Financial Freedom - Part 2

Part 2 - Getting educated on IPA’s

It's my opinion that IPA’s should have been taught as a financial freedom 101 class in kindergarten. It stands for Income Producing Assets. Often times also referred to as Income Generating Asset's (IGA's). Your house? Not an asset if you ask me. If you pay it off and hand it to your kids in 30 years and they rent it out for income, they will have an income-producing asset assisting their journey towards potential financial freedom. You, however, will not have an asset even if it’s completely paid off.

Why is this my position? Because you’re sitting on your asset. It’s not actually making you any money. What's a practical way of putting this into perspective? Next time, take out $100 cash, and put it under your rear end, and sit on it. Can you use it? No - So long as you’re sitting on it, it’s unusable. It’s what they call, illiquid cash. So then what is this illiquid cash good for? Sitting on it in the form of real estate doesn't grow cash and financial freedom. It simply hedges savings, against inflation. Read that last sentence a few times over.

Can you sell the paid off real estate and achieve financial freedom. Possibly. Then what?  You’re going to go and live on the streets while being "financially free?" Start paying rent? You still need a place to live, be it renting or owning. So again, you're not financially free. Yet time over people think that buying into real estate is the smartest thing ever. It is, but if one partakes in real estate, it should be part of a broader strategy, and not a numb-minded decision just because everyone else is doing it. 

So I’ve had this argument with people for a very long time.  On the path towards financial freedom, Income-producing assets puts money in your pocket. Wealth preservation assets (WPA’s) on the other hand preserves your wealth by putting money in your pocket against inflation. The real estate that you live in is a WPA. So if you're not financially free yet you invest into real estate, it likely means you don't have any meaningful amount of wealth. So then what business do you have entertaining WPA’s? What's retirement likely going to look like? Nothing more than status quo... hedged against inflation. Sure, that's better than just sitting in cash... but it's not financial freedom... and it's not retirement. At least not if you ask me.

The other reality is that purchasing real estate is one of the leading reasons most people never achieve financial freedom normally because they choose to live in their piece of real estate. Sure they're "paying" themselves, but it's nothing more than a fancy savings plan. And if you learned anything from my webinar, if you save money you're already losing compared to the possibility of gaining monetary value.

So why do most entertain WPA's when they have not achieved financial freedom? They’re afraid of losing money. Instead of acting from a place of fear, why not work on confronting those shadows and psychological components, so that you make better financial decisions? If you didn't read about that in Part 1 of this blog series, make sure you click here before reading further. It's my position that putting all your money in ONE asset class such as real estate; especially one that isn't actually producing income for you is as high risk in terms of financial freedom as going "all in" playing poker. It could work out in a great way, but it could also decimate your worth if the smarter and bigger money has no interest in your entity and landscape location.

So, what is the one income-producing asset I think every person who is not financially free should consider learning about?

Stock Trading. No, not day trading. Stock Trading. They’re two very different activities. Day trading expects profits daily and unfortunately sucks in gambling addiction and higher probabilities of financial failure.

Stock Trading on the other hand requires you to be disciplined, analytical, factually driven, and able to strike when the moment is correct... not when the emotion is correct.

How can you learn about the market inefficiencies which give you an edge to trade successfully? Education.

We teach that education, but so do others. Do a bit of research and find out who has the best comprehensive course to take you from where you’re at to where you want to be. If you want to check our material out, start by watching the webinar first.

Then if you're interested, you can jump on a game planning call with one of my assistants, and determine if learning from me is something you'd like. So click here to watch the webinar, and then click here to book your info call.

What's another income-producing asset I like? 

Rental properties. No, not the ones one puts 5% down on and expects to come out in the positive. Having a tenant paying down a majority equitized "mortgage"  in the 35/65 rule or better.

Some more examples of income-producing assets that can shape financial freedom:

- Investing in startups pre-IPO.
- Buying a franchise.
- Dividend-paying funds, stocks, asset classes.
- Owning a golf course, or ski resort, or other entertainment class businesses.
- Working with a VC (Venture Capitalist).
- Investing in sound second MIC's (Mortgage Investment Companies).
- Growing a real estate portfolio with Holdco-backed loans from the banks.

 Liked this read? See you in part 3.