E54 | How We Build Unstoppable Wealth Through Compounding

Compounding is the real engine behind almost every dollar of wealth we've built — and it's the one strategy most people give up on too early. In this episode we break down how we stack it across real estate, knowledge, and long-term investing to build wealth on an everyday income. The hardest part isn't the math — it's the one uncomfortable habit that makes compounding actually work.

In this episode:
- Why compounding — not a bigger paycheck — is what actually builds wealth
- Five different ways to compound a single real estate deal at the same time
- How we built nearly $3 million in equity in 5 years, starting from ~$230K
- The three types of appreciation (market, inflation, forced) and which you control
- Why we're not fans of the traditional 401(k) — and what we do instead
- The "lifestyle vs. assets" trap that quietly keeps high earners broke
- How buying knowledge (mentors, coaching, options) fast-tracks your growth
- The Coverdell ESA + 529 "college house-hack" that pays tuition with tax-free dollars
- Why patience — not income — is the real reason most people never build wealth
- The time we had to pull from our retirement accounts — and why we'd do it again

Resources & Links:
- The Broke Millionaires community on Skool (search "The Broke Millionaires" on SKOOL.com) + weekly live Q&A calls
- Episode 47 with Kam Dasani — options trading program with ex-Goldman Sachs traders
- Amanda Han — real estate tax strategist referenced for tax mitigation
- Strategies discussed: Coverdell ESA & 529 college plans, forced appreciation, depreciation

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This podcast is for informational purposes only and does not constitute financial, legal, or tax advice. Consult a licensed professional before making any investment decisions.

Transcript

SPEAKER_03 0:00

So we want to talk about like how you build unstoppable wealth through compounding. We've created almost $3 million in equity in the last five years that we didn't have five years ago. And we started with like $250 or $230,000 in equity and now got almost $3 million in equity. A lot of people think of compounding as something that's boring. It's not something that people normally get excited about. I am one of those people that nerd out and get excited about compounding. After 12 months of this, your money will almost 10x. Crazy. So 10,000 will turn into almost $100,000. The $10,000 could be worth a million dollars in two years' time if you didn't touch it and you just let it compound. 10 years from now, we're going to look back at this moment and we're either going to say, that's when we started stacking assets and letting them compound, or we're going to say, I wish I started sooner. Wealthy people tend to compound multiple things simultaneously.

SPEAKER_00 0:50

Welcome back to The Broke Billionaires, where we document our daily struggles and building wealth while raising a young family. Join us as we talk creative wealth building for everyday people and couples that are struggling in a down economy. I'm Lauren.

SPEAKER_03 1:02

And I'm Joshua Masari, and we'll be your host.

SPEAKER_00 1:07

Welcome back.

SPEAKER_03 1:08

Welcome. Here we are. It's been a little while since we've been in the studio.

SPEAKER_02 1:11

I know I don't even know. When was our last recording?

SPEAKER_03 1:14

We've missed a few weeks. It's been a little crazy. We had some interviews, we did, we did some episodes, and then life just got off the road.

SPEAKER_02 1:21

We got really sick.

SPEAKER_03 1:22

Got sick. Oh yeah, we tried to record and you did I was so sick. You couldn't get off the couch in the office. Yeah. And then life just got crazy. We were moving and selling a business and selling a house, getting ready to sell a house, and just so many things.

SPEAKER_02 1:38

A lot has happened in the last month.

SPEAKER_03 1:40

It's been a very busy month, as if life isn't always busy for us.

SPEAKER_02 1:45

Honestly. Um what's happened? Walk us through it.

SPEAKER_03 1:49

Well, I I know we talked about this once before, but I am officially sterile. I am officially shooting blanks, if you will. I did not realize that it took that long for the like post-op to actually be in the clear. Well, I'm eight months post-op. It took eight months before I got a clear test result.

SPEAKER_02 2:12

I he's talking about his vasectomy, if you didn't know, but um try not to be so graphic about it. I don't think everyone has that problem. I don't think I don't think that's common to have to wait that long. I don't know.

SPEAKER_03 2:26

Well, they say it's normally like two, maybe three months, so definitely not normal, but it's not like we weren't trying. I mean, you're supposed to like, you know, like ten times a month is what they say to clear everything out. And I mean, we were definitely doing that. We have a lot of sex, okay? That's why we have so many kids. But I I don't know. Doctor didn't have a good answer. Just I guess my body just didn't want to give up.

SPEAKER_02 2:54

I'm not gonna lie, there was a little part of me that was like, okay, this is like officially closed. We are officially done now.

SPEAKER_03 3:00

Well little sad, even though I didn't want another baby, but it is weird that it's like you can still have another baby, they just gotta take a big needle and go in there and it's more.

SPEAKER_02 3:09

It closed that door officially, so it is officially closed, but I think it kind of is aligned with the season we're in of shedding, right? We're kind of like shedding that phase of life.

SPEAKER_03 3:21

Yes.

SPEAKER_02 3:21

Of baby life.

SPEAKER_03 3:23

Uh yeah. Uh the roof we've been talking about for the last year and a half or year, whatever, finally is done, completed. Uh that finished up. We are now on April. That finished up at the beginning of April. I want to say it was like the like right around April 1st, second, third, something like that. Literally the day, I think it was, I think the contractors were still on the roof cleaning up. And I had I was taking pictures for the insurance company trying to get this handled as soon as possible. Like I was trying to take pictures from angles that didn't show them still up there, but it was done, but they still hadn't cleared everything off. I submitted them to insurance. Insurance accepted it as yes, it's a new roof. And so they put the policy again. The policy we had to do a what's called a non-admitted carrier, meaning an out of state insurance company that's not admitted in the state of California. Not that they can't insure it, they just don't have millions of customers in the state to offset all the costs. It's just you. So the rate goes up way higher because there's so much more risk to them. So instead of paying $2,500 a year, we were paying $15,000 a year.

SPEAKER_02 4:25

Crazy.

SPEAKER_03 4:26

Yeah. So uh got that, got that taken care of. Uh, I think we were actually getting a little bit of a refund for the last three weeks that was left on that policy. Um, and then our insurance went down to like $2,600. It went up $100 from what it was two years ago. No big deal.

SPEAKER_01 4:40

No.

SPEAKER_03 4:41

I can swallow that.

SPEAKER_01 4:42

Yeah, absolutely.

SPEAKER_03 4:43

So that's exciting.

SPEAKER_01 4:44

That's a really good update. That was a long, long process.

SPEAKER_03 4:48

And this was an expensive roof. I don't even know what the time the total invoice was, but it was like $35,000-ish, somewhere around there, maybe a little less. But um we ended up doing a solar program to be able to get this. So we're paying for solar now. Well, not yet. Once the solar's on, they still have to put the solar on. But once the solar's on, we'll be making a monthly payment for our electricity usage, which actually works out because they're this is the property that has four units and we pay electricity for everybody. So in summertime, our our bill gets pretty high. Now it'll be consistent year-round and it'll kind of cap what we're going with. We've got two Tesla batteries. So what it'll do is it'll charge up during the day, use electricity on the solar during the day. And then at night, there's two batteries that will store that energy, and then it'll run the house at at night.

SPEAKER_02 5:36

Yeah. I'm excited about that.

SPEAKER_03 5:38

Yeah. So fun stuff.

SPEAKER_02 5:40

Fun stuff. Um, we also listed our first house. I know we talked about that on our last episode that we had two houses we were getting ready to list. Our first one is officially on the market. We've had a couple of showings, open house. Um one thing about this process, this is the first time that we've sold, well, you've sold properties, but investment properties. It it feels different, doesn't it, than what you've done in the past.

SPEAKER_03 6:07

Yeah, I I I never really sell, I don't buy properties with the intention of selling. So it's always a selling is always a weird process for me. Yeah. But especially a house that we've had for so long and one that we intended to keep longer term, yeah. You know, flipping around and selling it, it it's a little bit of a different process that we're just not used to.

SPEAKER_02 6:25

Yeah, it's been interesting for sure. Um, I will say we had a couple updates that we did to the house, very minor. Like we painted it, we kind of took some, we had some feature walls that we took down and just kind of like freshened up the space and staged it. And I cannot believe what a difference that makes. Kind of want to move back in. I know me too. When I walked in, I was like, wow, this looks really nice. So it just goes to show you that first of all, we could never keep a house that nice all the time with four young kids. I've I'm realizing that. Um, but it's just, yeah, with neutral furniture and fresh paint, anything can look so good.

SPEAKER_03 7:02

It's crazy. Well, and there's not clutter, there's not toys everywhere and stuff. So like that makes a big difference too. Um, just not having the kids in the house. Because one thing that with this, we really made ourselves uncomfortable in this because we moved out last minute and decided to sell. Let's go, let's just move on.

SPEAKER_02 7:18

I mean, within like two weeks, I feel like.

SPEAKER_03 7:19

Yeah, we were like, let's just go. And so we just got a furnished rental and and we were in somewhere for two months, but we didn't want, we want to try to maximize obviously the the sale price of this property. We didn't want to be in the house and having to try to scramble and clean up for all the showings and doing an open house with somebody living there is just not ideal.

SPEAKER_02 7:36

You it really does not give the same effect when you're walking to the house and have personal items in the home.

SPEAKER_03 7:41

So I think we made the right decision in that. Um, and then we spent money on obviously staging and then just all these little repairs and upgrades to the house. Nothing major again, but just enough to like freshen everything up. We, you know, we had um we already had really good curb appeal, but we just kind of did some landscaping freshening, you know, new bark chips and just kind of cleaning everything up. But I think it was the right decision to just really give it that really good curb appeal. And then when you walk in, it's just like, wow, everything looks nice and new, a little more uh modern and updated. So yeah, we'll see where this goes. We just went on market less than a week ago. It was what, four days ago? Yeah. So I know we'll see. Crazy. See what happens.

SPEAKER_02 8:17

Yes, needless to say, the last couple the last few weeks really. I mean, with packing up that house, moving into a new one, we did move into a furnished rental, but we got a storage unit for our things and still ended up bringing quite a bit with us to the rental.

SPEAKER_03 8:31

How many times have we moved in the last two years?

SPEAKER_02 8:32

I think we said that this is number seven.

SPEAKER_03 8:35

And we're gonna have to move again because we're only here temporarily. So the place we're renting now is our happy place. We it's our happy place. We're back, we're back in our happy place on the island where we we've talked about before. But um, they do these nine-month rentals, and through May, it's actually pretty reasonable. It's actually probably cheaper than what we'd get in Costa Mesa for that same same. But we're like four houses from the water from the beach, which is cool. Um but starting in June, that monthly price actually the weekly price is actually more than the monthly price. Usually it goes up four times, but it's actually even more so on this property.

SPEAKER_02 9:10

Yeah. So we will not be staying for summer.

SPEAKER_03 9:13

I think it's like $28,000 a month for summer.

SPEAKER_02 9:15

We are we are here for another like five weeks or so. No, not even like four.

SPEAKER_03 9:21

So we're already looking for where we're gonna go because we don't know.

SPEAKER_02 9:24

Really living life on the edge, not sure where we're gonna live in another month or so. It's real fun.

SPEAKER_03 9:30

Yeah. But hopefully we'll have some cash in the bank and uh one of the properties sold and a little bit a little bit off our back and a little bit of less stress.

SPEAKER_02 9:39

Yeah. We are definitely in a season of shedding. Yeah.

SPEAKER_03 9:42

Then we got a whole nother another set of problems because then we got tax problem of tax problem. And I've actually got a meeting this afternoon um with Amanda Hans team uh to try to strategize and and mitigate our tax liability. As it stands now, this first property, once we sell it, we won't even have enough money to pay the tax bill if we didn't do anything. Like it won't have enough profit. And this is why we never sell properties.

SPEAKER_02 10:06

This is why when everyone says just sell your house, it doesn't always make sense.

SPEAKER_03 10:09

So the tax bill is probably gonna be well over the proceeds that we're gonna walk away with. The loans will be paid off and it's also paying a cross-collateral, it's paying the construction loan on the other project. So now there's equity. That equity just shifts to the other property because now it only has one loan and it's worth double what that one loan is, but it's still equity trapped in the home. So we got to sell the second home in order to really unlock all that money. Uh, but we are gonna have to get pretty creative with offsetting these taxes because we won't even be able to pay the tax bill with what's left over. So fun stuff. Yeah. Uh wanted to touch on something. Uh, I know we've kind of talked about this before with arbitrage. And arbitrage uh is popular for short-term rentals. Uh, some people do it with midterm rentals, which is kind of our our wheelhouse. But that's basically where you go, you rent a house from someone, you get what's called a master lease, you rent it from them, and then you turn around and you rent it on Airbnb. Some people will also do this with midterm rentals where they'll get a master lease, they'll turn around and then they'll they'll sublease it to displaced families or whatever, whatever the situation is for 30 plus days. I've never been a fan of this strategy because it doesn't usually work very well, especially with short-term. I think it can work better, it pencils better with short term, but you're at the mercy of local laws because a lot of people were doing this in the last couple of years, laws change and all of a sudden you couldn't do short-term rentals anymore. This is a lot of what you hear about getting shut down right now, is the arbitrage that it's not so then they're stuck with these leases, and all of a sudden the company goes bankrupt or that that investor goes bankrupt because they they have all these leases and they can't rent. You can't rent long-term or even midterm to cover what your rent is. Uh, so I've never been a big fan of it. And with a midterm rental, it's never, I know people that do it, but in my opinion, it's there's never a big enough spread. It's not worth it. There is still risk to it, even with midterm rentals, but it's just not enough meat on the bone. Um, but we've come across an opportunity that may actually pencil, which is very rare. The reason it pencils is because it has two units. It's kind of like one of our other properties where it has a main house downstairs and it's got a second unit that upstairs that's like a one bedroom with a like a kitchen and there, like a full kitchen and everything. So, because of that, this actually pencils to where we can probably get close to double the gross rent of what the rent that we'd be paying the owner. So we're we're looking into this pretty heavily because these don't usually pencil. And this would give us an opportunity to add a property to our portfolio where we have a lot of demand. And actually, you know, even after all expenses, cash flow, it even even with conservative numbers, we still cash flow. So I don't, I'm not a huge fan of the model, but this might make sense and it might be a a way for us to test the waters. Um we're also getting ready to roll out a website for our midterm rentals and co-hosting. So we're excited about that. That'll hopefully help from up more business as we free up time by selling the printing company and some of the other stuff that we're getting off our back because we can kind of focus more on the the midterm and co-hosting and and really build that up because we're having fun with that and having fun with it, and it's been profitable and I think it's a good, good model. So but life is crazy right now. Life is insane.

SPEAKER_02 13:18

So say the least. And we're coming into the end of the school year with Freddie Moms out there, May Sumber is what they call it.

SPEAKER_03 13:26

I've never heard that, but I like it.

SPEAKER_02 13:28

It's just as crazy as the month of December because of all the things and all there's just a lot happening at the end of the school year on top of regular.

SPEAKER_03 13:36

I feel like the summer is gonna be like a weight off our back. Like I kind of like I love sailing. And I really hope that we can get to a place where we can start sailing because that's like my happy place is like sailing. I love getting out on the ocean and setting the sails, and then the wind catches that sail and then it's just quiet, but you just hear the whipping, like the whipping of the sail, and you're just cruising. I kind of feel like our life is like that right now because when you're trying to get out of the harbor, first you got the engine going, you're kind of pulling away, and then you're you're tacking, trying to get out of the harbor and and everything. But when the wind kicks, like when you turn that motor off and you raise the sails, it's like this like you'll catch a gust of wind and it just like it pulls the boat forward. And then you just hear like this, this like light whipping of the sail. And I feel like that's what I want our life to be like this summer. Like once we kind of get rid of all this craziness, kids are out of school, sell the business, sell the houses, or at least one of them kind of gets this off our plate, and then we can just start sailing and like have less stress and just like start moving forward and and have things kind of like snowballing and and pulling us forward and not having to scramble so much and figure out life and move so much.

SPEAKER_02 14:51

That sounds really nice.

SPEAKER_03 14:52

Planning a camping, a two-week camping trip with the kids up the coast of California and Oregon. And I've never been able to do that. So assuming that we can get this business acquisition to go through and everything goes smoothly smoothly with that, I think by October I should be pretty much removed from from that transition. And it'll free up a lot of time to be able to do that and be able to do that stuff. So we'll see. We'll see if we get the sailboat sailing this summer.

SPEAKER_02 15:18

Oh my gosh, I sure hope so. It's been quite a two-year ride, that's for sure. I will say though, there's something about being by the water. We say this every time we live on Balboa, but it's like even though the everything is still just as crazy, it doesn't affect me nearly the same way when we're down there. Yeah, that's true. Like I'm oh my gosh, this weight already feels like it's lifted off me just being down there.

SPEAKER_03 15:43

Yeah, I I feel like no matter how rough of a day I have at work or running around with the houses or whatever it may be, when I go over that bridge, it's like I just leave all that on the other side of that that bridge. Like it doesn't come over the island. Um there's just a calm about having, you know, looking out your front yard and seeing the ocean. And, you know, on the days I don't go to the gym now, I'm I go paddle boarding. So I'll get up at, you know, 5:30, 6 a.m. and go paddle around the island for an hour. And I'll I took took one of the boys last week and did that. And so like being able to do that is it's very relaxing and like mentally like rejuvenating. I feel like it's just being able to do that, you kind of resets you before you take on the day.

SPEAKER_02 16:45

One of these days I'm gonna get through an episode without getting super emotional and choked up.

SPEAKER_03 16:49

But I think we've just been and hopefully we'll be doing this and we can document this. Our goal is to someday get down there full time. I mean, obviously we'd like to own down there at some point and do a project house, but that's a much bigger project house than what we are used to dealing with in terms of the cost. So we'll get there, but for right now, we're hoping we can find something uh to rent year-round because most of the rentals are nine-month rentals and then their vacation rentals, and so it doesn't make sense to to rent. Yeah, and we all want to move every nine, nine months. So we gotta find something that that works for our family and works like not somewhere where we're just like it'll work, like it, like somewhere that actually makes sense for our family. And we can charge. Our car. The cars. Yeah.

SPEAKER_02 17:34

Oh my gosh. That is it's very much a first world problem. But it is it is very annoying to have to plan your day around charging a car.

SPEAKER_03 17:42

And I mean, all of our houses, we've always had charging stuff in the garage. So you just do it at night and you don't think about it. But when you don't have that, it's a whole nother thing you gotta worry about daily.

SPEAKER_02 17:52

But let me tell you, how grateful are you that we had a charger or an electric vehicle on this last road trip we just went on and didn't have to pay for gas. Yeah. It might have added time and again, it made us uncomfortable. It added time to the trip.

SPEAKER_03 18:05

But we had two, everyone's complaining about six six dollars, six fifty gas, and we did this whole trip. Well, one of them was free. Yeah. The other one, I think we spent maybe sixty bucks total, seventy bucks total on charging because we took two cars to fit everybody, and it was I don't know how far we went. A couple hundred miles. At least. There and then back, so about four hundred miles, five hundred miles. Yeah. Just a quick disclaimer: the information shared on this podcast is for informational purposes only and should not be considered as financial, tax, or legal advice. Always consult with a qualified professional before making any financial decisions. Your individual circumstances may differ and require specific strategies not discussed here. Now let's get back to the show. All right. What are we talking about today?

SPEAKER_02 18:53

Compounding. Sounds like a you topic.

SPEAKER_03 18:57

Well, I'm gonna let you take the lead on this one.

SPEAKER_02 18:59

Well, I guess we're done then.

SPEAKER_03 19:01

Well, thanks for joining us today, guys. That's all we got. So I I don't know if we've actually ever dug into compounding and really talked about this, but this is really the basis of our wealth building strategy. Like wealth is not a like wealth building, it's not an overnight instant gratification type of thing. It can be, I guess, if you hit the lottery or you have a big IPO or you just get lucky in in one way or another. But for most people like us, um, wealth building is a slow burn. A very slow burn. But it starts to speed up, it gets faster. And that's where compounding comes in. So we want to talk about like how you build unstoppable wealth through compounding. Um it's really so a lot of people think of compounding as something that's boring. It's like something you talk about for your retirement account. Um, you know, it's not something that people normally get excited about. I am one of those people that nerd out and get excited about compounding.

SPEAKER_02 20:06

You're also someone who reads tax laws.

SPEAKER_03 20:09

I do.

SPEAKER_02 20:10

Codes, tax codes.

SPEAKER_03 20:11

That is true.

SPEAKER_02 20:13

So different breed.

SPEAKER_03 20:15

Yes. So compounding, um really like when you think of like interest rates compounding, or you know, you've got your savings account or something. Let's just let's just take a like a 401k mutual fund. Let's say that you're getting 10% per year, you've got $100,000 in there, and the whole idea of compounding is that if you keep the money in there, it starts to grow and grow faster and faster and faster. If you're getting 10% per year, $100,000, 10% on that's gonna be $10,000. So you have 110 at the end of the year. Then the next year, if you're getting 10% on all the money in there, you now have $110,000 that's compounding instead of $100,000. So now you're gonna get why do you do this to me? I just want to see if you're paying attention. So now you're gonna get $11,000. So you make $11,000 in interest instead of $10,000. And then the next year it goes up and so on and so forth. And it just starts to grow and grow and grow and snowball. Compounding, that's like the most generic, like what everybody thinks of when they think of compounding. So yes, that is true. But there's also other types of compounding too. You can like for us, we do real estate. So we compound our real estate and our equity. And with real estate, you've got all these different ways that you're compounding your wealth growth. So, you know, we've got appreciation. And we've and we've talked about this before. There's three types of appreciation. You've got market appreciation, you've got inflation, and you've got forced appreciation. We focus a lot on the forced appreciation because that's the one that we can control. But you've got these three baskets of appreciation that you're getting. So those are compounding on top of each other. And then over time, it just keeps growing and growing. We also have rental income. So as we rent these properties out, we're getting cash flow. We're making income on that. And we're also paying the mortgage. The tenants are paying the mortgage, which is paying down the principal. So we're actually compounding our equity by, you know, the value is going up, but also what we owe is going down. So the you're you're making that that. That spread larger, which means we're just growing our wealth because that portion is our wealth. So you're compounding two ways there. We also get the depreciation. So we get a lot of tax benefits with real estate. So the depreciation, all the income that we're making, instead of paying taxes on it, we're able to offset that income with the depreciation from the real estate and keep more of that money to keep it compounding. Another way that we compound our real estate is, you know, we've talked about the all method, and we'll take one property, build the equity up, we'll draw on that equity to buy another house. That'll be like our down payment and start the renovations. We're making a payment on that money we pull out in most cases. Sometimes we're we're just pulling it out with other products. But when we're making that payment, we're making the payment. But the the first property is now generating income to cover that payment. And so it's compounding by starting another project and now building equity in another project, starting the whole process over again. And we do that again. And we got three of them. And so we've kind of been able to build up and compound this equity and all these different different uh benefits of real estate. You know, in the last five years, we've done very well. And that's where we're at now is now we're selling because we've got so much equity we can't even get into it anymore. And so it's it makes sense to sell it. Again, we got to do, we have a tax problem we're gonna create with this. So we've got to deal with that afterwards, but we'll we'll see what that looks like. But you know, we've we've been able to do very, very well. We've created almost $3 million in equity in the last five years that we didn't have five years ago. And we started with like $250 or $230,000 in equity, and now we've got almost three million in equity. So definitely like was a slow process. It started out slow. It was, it didn't. I mean, there was times when we were like, what the heck are we doing?

SPEAKER_02 24:03

Lots of times we've said that.

SPEAKER_03 24:05

And it's not, it wasn't easy, but uh like we we had because of inflation over the last last few uh years, we got a lot of uh market appreciation from that. Um I would say market appreciation and due to inflation, the the value rose quite a bit uh just with the dollar shrinking. So, you know, we all these different strategies that we've compounded really, really helped to kind of explode our wealth over the last five years. And so now what we're doing is taking that and taking these gains and figuring out, okay, so how do we so we've done all this, we've made all these sacrifices and we built wealth, but it's not generating income for us because it's just it's wealth on paper, but it doesn't actually pay the bills. And so that's why we've been struggling is because we put everything into these projects and we haven't uh built, I mean, we have a little bit of income from the the rental income that we get, but a lot of that is just going towards paying the mortgages and then paying the next one because we've rolled those over. So they're all paying themselves, but we're not getting paid from it. So now what we're looking to do is taking these gains and then okay, how do we redeploy this capital and create income? How do we create a compounding strategy that's gonna actually create passive income for us, or maybe not necessarily passive income, but just create income. So we're gonna be a little more income focused now because now we got poor kids. These kids eat a lot. And people love you.

SPEAKER_02 25:29

I met someone yesterday who said she had three teenage boys, not even four. She's like, however much you think they eat now, 10 times it. She was like, something else you don't think about is the cost of cars and car insurance. She said, My car insurance went up 10 times once my kids were on it. So we have small problems now and they're just gonna get bigger as these kids get bigger.

SPEAKER_03 25:52

They're still big problems, though. We got some of the things that we're gonna, yeah, I mean they are. School coming up like that, like that's already like we're struggling to pay school price, you know, tuition and stuff. And that we got two more that aren't even in school yet. So yeah, I can't imagine when they start driving. I mean, I don't think hopefully we're not buying their cars, but or we've got cars laying around to get to pay the insurance, yeah, for sure. Maybe we'll start an insurance company, figure out how to get around that. I don't know. Yeah, I don't know.

SPEAKER_02 26:18

They're just gonna keep getting more expensive, was my point to that. Yeah.

SPEAKER_03 26:21

But I mean, the point is like we're looking at ways of compounding the money that we have that's gonna be liquid, and how do we put this to work for us and compound this to keep growing, but also start spending off income. You know, most people compound their salary. A lot of people, if you're W-2 uh income working for a corporation or whatever, you've got your salary and it's like, how do you, how are you growing that? And it, you know, people try to get their raises and get their promotions and stuff, and you can only compound that so much because you're working, you're trading time for money. So you can only work so much. You can't, you can't triple your your effort and time because you don't have that. So when you start doing investing and looking for compounding um strategies, you can I call the snowball effect and you can just keep growing, growing exponentially. You know, we did this with our 401k and we started buying properties and like looked, okay, if we buy this many properties per year, this is what they're spending off, and then we'll buy more and then keep keep compounding. And by putting that money back in all the rental income back into the 401k and then buying more and compounding and just keep building up. And, you know, we started with we started with one property and then we had like three or four, and then it was like eight. And now um we're kind of we sold off some, we're selling off properties and then putting it more into commercial now where it's apartment building or an apartment building with with units. Um, I think we've got, I don't know, like 18 units total, something like that. I don't even know. 16, 17, 17. We're not at 17 right now. Um so you know, it's there's a lot of different ways to compound, but just figuring out a strategy that compounds and could continues to grow. Um yeah. What do you think about that?

SPEAKER_02 28:08

I think that you're the brains behind this whole operation, that's for sure.

SPEAKER_03 28:12

A lot of people, okay. So another thing is 401ks. Like people think of compounding at a 401k. You put your money into it, you know, your 10% or whatever it may be out of your salary. It goes in there and it is in mutual funds and it's compounding because it's getting 8 to 10% returns, or maybe even better sometimes, some years, and that money goes back in and buys more mutual funds, and that's compounding because then you've got more shares of those mutual funds and it keeps growing and growing. I'm not a huge fan of 401k, traditional 401ks, because eight to 10% is not a lot. Everyone talks so right now you see this online, everyone's like, oh, my 401k got 20% last year, did really good. Like, yeah, everybody's 401k got 20% last year because the stock market was going crazy. But if you look at year over year over, you know, a 20, 30 year period, you're not gonna see those type of returns. You're gonna be probably eight to 10% on average. And then there's fees that are taken out of that. So at the end of the day, you end up with like six percent is is what you're actually real world money getting back on it. That takes a that's a slow, slow grow.

SPEAKER_02 29:13

Yeah.

SPEAKER_03 29:13

In my opinion.

SPEAKER_02 29:14

Well, and that's something you have to start so young, right? It's not gonna do much for you. Right.

SPEAKER_03 29:20

So you got like like you gotta start really young because soon as you start working. Yeah, you need more time for that to compound. And so it just takes a lot longer to to get towards actually building wealth to where you can actually try to live on.

SPEAKER_01 29:32

Yeah.

SPEAKER_03 29:33

Um, so the other and then the other thing, so they got finance compounding, equity compounding, and the other thing that that you hear compounding on sometimes is knowledge, uh, skills or or knowledge um compounding. And that's more like what you it's not, it's not how hard you work. It's not even who you know anymore, it's what you know. It's like knowledge is power, knowledge is is well. Like that is knowledge and data, like you look at these companies that are, you know, Facebook and all these billion dollar companies, it's the knowledge that they have on people that's so valuable.

SPEAKER_01 30:07

Yeah.

SPEAKER_03 30:07

So data is really, really like gold these days. So, and it can be knowledge on anything, right? So we've learned how to make money with real estate. We didn't have that five, 10 years ago and have that knowledge that we have now. Now that we have it, we're we're able to get properties, turn around faster, figure out how to make money faster, and then get into the next one because we know what we're doing. We've been able to compound that knowledge now and put that to work a lot faster than when we were first starting out. Yeah. So I think that's like really important.

SPEAKER_01 30:36

I agree.

SPEAKER_03 30:37

Another thing that people talk about, or you might hear about, is that wealthy people tend to compound multiple things simultaneously. I feel like we do a lot of things. We got built businesses we're building, we got real estate we're doing, we got all these different investments and strategies that we're we're implementing, and and they're all compounding, and a lot of them compound on each other. So we're not just doing putting money in our 401k and letting it grow. And that's our that's our you know, fallback, or that's gonna be what carries us into retirement or whatever. We have a lot of things going on, which makes it a little crazier, but by compounding more things, it's just growing that much faster and giving us that much more of a head start for later on. I I think another five years from now, because of everything that we've been compounding, we are going to be like financially free and and be able to live a very free lifestyle or a very like fruitful lifestyle.

SPEAKER_02 31:34

I like that fruitful.

SPEAKER_03 31:35

Fruitful.

SPEAKER_02 31:36

I think it's I mean, we've talked about this too. Sometimes I feel like we have our baskets spread so thin. So I think there's that balance of not having all your eggs in one basket and not putting everything into one area that could just completely implode and not do anything for you, right? You know, one area that just completely goes down and you're screwed. But at the same time, finding that balance of how are you, how are we doing a lot of things really well, you know? Being able to split our time evenly to where we're giving it all.

SPEAKER_03 32:11

And I think that's been hard because we have we're getting pulled in so many directions. So that's kind of like why we're shedding some of these properties to businesses. Like we're trying to like like narrow in our focus so we can really focus on compounding those few things rather than so many things. Um, so I think that'll help. Um, another thing I would say a trap that a lot of people get caught in when it comes to just living your life and like making more money and trying to build wealth. A lot of people confuse lifestyle with wealth. So they'll compound their lifestyle, but not their assets. And you're not actually building anything. You know, you get a raise and you get a nicer car, but you have a bigger payment. You get a bigger house, uh, but you got a bigger payment. And you're not really going anywhere. You're just kind of getting caught up in the hamster wheel of you're making more, but you're spending more. And you're not actually building and compounding those assets, which is what's going to give you financial freedom. Because if you stop, if that person stops working, all that goes away. So you're not actually building any freedom. It's it's more like uh keeping up with the Joneses type of mentality. I think a lot of people get caught up in that, or they'll be like, oh, I'll I'll start saving later, I'll start investing later because they want to enjoy the finer things in life now. But if you flip that script and instead of doing that, put that extra income towards assets and start compounding those assets for five, 10 years, then you can leave that job, or if something happens, that job, you've already got income built up from these other assets and you can just keep keep sailing.

SPEAKER_02 33:41

I mean, that's what we've talked about, right? It's it's choosing your uncomfortable, right? It's do you want to be uncomfortable now and be able to have a really said fruitful life? Or are you wanting to just live right now? Yeah, and for some people, maybe that works. You know, for some people, um, I think that we can see the future and have a lot of people around us that are maybe not living as fruitfully as they're wanting to in retirement. I know when I was working in reverse mortgages, I saw it day in and day out, and it was heartbreaking to see how people were just struggling to get by. And that was like very eye-opening, at least for me, to see. I know you were kind of already understood all of this, but that was very eye-opening for me to see how important what we're doing now is and being uncomfortable now while we're young to then have that comfortability later on in life.

SPEAKER_03 34:38

Yeah. I mean to start getting to that comfort comfort. But yeah, and I I mean we do it with real estate, which is it is slow. Um, you know, people say real estate is slow, but I say it's not really slow. You're just stacking, you're not stacking the layers. We're stacking layers. We're getting properties, we're renovating them, then we're turning them into midterm rentals, and then we're leveraging that to the next one. And so we've got all these different layers uh that in our real estate. And I think people have an idea that real estate's, oh, you buy it and it rents and you make maybe a couple hundred dollars a month in cash flow.

SPEAKER_02 35:19

Or you flip it and there's your money.

SPEAKER_03 35:21

Yeah, but then you got taxes you got to pay. But I think people just think like, oh, you hold it and then you got, you know, hold it for 20 or 30 years and it'll be worth more. But it's like it's not that much of a gain if you look at it that way. But with all these different layers you start stacking and all these different strategies and appreciation, depreciation to hold more, you know, of your money and not pay taxes, like there's a lot of ways that you can stack and compound real estate, and you really got to dive in and and get kind of all these different benefits of it. But really, when you're when you're compounding all these different features simultaneously, it it really starts to become a great wealth builder. You know, it's it's they say it's the fastest wealth builder available today that's legal. Interesting.

SPEAKER_02 36:00

So I guess you could've not legal.

SPEAKER_03 36:03

There's all probably all kinds of things. You could sell illegal drugs, probably is one of them. Probably true. I don't know. Don't ask me. Okay, so I want to talk about another strategy that we're actually going going to be implementing um this year. And uh episode 47, we had Cam Dasani in the studio and he was talking about his options trading strategy. And he not his strategy so much, but just his his knowledge really. Um, he has a program where you can you can buy into his knowledge, where he's got Goldman Sachs traders that are or ex-Goldman Sachs traders on his team, and these guys are doing all the research, figuring out which options, trades to get in and get out of. And so they have a program where you can basically trade with them. So you're getting kind of like hedge fund type trading without you having to know what's going on. Like you don't have to do all the the research and and really know what know what you're doing in terms of like you know, reviewing financial reports and stuff, which I know you love doing that stuff, but I it's it's uh I had no idea what options trading this was before we had him on the show.

SPEAKER_02 37:15

I've done it before, but you still didn't know.

SPEAKER_03 37:17

No, I I know you did, but I didn't have a true the stock market, it's just so this is one thing we talked about earlier, like compounding knowledge. Like buying knowledge can get you ahead way faster and get you farther down the compounding trail than doing it yourself. That's what we've started to do. We've started investing in coaching, investing in masterminds and getting around these people and getting this knowledge that kind of fast tracks and compounds your strategy because you're able to pick up knowledge from other people that have learned it rather than figuring it out on your on your own because compounding is a time thing. So if you can speed that up or you can get ahead down that that trail a little further, you're gonna be further ahead. So that's what we've been doing. And we're gonna be implementing this options trading strategy. Um, and I think we've got a few different things I want to do with it, but one of the things is I'd like to start a education savings plan for the kids, for each kid. And we can do this with options trading through a Coverdale ESA. And you can only put $2,000 a year in. So it's it's a pretty small amount to start with. But I think that with this options trading strategy, because I understand options to know how much you can make if you know what you're doing. I don't know what I'm doing, but if I pay somebody that does know what they're doing, now I know what I'm doing. Now I've got a strategy. So it's all about having a strategy in place that that is a winning strategy. So uh one of one of our one of my buddies actually joined this program and I'm kind of talking to him. He's been doing doing these trades. And I mean, they're they don't all win, some of them lose, but the win, the wins outnumber the losses in terms of returns. So there's a backstop. Like you can get out, you don't lose all your money on a losing trade. Like you get out of it. And I think most of them they're losing like 15%, and that's their backstop. But the wins can be all over the place, like 20%, 30%, 40%, 50%. So they're kind of ball over. And it I think in the first month he he had about a 20% return on his money in the positive, even with the losses. So 20% on an annual is pretty good. You know, the last couple of years, everyone's stock market went crazy. And so everyone had 20, 25% in their 401k, and everyone's going crazy over it. But this is 20% in one month, not a full year. So if this strategy is consistent, and I'm not going to just throw all our money in this, I want to play around with a little bit, start small, get some data collected, and like, okay, I've done 10 trades over a month. And most of these trades you're getting in probably two, four or six weeks. I would say like maybe like three to four weeks is a like average turnaround on the on a trade, on options trade. And so if you're getting in 10 of them a month, in and out of 10 of them a month, so do this and like, okay, it, you know, it was a 20% return. Like, do it again. And if it's continually a 20% return, that is like crazy returns. Like if that is consistent at 20% a month, and that's what you're getting, again, this is not a year, this is per month. So you take that times 12 months, like you can really do some damage. So basically, if you take, let's say, $10,000 and you get a 20% return after a month, um you that $10,000 could turn into $12,000. So it's a $2,000 problem. $2,000 doesn't sound like that much, but we're looking at ratios percentage-wise, 20%. So if that $10,000 is 20%, now you got $12,000 the next month. If that 20% continues and you get another 20%, again, this is when compounding gets exciting. That 20% on is now on $12,000. So now you're getting $2,400 instead of $2,000. And then that $2,400 on top of $12,000. So now you got $1,400, $1,400. And then the next month it's going to be almost $3,000. And then it just keeps going up and up and up. After 12 months of this, your money will almost 10x.

SPEAKER_01 41:21

So crazy.

SPEAKER_03 41:21

So $10,000 will turn into almost $100,000. If it was, if it was straight 20, 20% per month, your $10,000 would be almost $100,000. And the easiest way to figure this out, if you're not real good with math, is take your calculator on your iPhone, put in whatever starting amount you want. And let's say that you're doing the 20%, you put in 10,000, multiply by 1.2, and that will tell you how much money you have after you get 20%. So 10,000 times 1.2 is 12,000. And then all you do is you hit the equal sign again and it'll automatically calculate that 20% return again. And so you just hit hit equals 12 times and you'll see exactly what it comes out to for the month. So again, maybe not a lot of money at $2,000 per month. Doesn't really do much for my life. But what happens is in your $10,000 without pulling, yeah, again, compounding is you're not pulling money out. You're leaving it, you're letting it compound and grow and snowball. This is where it becomes really super powerful. Getting excited.

SPEAKER_02 42:19

I know you are.

SPEAKER_03 42:19

I can see so if you let that compound, let's say you let that $10,000 compound for a whole year and you do get 20% for the whole year, now you've got $100,000. I think it's a little less than that, but let's just say it's $100,000 of money. And 90% of that, $90,000 of that is not your money. That's the market's money because you only put $10,000 in, but you didn't pull out any profits, you let it all stay. So now after one year of doing this, now on $100,000, what's your 20% per month going to be at that? A lot. Okay. That's an easy one. 20% of $100,000 is $20,000. So now instead of $2,000 per month, you're now making $20,000 per month. So now at that point, you could decide, okay, now I can like, I could pull $20,000 out and just leave it and let it go $20,000 a month. Let's just, again, assuming that's going to continue making 20%. It could be more, it could be less. Like, I don't know. I don't have the data on this personally. But if it did that, you'd be getting $20,000 a month by waiting for 12 months before pulling money. If you had started pulling money right away, you'd still be getting $2,000 a month.

SPEAKER_02 43:31

You'd have to be uncomfortable. You got to get uncomfortable.

SPEAKER_03 43:33

You got to be patient. This is the part that people have a problem with is patience. So what's really crazy is what if you go two years? If you if you ran this out for two years, again, $100,000 times $10 in the second year, it's a million dollars. You could again, this is hypothetical.

SPEAKER_02 43:54

$10,000 to a million in two years.

SPEAKER_03 43:56

The $10,000 could be worth a million dollars in two years' time if you didn't touch it and you just let it compound. I'm just trying to illustrate the power of compounding. Yeah. I don't know if this program really does will do that 20% consistently. I hope that it does. If it does, then we're not gonna touch money for a while, let it grow, and then we'll start pulling on it. But okay, so now you got a million dollars. And now you're 20%. And in year three, now you're making $200,000 per month on something that takes you a couple minutes a day.

unknown 44:26

Wow.

SPEAKER_03 44:27

And so that at that point, okay, now I'll I'm I'm I need I got uncomfortable for a couple years. Let's start start pulling some money out. So then, but I I think the way you don't pull $200,000 out, especially when you get up, that's a lot of money. What if you just pull $100,000? You pull half of it. Pull $100,000 out, let the other $100,000 stay in there and continue to compound. It's not going to compound as fast. So it's going to slow down a bit, but you'd still have, it's still going to keep growing. And every month, the money that you're pulling out is going to increase every single month. You know, by the end of the year, you you might be pulling out 20, that 200,000, but it's still growing. So that's like the power of compounding. If you just will be patient and leave it and let it grow, it gets to a point where like we don't need $200,000 a month. Like we don't need that to live. So at that point, you know, you you can start pulling what you need to live and live a really good life, and it's still going to keep growing and spitting off a lot more. Right. So just like the patience part, like the the that's the part people have a problem with is patience. Very hard. It's I know you have a hard time too.

SPEAKER_02 45:33

I do. I'm getting a lot better.

SPEAKER_03 45:35

So we'll see. We will see how this works. Cause I I mean, what I'd like to do is is do this with this this kid's school again, like taking that two thousand, taking two thousand dollars into a Coverdale ESA. Uh I'd like to do this outside of that too, for us personally, but doing this this $2,000 investment. And if that $2,000 will 10X by the end of the year, you could get that to $20,000. And then the next year, at that point, you could probably start paying tuition. So you can't start paying tuition right away because $2,000 doesn't go very far. And with a Coverdale ESA, you can't put more than $2,000 into it so per year. So if we can get it, let it marinate or let it compound for a year. At that point, if it starts spitting off enough to continue to grow, but also to cover tuition. Now you're paying tuition with tax-free money because it's it's in a Coverdale ESA. So you don't pay tax on the gains, then it pays all for tuition and then continues to grow as tuition costs rise. You're still growing, growing, growing. You get into college, uh, it pays for tuition there. Also, you can pay for uh with these ESAs, you can pay like a 529, and I believe the Coverdale ESA is the same thing. You can pay for living expenses while you're in school. So room and board. Um actually, uh Brandon, Brandon Zalexon sent this to me earlier today, funny enough, uh, a post by Amanda Hahn, which I'd love to have her on the show, um meeting with her office later today. Um, she posted something that I had never heard about. So with the 529 ESA, you can use money, pull money out tax-free for room and board to pay for uh a rent or a dorm or whatever. But what people are doing is buying a house where their kids go to school. So your kid goes to school. It doesn't work that way well in California, but pretty much anywhere else. Your kid goes to school and university, you buy a house there. What you can do is you can rent the house to your child. They pull the money out of their ESA for room and board. It is capped at whatever the school's housing is for that area. So there's a specific amount of money that you have to stay within to stay in those guidelines. But the the IRS will allow money to be pulled out for room and board because it's a it's a tuition or a uh education expense while they're living there going to school. So they so what you can do is pull the money out of the SA, rent it to your child. Your child is paying you for that rent, and you're getting paid now with the $529 tax-free dollars and keeping all that money in the family and it's paying down the mortgage. Here's where it compounds and gets really crazy. If let's say you buy a three-bedroom house, like what does your kid need a three-bedroom house for when I call it? I don't, right? So what they can do is let's say, for example, that the house is $2,000, or let's say it's $1,200 a month, is you're pulling that out of the SA that $1,200 is the amount for that university's like room and board. So they're able to pull out, pay $1,200 tax-free through this program. If you've got a three-bedroom house, you've got two other rooms. And this is really, I did this in college. You just house hack, you just rent the other two rooms out. If these other two students are paying you $600 each for their room that they're renting, now you're stacking that the $1,200, the students actually making $1,200. So you got the $1,200 coming from the $529 plan that was already tax-deferred and tax-free money is going to the parents. So that's it's paying the mortgage, and then the parents are collecting that. At the same time, the student is renting out, subletting two rooms to roommates and collecting $1,200 that that student is now keeping or that child is keeping on their own. So that's compounding that one, that one real estate transit, that one real estate is compounding by keeping the money in the family, paying this down. You're building wealth because you're paying, you're paying down the $529 plan is paying down the $529 plan is paying down the principal with tax-deferred money, or that's actually getting pulled out now tax-free. And then at the same time, your child is making $1,200 a month in income by renting the rooms out. So that's like there's a lot of ways to compound with real estate and and just it gets crazy. And then you're depreciating the the asset itself. So the money that you're collecting from your child, which is getting it from the $529 tax-free, is coming to you. And then you're hopefully offsetting a lot of those gains with depreciation. So you're now collecting that tax-free, paying down, paying down the mortgage and just building wealth. Everybody's just building wealth.

SPEAKER_02 50:28

Let me ask you with these ESAs. What happens after your child graduates college and if there's still money left over in those accounts?

SPEAKER_03 50:34

Yeah, that's a good question. I don't know. Uh I don't know a lot of people have done these, so I don't really know like what people have left over. We do alternative investments. So with a 529 plan, you can only do like mutual funds, like kind of like a 401k. You're only putting in a mutual fund. So it's only going to grow eight to 10%. You might have some better years, but it's not going to really like grow that much. With what we do, doing the coverdale allows you to invest in options, invest in real estate, do things like that. So you can actually buy real estate with it. After the fact? No.

SPEAKER_02 51:03

No, beforehand.

SPEAKER_03 51:03

You can buy it with it as you're growing it. You can't use it though. So we you couldn't buy that house for your child with the ESA. I don't think that's a good idea. Oh, okay. I thought you had to buy a house with ESA. No, so that would just be like a separate investment.

SPEAKER_02 51:16

Got it.

SPEAKER_03 51:16

There's rules where it has to be handled, like you can't use it for personal gain. Got it. But you could buy other properties and have them paying into it as uh like like dividends, like we do with our solo 401k. Um but what happens is let's say you go through college and you've got like more alternative investments and you're really growing and snowballing this, and it it's worth, you know, you got all this extra money at the end of of college and and tuition and everything, um, you can actually convert them over to uh an IRA. So that converts to an IRA for that child. So that kind of gives them that head start on their retirement planning as well.

SPEAKER_01 51:49

Okay.

SPEAKER_03 51:49

All from a $2,000 initial investment. So there are some other costs. There are with this options trading, you got to pay for the knowledge. And so we're gonna be like that's that's an expense. But I think most people just have one account that they're doing and it's not cheap. I don't know what the the packages are, but uh it's probably about a thousand dollars a month. Uh so it's not cheap. But I think a lot of people will just have like one account that they're trading and with a Robin Hood or whatever, and they're just trying to create additional income. We stack things and we compound. So we take that knowledge. I'm not just gonna have one account that's I'm putting $10,000 into and I'm going to compound. I'm gonna have an account that has $10,000 in it for us. I'm gonna have four accounts that has an initial $2,000 for the kids. We're gonna compound that knowledge and and spread that across, you know, 10 different accounts that are all doing the same thing and using that same knowledge for the same trades, but now we're getting 10 times the benefit because we're using it in 10 different different arenas.

unknown 52:51

Yeah.

SPEAKER_03 52:51

So compounding, compound knowledge, compounding, compounding, compounding, compounding, compounding. What else do you know about compounding?

SPEAKER_02 52:59

I like it.

SPEAKER_03 53:01

I I would say compounding, like the whole mindset of compounding and the hardest part is that it requires patience.

SPEAKER_02 53:11

100%. It's that I think kind of like what we've talked about is you know, when we started on this path of kind of the real estate, the investing, and you kind of laid it all out for me. It was hard for me to see it until it started compounding, right? Until we're physically a couple years in and I could start to physically see on paper what it's doing. In the beginning, it's not very exciting. I mean, truthfully. Yeah.

SPEAKER_03 53:37

And waiting, nobody likes waiting. Like nobody wants to be patient.

SPEAKER_02 53:40

It's hard to it's uncomfortable to wait. It's uncomfortable when you're in a in a tough situation when you have those funds there that you could potentially make life easier. It's hard to l let things sit and grow and do what they're gonna do to prolong a much more fruitful life in the future.

SPEAKER_03 54:00

Yeah, I think you just need to reframe the way you look at it because like people hate being patient. Like it's there's no, I don't like it. Nobody likes it, right? Yeah. But I think you need to look at it from the lens that you're not waiting, you know, you're building. Like you're like you're not just waiting for like not like something to happen. Like you are actively building by being patient and not touching this. You are building for a better future and it will pay off because that compounding does start to take the and it and it's a slow, it's slow at first, but then it starts to like gradually get bigger and bigger. Like we saw with our properties, like the first two years, it was a lot of work, and we were getting a little bit of equity gains here and there. And then there was, you know, COVID happened, and and after that, and the everything took off, and we saw a lot of appreciation between inflation and market appreciation and the force depreciation with those three, we went, you know, almost 10x our equity very quickly. So I think like one thing that people can be like relate to, if you're broke or you're struggling to like build wealth or to just get traction and anything really. Like if you're spending about as much money as you make and you're not you're stuck in that hamster wheel, um, you know, you're not broke because you don't make enough. I would say can be. You can be. I would say you're not you're not broke because you don't make enough. You're broke because too much of your money is exiting your ecosystem. You're not keeping enough in to compound and really build up. If you're spending everything that you're you're making, you're not getting anywhere. You've got to keep some in and be patient, let it grow and kind of get you out of that hamster wheel.

SPEAKER_02 55:40

Like you said, not buying a new car, upgrading your house, upgrading your lifestyle with every increase you receive.

SPEAKER_03 55:47

Yeah. And it's not that you can't do those things, but if you just hold off for a year or two, put some money away, put it in and invest it, let that start growing rather than as soon as you get that raise, you get that new car, you get that new house. Like a lot of people get stuck in that. It's like as soon as they can make that decision, they're doing it. You know, they haven't even lived in their house for two years and they're upgrading it because they got a raise. And it's like you're not ever going to build wealth that way. You know, you got closing costs and everything, taxes on the sale. A lot of people do that and they actually lose money on the sale because they don't let it compound enough. You don't let that appreciation build up at all.

SPEAKER_02 56:17

Has there ever been a time that you've almost pulled money out of a compounding asset?

SPEAKER_03 56:22

Yeah, we've done it. We've gotten in trouble. We've had to. I mean, uh, you know, unfortunately, like life happens. So we've, you know, this last year we had to, we had to liquidate some of our retirement accounts. Like we didn't have any money. We still don't have money. Like we weren't paying ourselves from the business. Uh, the real estate was paying for itself, but there was a lot of money, a lot of expenses because we were building a new project. And so we just ran out of money. And so we did have to pull out, and it's it was really hard to do because it really hard letting it like compound, it was really exciting seeing it grow and we had we had to do it. So there are setbacks. Life happens. Like that's just the way it goes. But I'm glad that we let it compound the way we did because we had that to fall back on. Had we not had that, we'd be in a lot more trouble.

SPEAKER_02 57:10

And we didn't pull it out the first time as soon as things got hard.

SPEAKER_03 57:15

We waited until they'll wait. We waited until we had like our back was against the wall and we like had no options. And so we there was a couple times we had to do it and we we like fought through and suffered through, and that was like the last resort option. And we did have to do that. Both of us did. And but we've been able to hold on to the assets and get through and wait for this appreciation and wait for the market to like get to where we wanted it, and now the bonus appreciation play. Now we are, you know, looking at a windfall of cash. If we sell both properties, and we if we would have pulled the pulled the ripcord earlier, we wouldn't be sitting in this position. So because we waited and let that keep compounding, we're in a much better position to where that money that we pulled out is is minuscule compared to what we're facing now in terms of like the benefits. So I would say we haven't sold the houses yet. Haven't sold the places yet.

SPEAKER_01 58:11

Hasn't sold yet.

SPEAKER_03 58:12

We're now listing everything because now it makes sense and we've held on long enough to to earn that.

SPEAKER_02 58:17

I I think that was a scary thing to do. It's everything that you're told not to do, right? Don't ever touch that money, let it just continue to grow for you.

SPEAKER_03 58:28

It's scary to pull everything out that you have left. Your life savings.

SPEAKER_02 58:32

Yeah.

SPEAKER_03 58:33

I wouldn't really call it our life savings because we have so many different areas and assets and and things that we've built. So it wasn't like it wasn't like it was our last penny of wealth. It's just that's one thing that's a sacred thing that you don't touch your retirement account until you get to retirement. It's not the first time I've had to do that. I started over several times, but I know with the knowledge that I've gained, I'm able to get there faster now.

SPEAKER_02 58:59

So let's look at ourselves in the future, looking back at like say 10 years from now, and we're looking back at this moment. What are you going to tell yourself about this experience?

SPEAKER_03 59:14

I think that 10 years from now we're gonna look back at this moment, which is now recorded, archived, we can look at this. Ten years from now, we're gonna look back at this moment and we're either going to say that's when we started stacking assets and letting them compound, or we're gonna say, I wish I started sooner. And I know with what we've been doing, we're gonna continue doing this, we're gonna continue to let things compound, and we're not gonna be in that second bucket. We're gonna say, This is the moment. I would actually say this probably started five years ago for us. I think we're already five years into that 10-year mark because we I think I think 10 years is a good amount of time to really like let things compound. So I would say like five years from now, we're gonna look back 10 years, which would be 2020 when we bought our first house together, and we're gonna say, like, that was the moment we started letting our assets compound. And because of that, we are now don't have to worry about anything. Like we're we're now way better off.

unknown 1:00:20

Yeah.

SPEAKER_03 1:00:20

And we and it's 10 years of sacrifice. We're halfway through that. It's kind of discouraging to think that we may have another five years of this, but things are going to get easier along the way because you know, we're we're now we built up wealth now to where now we can start spinning off income and it should start to get easier and not as much of a sacrifice. I think we'll still be making a sacrifice. We're not just gonna go buy that white picket fence and live that house forever and not have to worry about anything. We're still gonna continue to grow and build and make sacrifices. But I think the sacrifices start to get smaller as your wealth gets bigger because it as that snowball continues to build, it's like the sacrifices you're having to make now are much smaller compared to the overall picture. Um, and as you start to draw income from these things, it's like, you know, like we were talking about earlier with the options, like when you get up to a million dollars, that 10 for that 20% is now much larger and you don't need that much to live. So I think that it just gets easier and easier as you continue to to grow in that sacrifice. At some point, you don't have to make those sacrifices anymore because your wealth has grown so big that it doesn't, your that little sacrifice doesn't even make a dent in helping it out anymore because it's just on its own and it it's smooth sailing.

unknown 1:01:32

Smooth sailing.

SPEAKER_03 1:01:34

So um if you have questions about compounding, uh join our school community. We do have a school community, it's the broke millionaires. You can search on SKO L dot com. And then I also do a weekly, or say we, but you're usually Usually halfway in. Yeah, halfway in with the kids come back and swim. Um we do a weekly call uh and we dive into topics like this, and you can ask questions and run your situations by us, and it's kind of fun to workshop with people live on calls. So it's kind of a continuation of these conversations, but it's a a two-way conversation. How to apply it to your Yeah, like I enjoy, I enjoy talking about this stuff. So it's fun to kind of talk back and forth with with other people and get other ideas as well. So it's fun. If you are finding value in what we're doing, share this.

SPEAKER_02 1:02:24

Please.

SPEAKER_03 1:02:24

Spread the love.

SPEAKER_02 1:02:26

Give it a nice rating.

SPEAKER_03 1:02:27

Yes, that helps us and helps other people find the show too. So if you are finding what we're doing valuable, uh, even if it's just a rating, a quick click of the rating, that helps. Um, and reviews go a long way as well, but it does help in the algorithms for other people to find the show. Anything else? Any final thoughts, the final words?

SPEAKER_02 1:02:45

I just hope that people are finding value in what we're talking about and able to start applying it to their life if they if they're crazy enough to go down the path at least chosen.

SPEAKER_03 1:02:57

I think the the more we build up, the more it becomes like proof is in the pudding. Like yeah, we're making sacrifices, we're broke, and like people probably think our life is miserable, which it's not. I'm not gonna say it's not at times. It's hard. But what we're doing is it's not like you have to get lucky to make it when you're building what you're doing.

SPEAKER_02 1:03:22

You're not waiting on luck.

SPEAKER_03 1:03:23

You're not waiting on luck.

SPEAKER_02 1:03:24

You're putting the work in.

SPEAKER_03 1:03:25

You're putting the work in, you're making yourself, you can call it luck, but you know, we're we're making ourselves lucky.

SPEAKER_02 1:03:30

We are about how I feel about that word lucky.

SPEAKER_03 1:03:35

Yeah, I don't I don't believe in luck.

SPEAKER_02 1:03:37

Yeah.

SPEAKER_03 1:03:37

Okay. I think that's it for today. Get out there and make it happen.

SPEAKER_00 1:03:43

Thanks for listening. This has been a production of Rebuilding the Dream Studios.