4 Things That Always Steal Your Money (Avoid No. 3)

But you're working really hard right now and still sometimes thinking, man, why am I not making it? Is it because I am spending too much money or that I probably need a better job? Well, the fact is that it doesn't matter if you get a new high paying job. It doesn't matter if you drink one cup of Starbucks less. It doesn't matter because they're actually four silent money monsters, four things that are actually taking away and stealing your money in fact. And the crazy part is no one ever tells us about it at all. There's no class that teaches us at school. Nobody explains this to us and they just say, hey, work hard, save some money, get a good job and it will all be okay. Hey, if you don't know me, my name is Shoron Trivazza. I have had a chance to build two billion-hour businesses, one in the private markets and one publicly traded on the Nasdaq. I invested in all hundred plus companies. I was an investment maker at Goldman Sachs and at Credit Suisse. I am also a die-hard and a Hamdak's fan. And today I am the CEO of acquisition.com where I work with my partners, Alex and Layla Hermosey to build what I'd like to call the next billion. But the reason I'm sharing this with you is once I realized why everything was slowing down to a money perspective, it put all of these issues in perspective for me. It was not about not having the coffee. It was not about trying to get a new job. I just realized if I could just control these four things, everything would change. So I'm going to tell you exactly what these four money monsters are and how you can avoid them. So here is money monster number one and that is inflation. Well, what is inflation? Inflation is a silent tax on the growth of the economy and most people don't even know that it exists. So let me give an example of how it may actually kind of show up in your life, right? Let's assume you have $10,000 in your bank account right now and that it was, it stayed in your bank account for five years. Well in five years, that $10,000 is probably going to be able to buy less than what it could have five years ago. I will tell you actually a crazier story. I drink the same exact Starbucks order for the last 10 years and I remember during COVID, during 2000 and 2020, this exact drink cost $2.85. Well, today it costs $5.75 and that is in under six years. Now how do I know this? Because I ordered the same drink on the app every single morning in under six years, right? You have more than a double in the price of something that we all drink that we all work with day to day. What is that? That is inflation. And so when you have the same amount of money that is sitting in your checking account and you don't do something with it, then it is naturally losing value every single day. This means that every dollar needs a job. If you walked into your office and you had 10 employees and those 10 employees were just kicking their feet up and doing nothing, or what would happen? Nothing, right? You'd be really frustrated. That's exactly what's happening with your money as well. So if your money just sat in a checking account, you can be darn sure that its value is being reduced. Now why am I telling you this? I'm telling you this because you and I have no choice but to at least find a way to let our cash keep pace with inflation because that $10,000 if it just sits in that checking account and is making checking or savings account and is making nothing less than 0.01%. Then in two, three, five years, you put more savings into it. It loses money every single day. So the least you can do is try to do, is try to get it into a high yield savings account. If you just did that one thing and you did nothing else, the least it happens, it actually keeps pace with inflation. Just keeps pace. It doesn't beat it. It just keeps pace with it. So you may end up in five years with a little bit more than $10,000 but the equivalent purchasing power of that $10,000 is exactly the same. So if you did nothing else and you were just going to quit this video right now, please do me one favor. Don't put all your cash into a random savings account. Make sure it's at least in a high yield savings account. Now if you don't have access to a high yield savings account but you have access to a brokerage account. So I want to introduce you to this concept called a Treasury inflated protection security. Treasury inflation protection security tips. You're welcome to Google it and essentially this is what it means. Tips is a bond. It's a security that's offered by the US government. Most treasuries that are offered by the government have a fixed rate of return. They say, hey, here's a 10 year treasury. It pays you four and a half percent meaning it pays you four and a half percent of interest every year for a 10 year maturity. Well tips is a little different. How tips works is that it's the interest rate on tips is actually benchmarked to something called CPI which is the consumer price index. And the consumer price index is just a made up basket of goods and services, mainly goods that most people use bread, milk, whatever else. I'm not sure. But they track the price of that basket of goods over time. And if it's worth $100, then it's worth $103. It's worth a cost. Now you've seen a 3% growth in inflation. So the tip security is actually tied to the CPI which means that if you invest in tips, you don't have to worry about keeping peace with inflation. It automatically adjusts and keeps your money in place and at pace with inflation. So if I were doing this today and I just wanted to make sure that I did not lose any money to inflation, I would take the $10,000 that I had and I would put it in the tip security. And then I know that whenever I pull it out, it will be, or I've kept pace theoretically with inflation. Now, how do you get access to tips? Well, you can buy directly from the US government. You can go to treasury.gov, I believe. If that's a little complex, there is actually a ETF called TIP. And if you buy that, it actually does the same exact thing. It mimics how the tip security works and it allows you to keep pace with inflation. In fact, I own it right now. I use the tips security for a combination of how I manage my cash overall so that I don't have this single monster eating away at my finances. So money monster number one is inflation. What's money monster number two? Money monster number two is taxes. Now, taxes are the number one drag on wealth creation. If you did nothing else, your number one investment strategy should be to have a tax strategy. Because what is a tax? A tax is this partnership agreement that you have signed with the government overall. Now, if you live in the US, that is taxes are a partnership agreement that you have signed with the US government. It, the tax code has 70,000 pages or whatever it has. And you have never read the entire tax code. You have no idea what it is. But the tax of your taxes are collected at source. If you don't actually pay your taxes, they will do whatever it takes to collect it. They will sell your house, they'll sell your car, they'll garner your wages. They will garner your wages. They will talk to your employer and say, hey, this Shuranga has not paid his taxes. You need to pay it at source. You can't even pay him until he pays our taxes for us. That's called wage garnishment. They will find a way to get the taxes. So it's important for us to figure out if you can actually have a tax strategy. Now, what is a tax strategy of the entire US tax code? Less than 1% of it is related to paying taxes. 99% of the tax code is actually built on incentives. It tells you how to not pay taxes. And that is what I would love for you and me to learn. Because if I told you that there was a partnership agreement that you had with the US government that allowed you to not pay taxes and you just had to familiarize yourself with it. And heck, 99% of that document was related to not paying the taxes. I think you and I would pay attention to that. But the fact is, no one's taught us how to do that. And I think that's really, really important. And if you just, if you did nothing else and you just saved on taxes and you just got the 30% back or whatever it may be, you win. There is no way you can create a 30% net investment in any given year. You get it right away. Additionally, if you actually get your taxes back and you got every dollar that you get back, it's a dollar in your pocket. To go get some investment to work, you have to take that investment, pay taxes on it, and then go invested somewhere else. In this case, you already have it, which is insane. So the number one, the first strategy of investing is to actually have a tax strategy. Now, you may say, well, it feels really complex. What do I do, et cetera? Let me give you a couple of ideas. The first idea on a tax strategy is that if you live and work in the gig economy and where you are living is not relevant. So you don't have to go to a job day today where you have to live in a particular city. And it may be worth considering whether it's more beneficial to live in a tax efficient state. Like the state of Florida, the state of Nevada, or the state of Texas have tax efficiently. They don't have any state taxes. So you instantly get a break. Well, look, I mean, I live in the state of California. I'm driving in Southern California right now in Greater Laguna Beach. Well, I pay an extra 13% in taxes because it's 72 degrees and my wife and children love living here. So I just have to make more money. Maybe you want to do that too. And that's okay. So sometimes you should take the easy button and maybe where your live is important. Second, is there are some tax-advantaged accounts where you put your money. I call this asset location. It's not about allocation as to stocks and bonds and mutual funds. It's asset location where do you actually put your money? So if you take, for example, a 401(k) plan, I'm not advising that you do that. You should talk to your financial advisor. However, but if you work with an employer that provides a match to your 401(k) plan, plan that makes sense to take the match because they're essentially telling you, hey, for every dollar you put in here, we're going to contribute somewhere all of it for you, for free. And in a tax efficient account, that's a really, really good thing, right? That's number two. If you start to find the different versions of how you can actually save in taxes, you'll start to realize that it's not just income taxes. There is state taxes. There is long and short term capital gains. Let me tell you about this one more, which is the idea that if you actually buy a security, right, and holding onto that security like a stock, you just make a determination that, hey, if I don't need that money, I'm at least going to hold onto it for 12 months. Well, if you bought Apple stock and you held onto it for 12 months in one day, then when you sold it, you now have capital gains. It sounds really simple from a treatment perspective, but that is a different ordinary income, which is for a lot of people 37% or capital gains, which is 15 to 20%. You automatically make a twice the amount of money from a savings perspective just by holding onto a security for 12 plus months. Now, why is the case? This is what I want to explain to you. There's the reason is that the tax code incentivizes certain behavior. It does not penalize income. If you just realize that the tax code is just an incentive machine that the US government has put policies in place and every other government in the world has put policies in place where they're like, hey, we're going to give somebody a deduction if they do this activity, if they invest in this low income housing, if they put money in oil and natural gas, if they do R&D development, if they buy real estate, they do that to actually spur the economy. And because you spur the economy, because you're doing the job that the government should do, but the government can't do, they give you a tax break for doing it. And it's significantly more efficient for the government to be able to do that as opposed to doing themselves because they don't have the capital to do it. The tax code is an incentive mechanism. And if you know the incentives, you can play right into that and get the benefits ditching the worst thing. Did you know the worst tax treatment is for people who work their face off. The worst track treatment is for people who get a salary. The worst tax treatment is for people who wake up every morning and get a salary at a bonus every year. It's the worst tax treatment. That's why the tax code incentivizes you to start a business and invest in real estate and, you know, put money down for R&D, etc. Just knowing that allows you to figure out how you can avoid the money monster number two, which is taxes. Here's money monster number three. By the way, before I jump away from taxes, if your CPA is not talking to you about tax planning and only thing that your CPA does is a file, your tax return, they call that tax preparing, then that's what your CPA is. That's what your accountant is. They are a tax preparer. They do compliance. They just make sure that you turn in your tax returns on time and that's their job. If you want to actually get tax strategy and tax advice, you need to go find a tax strategist. This distinction was really important to me. I thought that my CPA, my tax advisor, my tax preparer was my answer. That's when I, what, but then when I talk my first mentor, who's a multi-millionaire, he said to me, he's like, your CPA prepares your taxes. He's a tax preparer. You need to go find a tax strategist and your entire conversation needs to be with this person on the ways that you can reduce your strategy. And then you have your tax strategist pitch the tax strategies to your CPA. It's not your job. It's a tax strategist job and it's a tax strategist job to actually figure out how to earn their fee to repay you less money. And the tax strategists do this all day long. The entire job is to reduce taxes. So they spent, they figure out they read the tax code, they have all the ideas and they're like, oh, here's your on. Here's a situation. If we make this thing and if we do know the law and the follow the rules and document the truth, he will get this benefit. Let me actually present a memo to his tax preparer so that he can go do that. It is not your job to pitch your CPA on what you should do. You will never win that battle. You don't know more than him or her. But if you have a tax strategist that can do that, you will instantly be able to drop more money to the bottom line thereby creating better financial security for yourself. Here's number three. So number one was inflation. Number two was taxes. Monster number three. This is the silent monster that no one knows about. And that is interruption. Now what is interruption? When you invest in something, the benefit of that investment is for it to stay and grow. Now interruption is just like everything else. Now I'll give you an example that is not investment-related. Let's say you were wanting to get six backups. The greatest thing that everybody wants. Six backups. Well, would you continuously do it where you ate right, slept well, got exercise, got a trainer, or would you do it for three days and then you would quit for five. You'd do it for eight days and you'd quit for ten. What would you do? You would do it consistently. Well, investing is just the same. The longer you have an investment horizon, the better you win. Let me give you an example from a step. People talk about the historical average of the S&B 500 investing in the market to be 10 to 11%. That's true, especially if you invested in it from, you know, for a 25 to 30 year period. You could look up my numbers on this. It, of 25 to 30 year period, it kind of averages around 10 to 11%. Depending on with 30 years, right? However, but for people that have invested during that time, their return has been three to four percent. Why? Because most people, when are unable to have their behavior tied to this idea of investing even when that is the strategy. They're like, "Hey, markets went up. Everyone's greedy. I should take my money out." Oh, markets went down. Everything is down. I'll just wait for it to come back up before I buy in. Or, "Hey, I'm getting nervous. I need to buy this." Or, "Man, I really want that Lambo. I should sell my stock to buy that Lambo." You interrupt because you want to pay. You purchase, you interrupt because your next door neighbor told you that there's an impending crash coming. You interrupt because you saw a headline. You interrupt because you saw a news article. And because of that, you interrupted the greatest machine that is working in your favor. What is the greatest machine that's working in your favor? What is the greatest thing that you have from an investing perspective? Your best investment partner is time. The number one partner investing is time. And when you let time work, it actually works slowly. It works slowly in the beginning and fast at the end. So you've got to get into the fast portion. And the only way you get into the end is if you don't interrupt it. Interruption crushes long-term returns. And it's almost a point of 60% down when if you just let the money stay and build and grow. Overall. By the way, if you have children, please teach them the idea that once you think about long-term investing to do whatever it takes to never pull the money out, I'll actually do another episode on how, what if you have a need? Sometimes people are like, "Hey, I put money aside and I'm investing in a long-term portfolio for a long amount of time. I have a short-term need. What do I do? I feel like I have to sell my securities." Well, I'll talk about this another episode to give you more detail on how to do this. But you have the ability to borrow against your portfolio without actually having to sell that stock and interrupt the growth of that portfolio. And when you do that, you still get your liquidity today, but you still don't interrupt the growth of the portfolio overall. So money monster number three is interruption because of stress, behavior, market news, headlines, etc. And here's money monster number four, which are fees. I am telling you this because I was a banker at Goldman Sachs. I charged fees. And one of the number one reasons why I quit the financial services industry and became an entrepreneur was I just could not stomach charging fees to my clients because I saw how much it affected their kind of long-term impact on their portfolio. I'll give you a crazy number example. Let's say you had a million dollars and you invested it over a I think it was like a 15-year period or 15 or 20-year period and say it was in the S&B 500 and it grew 10% a year, right? Over that period you roughly will have called it six and a half-ish million dollars at the end. Well, the crazy part is if you had the same exact portfolio and instead of getting a 10% return you just got a 9% return, 1% less, 1% less, right? And that's a normal fee. 1% of asset center management is a normal fee. So the same portfolio got you six and a half million dollars. The same portfolio with 1% less gets you how much less. How much less do you think? Well, I'll tell you. In the same period a 1% fee equals over a million dollars equals over a million dollars. That is crazy. That's almost your entire that's more than your entire principle in this process. And we don't notice the fees that we charge on investment because the financial services industry, hello, me having done that one time, has an amazing job of masking that process. And I think we should ask for our fees. Now, I'll give you crazy example that this may be the pro tip of the video, which is one of my favorite ETFs to invest in is called the Q's, QQQ. QQQ is a technology forward ETF that invests in technology companies and it's a great way to get exposure to technology of the future. Now, everybody invests in QQQ. I have a lot of friends in QQQ. I invested in QQQ until I realized, one day I was like, I'm curious what the fee structure is on QQQ. And while it's not much, because it's just an exchange-traded fund, I realized that it had a fee structure that I was surprised by. And then I did some research and I realized that there was another fund called the QQQM, which was the exact same QQQ ETF, the exact same one. But the M was for long-term investors and the fee on the QQQM, the same exact structure was 75% less. So you could literally get the same exposure, especially if you're not gonna sell your securities and you would pay 75% less in fees and you might sound not like a lot, but over time when you hold it, in this case, it was a million plus dollars, right? Which is crazy. So I think it's really important to ask your advisors or look at the fee structure as to how the fees work. As a financial advisor, I wanna tell you, as a former financial advisor, I wanna tell you, I'm a professional investor now. I have no problem talking about fees because I'm a professional investor now and I put my money where my mouth is. But if you're talking to a financial advisor, it's hard, it probably feels uncomfortable for you to ask, hey, what are your fees? It's uncomfortable. What I, my recommendation on how to ask that question is, I would say, hey, Sharon, I'm super excited to work with you. I want you to make a lot of money. Could you kinda explain to me, help me understand how everybody gets paid? How I get paid, how do you get paid, how do the funds get paid? Like, can you explain to me how everybody gets paid? Because net net, what you showed me I love, could you kinda explain to me, help me understand how everybody gets paid? And that is there for you, sure responsible, to break down for you how everybody gets paid. And when you see how everybody gets paid, at least you know where everything sits, how everything works. And you can make a decision that is good for you because you just wanna make good decisions based on good information overall. For money monsters, and if you just sequentially start to eliminate them, I think you start to get wealthy without actually doing much. Number one, inflation, make sure you don't let your money sit idle in your random accounts, every dollar needs a job. Number two, taxes, taxes at the number one drag on wealth creation. Try to not just have tax prepared, but you had to track strategies. Number three, interruption. When you pick a long-term security, let it and don't interrupt it. I'll talk about borrowing another time. At number four, fees. When you talk to a financial advisor or you look up an investment, just look up what fees there are. Right, and that will allow you to give you a sense of understanding what it does overall. Sometimes wealth creation is not about making more. It's actually about losing less because it's not what you make. So what you keep.