conversation.

Pam Freeman  18:35  
Absolutely. Like, it starts with a conversation on need, you're gonna get married, if you're planning on it, there is a financial component on it, you just have to just not be afraid of it. Trust me if you're trusting him enough to marry him trust enough to have the conversation.

Mel Abraham  18:49  
Yeah, absolutely. Absolutely. And I have an episode on my show that I want everyone to go listen to about a couple who I have them do this. And she was a little reluctant to it. But it brought them closer together.

Pam Freeman  19:05  
Exactly. 

Mel Abraham  19:07  
I brought them closer together because the that that conversation wasn't about. It wasn't about the money, it was actually about their vision from life. And now all of a sudden, when you put you both of you in the same ship in the same boat, to to this horizon that you're co creating, then the conversation around money really is about money but as a subset of the vision for life and not about money. It might because the people, they'll sit back and say oh, so I'm supposed to have monthly meetings with my spouse and go over the budget. So yeah, think about how good this is gonna go. You're gonna sit down and you're gonna tell your spouse, you know, he spent $10 too much last week, or is it? No one there's there's nothing productive about that. But when we're talking about The vision for your life and how we are together co creating that existence. This is where things start to, to really start to take hold. When you start to look at, I'm 60, I'll be 62 this year. And my wife, I won't say because she looks 22. But she's not. She's 23. But, you know, but my point is, is that we're looking at at, hey, what's this new season in our life? We've got to now we have to we just got another granddaughter. So we've got our second granddaughter that's like, two weeks old. So we've got we've got these grandchildren, what is the vision? Like? And how do we continue to have these conversations and have conversations with our children, and at some point our grandchildren, so they're financially literate, financially astute, it's not about the greed and the money. It's about equipping, and educating and empowering. So they have the capacity to be independent. of, of, you know, whether it's government or anything else to be able to do things in a different way. So, absolutely, so fun to have you on. Thank you so much for coming on.

Pam Freeman  21:22  
Thanks for having me on now. All right,

Mel Abraham  21:25  
Charlotte is asking, What do you think about joining a franchise with a pay as you go option Is it risky, one can buy out after three years, five years, Shawn, I need a little bit more information. Okay, let's just talk about franchise in general. The reason we buy into a franchise is because we want to have the ability to, we want to, we don't want to build from scratch. And when we buy into a franchise, we actually get their operations, their systems, their processes, their recipes, their everything. So it's proven. And and for that, you end up paying a royalty. You pay a franchise fee. Also, though they can they can tie your hands on things. So I think that that is really important for us. When it comes to that franchise, what does that look like? What are the terms of the franchise? What is the lock in? Are they locking? What you can do? Are they going to allow competitors into a regional space? What is when you say pay is a go option? Is that? Is that mean? That they just take a percentage of whatever you make? Great, that's possible, because then, you know, are you on the hook if it's not successful? But how long do they take that percentage for all those things start to come into into the evaluation of it, I'd love to get more information Charlotte and and talk through it a little better. So I can give you more direct input. But I think that that it's it's an important thing to look at all the details, make sure that you have conversations with other franchisees that have done it, what it is been like to be a franchisee How was the training? How was the support? How was the reporting How was the the payouts were there any issues, all those things come into play. And depending on the franchise, some of them are more risky than others, some of them are more established, some of them have a success pattern to it. That, that they know they they go into certain locales, with certain criteria, certain demographics, and they make it that way. So hopefully that that helps. All right, Kelly, I am loving this conversation. Communication is so important. Kelly, you know, this is something that we don't do with money with wealth is we don't have the conversations. Communication is huge. I, I I think communication is one of the most powerful skills that we can ever nurture in ourselves. And I didn't understand this when I was going to college. And the fact of the matter is, I was going to be an accountant. So all I figured I needed to know his spreadsheets and columns and rows and, and and mathematics. So I didn't have to worry about communicating but because they started to speak and because I started to testify in trials as a financial expert. I realized that communication is huge, but not as a huge was a huge in my professional career. It's huge in every aspect of our life. Think about it. All problems. No prob let me put it As with no problems will get solved if we can't communicate in the relationship in society and communities in the world. I mean, if we look at some of the problems that we see around us, most of it comes down to the fact that people aren't communicate, that can't have a reasonable dialogue that comes to some productive conclusion doesn't mean it's your conclusion. But we come to some productive conclusion and move on. But we don't, we choose to not have the conversations and we resort to something worse, it causes dissension, it causes distrust, it causes wars, it causes all these other things. And yet, the only way we can solve it, ultimately, is through communication. And when we reduce that down to just our own personal lives, your ability to communicate, whether it's money, whether it's relationships, whether it's health, all of that stuff, is going to change the richness of how you experience those relationships. And I think it's huge. So chances Okay, I have the contract details and they have a meeting set for me with the franchisee giving training. Thanks. It's really okay, good. Good. It is a pet support business for pet parents and veterinarians. Oh, don't get me caught up in that I will. I will. We, with our little Buddha, all of a sudden was like we want to take in every dog. So but I can see that pet support this. I love this. All right. Good. Let me see. I've got a couple of questions I want to answer. Before I let you all go. If you're if you're cool with it, and if other questions come up, please, please let me know. Say hello. So the first question this one is one says, Do you recommend? Where should basically the question is? Do you recommend having the your emergency fund your piece of what we call a peace of mind fund? In just a traditional savings account? Or can I use it in other types of accounts? For instance, a health savings account, flexible spending accounts. So all those things. So here's here's let's just talk about what the peace of mind fund is for. And we are in a time of uncertainty, we're on a time where there's going to be some, let's just call it volatility. Do I think you know people are some people are saying we got to recession, some people are saying we don't it doesn't matter. Okay, in the sense of, if we're doing Smart Money, smart financial decisions, they will work in recessionary times just the same as they will work in non recessionary times. I think that the important thing is to really start to look at it and say, one, I want to have some liquidity, okay. That's the purpose of having the emergency fund or the peace of mind fund is to have the liquidity to sustain yourself during a downturn to sustain yourself God forbid there's a health issue to sustain yourself if there was a loss of job so you don't have that stress and strain the fact of the matter is, is that financial stress on a relationship is one of the biggest stressors in the relationship there was a study that that came out where it ranked it as one of the top five stressors in people's lives. And one of the ways to take that stress off is to make sure that you have liquidity to sustain yourself when you start to have potential challenges. And so the emergency fund or the peace of mind fund as we use it is there to do that now that doesn't mean that you park it in a corner at 1.1% You know interest rate and you get nothing on it as much as the interest rates have gone up the good part of that is that the savings rates have gone up but you would need to go to a high yield cash account at a bank and so I would I would put my emergency funds in a high yield cash account I'm gonna give you three criteria for a high yield cash KEN I wouldn't tell you where mine are I got nothing in there I don't get any Commission's that doesn't matter, any of that type of stuff. So So there's three criteria for a high yield cash cow one, it must be 100% liquid liquid meaning that you can get it in a day's notice. Okay, you don't have to wait. It's not locked up for you know for a year or two years or six months Okay. to It is insured Okay, it is insured, meaning that if this institution goes under your money is security, they this is insured, and three, there are no fees, you all are giving them their money, they shouldn't be charging you for them to hold on to your money. So there are no fees. So it's liquid, no fees and insured.

Mel Abraham  30:23  
Where do I have mine? Okay, you can find these places out at go to bank rate.com, you can see what the best savings rates are watched for the teaser rates, there are going to be those out there that say, Hey, we're gonna give you 5% 6%, but it's only five or 6% for the first 5000 bucks, and then it becomes an issue. So be aware of that. There's a lot of them out there. I have most of mine right now at Wealthfront. Okay, I have some at CIT. I've had some at Marcus and I see that in the in, in in the chat. But I haven't a Wealthfront there right now they just moved it up, they're paying 4.05% on their cash Connect account, it is insured and it is insured not for the typical 250,000 It is insured up to $2 million. So you can have higher dollar amounts in there at an insured level. There's a couple things that I think are really important here. If and many of you should consider whether you have a trust or not like a living trust or anything. And if you're not sure about that goal, watch my episode on trusts to see what the differences are and what you need to do to make that happen. But a lot of the institutions and Marcus's one of them will not allow you to put the the accounts in the trust name, well, that can potentially be a problem with probate and other things, if you're not careful. Wealthfront will allow you to put it in the trust's name. So so there's some nuances you want to be aware of. But like I said, I I don't have, I don't have a dog in this fight at all, you know, in the sense that it doesn't matter where you go, what I want to make sure is that it's insured, it's liquid, and there are no fees, and you can go to bankrate.com, check them out. Like I said, I have a good 90% of my stuff, including my mom's stuff is that is that Wealthfront. I have a little bit at CIT Bank, which is a division of First Citizens. I have an ally account, but I haven't I haven't funded I have a Marcus account that I had funded, I moved it. And so it just being full disclosure doesn't mean that they're bad. I still have the accounts, and I will move things around as needed. But the bottom line is the answer this question is that if the money that you're putting aside is for your emergency that it must be liquid, it must be insured, it must be no fees, you're not investing in a stock market, you're not putting it in something that locks up because the purpose of an emergency fund is to have it there and available when you God forbid, needed. Hopefully it's never okay. And if it's locked up, you can get to it. The definition of an emergency is it was unplanned, so you can't plan for it. So the fact of the matter is that I want to keep it there. Now some people will say, but then I'm losing money to inflation. I get it. Yes, conceivably you are however, we need to understand. And I talk about this a lot that every dollar has a purpose. Every dollar has to have a job description. And these dollars description is to give you peace of mind, not wealth creation, the rest of the dollars we're going to put into wealth creation, but we need to have the peace of mind to operate. So hopefully that makes sense. Great, great conversation. All right. Let's see. I think I have time for one more. I want to buy a house. Okay, this this is from Jenny. She says I want to buy a house but I can't really afford it completely. And so I'm questioning whether I can buy a house and and kind of bring in a roommate or two roommates to help me make it more affordable because I know that you that you don't recommend going with a two to a small downpayment. So here's here's my my belief if it's your first home, I I'm okay with a smaller downpayment. Okay, if it's the first home however, we need to be smart about it because there A couple of things that happen and like, so I don't want you to overextend yourself. Bottom line is that if your housing costs are more than 30%, more than 3030 to 33% of your income, it's too expensive. Now, when I say housing costs, that means mortgage insurance taxes, okay? I don't want you choking on the house. And you can turn around and say, Well, I'm gonna get some roommates. Okay. But then you have a whole nother situation, because now you become a landlord. And not only that, you are in a situation where, what happens if you don't get along with roommates? What happens if these roommates turn and all that stuff, and you got to be able to afford the payments when you don't have the roommates? And if you really want to get scared, there was a show and I don't remember the name of it. But it was a series. And it was this, it was about the the worst roommates in the world. And this was like, astronomically scary. So before you all think about, hey, I'm gonna go get some real estate. And I'm gonna get some roommates. Okay, now, this is a little different than house hacking, where you get a duplex, or a triplex, and you're living in a good portion of it. And they're in a separate building. They're in a separate unit. They're not in the same house as you. Now, mind you, I had roommates in college and out of college when we first started, but good thing we all got along. Okay. It could have been, it could have been a disaster if we didn't. And so. So house hacking, you'll put them in a separate unit, that still is a potential problem, because you need to understand what it's like to be a landlord. If someone stops paying, how do you get them out? Okay, I know in California, if someone is in the property for more than 30 days is no longer short term rental, and now you have to go through an eviction process. And if they're smart about it, okay, smart or crappy about it, and they understand how to game the process, they can lock your property up for a couple years by declaring bankruptcy by doing all kinds of things, where you can't throw them out. And now you can't, you can't sell the property. You can't rent the property, you don't have cash flow coming in. So I am reluctant to say to you, hey, yeah, go get a bunch of roommates. So you can go get this house, or this property and your first property and live under the same roof. That's, especially if you don't know them, the roommates I had we knew we, we went to school together. And we spent a lot of time together. So I knew them. So I'd be really careful about it. In doing that, and realize that the buying of a house is a long term decision. If before you even think about buying a house, do you anticipate that you'll be in that property for five to seven years minimum? Because to get in the house, you got to costs to get out of the house, you got costs, there's a lot of friction in and out. And so I'd be really careful about I love the idea of potentially buying a house. I don't like the idea the roommates? Actually. So cool. question coming in on IG, is it better to save for a house or put money away for retirement? This is a okay, this is a touchy question. Indirectly, they're kind of the same. But when interest rates were lower, it was an easier answer than it is today. Because the cost of homeownership is actually two maybe even in some cases three times more because interest rates are two to three times more of what you get, you get 2% Two and a half percent rates before now you're in the sixes, okay, five and change six and change depending what it is. But here's the thing that I think we ought to look at. One the power of time to create wealth is huge. Okay. And so the sooner we get the dollars working for us in building an investment portfolio, the better off we are now that can be in real estate. But then the real estate has management costs to it and other costs to it whereas stocks or ETFs and index funds typically don't have those kinds of costs, and long term they they grow. If you are in a place where you are working for a company and you have a company that is mad Checking your contributions to a 401k, you've got to make that a priority because they are giving you free money.

Mel Abraham  40:08  
Okay, they match 3%, you get you put 3%, they give you another 3%, it's 100% return on your money you've got, you've got to at least take that. But we walk through something called the wealth priority ladder. And at the at the base, the first thing that I want to make sure you do is to make sure that you you've gotten an eliminated your destructive debt, your variable rate, credit card debt for consumables, not business stuff that's making you money. But if you're buying flat screen TVs and luxury items just to have a lifestyle, and you're doing it on credit card, you got to get rid of that, first, I would do that before I buy the house, I would do that. After I make sure that I get the match for my, my employer. And I've walked through how to do that earlier in, in, in this session. So go back and watch the recording about setting up the payment plans and that kind of thing. But the first things first is I would make sure that we get the match from the from the company, then we can make sure that we have our peace of mind fund in place. So we have that peace of mind. And now we can start putting money away into a high yield cash account that high yield cash account then can be used for buying a house for the down payment on the house. And or, or using it to make investing later. But you'll park it in high yield cash cow until you decide to allocate it so but get them match first. Great question. Is it Emma? Thank you for the question, Emma. Hopefully that helped. Let me know if there's other questions, we are right about at the top of the hour. And if not, I am going to, we'll close this one out. So here's the deal. I hope that you enjoy these, I want to keep doing these I want to I want to be able to go live with more of you. I want to bring you on my show and have conversations and coach you. I want to help you with this process. And not only this, but business and life, let's just make sure that we we stay on this game. Now. In order to do that, I want to make sure that you are following me. Obviously if you're on these pages, you're following me because you got notification, I want to make sure that you're not doing it alone. So share the show, share everything out. So you're doing it with people that can support you on this on a journey. Let's make 2023 An absolute breakthrough year for you. And do it in a way that completely transform you. So when we have this conversation 12 months from today, your love looking at me or word chat and you go I'm in a totally different game. All right, before it closes out. I just saw some come in that I cannot let go by the question was my thoughts on college student loans, let's just talk about this. I want to get on a bit of a soapbox. Um, I'm gonna look at things a little differently. Here's, here's my thinking. We have a financial crisis in our in our country today. It is a financial student loan crisis. We're at 1.8 trillion trillion dollars in debt. And you have these kids that are that are coming out of college that are supposed to go soar that are supposed to they are supposed to launch their new careers. They're supposed to go launch their professions, their lives and build things up. And they say hold on before you go out into the world. Let me strap this albatross to your neck. It's called your student loan, by the way, you're gonna have to get this thing paid back. And I think it's a travesty. But it's not a travesty. Some of it is parents but but the reality is, is I blame it on on the financial aid offices of the universities, you've got these kids that are coming in at 1718 years old, that don't understand the dynamics of debt, and they don't understand the dynamics of compounded interest. They don't understand the dynamics of all of that. And they're saying, Just sign here. Don't worry about it until you graduate. But here's what's happening. You've got you've got kids that are graduating with degrees that are going to get them into a job that make $27,000 a year yet they end up with a loan of 150,000 because they wanted to go to college because they liked the mascot. And so the problem is, is that if you're going to get a loan at all, it has to be at a level that you can pay it back based on your entry level salary that you're going to get when you get out of school. So if we're getting a degree, it's sociology them might only pay us 30 grand a year, you have no business getting $150,000 in student loans, I don't care what school you want to go to. That's just my my take on it. Now parents, I want to talk to you. Because and hear me out, you have no obligation or responsibility to pay for your kids college. And I get that that might rub you wrong. But here's Hear me out on this. When you start to put money away for the kids college, and I did, and I will, and I advise people to do it. However, I want you to do it with a different understanding. The understanding is this. We don't know, if the our child is going to go to college, we don't know if they're going to finish college. We don't know any of that. And so what you're doing is you're putting money aside to take care of a potential thing that is uncertain. Before you're putting money aside, to care to take care of something that is absolutely certain what's absolutely certain, your financial future, your need to retire, your need to take care of your financial destiny. At some point, you're going to stop working, that's a certainty, we have to fund that and make sure that we have a plan and that thing funded before we're worried about funding the uncertainty of their college. That's one. Number two, I look at it and say, it's important for us then to start having conversations with our children. They don't get to pick their college because they liked the mascot. And if they liked the mascot and that college is expensive, and they want to go for a degree that isn't going to pay for it, then they need to figure out how they're going to get scholarships, they need to participate in their own success. You need to engage them and enroll them in the process. To do that, and there is nothing wrong with him going to a two year junior college and then transferring in. So what I'm what I'm getting at is that we should be smart about it and a student loan shouldn't be the first stopping point to fund College. There's a lot of ways to do it. If we're smart early on, but we have to I think that you all need to put your financial well being above their college because they can they can find other ways to pay for it. Okay, scholarships. I worked while I was in school. Okay, jobs, okay, all those things that can come into play, they can go to a junior college say if they can't, they can't afford Jeremy, my son. He wanted to go to film school. at USC, Film School USA was going to cost me $250,000 Oh, my God all good thing. He decided you want to go to film school. But I was able to pay for it. We weren't going to do loans. I had the money put aside but it was money put aside taken care of that didn't jeopardize either my financial future. If it was a situation where I couldn't afford it, then the answer would be yes, you can go to film school, but you're not going to go there, you're probably going to go somewhere else. You might go to Chapman, you might go to another college, or get a scholarship, or some sort of grants, all those things. There's a lot of ways to do it. But the first place isn't the debt because that debt becomes an albatross on their neck. And now your kids that you want to see soar can't because they're they're carrying around this anchor. I heard a story. I don't know the person who went to school to be a doctor. He went to med school to get his medical degree. He went through and he ended up with $300,000 in loans. 300 grand. Okay, that's more than some houses. Okay, not in California. Okay, but other than some houses, and then he didn't pass the medical boards. So he never became a doctor. So not only does he have a $300,000 loan, he doesn't have the job and the capability to pay it now. And student loans in many cases are not bankrupt. Well, they're not you've got a problem with that. So we need to be smart with how we look at things and sometimes that means having hard conversations and looking at the hard reality of where we are. The worst thing that we can have happen is that when you are 60 or 70 years old, you gotta go knock on your kid's door and Say, I pay for college. Now I gotta sleep on your couch.

Mel Abraham  50:04  
And then the other side of that is that when they're 35 or 40 years old, you don't want them knocking on your door when you're sitting back saying, I'm want to enjoy my life do I need to come back and live in the basement? Now, I get it, things happen. But when we create independent thinkers, independent children, and we have these conversations, and we give them the tools to make it work, then we reduce the likelihood that either of those things are going to happen. Okay. And so I hope that this answer, yeah, got me off on a tangent. It's a hot button for me. Got it. I just, I didn't even remember. Oh, it was Melinda. So it's a hot button for me, Linda. So right, it just, I just because I'm struggling to watch these kids struggle. And all of it is because they didn't understand. And their lack of understanding isn't really their fault. It was it's not something that people are talking about. And so if like this whole idea of student loan forgiveness, I, if I'm not a politician, because I just, I'd probably offend everyone. But the fact of the matter is, is that, that I truly believe that you want loan forgiveness, you take it out, you go back to the institutions that gave the loans that they shouldn't have given until, okay, it's it's a mess. Okay, the free money to get education caused education costs to go way up. And, and it's it's created a situation where our kids are having a trouble living, because they didn't realize the albatross around their neck. Cool. All right, y'all, you guys, you guys rocked so. I hope you know for me, I just having these conversations having conversation with you. It's it's, it's a blessing for me. Yeah. And, and I appreciate you showing up. I appreciate you staying. I appreciate you asking questions. If you have more questions, send them to me go to askMelnow.com Let me help you out. Let me guide you. I get I'm not here to sell you investments. I'm not here to sell you insurance. I just want to sell you on your dreams. I truly believe that financial freedom. It's a birthright. It is accessible to all of us. It may not be easy for everyone. But there's a path to make it happen. There's a path to live that life that outlives you to create something that is meaningful is to create something that's richer, and if all I can do is shine, even if the light is dim, a dim light on it, that I'm doing what I'm supposed to be doing. Alright. Thank you so much for being here. Keep it rockin let me know about on the show anything. Reach out to me and know that I'm here on this journey with you each day, in every way. All right. And until we get a chance see each other again. As I always say always, always strive to live a life outlives you. Thank you for listening to the Affluent Entrepreneur Show with me your host Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com/group and I'll see you there.