How to Earn $650m and Still Be Broke

On today’s podcast, going to talk about how you can earn $650 million and still be broke. Stay tuned.

Welcome to the True Condos podcast with Andrew la Fleur, the place to get the truth on the Toronto condo market and condo investing in Toronto.

Hi, welcome back to the show. Apologies in advance if my voice sounds a little off today. It is the middle of January. The polar vortex is about to hit, and I have got my first bad winter cold. So I’m going to struggle through this with you. Hopefully you are feeling good wherever you are and whenever you are listening to this, whether it’s now, in January of 2019 or some point in the future. Thank you for listening. Thank you for your time, and I appreciate your support for this podcast. If you enjoy this podcast, if you want to go ahead and leave a rating or a review on iTunes, that’d be greatly appreciated.

So, I want to talk on this podcast, as I said, about the topic is how you can earn $650 million and still be broke. And I came across this interesting headline, which really got me thinking about real estate and investing and, in a broader sense, life in our society in general. And that is Johnny Depp. Johnny Depp, apparently, the famous Hollywood actor, some would say one of the greatest actors ever … He is apparently broke or close to broke, and apparently he has earned over $650 million in his career, and yet, it’s, according to several reports, almost all gone. So pretty incredible, when you start reading into this story.

And it’s probably not the first time that you’ve heard of this. Certainly not the first time I’ve heard of this, a major star celebrity, athletes we hear about this all the time where they’re earning tens of millions, in some cases hundreds of millions of dollars, and then at some point, you hear that they’re broke. They’re bankrupt. They’re in dire straits. There’s nothing left. And of course, the automatic reaction to that would be, “Well, that’s absolutely ridiculous. That’s not possible. How can that be? They must be a complete idiot. I would never do that if I had that kind of money.” You know, I’d be totally not, you know, broke, and I’d be owning my own island and having servants and whatever it is. I could never do that kind of thing.

But I think if we took a little bit of a further introspection into ourselves and into our society right now, and if we were a little bit more honest with ourselves, I think the truth is that this could happen to anyone, and it doesn’t matter how much money you make. It doesn’t matter how famous you are. It doesn’t matter who you are. This, I think, is just a symbol of a greater problem in our culture in general as it pertains to money, finances, wealth, and that is people have no idea what they’re doing with wealth, for the vast majority. Now, obviously some people do. Some people are very successful, and some people multiply their wealth like crazy, and hopefully you are in the camp of wanting to learn more how to do that, and that’s why you’re listening to this podcast and learning about investing in real estate, investing in condos.

But the vast majority of people out there are just not educated on money. They don’t understand how it works. They don’t understand how to grow wealth. Whether you’re, you know, a guy … A person making $40,000 a year in some entry-level job or you’re Johnny Depp, who made $650 million, if you don’t know what to do with your money, you’re going to end up in the same boat. That is, you’re going to end up in trouble. You’re going to end up with nothing. And life is going to suck. So hopefully, again, this podcast … And a big reason why I do this podcast and why I do what I do is I believe strongly that we need to be educated. We need to be taught. It’s not something that’s taught in schools. It’s not something that people talk about. It’s not something that most people understand. It’s not talked around the dinner table of most households. And so, it certainly wasn’t when I was growing up, to much of an extent at all.

But it’s such an important subject that touches on everyone’s lives, and it’s something that we need to understand, and for my money and my analysis and my experience, the greatest investment and the greatest thing that you could do for yourself, for your family, for your future, is to invest in real estate. It is the most historically proven asset class that is going to grow your wealth and bring you a better future for you and your family. So that’s what I believe, and that’s why I’m here, and that’s why I do what I do, and probably if you’re listening, you believe something similar or you’re on a similar journey, as well. So glad to have you with me here, and hopefully we can help each other grow and learn and become richer in the long-term as we do this.

This article with Johnny Depp got me thinking about some other things, came across some other articles. Want to throw some stats out at you, as well, which I found interesting. 46% of Canadians … Here’s one article. I’ll include the links to all this stuff in the show notes, which you can always find at TrueCondos.com/podcast. 46% of Canadians apparently, according to one survey, are $200 a month away from insolvency. If that doesn’t shock you, I don’t know what does. $200 a month. You’re teetering on the brink of insolvency, on the brink of … You know, I don’t know how they define that in this particular case, but some form of bankruptcy or some form of major financial problems if you had a $200 difference in your money coming in on a given month … 46% of Canadians. Almost half of all Canadians are in the boat where it’s $200 a month away.

And I would venture to say, if you increase that number from 200 to 300, 400, 500, maybe a thousand, you would quickly cover a vast majority of all Canadians. So that’s scary. Here’s another stat. 31% of Canadians don’t make enough money to cover their bills and debt payments each month. They don’t make enough money. One-third of all Canadians don’t make enough money to cover their bills. Scary. 45% of all Canadians will need to, said they will need to increase their debt in order to pay for their living expenses. Living expenses. 45%, almost half of Canadians said they will need to go into further debt in order to pay for their ongoing living expenses.

50% said that they will be in financial trouble if interest rates keep rising. Interest rates, of course, have been rising over the last year. You know, you’ve been hearing me talk about that a lot. I believe that, you know, interest rates in 2019 will probably not go up. They might, in fact, actually go down, I believe. But, nevertheless, 50% … Half of all Canadians said they’re going to be in financial trouble if interest rates keep going up. Huge percentages, scary numbers.

Here’s some more related statistics from a different survey from RBC. It said that two-thirds of Canadians can’t afford time off for caregiving. So imagine you have someone in your life, someone in your family or someone you care for, maybe an aging parent, maybe a sick child, maybe a spouse … What if something happened, God forbid, but what if something did, and you needed to take time off to care for someone else and you weren’t bringing in your income? Two-thirds of Canadians could not afford to take time off for caregiving, said this survey.

Two-thirds of Canadians could not afford … And further, an interesting related note was, from the same survey, two-thirds of Canadians are thinking about taking a sabbatical to pursue a passion or a personal aspiration. Two-thirds of Canadians are thinking about leaving the 9-to-5 and going out and either doing a sabbatical or pursuing a passion, pursuing a personal aspiration. What were these things specifically they were talking about? Well, the number one thing, apparently, was travel, to travel extensively. The number two thing was to start a business, and the number three thing was to live or work abroad. So travel, start a business, live or work abroad.

Two-thirds of Canadians are thinking about doing that, but looking at the stats that we just shared, obviously, you know, nobody can actually afford to do it, and it’s … They’re thinking about doing it, but it’s a pipe dream. RBC’s trying to sell some insurance products there that will sort of help you do these kinds of things. Anyways, but I just find it very interesting.

As a society, we have these dreams. We have these goals. We have these things we want to do, but the reality is very different from what’s going on in our heads. Reality is most people are broke or very close to broke. But most people cannot afford their monthly bills. They can’t even afford their living expenses. They need to go into debt just to pay the rent, utilities, you know, put food on the table, pay their car payments, and so on. So we are living way beyond our means.

This is a societal problem. This is not a Johnny Depp problem. This is not a, you know, an Allen Iverson problem or other athletes that have gone through this. Everybody’s in the same boat. Everybody, we live in a consumeristic society. We are taught from a very young age, programmed from a young age, to consume, consume, consume, to buy, buy, buy, to keep up with the Joneses. You’ve got to get the two cars. You’ve got to go on the certain vacations. You’ve got to look a certain way. You’ve got to have certain clothes. You’ve got to live in a certain neighborhood. It goes on and on and on, and it’s just a reality that we live in.

I mean, what I always find interesting when I look at this, and when I hear stats like this … Obviously, it’s a big problem, and we’re here to … We’ll talk about how to address this problem in a minute, but I just find it … It’s interesting. In some ways, we live in the greatest time of human history. We have resources at our disposal. We have a quality of life that people in some ways, hundreds of years ago, or even a hundred years ago, would be just absolutely blown away by the things and the conveniences and everything that we have in our world today, like the … Like a middle-class person today … Some people say stuff like they have more luxuries than kings of the past, you know, and Roman emperors and stuff of the past.

And I was like, it’s like, life is very good in general, right? Especially if you’re living in Canada and you have a job and you have a roof on your head and you have food on your table. Life, generally, is very, very good. But when you dig a little bit deeper and you start hearing these statistics and stuff, I just think, you know, life hasn’t really changed much at all from our ancestors hundreds and thousands of years ago, of basically we are still in the same position of subsistence living. We’re just barely scraping by, right?

You know, like hundreds of years ago, the majority of the world would be under the category of subsistence living, that is, just create enough or just make enough to live from day to day. There’s no long-term plan. There’s no long-term stability. You’re not thinking about retirement. You’re not thinking about golden years. You’re not thinking about spare time and what are you going to do for hobbies. No. You’re just trying to live and survive day to day, and if you could do that in week to week, you’re happy, and that’s the greatest thing that you can aspire to. That’s subsistence living, and you know, a huge portion of the planet are still living under those kind of poverty conditions around the world today, yes, but for us here in North America, us here in Canada, obviously we’re in a very privileged position economically, and conveniences-wise and everything else. But, again, are we really … Are we really any different than our ancestors when, if the $200 difference in a given month for half of us is going to put us into insolvency?

Most people, I believe, are just barely scraping by. Most people are still in that subsistence living category. The only difference is it’s voluntary, whereas in the past, it was like you were subsistence living because that’s what 90% of the world was, and that’s just what you did and what was normal. Now, it’s like we voluntarily put ourselves into this subsistence living by just accumulating too much stuff, accumulating too much debt, bad debt, buying the second car when we don’t need it, buying all this crap and then going on these vacations we can’t afford, and trying to keep up and look a certain way, and listening to the advertisers what they tell us about how we should live and what we should look like and so on and so forth.

So we end up in this hamster wheel of life economically where you’re never getting ahead. You’re just barely getting by, month to month. In fact, most people are actually getting further and further into a debt hole from month to month as these statistics are revealing to us. So it’s a problem. This is a big problem, and this is something that I see out there, and this is, again, why I do what I do is I see that people don’t understand money. I see that, I see a way out for people that I hopefully am a small voice here in the wilderness calling out to help people see there’s a way out of this, and there are solutions to this. We don’t have to live like this. We don’t have to live $200 away from insolvency. Nobody does. Nobody should have to in this day and age and all the resources and things that we have in this society, in this country, especially the greatest country in the world, you know, to live in, Canada.

We’re here. We have everything at our disposal before us, so we need to change, and we need to do things differently. So we have these problems, as I said, just to summarize. We’re living way beyond our means. The other problem is we’re living a lot longer than we ever did before, so healthcare is just getting better and better, people are living longer and longer. And that is becoming a bigger and bigger problem because we don’t have a plan for how we are going to pay for ourselves to live when we’re 80, 90, 100. What happens if you live to 100? What happens if you live to 110? What if, 50 years from now, people are living to 120, 130? If you look at all the actuarial charts, this is happening. This is reality. This is going to happen.

But the problem is, we’re working less and less as a percentage of our total lives. Like in the old days, again, you would just work until you died, essentially. Like you didn’t have a retirement. You just, you didn’t live very long, and you just work and work and work 100% of your life, and then you die. Now, you know, if we’re still holding onto retirement around age 65, but we’re not living to 70, 75 anymore … What if, if we’re living to 90, 100 years old? We’re working less and less. Our working years are shrinking as a percentage of our overall years of being alive on this planet. So, again, this is a big problem. We need to have a plan in place. How are you going to pay for a long and extended retirement if, you know, if these trends continues as a society, how are we doing this?

What if your income stops? What if you need to take time off to give, for caregiving, for a loved one who needs your help? How do we get off this hamster treadmill that so many of us are on? Well, again, no surprise here. If you listen to the podcast, you know what my answer is, and my answer is to invest in real estate, specifically to invest in condos, is my favorite method of investing in real estate. Let’s talk about some of the aspects of real estate, the beauty of real estate investment and why it’s such an amazing thing.

Number one, it’s proven. It’s a proven asset class, as I said at the beginning. It’s proven over centuries that real estate is tried, tested, and true. Like, it’s not … This is not Bitcoin. This is not whatever you could think of. It’s tried, tested, and true. Real estate is just a centuries and centuries of history, and especially, even just looking over the last … Forget about the long-term. Just look over the short-term history, the last several decades. Real estate is a proven asset class. It’s a proven way to grow your wealth, so you know, don’t overthink it. Just look at where people have been successful and copy that.

Number two, it’s simple. Anyone can do it. It doesn’t require a Ph.D. You don’t have to be searching and looking at charts every day or checking the NASDAQ or whatever every five seconds. It’s simple, and it’s boring. And to me, that’s what makes it great, is just you put your money in, you sit, you wait, you collect rent, you sit, you wait, you get a new tenant, you sit, you wait, you fix up the property, you sit, you wait … It’s just, it’s very simple. You’re holding an asset over time. You’re renting it out. It’s putting money in your pocket every month, and over time, history continues to show us, time and time again, that that asset will appreciate in value and your wealth will grow.

Number three, the beauty of real estate. It’s forced savings. That’s another thing I like about it, is that you can’t necessarily see it every, day-to-day. You don’t feel it. Like I have all these properties out there myself, right now, today. I think about them. They’re not doing anything for me in this moment. They’re just out there, doing their thing. They are not … There’s no one showing up at my door each morning with a bag of money. But those little machines are just quietly and consistently running in the background. I’m getting paid. My wealth is growing in the background. My mortgages are being paid down every single month by somebody else. It’s forced savings.

So in a society that, as I said it from the beginning, has an absolute, you know, phobia of saving, it’s a great antidote to that. So if you’re in that category, if you know people in that category of you spend more than you make, then real estate is a perfect antidote for that. It’s forced savings. People who are against real estate say, stock market is better, do the stock market. Buy, put your money in the stock market. Well, sure. I mean, it can work for some people, but it doesn’t have that same aspect to it that I love of forced savings. It’s just you, when you pay that mortgage every single month, and of course, with real estate, it’s your tenant who’s paying the mortgage for you, it’s like a forced savings account every single month that your principal is being paid down every single month. You’re paying yourself every single month without thinking about it. And that’s the beauty of it.

Number four. It’s a business in a box, so a real estate investment property is a business in a box. It’s the perfect little simple business. You have revenue. You have expenses. You have your balance sheet. You have a customer. You provide a service. It’s just a simple business in a box, and the skills that you take from investing in real estate are very transferable to other businesses, as well. There’s nothing like owning and controlling your own business. That’s another, again, that’s a whole separate subject, but that’s an amazing skill and something necessary to have to grow your wealth.

Number five, real estate rewards the patient. Those who play the longest game are going to benefit the most from real estate, and that’s, again, so much of our thinking in this society, going back to the start, is short-term, is thinking about today, is thinking about this week, this month. How do I feel right now? I want to feel great. I want to get this thing. I want to get that car. I want to get … It’s all about right now. Instant gratification. Real estate, it’s … If you’re all about instant gratification, real estate is going to drive you nuts because it doesn’t work that way. It rewards the patient, rewards those who play the long game. If you want to grow your wealth in real estate, the longer that you’re in real estate the more wealth that you’re going to create, and the better off you’re going to be the longer that you’re in it.

So again, that means it’s automatically not for everyone, but for those who understand the power of that and how it works, you’re just going to do phenomenal over the long term. And the younger that you are that you figure that out, the better that you’re going to be.

Number six, covers over a myriad of other mistakes. So, again, going back to the sort of idea of forced savings, like even if you are somebody who spends more than you make, if you’re in that category, if you’re having a hard time breaking that habit, if that’s just, you kind of are saying, you know what? That’s just the way I am. That’s the way I’m always going to be. I like spending money. Then, again, you should really add some real estate to your portfolio because it’s going to be doing its thing in the background. While you do your thing in the foreground and live your life and if that makes you happy, then go for it, but at least have something in the background there that’s covering up your mistakes, so to speak. That’s building your wealth quietly in the background.

While you might not know anything about stocks or equities or markets or other types of investments, and you might be horrible at managing your own money, and you’re the type of person that just always overspends and you’re always going into more debt, if you’ve got that real estate on the other side of the balance sheet, it’s going to cover up a lot of those mistakes that you’re going to make over the long run.

Number seven, it’s a multi-dimensional asset, as I talk about a lot. It’s multi-dimensional, and that’s, again, the beauty of real estate. It benefits you in several unique ways. There’s typically four categories we talk about. Number one is cash flow. You get, if you buy a property that’s giving you positive cash flow, it’s paying every month. Number two, principal recapture. You’re paying down that principal every single month, is the second thing, with your mortgage payment. Number three, appreciation. Property tends to appreciate over time, so you’re gaining from the increased value of the asset. And number four, is there are certain tax benefits that will come into play that you can’t get in other assets, that you can get with real estate investing.

And finally, number eight, reason why real estate is such a beautiful investment to counteract all the stuff that we’ve been talking about is it’s an inflation hedge. It’s a great thing that will counteract inflation over the long term. You know, you can’t earn your way to wealth, for most people. You’re not going to make enough money, just making money is not going to make you wealthy. And one of the big reasons why is because, you know, most people, you spend whatever you make and then even a little bit extra. So just like Johnny Depp, whether you’re making 650 million, 650,000, 65,000, whatever that number is … You’re never going to get ahead if you’re just relying on income alone. That’s the problem with the middle class in Canada today. That’s the problem with most people is they’re relying on income alone. They’re not building assets. They don’t have businesses. And in the long-term, they’re going to be screwed.

So it’s the ultimate inflation hedge, real estate is. Wages are not going to do it for you if you’re looking to build your wealth long-term. The only thing you could do, as an average person, as far as I could tell, is invest in real estate. And that is what I do, and that is what you should do.

And that, also brings us to the end of this podcast. I hope you found today’s episode interesting, and once again, if you did, go ahead and leave a review on iTunes. Share this episode with somebody that you know. Send it by email. Hit the share button on your iPhone. Text it over to them, whatever it might be. Make sure you’re subscribing to the podcast, as well. Make sure you’re subscribing to receive my weekly email updates at TrueCondos.com. And until next time, I hope you have a great week, and happy investing.

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