Luke 19:24 says, and he said unto them that stood by Take from him the pound and give it to him that half 10 pounds.
Robert Kiyosaki said, “the next great transfer of wealth will take place not by conspiracy, but by ignorance.” Today I want to talk about the ultimate transfer of wealth, how it happened, how it continues to happen. And if you want to stick around to the end, I’ll provide you a resource so you can figure out maybe the amount that you are potentially transferring as well.
But first a little history. The first bank in the United States was the national bank is chartered for a term of 20 years by Congress in early 1791 in January of 1782 the first commercial bank, the bank of North America opened.
So, here’s my question for you prior to 1782, essentially before that first commercial bank. Who in America had the wealth? Well, the obvious answer is the people, the citizens. I mean, think about they own their land, they own their property, they own their businesses, they own their possessions, and they used money currency, a lot of different forms of it cause each state had their own, but a lot of different currencies as a medium of exchange.
And essentially from that point until today, there has been a large transfer of wealth, essentially from the people to the institutions.
Let’s go back in time to those late 1700s. And if you wanted to buy a piece of property, whether it be land or, cattle or, or machinery or something like that. What would you do? You would talk to the seller as a buyer and you would talk to them and you negotiate a price and you basically would, would transfer the money and give it to them.
You just weigh it out, maybe have some witnesses sign things much like Jeremiah does when he buys the land of, from his uncle before the, The Israelites go off to Babylon, basically the same thing. That’s, that’s how they did it back in Jeremiah did it. And up until the late 1700s or so, that’s how it took place.
But what happens today? If people want to buy machinery or land or a house, there’s more involved. There are banks in love because they must go borrow the money because people don’t have any money because the wealth, the money has transferred from the people to the institutions. And here’s what you must understand about debt.
Is a product that is sold by banks. So, when you go buy a car and you get a car loan, you walk away with two different products. You walk away at the car that you bought, but you’ve also bought a car loan. If you’re a student and you go finance your education, you’re essentially getting two products.
You’re getting. the education, the degree, the access to the, to the institution, the classes, but you’re also buying a student loan. Debt is all that banks sell and they’re very, very good at it. All through the month of June here, we’re going to be talking Lord willing about debt.
So, then that leads us to the question, okay, how did this transfer happen? And it came through debt. What you need to understand about debt or any kind of loan, there’s essentially three elements to it. There’s the amount borrowed the term under which we’ll pay it back either months or years and the interest rate that’s associated with paying interest on that borrowed money.
If you ever gone to buy a car and you use a typical process of buying a car where you’re going to finance it, think about what do they do? They say, well, how much can you afford? How much do we want your payment to be? And they get you to zone in on just that payment amount, which is really a calculation of those other three equations.
And so, when they get you to home in on just the payment amount, they can manipulate any of those other three variables to make that payment to be whatever you want it to be. If you want your payment to be lower, they’ll stretch out the time. If you, if you’re okay, the higher payment, maybe they’ll just charge you more interest rate or low interest rate or less for the car or more for the car.
They can manipulate all three of those variables to get to the payment of whatever you want. So, it’s a very dangerous idea. Hopefully you’ll never do it. When you go to a car dealership, don’t fixate on, the payment fixates on the price. How much are you paying for this vehicle? Because if you, even if you give them to focus on one, they still have those other two variables manipulate.
And that’s the thing that most people, they don’t really know how much they pay for stuff when you’re paying payments. If you were to ask the average person that has a car loan, how much they actually paid for the car, the price, the fees, the taxes, the tax, how much should you pay for that car?
They probably don’t know. But if you ask them what their payment is, they’ll say, Oh, 472 a month. Why do they know the payment, but not the price? Because they got fixated on the payment instead of fixated on the price. So, here’s the thing. When you’re talking about those three variables, price, term, and interest rate of all those three, it is really the interest rate that plays a role.
The largest role.
And as you manipulate the interest rate, as example, it has a dramatic effect on the actual balance. Let’s look at an example to illustrate this.
So, to help illustrate the idea of how much interest rate plays a part of a loan, let’s take the opposite perspective, because the way money grows, and the way money costs is really the same thing. It’s just what side of the equation you’re on. One person’s payments are another person’s revenue. One person’s depletion of wealth is another person’s gain of wealth.
So, let’s say, for example, you had 1, 000, you had 1, 000 and you went down to the bank, and you put it in a savings account. And you got 1%, you got a 1 percent interest rate, and you came back 20 years. So, 1, 000 for 20 years, you put it in, you got 1%, you never touched anything. You never had anything. How much would you have?
You came back 20 years. You’d have about 1, 200, 1, 220. Well, if we just change the interest rate, we still take 1, 000 and we invest it in something. And we leave it for 20 years. We never add anything to it. We come back, but the interest rate was 10%. We, that’s all we changed in equation. How much we’d have in 20 years, we’d have about 6, 700, 6, 727.
But what if we got Not 1% and not 10%, but really 20%. And we came back, we put together a thousand dollars. We put in an investment. We got 20% ready to return. We’d never add anything. We 20 years we came back, and we took it out. How much would there be? There’d be $38,000 in there. Well, that’s essentially what happens because those banks are paying you 1% and they’re learning it back to you in the form of.
Auto loans or credit cards, 10 or 20%. And you can see the column on the left. That’s how much money you have after those 20 years. And the column on the right, the skyscraper on the right, that’s how much they have because we traded dollars for dimes. By being in debt and all they did was essentially change the interest rate because it’s not linear.
So, you see that the interest rate doesn’t make the amounts. Linear, like it’s not, you know, 30, 000. It’s exponential, it curves. And so, what happens is when you go down to the bank and you save your money in the bank and they pay you 1 percent and they loan it back to you at five, 10, 20%, depending on the actual loan, what you’re doing over time is you’re trading essentially dollars for dimes.
You’re giving them a dollar and they’re giving you a back of the dime. If you make that trade long enough and often enough and a lot over time, you’re going to run out of dollars and they’re going to have them all and you’re going to be left with dimes. And that is how wealth has been transferred from the people to the institutions over time.
I remember hearing a story about a family. around the civil, the time of the civil war about getting clothes on. See debt in America used to be taboo, meaning that it was kind of frowned upon. This, this family during the civil war time, they essentially lost their farm. And so, what happened was they got foreclosed on.
They couldn’t make the payments. Time’s tough. The crop didn’t come in and they got foreclosed on. And really what happened to them was they kind of became the outcasts of the town. People couldn’t believe that. Why, why would you have a mortgage on your farm? Who would do such a thing? It’s kind of like the, the town drunk or the town bum or you know, whatever the town drug dealer, like the dope head people that just would feel sorry for them.
It’s like, why would you do that? And the sad thing is that the mortgage. was only 5. They have foreclosed on a 5 mortgage. How far we’ve came from the idea that mortgages were taboo to now you can buy anything on Amazon and finance it over 36 months. You can, you can finance everything everywhere and the reason why is because that has become so common now that that’s how we’ve transferred wealth.
Think about, have you ever looked at a major city skyline? Like, next time you’re driving through a major city, just look at the skyline and look at the buildings and look at the names on the buildings. What you’ll see is two things. You’ll see either banks or insurance companies. And the thing is that that is the most expensive land in the country.
The center city, the high rise, the skyscrapers, that is the most expensive lands for the most part in the country. And it’s all owned by the banks. So, who owns now all the wealth in America? The banks do. How did they get it all?
We gave it to them. At one point, the people had the wealth and over time through the medium of debt, it has been transferred to institutions. And now if you want to buy property, you don’t just go weigh out the money or just count the money. Okay. You go borrow the money because you don’t have any money.
And the reason why we don’t have any money is because we continue to play this game and trade dollars for dimes. And it’s costing us a lot. Have you ever considered how much money you would have if you didn’t have any payments? If you watched our millionaire theme hour episode that Mrs. Beautiful and I did, she hints at the idea that we had this spreadsheet when I first was starting to learn about this stuff.
I learned about compound interest. We had, you know, thousands of dollars in debt payments going out. And what I do is I put a spreadsheet essentially said, hey, this is money we’re already paying. If we didn’t pay it in debt and said we had it and we could invest it, how much money would we have?
And it was, it was staggering the amount of money we’re, well, actually let’s look at an example here with.
So, jumping in the right capital here we can see average Joe and Jane And can we land on their snapshot? We can see from their balance sheet widget over here, it looks like they have some credit card debt, they have a mortgage, they have some student loans, and they have some other debts. If we dig a little bit deeper into the debt module, we can see that they’re currently, they have some around 291, 000 of debt.
If they just kind of pay their payments as they pay them now. They’ll pay them off sometime 2045. So, 21 years or so from now, and here’s their actual loan balances that they have, they have a car loan, they have a mortgage, they have a student loan, they have two credit cards, and the nice thing about.
Right. Capital is that it actually will break out the amortization schedule, either by annually or by monthly, and you can see exactly how much interest they’re paying with each payment and when they will pay it off, but we’re concerned about this simple page here, and I’m going to introduce you to a spreadsheet where you can put the same numbers in and calculate how much you would have if you didn’t have debt.
So over on this side here, now I have a spreadsheet. Essentially, I have taken. The loans and the payments and the amounts that Joe and Jane average have. And I essentially plugged them into this first sheet here. So, they have a mortgage with their minimum payment, their car loan, their student loan, their two credit cards and the payments there.
So, we can see they’re about 192, 000 in debt and they pay out per month, almost 2, 200 in payments. And so. Think about the current plan that they’re on. Essentially by the time it’s all paid off, they will own their house and own their car and pay their student loans off and pay their car off, but they won’t have any actual money.
Well, the idea of this spreadsheet here is. It simulates the idea. If you didn’t have those debts and instead the money that you’re already paying out in payments, you could then take and invest. How much would you have? So, meaning that if they didn’t have any debt, if they didn’t have this 300, 000 in debt and they took the same.
Almost 2169 that they’re paying out every month in payments and they could invest that instead. So, when we talk about building wealth, we talk about putting 15 percent of your income in their time. Most people say I can’t do it. And the reason why is because they have payments. If you get rid of your payments, you have this thing called money.
It’s kind of cool. And then you can take that money and invest it. And how much would Joe and Jane average have 20 years from now? About 1. 6 million if they took that same amount that they were essentially. paying out annualize it. So just over 26, 000, they’re paying on payments, and they invested instead rating about 10 percent rate of return.
You could do that averagely and various investments. How much would they have over 20 years? 1. 6 million. This is what their debt is costing them. Pretty sad, huh? That’s how wealth has transferred from the people to the institutions.
So, the question for you is how much are you continuing to transfer by being in debt and paying debt payments? If you want, I’ll give you a copy of this spreadsheet. You can get this essentially two ways. One, if you’re on our mailing list, it’ll come on that mailing list. Or you can send an email to Mike at true health that show, put the word payments in the subject, just payments, you’ll get an auto response with the link where you can get a copy of this spreadsheet as well.
Your micro action for the week. Figure out how much your payments are costing you. And I don’t mean per month, like adding them up while that might be beneficial. I mean, how much is it costing you over time? Do a time value calculation on that or use this spreadsheet that I showed you here today, we talked about the ultimate transfer of wealth.
How the wealth in America at one point was at the people at the citizens that has now been transferred to the institutions. We talked about how debt is a product sold by banks, how loans work a little bit and the opportunity costs associated with debt payments and a resource to figure it out. I hope this helps you on your financial journey.
If you have any questions or comments, you can leave them below, or you can send an email to Mike@truewealth.show And until next time, I hope you have a great day.
