Paul is in Springfield. Hey, Paul, welcome to the Ramsey Show. Hey, how are you guys doing today? Better than we deserve.
What's up? So I've been obviously listening to a lot of your podcasts about building wealth, and this is something I've been working on for, I'd say, almost 10 years now. I'm 31. Good for you.
Thank you. I started investing heavily into real estate because that's what my father did, and I saw the value in that of passive income for retirement. I started a new job a couple of years ago and started making life-changing money. It's a lot more money, so I started getting a financial advisor to make sure I don't spend the money stupidly or just to start investing in and spreading my investments a little bit more broadly.
And, you know, obviously I want to keep investing in things and keep growing this wealth smartly, but I was just kind of looking for what your advice would be of what you think maybe the next best steps would be. Well, I think you're going to be fine if you'll behave in a couple of areas. The reason I think you're going to be fine is the reason most people don't succeed with money is they just don't bother to pay attention, and you've been paying close attention for a decade, which is very important, and so I'm guessing that you probably made some really good strides. So this wonderful money you're making, how much do you make?
Well, last year I made $540,000. This year I'm 100% commission-based job. So right now I'm at, I think, $300,000, so I'm guessing I'm going to make close to $5,000 again this year. I have, so in total, I thought you said $140,000 and then you said $500,000, which is it?
No, so I'm going to make about another $150,000, I think, this year. So I think I'll be at $500,000 again for the year. I think I'll be making $500,000 again this year. So last year you made $500,000, this year you're going to make $500,000?
Probably, yes. Okay, good. That's fine. I misunderstood what you said earlier.
Okay, good. Wonderful. Congratulations. That's just a fab.
You're right. That's sick money. It's wonderful. I love it.
Right for you. You're obviously doing some good. So here's what, here's a couple of rules I've discovered in 30 years of working with wealthy people, okay? Number one, almost no one statistically becomes a millionaire from an inheritance.
So that's all just mythology and bullcrap, okay? And we've done the largest study of millionaires ever done in North America, 10,167 of them. Eighty-nine percent of them did not become millionaires because of inherited money. So you're not that unusual as you become a millionaire.
Number two, millionaires do not do super fancy, weird, extremely risky things and keep their money. They usually lose everything if they do. So the millionaires that we have studied are fairly boring. They put money in things they understand and like.
For me, I buy growth stock-type mutual funds, growth and income, aggressive growth international, that kind of thing, and I buy real estate that I pay cash for. Like you, I grew up in a real estate family. Mom and dad were in the business. And so I love real estate.
I got my real estate license when I turned 18 years old. I love real estate. I've got buku's of real estate, several hundred million dollars worth. But I pay cash for it, and I don't have any debt, and all cash flow is like a bandit, and I don't have any of it that causes me super stress because of that.
So, you know, but that's how I live, and my life is great because of that. So I would tell you to invest in things you understand and you're comfortable with. Obviously, real estate is that. People who like real estate often take on a whole lot more debt than I think they should.
Right. So, yeah, I haven't been buying for cash. And if I do buy for cash, it's because it's a foreclosure, you know, I'm going to renovate it, and the goal is obviously to buy it at the right price point, and then not overinvest, and then refinance it, going 20% down, and using the passive income of the rents to pay myself back, or I have enough equity. Let me stop you for a second.
There is no passive income from rents. If you've been dealing with renters, you've figured out it ain't passive. Well, yeah, it depends on how good you are. It's not passive.
No, it's not passive. I've been doing it for four years. Dealing with renters, commercial or residential, is not passive. That's TikTok mythology, okay?
The term is coin to cash. You're active. Real estate has the highest hassle factor of just about any investment you do, but it has one of the higher returns. So, anyway, you called to ask what I think you should do.
I think you should use this fabulous income to clear off all the stupid debt you've got on this real estate, and you're going to have a much higher trajectory in your wealth growth long term. Short term, it's going to slow you down. But long term, when you have no debt on this portfolio, and the piece that goes with that, and this cash flow that's going to go with it, you're going to buy a lot more real estate and pay cash for it. That's how I've got several hundred million dollars worth.
I don't have any rents that go to anything except buying more stuff. I don't have any, no payments. Yeah, but you hit on this earlier, and I think it's true. When you get into the real estate game, the majority of people, they have to go to the bank, right?
Like when they're playing this game. And the majority of them aren't in the business 10 years later. Yeah. Because they think it's passive.
It's not. And they think there's no risk in the debt. And there's a lot of risk in that debt. Yes.
And so it's worth going slow. The phrase you coined of moving at the speed of cash and everything you do, including real estate. But that is a slower pace than, again, what you're going to see on your TikTok or Instagram reels of people doing real estate. When I was in my 20s, I started buying real estate, and I was in a real estate investors club.
They followed all the crap like we do on TikTok now. Oh, there's nothing down real estate or staying leverage crap. Okay? And the guys that were in that club, there were several people that had millions of dollars of net worth in that club.
100% of them now, 30 years later, are broke and out of the business, or they paid off their debts, and they have paid more real estate. There's three of them that I know are still standing, and they all paid it off and became debt-free. The rest of them that try to continue to play the leverage game, they got hammered in one of the downturns or another, and they're gone. They're out of business.