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So the big question is this, what would you do if money didn’t matter? So you had millions in your bank account, what would you focus on? Would you spend more time with your family, with your wife, with your kids? Take family vacations.
Would you pursue your gifts and talents and dreams? Serve your local community, teach others, serve your church. You see if what you would do if money didn’t matter, it was pursuing your gifts and talents and dreams to serve others, and that is probably what you should be doing.
The problem is most people are in the rat race, living five inches in front of their face with no time to pursue what they were born to do. That is the problem, and the solution is to develop enough passive income to replace your working income so you can quit your job and be free to live your life the way you were created to.
That is a solution and this podcast will show you how…
What’s up guys, this is Ryan. Thank again with another very useful and helpful episode of Cash Flow Dad Life. I got a lot of questions about last podcast in regards to debt hacking. A debt hacking is basically where you use real estate and invest in that and use the cash flow to pay off your monthly debt. And it also works to increase and grow your retirement.
Now, a lot of questions were revolve around this. So a lot of people have a choice. They could either pay off debt or they could invest in real estate. So today I’m going to give you guys a clear formula on how to accomplish that…
So I don’t know how many of you guys bring your kids to a church, but we bring our kids to church every week. And uh, and my two year old, uh, at one point we were at this church wedding.
And my two year old was in…by the way, you know, people who bring their kids to church regularly will probably relate with me on this one. There is always some old elderly person that clings to the edge of the Pew of the church is full. Then you’ll always have an old person that just sits in their position on the side of the pugh in claims to it.
And if you’re like, you know, basically like, hey, you know, there’s an entire pew here, can you move over, they will get out the way and let you get in and then they’ll sit back down on the edge. So I’ve got five kids, all of them are going to have to go to the bathroom or you know, some sort of thing throughout mass. So I ended up having to bother this person getting back and forth.
I don’t understand it. Just move over. You don’t have to go to the bathroom every single five minutes. My kids do just move over anyways and rant on old people clinging to the edge of the Pew. So we actually were in a situation where we ended up getting an ender, you know, and we’re always late to mass.
It’s just the way it works…
But we ended up getting an end position, and my little two year old is watching people after communion and they’re walking back down the aisle during this wedding mass. And I hear in the corner of my ear, I hear him going, “Yes, yes, nope, nope.”
Yeah. So I’m like, “What is he doing?…” So I’m trying to pay attention to what he’s doing. And basically every pretty lady or pretty girl that walked by he was going, “Yes.”And if something didn’t quite meet up to his criteria, he would say no. So he had a clear evaluation process for what he wanted.
And so what I want to give you guys today is a very clear evaluation process for how to decide what you’re going to do between paying all either paying off alone, getting out of debt or making an investment. Is there a science to this? Yes, there absolutely is. And it breaks down into one number that you have to analyze.
And that is what’s called R O. I enter the investment world. ROI Means return on investment. It’s a percentage of think about your money that you have as a boomerang and what you’re measuring is the percentage of how fast that money can come back to you, whether you’re paying off debt or making an investment, that cash is going to come back to you at a certain pace.
All right, so let’s just say for example, you’ve got two choices. You’ve got a car loan, and guys, I know I’m going to go over some math right here and I know listening to a podcast, it might be kind of tough to follow the math if you have to pause it and get out your calculator and make sure you understand what I’m saying because this trick will blow your mind.
This trick will add some clarity into your personal financial situation and it’ll give you the guideline on what you should do with your money. If you had a habit and you have the option to pursue either a real estate investment or paying off debt.
Okay, so this is the number that you want to analyze this, this percentage. So you’ve got two choices. One is a car loan that you owe $10,000 on and your car note is $340 a month, or you’ve got a three bed, two bath house that you can buy that you could get $400 a month out of, and it’s going to cost you 10 grand as a down payment for that house.
So here’s the formula right here. What you want to do is you want to measure the monthly cash flow and you want to multiply that by 12, giving you an annual number and then you want to divide that by either the down payment, the investment or the payoff, and that will give you your ROI percentage.
So for example, if you were to pay off that car, you owe $10,000 on that car and that $10,000, what is that going to get you? It’s going to get what you would otherwise spend on that car payment. That’s $340 a month.
So if you were to take that $10,000, pay off the car loan immediately, you would get $340 a month that you didn’t have before going into your bank account, 340 times 12, because you want to get an annual number is $4,420 a year. So now you’d have $4,420 a year more.
That divided by 10 is going to equal 44 point two percent.
That is your ROI. Okay?…
So again, the car, it was $340 a month. You put 10,000, 10,000 is what you need to pay off that loan. You multiply that 3:40 by 12, that gives you 4,420 divided by that $10,000 payment gives you that 44 point two percent ROI.
Alright, now you could either pay off that car at 44 point two percent roi or you could take that $10,000 and you could buy a three bedroom, two bath house. That would give you $400 a month in cash flow. Okay? So what are you gonna do?
You’re gonna take that $400 and you’re going to multiply that by 12 giving you an annual number of $400 times 12 is $4,800 and you’re going to take that $4,800 and divided by the same $10,000 that gives you 48 percent return on investment.
So if you’re looking at a decision of do I pay off my car loan or do I make this real estate investment, what is going to bring that $10,000 back to you at a, at the fastest rate? Well, in this case the real estate, because you will have 48 percent Roi, we’ll come back faster than 44 point two percent Roi.
That will come back to you on paying down our paying off the car loan so that money would come back to you faster over the course of a year. There’s all kinds of other factors involved, but this is.
This is just the simplest way to look at it. If you use the Roi trick to decide and decipher whether or not you pay off debt or you make an investment, that is the best thing to do, it will not lead you astray because it’s all numbers driven.
It’s not emotionally driven…
It’s all factual percentage of numbers and that will, that will, uh, that would solve your issue right there guys. So if you’re looking for a clear formula and a way to either figure out whether to pay off debt or to make an investment, that is it right there.
Once more, it’s the monthly cash flow or the monthly payment times 12 to give you an annual number divided by either the down payment for the investment or the payoff of the loan. And that gets you your ROI.
Hopefully guys, that wasn’t too confusing for you. If it is, you know, you can always rewind and go through it in your head and the math on the paper, but that will help you out tremendously if you’re trying to make that decision.
Thanks for listening. Please remember to rate and subscribe. You’re going to want to listen to every episode as soon as it comes out. It hasn’t been an idea or strategy that can literally change your life.
Listen, don’t miss out on the free investor pools that I have on my website https://cashflowdadlife.com/. So go to https://cashflowdadlife.com/ gets a free swag and lists and hit me up. If you want to talk about how we can get you out of the rat race as soon as possible. Until next time. My name is Ryan Enk and this was Cash Flow Dad Life!