change your money mindset, the mortgage edition

Summary

most people call their house an investment. it can be. but the mortgage you pay every month, that’s not an investment, that’s an expense, and the interest you eat is real money you’ll never see again. here’s the mindset shift.

1. the goal isn’t paying the house off. the goal is having investment income that covers the mortgage. different game entirely. one focuses on the expense. the other focuses on the asset side.

2. cash flow from investments is the lever. real estate, dividends, businesses, anything that pays you while you sleep. when the monthly cash flow covers the monthly mortgage, you don’t care about the mortgage anymore.

3. this isn’t paying off the house faster. that’s the scarcity move. the abundance move is growing the income side until the expense side is irrelevant.

4. apply this to every fixed expense. car, insurance, kids’ schools. one by one, build the cash flow to cover them. that’s how financial independence actually compounds.

5. the trap is the budgeting-only frame. cut, condense, save. fine for an employee. for an entrepreneur the question is “how much more can I earn” not “how little can I spend.”

scarcity manages dollars. abundance builds machines that print them. try harder.

Transcript

intro to money mindset for entrepreneurs

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe. If you like what you’re hearing, please share and enjoy. Today I want to talk about your mortgage or really any kind of large expense, diving a little bit more into the mindset of personal finance and how entrepreneurs look at things a little bit differently or should.

the problem with just paying off your mortgage

I’m Jerred Moon. This is the Better Human Business Podcast and let’s dive into it. But before I do, make sure you go sign up for the Try Harder newsletter. Try hard. Try hard right now. On your phone or your computer, in the browser, you type in jerred.com, J-E-R-R-E-D.com. Sign up for the newsletter.

I would love to have you there where we are publishing awesome stuff each and every single week. I’d love to have you and interact with you there. Again, you can reply to any of those emails. It goes directly to me and I will respond. Ask me a question. Maybe it ends up in the podcast. Anything would love to have you there and I appreciate all of you who are signing up, by the way.

how interest impacts the idea of your home as an investment

I know I’m mentioning this every single week and I do appreciate the replies that I’m getting and the people who are signing up and the people who are referring. I really do appreciate you and you have to sit here and listen to me talk about it for another 30 seconds on the podcast even though you’ve already taken the action.

I do appreciate each and every single one of you as well. Let’s dive into this real quick. When I first started in entrepreneurship and got more into personal finance, one thing that I really wanted or didn’t want was a mortgage. I was like, I just don’t want a mortgage and that didn’t mean I wanted to rent.

using investments to generate passive income to pay bills

If you listen to people like Grant Cardone, he’s always talking about how mortgage is such a bad investment and to some degree, I agree with him but I don’t think that renting is great on a monthly budget, on a monthly standpoint either because your landlord has to factor in a cash flow factor for themselves.

You’re paying someone else’s mortgage but at a premium and then also your landlord can increase your rent every single month and you don’t own anything.

example of using rental income to pay mortgage

I don’t fully agree that owning a house is a bad investment, Grant Cardone is saying, but I also don’t think it’s an amazing investment because just like for a quick example, if you were to buy a half million dollar house, so $500,000 house at 5% interest which people would kill for at the time of recording this at least and let’s say you have this house and you live in it for 5 years, you’re doing well in business, you’re making more money and you’re like, you know what, it’s been 5 years, we’re going to sell it for $650,000 or $600,000 or $620,000, something like that, let’s just say that’s what you decide on and in your brain, this is what you’re thinking, you’re thinking, hell yeah, bought this for $500,000, 5 years later, I’m selling it for $620,000, I’m making $120,000, bad ass, this is

awesome, not really, remember that whole loan that you had and you’re paying 5% interest, well, they collect most of that interest up front, it’s not evenly distributed, so in 5 years, you will have paid approximately $120,000 in interest payments in your mortgage, so if you sell in 5 years a $500,000 house at $620,000, you’re at like absolute break even, right, like with how much you’ve spent, it’s just an interest and so no, homes are not an amazing investment, they are over a longer period of time but that’s not the way I think that anyone should be looking at it, so let’s dive in a little bit more.

keeping your primary business income to grow wealth

Like I said, all I wanted was to not have a mortgage and that’s a hard thing to do, it’s hard to get enough cash to pay off your house completely but then I eventually changed my mindset on this and it wasn’t that I want no mortgage as in I want my house paid off, what I really wanted was to not have to pay, be the one to pay for my mortgage and so how can we do that and this is how I view buying a new house or getting a new mortgage now is I want my investments, cash flow from my investments to pay for my mortgage, so one more time, I want the cash flow from my investments to pay for my mortgage, then once that can happen, I don’t really care what my mortgage is because the cash flow from my investments are

paying that mortgage and there’s kind of two schools of thought here, so let’s just say for argument’s sake, I had a $3,000 a month mortgage, if I had five rental properties and across the five rental properties, the cash flow was $3,000 a month, that $3,000 a month can go and there are other expenses and stuff but let’s just bear with me in the example, let’s just say that $3,000 now covers my mortgage, right, so me cash flow wise, no money from my business, my main source of cash flow is going into paying my mortgage, my investments cash flow or paying my mortgage but here’s where people get tripped up, I want to work, I want to work, I absolutely do, I love being an entrepreneur, I love what I do, I want to work, so what other people do is if they’re trying to live

thinking in terms of covering expenses, not just paying them off

off this cash flow from their investments, if they were to invest, so you had $5,000 a month in passive income coming through, a lot of people were like, oh cool, then I’m just like not going to work and I’m just going to live off this money, that is a very small mindset, it’s a small minded way to go about it because I want to work, I’m going to keep producing cash flow, that’s just going to happen, so go out there, have your main source of cash flow, now the game is how can I not have this cash flow pay for my mortgage, how can I have some other form of cash flow like an investment cash flow pay for my mortgage and then you are at break even, right, that’s the real goal and this makes you think of things differently, so I’m challenging all

of you to think of things differently, so if I have all of my investments cash flowing enough to pay for my mortgage but I’m still trying to grow my business, my business income doesn’t cover any of my mortgage but my mortgage is covered, hopefully that’s making sense, that’s so much different than I am going to try and make as much money as possible and then pay off and have no mortgage because you could do that but I would rather own multiple different properties that are cash flowing, that’s actually a safer alternative because the house I live in I could always sell, get rid of, move but then I have these other assets that will continue to bring in money, so you see how this is a different mindset, it’s a mindset shift, it’s how can I get things paid for, now your mortgage might be

building a secure retirement with income-generating assets

a hard one to start with because you might have a higher mortgage but when it comes to cash flow and investments, I want to challenge everyone to think like that, how can I have this investment pay for my cell phone bill or how can I have this investment pay for my car payment, whatever payments that you have and then when you start working on goals this way, either through investments or even side hustle, maybe you have another business that you just need to generate a couple hundred dollars worth of cash flow, this puts you in a growth mindset, not this small minded shrink, condense, shrink, budget, condense, that’s not a place of growth, to be in a place of growth you need to think about how can I actually grow, so that is how I want to challenge everyone to start looking at your finances,

how can you get things covered through investments that cash flow so you don’t actually have to live off of it, now at the end of this how does this play out, so like I said I’m always going to be working for at least for the foreseeable future because I want to, I don’t need any cash flow from any investment right now, what pays for my life is my business, my business is, they pay for my life, they pay for the food on the table, they pay to keep the lights on, pay you know basically everything else, so if I can have this cash flow that covers the mortgage, cool I met that goal but it’s oh well you could you could have that money and live off of it but I don’t want to, where when and where I need that money is when I

do decide to retire, so this whole time my investments have been paying for my mortgage, let’s say in 20-30 years my mortgage is paid off and all those mortgages are paid off, now I can actually start to live on that in 20-30 years, 30 plus years when I actually think I want to retire, I don’t want to be in my 30s and have enough cash flow to support my life and stop working, I know that’s a dream for a lot of people, a lot of people think that’s awesome like that’s that’s the goal but if you’re not making a significant amount of cash flow through your business you’re going to live a very tiny life for the rest of your life and maybe that’s okay with you but it’s not okay with me, so maybe challenge your mind and try harder.