Episode 284 Playing the Wealth Game with Freddie Rappina
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Davina:Hi, everyone, and welcome back to the Wealthy Woman Lawyer podcast. I'm your host, Divina Frederick, and my guest today is Freddie Rapina. Freddie
Freddie:is
Davina:a financial advisor and a chartered wealth financial consultant as well as an accredited investment fiduciary, and he's the founder of Opta Financial. Freddie helps clients examine their current financial situation and financial goals, and then he completes a financial analysis, provides recommendations, and implements and reviews plans for clients. Freddie is also the author of the book, Playing the Wealth Game, the Strategies Behind Financial Moves That Win. And we're really excited to talk with him today about this book and the advice that he has for us, on how to improve our how to grow our wealth and improve our investments. So please help me welcome Freddie Rapina to the Wealth of Women Lawyer podcast.
Davina:Hi, Freddie. Welcome. It's good to see you.
Freddie:Hello. Thanks for having me. Appreciate it.
Davina:Good. So I wanna talk about your book first and foremost because I I mentioned in the intro that you have written a book. So why don't you tell us about the book? Give it tell us the title and tell us a little bit about the book and why you wrote it, why you felt it was necessary.
Freddie:Well, the book is called Playing the Wealth Game, and, I wrote it to kinda help people get over that hump from just what I call middle class finance to, more advanced or wealthy finance, however you wanna put it, and, and and let people know that there are 2 different games going on, in finance. And depending on which one you wanna play is going to heavily impact, your future. So and but I didn't wanna say, like, one was right or wrong. I wanted to say they're different and they're 2. So it's it's a more of a self discovery book, for people to understand whether they are playing checkers or they're playing chess or or if they want to switch.
Freddie:And, but people by the end of the book shouldn't be screaming at the moon. Why do their wealthy just keep getting more wealthy and others not? And the reason for that is they're not playing the same game.
Davina:Right. Interesting. And so you use this analogy. I wanna get into this. You use this analogy of checkers and chess.
Davina:Mhmm. That's sort of middle class finance and wealth finance. So why don't you explain to us what that checkers versus chess, and and I'd like to know how you came up with that too.
Freddie:Yeah. Okay. So Checkers, would, you know, would be if you're playing Checkers Finance, you're saving a whole bunch of money, usually in qualified accounts. You know, like your audience, they came out of law school probably in a good bit of debt and working for probably very little for some firm somewhere or maybe starting on their own. And they thought to themselves, hey.
Freddie:This is all gonna be so worth it years down the road when I'm making, you know, 300, 400, $500,000 a year. And, you know, going through this grind is going to be worth it. And then those years pass, and they are making that kind of money, but they're not feeling it. They're like, well, I'm doing everything they say I should do, but, but I still feel like I'm still living a, you know, a a modest lifestyle when I'm making very good money. And the likely reason for that is that they have done a good job securing great income.
Freddie:They have probably have done even a good job saving money. What they may not have done a very good job of yet is building wealth. So and those aren't the same things. So, so the Checkers find it Checkers Finance. I don't say there's anything wrong with Checkers.
Freddie:I just say it is Checkers. And if you're gonna have if you're gonna play Checkers, I want you to play it well. But, but I also want you to understand that it's not chess, and you're likely not gonna be able to achieve the types of, of things that a chess player is able to achieve playing that game. Right. And I came up with that with this just, you know, I wanted a simple simple analogy, and, it was it it was a week where my son was pitching, and the other coach said that he looks like he's playing chess and others are playing checkers.
Freddie:At the same time, I read Kobe Bryant's quote saying almost the exact same thing, and I was like, okay. That's that's that's what I'm gonna use.
Davina:That's it. That's it. So I would interpret that as, checkers is something that anybody can play. You know, they say on the box, ages 7 and up or whatever on the box, and anybody can play checkers, and checkers is a fun game. But chess requires some sort of training and understanding.
Davina:You have to be a strategic thinker to really be good in chess. Even play chess, you have to be able to understand, have more complex strategic thinking. So give me some markers or identifiers that we can know if we're playing checkers. Just just checkers. Like, how do we know that that's what we're doing?
Freddie:The biggest differentiator, in my opinion, between a checkers player and a chess player will be their attitude towards debt. So if you're playing checkers, you wanna stay the heck out of debt, like all debt, you know, pay off your mortgage, pay off everything, pay pay, you know, have no debt, save, save, save. That's, you know, playing checkers well. If you wanna play chess though, you actually wanna get into as much debt as possible without overleveraging. So and when I'm using debt in this context, I don't mean, like, running up your credit card or Walmart or anything like that.
Freddie:I mean, using leverage to buy assets that produce cash flow. And those assets are typically real estate investments and or businesses, you know, like other law practices or whatever, things that are going to generate more income for for that person. So that will be that that the attitude towards debt, in my opinion, is the biggest, you know, big biggest thing that's gonna separate the 2.
Davina:Yeah. I know some people are listening to this, and they are freaking out because Yeah. I met a number of women law firm owners, through the years that their number one goal is to get out of debt, stay out of debt, and they don't want they they hesitate to invest in themselves. They hesitate to invest in in their businesses because they're so afraid of debt. Because we've been taught that by the, Dave Ramsey's of the world that debt is a bad thing.
Davina:So tell me, you know, are is there good debt and bad debt? Because is that a myth? What is that?
Freddie:Well, it is good debt and bad debt thing is a little bit overused. It's more of what is the debt buying. If the debt is buying a cash flow item that's going to service the debt and put money into your pocket, then it's a good use of debt. If the debt is not going to do that, then it's probably a bad use of of debt. Right?
Freddie:So and, you know, like I said, there if people wanna play checkers, you you be debt free. I mean, that's that's that's playing checkers very, very well. Just don't expect to be wealthy. That won't happen. To be wealthy, you need to you need to start understanding how debt works, how taxes work, and and using them to your advantage.
Freddie:And you don't have to look very far. Right? You you just have to understand what if debt if all debt was bad, why would corporations have debt? Right? We we just call them bonds.
Freddie:There it's debt. Right. Right? They they borrow money from people, and they invested in their, you know, research and development or whatever they're doing with it. Why do why do municipalities have debt?
Freddie:Right? Also called bonds. Well, they invest in their infrastructure, schools, you know, hospitals, whatever, you know, even football stadiums, whatever they're doing to increase the the tax base in their community so they can create more income from those for themselves later. Right? So it's how are you using the debt.
Freddie:Now, of course, like, I'm using, like, a big scale there. But that you are if you're able to, you know, use that properly, you're able to, increase your wealth. So, and compound interest, in my opinion, and, you know, I feel like I'm one of the few wealth advisors out there that will say this out loud. It's the most oversold concept to the middle class. Really?
Freddie:Wow. Upper middle class. Yes. Because it just takes too darn long. It so if you're getting us, you know, the rule of thumb, you know, napkin math, if you're getting a 7% rate of return on your investments, your money should double every 10 years.
Freddie:Right? That's the good news. The bad news is how many sets of 10 do you have, and how much money do you start with? Because if you didn't start with a whole lot of money or you don't have a whole lot of sets of 10 left, you're you're just saving money and other people are becoming wealthy because they're using your money to play chess. So I don't want just people investing in banks.
Freddie:I'm not saying that's a bad idea. I'm saying I want you to also do what the bank is doing. I don't want people to just invest in mutual funds that we recommend. I want them or ETFs or any market based asset. I want them to also do what those investment companies are doing to increase their increase their bottom lines.
Freddie:I don't want them to just purchase insurance policies. I want them to do that, and also do what the insurance companies are doing, to, to increase their wealth. It just will be likely on a very smaller scale.
Davina:That is so fascinating because I don't I don't think I've ever heard anybody say, look at what the big companies, these big corporations that are so wealthy, look at what they're doing to become wealthy, and then see how we can emulate that on a smaller scale. That is a very powerful thought and statement. It gets you to really rethink how you are building wealth. I once heard somebody say, you can't save your way to wealth.
Freddie:Nope.
Davina:And I think that really goes against a lot of what I was what those of us who grew up in the middle class have been taught because we've been taught by parents that we need to save. And that's how you save for that rainy day. And you're lucky when you have rainy day comes and you have a little bit of money saved for that.
Freddie:I don't wanna discount saving altogether because it's definitely a big piece of it. Okay? So saving is good. Alright? It's just stopping there is is where you're not playing chess.
Freddie:Right? So you save, so you have the assets that a lender is going to look at favorably and say, okay. You are a good bet. We're gonna you know, we're we're willing to lend you money, and you're going to buy this asset, and you're gonna pay us back with, you know, the assets money or whatever. You have the reserves.
Freddie:So saving money is good. It's just what that it's that next step that where a lot of people, you know, kinda stop and, and don't purchase, don't use leverage, don't use debt to purchase the cash flowing asset to increase the income that they can use to enjoy their lives now, not waiting 30, 40 years for compound interest and you can buy your golden wheelchair at the end. Like, it just doesn't it just doesn't you know, it doesn't it doesn't sit well with chess players. Now for checkers players, like, you can you can have a nice life. You can, you know, you can retire.
Freddie:You can be happy. I'm not discounting that. I'm just saying you're talking about building wealth. It's just a totally different thing. It's totally different.
Freddie:I'll I'll give you some evidence to that. Right? Like, you know, I live in the Tampa area. And if I went down to the boat show here in Tampa and walked up to somebody with a $25,000,000 yacht and said, hey. How did you afford this $25,000,000 yacht?
Freddie:This is awesome. That person's not gonna respond with, I fully funded my IRA, or I bought a well diversified mutual fund, or I invested in some insurance product with a guaranteed x percent rate of redone. Those aren't gonna be the answers. Right? Sure.
Freddie:So we know that instinctively, but yet we still continue to stand in line of the slaughterhouse and continue giving our money away to Wall Street and and having them build their the wealth for their companies by because they're purchasing the assets. They're purchasing the real estate. They're purchasing the business. Heck, you can't even find a starter home anymore because, you know, they bought a whole ton of them. Right?
Freddie:So they're doing, it on a mass scale, and it's almost like a paternalistic element to it. Right? Right. I don't think it's, like, evil. I think it's just more like, you you know, the this would chess would be too hard for you.
Freddie:Why don't you just stick with checkers and leave chess to the adults? Right? And it's, you know, it's a way of
Davina:That's that's really interesting because, of course, now we're in an era where the milli the billionaire is, you know, at the top of everything. We're seeing a lot of billionaire
Freddie:Mhmm. Activity happening in the news, and everybody is really
Davina:focused on all the billionaires and how in the news, and everybody is really focused on all the billionaires and how they created their wealth. And there's a lot of resentment of toward billionaires for how they, you know, that they take there's a lot of negative stories around it. They take from others. They hurt other people. They, you know, do all of these things.
Davina:Billionaire equals evil person. Right? But really what you're talking about are people who are playing a game. They may or may not care if anybody gets hurt in that game if they wanna win the game. So how do we how do you take people who have a mindset of billionaires are evil.
Davina:There's a there's a there's something wrong. You have to take advantage of other people to play this chess game.
Freddie:You, you just have to you have to really think it through, and you have to just kinda have to let that go because, you know, there's always gonna be the billionaires. Yeah. Just have to let them go. Yeah. Right?
Freddie:And but you also don't have to be a billionaire to play chess. Right? You don't have to be of of of that stature or however you wanna say it to play chess. You can play chess on a much smaller scale, and it doesn't take a whole lot to be able to get above get a get a lifestyle that's very comfortable that most people would in would enjoy greatly. And that's you know, once you get to this lifestyle that you're doing what you want, when you want, with who you wanna do it with, I mean, that's I mean, there's not a whole
Davina:lot more. And you don't have to take advantage of other people to do it.
Freddie:No. No. In fact, you're in a lot of sense, you're helping people. When you're when you're playing chess, like, you're using a lot of the tax advantages, you know, a lot of the a lot of the tax code to your advantage, and it actually benefits the the government, and that's why they have the tax rules. Right?
Freddie:So, you know, if you're investing in real estate, you're creating more of a natural rent control, and that's the reason why the the government wants gives land, landlords the, the tax breaks. Right? The depreciation on the real estate and all all the rest of it. It is because they want people to invest in real estate because it creates natural rent control in the market. Being all of the other landlords in this particular area are competing for the renters, it keeps rent low.
Freddie:So if you look at the tax code, it's none of this evil thing where the government's trying to steal all your money and you start flipping your script a little bit and you say, okay. This is actually a guide on how to not pay taxes because that's what the government wants me to do. The government doesn't want me to pay a whole lot of taxes. It just it it's incentivizing me to invest in the ways that they want me to invest. This way, it's mutually beneficial.
Freddie:It helps the government in some form or fashion, and it helps my bottom line because I'm paying less taxes. As soon as you do that, everything kinda changes, and you're and you have more of a chess mindset.
Davina:Yeah. It's interesting because I think a lot of people would scoff at the idea that the government doesn't want you to pay taxes. I mean, because it just seems like the government's taxing you to debt. So when somebody sits down with you and you introduce this concept to them and they go, please, the government wants us to pay taxes. How do you show them that there's a that there's a different side to that?
Freddie:Okay. It's, I mean, I just ask questions like, why do you think the government gives you a tax break to have kids? Why do you think there's a tax break for that? Right? You think they feel sorry for you?
Freddie:No. What did you just do? You created future taxpayers. Right? Future taxpayers, you increase the tax base for for the government years down the road.
Freddie:Right? So there's a tax rate that for that. Why does the they give tax breaks on interest on mortgages? Well, they wanna encourage homeownership. While they give tax breaks on on owning a business.
Freddie:Right? What business is a big one. Why are there so many tax write offs for that? But what do you create or can create, I should say? Jobs.
Freddie:Exactly. What kind of jobs? W two income jobs. Right? If you're creating w two income jobs, man, the government's gonna hammer w two income earners.
Freddie:Right? So by giving 1, you know, theoretically, one person a tax break that can create multiple w two income earners, the government's gonna hammer them. So it's beneficial for them to give the tax break to the one person. So as soon as you start thinking it like that and you start really understanding that, oh, wait. Wait.
Freddie:Wait. Wait. This is actually a good thing. Right? You know, I I wasn't always in this, you know, in in this world.
Freddie:Right? I was once a and I was a rookie police officer, when I was in my early twenties, and I couldn't afford to go on dates. I had the entertainment book for those of you who can remember that thing, and that the entertainment book never left my car. It was in the it was in the back seat at all times, and I would, you know, use the coupons at the restaurants. And, and once I finally got comfortable with the person I was dating, I would say, hey.
Freddie:We can go wherever you want as long as it's in this book. So it's it's so once you wrap your head around the tax code like that, it's much easier, and it's possible to build more wealth. Once you start understanding debt, how debt how how to use debt properly, how to use leverage properly, how to use taxes, how to make the tax code your friend instead of your enemy, and, and and understanding how saving money is just the first part. It's not the only part. And And that's coming from the person who makes money with his clients in the market.
Freddie:Right? Right. Right. So so when I'm telling you that the market isn't the end all, be all that's and that's how I, you you know, make a living. There's you know, if especially if you stop there, that that should give somebody some So
Davina:that's like that's a that's a point of, you're saying you could take it further than that. Right? So it's good if you're saving. It's good if you're investing in the stock market. It is good if you're putting your retirement account or all.
Davina:And and we need to do some other things if you truly want to be wealthy.
Freddie:That's right.
Davina:So let's go back and just talk about another sort of marker of check checkers is the 401 k.
Freddie:Mhmm.
Davina:Right? So what I a lot of what I hear you say is, like, I think about this, with social media. You're either a consumer or you're a creator. So you're either sitting there scrolling and consuming consuming consuming consuming content other people have created, which gets you nowhere, or you're creating and getting into the game. You're creating and you're doing things to make money off of what you're creating.
Davina:Right?
Freddie:Mhmm.
Davina:This is kind of like what you're talking about?
Freddie:Yeah. The the 4 I mean, like, all the the qualified accounts for 4 zero one k, what whatever. I mean, it's I'm not saying those are bad things, and I'm not saying you shouldn't invest in them at all. It's they're good. They just can't they're not gonna they're not likely gonna lead you to your promised land, though.
Freddie:I mean, it because it just takes so much money saved to create an income stream that is going to that's gonna last, first off, and without running the well dry. So if you let's say you you save, like, $1,000,000, alright, in your qualified account and you're drawing, you know, the 4% rule, right, out of your out of your account when you retire, well, it's $40,000 a year. Where are you retiring on $40,000 a year? Right? So even if you had everything paid off.
Freddie:Right? Like, this is where are you gonna afford that? Even if you had no debt, your mortgage is paid off. Well, what are what are the property taxes gonna be on your house? What are the insurance gonna be on your house?
Freddie:All the other expenses. And are you gonna actually go out and have fun? Or are you just gonna sit around in that paid off house and wait to die? It's it's so getting into that mindset of, like, wait, this is a this is in this is good and it's important. It's just not the only thing, and it's not gonna be the sole thing that's going to likely bring you where you want to be.
Freddie:So as soon as you can get in into that mindset, you're you can start graduating out from just that save, save, save, mentality that is only making the wealthy more wealthy. Think about it. If there are, like I looked it up. There are, like, 300,000 licensed financial professionals in some form or fashion in the United States. Right?
Freddie:If they all were giving really great advice on how to build wealth, wouldn't the wealth gap shrink? Right? Wouldn't it wouldn't it go this way instead of this way? And now it is expanding. Especially over the last 30 years, it has expanded so much where so few have so much of the wealth.
Freddie:It's be in my opinion, it's because not enough people are playing chess.
Davina:Right.
Freddie:That doesn't mean Checkers is wrong. It just means that, you know, the more people need to play chess be and understand that game too and and, in order for this, this wealth gap to start narrowing.
Davina:I think that's a huge, you know, for those of us who own a business, we understand on some level. We there's a lot of discussion among law firm owners about how to save money on taxes. And we're there's a lot of frustration with CPAs who are tax strategist. They're just doing our taxes and not giving us any advice, and people are casting around trying to find advice on that. So I think, you know, there's this glimmer where people see, you know, the emperor's the emperor has no clothes.
Davina:Right? We know there's there's something here we're not doing that well enough. And I think it is because it's intimidating to a lot of people, and there's this thought of, like, I don't have to I'm raising kids. I've got this business. I'm trying to be a good lawyer, and I don't have time to learn finances.
Davina:I don't have time to be a tax expert. I'm a criminal defense attorney. I can't be a tax expert. I don't have time to learn the real estate in market or industry and manage all of that. What would you say to people who kind of having those feelings?
Freddie:Yeah. I mean, it's it's it's it's very, I mean, it's very common, and, it's not wrong. It's it's you you need to build a team. Right? You need to outsource that information to other people.
Freddie:Like, I don't know how to be a good attorney, so I hire other hire attorneys. Right? So, you need to build a team, and that team should consist of a good wealth adviser. And if you're a checkers player, you want a checkers wealth adviser. If you're a chess player, you want a chess wealth adviser, not a checkers wealth adviser.
Freddie:Right? Mhmm. And also a a good tax professional. Now tax professional needs to do tax planning, not just do your taxes. Those are 2 totally different things.
Freddie:So, like, people I work with, we're we're we're trying to figure out, like, okay. How can we lower the taxes, not do the 10.40 Just
Davina:pay your taxes.
Freddie:How much you owe. It's like that's, you know, that's not there there needs to be that person too, but that's not that's not the purse that's not planning. That's not that's not tax planning. Right? You need to build a team of of of people, but you also don't need to know everything.
Freddie:You just have to have some kind of working knowledge. Right? So this this a general understanding so you so we can have a a good client adviser conversation. You see this thing right here? I have no idea how this damn thing works.
Freddie:Not a clue. Well, this this is magic as far as I'm concerned. It could be wizards in there doing stuff. I I don't I know how to work it, though. I know I'd have some working knowledge on how that on how a cell phone works.
Freddie:Right? But I I don't know how it works, and I'm never gonna understand it. Right? And I don't want to. I don't wanna spend my time trying to figure out all that.
Freddie:I just want it to work. Right? So if people take that attitude, they will generally do better with, you know, making sure they have making, you know, understand that they have a a team.
Davina:Right. Right. I wanna talk about risk tolerance because I think that's a huge factor in whether you're playing checkers or you're playing chess because, if you have to know your risk tolerance, I'll give you an example. I I was a foreclosure I worked for the lenders in foreclosures actions in 2008 and beyond 2007, 2008, and beyond. And a lot of the people sitting in front of me were not your typical people you think of as filing bankruptcy and foreclosing.
Davina:They were real estate investors.
Freddie:Mhmm.
Davina:And so seeing the downside of real estate investment colored my view of real estate investment. Right? Mhmm. And and then, the way that I the way that I am in the stock market, other people may look at that and go, you're crazy. What are you doing?
Davina:Right? So I think it's important for people to understand their risk tolerance. So what are some things that maybe we can do to not only understand it, but maybe improve it a little bit, improve our mindset a little bit around taking risk.
Freddie:Yeah. You you you wanna be you wanna invest from a position of strength. Okay? So when I said that saving is the first step, I really meant it. So when you have the assets to be able to weather a storm with a real estate investment or a business or whatever, when you have the resources to be able to weather that storm, it's not the same as if you didn't have those resources.
Freddie:Right? Uh-huh. Because neither constantly you're worried about the storm or you once it happens, you're you're you're just cooked. It's just it's you know? So that's what I'm talking about when I say overleveraged.
Freddie:Like, you can let the cart go before the horse at some point, and you need to dial that back. So when we talk when we talk about a risk tolerance, we talk about that. But there's also risk in just doing nothing. In my opinion, checkers is the most riskiest game. You don't even have any control over that.
Freddie:Right? So, I mean, this it's called systematic risk where the whole market goes down, and there's nowhere to hide. And we saw that in 2008. So it's really being, in a position or inflation inflation going up, and you have no control over that if you're a Checkers player because you're getting your income as a w two employee. And you walk in you know, the only thing you can control is walking into your boss's office and say, hey.
Freddie:I wanna raise because inflation's killing me. When you have the assets, whether that's a business or real estate, you can raise, you know, raise the the cost the cost of the services or the rent to cope with that inflation, going up. So it you have more control over it. So but risk tolerance is very important, whether it's in the market based assets and also in the real estate or business in investments. It's not easy.
Freddie:You know? That's that's another thing. You know? I say it's not easy, and people can get very easily overleveraged when they see that it works, and we see that a lot with real estate investors. You know, they just start buying all this stuff up, and it's like, wait.
Freddie:You don't have you don't have the money to pay anyone if any 2 of those things go wrong. Like, you know, if you have 10 things and one go wrong, that's fine. Right? But you're you're because your risk is spread out. But if you don't once you get once you get too overleveraged, then then you're building a house of cards, and that's gonna eventually come down.
Freddie:So Right. You need to again, you need that team to kinda pump your brakes a little bit and say, wait a second. Wait a second. Let's look at this a little bit.
Davina:Yeah. So, again, you're talking chess though because this is this is strategy. Right? So so people who are they think they're being strategic, but what they're being is I've just this worked for once, and so I'm gonna go down this path as opposed to, okay, that worked. Now let me look at the whole picture with my advisers and see what the next move is.
Davina:Right? It was not the same move over and over again. Right? It could be, but it maybe it's not.
Freddie:But not it doesn't have to be. Right? So, it depends on what your goal is. Right? So a lot of your audience has law practices.
Freddie:Like, well, one day that ends. Right? So, you know, what happens to the law practice at the end? So what happens to my my financial firm when when I'm done? Right?
Freddie:So it's, you know, it's a very similar concept. So by purchasing the assets, purchasing the businesses, purchasing the real estate, purchasing the things that are in the cash flow after the doors close, and that's gonna bring income, you know, in perpetuity, hopefully. I mean, that's that's where you wanna be. Right? So it's building it's, you know, being really good at your job, really being really good a really great attorney and earning a lot of money that way, but, also, what are you doing with the money once you earn it?
Freddie:Because and I I want people to have fun. I want people to spend money. I'm not one of those wealth advisors that are just like, save, save, save. Nope. I want people to spend and enjoy their enjoy their lives while they are able to.
Freddie:It's just how where are we getting the money from? If we're getting it from the practice all the time, then the practice always has to make it. Whereas if we're getting it if we're using the the money from the practice to buy the assets and the assets are producing the income and we're using a good portion of that income to then go to, you know, France or do whatever makes your heart sing, then we are probably doing it a lot more effective.
Davina:Yeah. One thing I can tell you about women law firm owners that I know is they'd love to travel, especially internationally. Because every time I'm meeting with prospective new clients, and I ask them what it is that they want to do, now top of the list is I wanna be able to travel more.
Freddie:And I
Davina:wanna be able to travel long young because I saw my parents
Freddie:Yep.
Davina:Save and save, and then they got to a certain point in their life, and they retired, and then they died. And they missed that opportunity. So we're seeing a lot of kind of balancing of that, having fun now and enjoying our lives and also preparing for the future. And I think not enough people prepare for the future in any sort of way. And whether it comes to saving or investing in the market or or investing in real estate or investing in whatever.
Davina:Right? We're seeing a lot of people who were spending running up credit cards, and they're they're doing a lot of credit card point games.
Freddie:Mhmm.
Davina:And they're not they don't have this is an overleveraged in a different way. You know? So tell talk to me a little bit. You have a chapter in your book about annuities, and I think that's interesting because, you know, a lot of people have a very negative, story around annuities
Freddie:Mhmm.
Davina:And this idea. So why don't you tell us what an annuity is, and then tell us why you think that we should be leveraging, that there's leverage in those annuities?
Freddie:Okay. Yeah. So it is very important for people that haven't read the book yet to understand what the term annuity is in this context. Okay? We are not talking about the financial product.
Freddie:We're not talking about the insurance product, you know, like a variable annuity or a fixed annuity. We're not talking about any of that. We're talking about the word and what it means, and that's, you know, a a payment at that's due at the beginning or at or at the end of a time period. So you even have an you know, like, rent to your landlord's annuity due to the landlord. Your mortgage is an annuity due to the bank, the lender.
Freddie:Right? So when you have annuities coming in where you have income coming in from these assets, you have more leverage because you have more income that you can take out a bigger loan the next time you go to that lender and to purchase more assets that create more annuities, and then it just keeps getting bigger and bigger and bigger. Right? And you use those those cash flows, those income streams to benefit your life now. So you don't have to do what you said early here and not just run your credit card to go travel now.
Freddie:It's like, okay. No. We're using a portion of the these income streams to go travel and still keeping the keeping not killing the goose that's laying these golden eggs every single month, with our with our cash flowing assets. So it's you know, I call it, you know, Investadium. Like, you know, it's not exactly carpe diem, but it's also not, you know, just, you know, paying right now and not and not worrying about where the money's gonna come from in the future.
Freddie:I want you to worry about that, but I also want you to buy the asset so you don't have to worry as much on where the you know, where am I gonna get the money to go on my next, you know, adventure doing whatever I wanna do. It's that that's that's where you have a lot of freedom.
Davina:So some of our chess strategies are things like under, understanding the tax code so you can work it to your advantage and investing in in assets that cash flow and maintain their value or increase their value.
Freddie:Increase in value. Yeah. Over time. Sure. Yeah.
Freddie:Yeah. Real estate for sure.
Davina:Yeah. What are some other sort of things that chess players think about?
Freddie:You know, definitely thinking about bigger and better real estate. Okay? So at first, you might start with single family purchases and but also should have in your back in your mind, hey. I wanna get into multifamily eventually because there's bigger money there. It's also you know, there's it's a bigger loan.
Freddie:Right? So, or businesses, like, you know, bigger and better businesses, bigger law practices, or maybe I'm happy with having my small practice. You know, understanding real estate's gonna be in there somewhere. It's it's gonna be really difficult to do all this without it. You know, to what extent you use it, it's gonna be a little bit more tailor made.
Freddie:But, yeah, test people are thinking, okay. How do I increase my income streams so I can enjoy my life more? That the goal is the freedom. The goal is to, to be able to enjoy life now, not waiting 30, 40 years for, you know, the rates of return. I mean, we have all time highs in the market.
Freddie:You know, we're over 6 1,000 points right now on the s e S and P right now as we're talking. Who's getting wealthy right now? Like, like, the when the market's at all time highs, you see people just getting up from their desk and saying, I'm quitting. I'm I don't need it. I don't need this anymore.
Freddie:The S and P is at an all time high. No. Just because the market's at all time highs doesn't mean people you know, everyday people are becoming wealthy. You know, so it's again, once you start looking at it from that lens, it it it will help, people switch from that checkers mindset to that chess mindset if they choose to do that. But just don't go screaming at the moon if you're gonna play checkers.
Freddie:Why do the rich keep getting richer? That's, you
Davina:know, that's So what is your, you said, well, you have a chapter that is wealth is not a product off the shelf. Tell us what you mean by that.
Freddie:Well, it's it's not something you can just purchase. Right? This is strategies. Right? It's, you know, like like I said before, no one's investing in a well diversified mutual fund becoming wealthy.
Freddie:Now doesn't mean a well diversified mutual fund is bad. It just means, like, that thing is not going to make you wealthy or an insurance product or anything for that matter. It's a it's a, you know, it's a it's a congress. It's an orchestra. You know, having flutes and having trombones are you know, are important.
Freddie:But, and just having one thing, though, is not gonna, you know, make a good orchestra at all. So it it's just understanding those really basic, you know, concepts. But, again, we go back to look at what they are doing. Look at what they are doing. Look at companies.
Freddie:Look at the people who who have a lot of the S and P 500 under management. What are they doing? Are they doing the same things they're telling all the common people to do? No. They're doing other things.
Freddie:Look at life insurance companies. Wow. I don't have to go I mean, this will this will prove my point. Right? Yeah.
Freddie:So life insurance companies, the 3 largest, biggest, baddest boys on the block are MassMutual, Northwestern Mutual, and New York Life. Tops. Right? They're the top dogs. How in the world can these life insurance companies, what they insure is life, have their best years to date in 2020, 2021, and 2022?
Freddie:How can life insurance companies have their best years during and soon after a global life threatening pandemic?
Davina:When they're presumably having to pay out because people are dying.
Freddie:Right. Exactly. I don't I don't assume right now that, you know, all the fire insurance companies in California are having a great day. Right? Like, that's it's probably not a good thing for them with their insure you know, houses and houses are burning.
Freddie:That's not good. But if we talk about life insurance companies, we had a global pandemic, and CNN's got a scoreboard up every single night on how many people had died. And these life insurance companies are having great years. So that should give somebody pause and be like, wait a second. How does that work?
Freddie:Right? So it and I'm not saying these companies did anything wrong. I wanna be clear about that. They didn't do anything wrong. It's the contrary.
Freddie:I believe they're doing things right. They because they are purchasing the things that cash flow. They're purchasing the businesses. They're purchasing the the the real estate. You have shopped on a mall that is owned by an insurance company.
Freddie:You have stayed at a hotel that is owned by an insurance company. You you've had a you you patron some business that some company owns and some company owns, and then the top of that food chain is an insurance company. So when if we start looking at that, it's like, okay. Well, this is what they're doing, you know, and not just what they're saying, what they're selling, or what they're telling their, you know, their financial advisers to tell the common person to purchase so they can go turn around and do the, you know, something completely different with the money. Alright?
Freddie:So once you know, and I just think it took a an independent, brash wealth adviser just to kinda say it out loud. Like, wait a second. You know? Look at it from an evidence based mindset. This is not this is not just what they're doing.
Freddie:Right? They're not just purchasing these products or or you know? So it's not a product on the shelf yet. It's a strategy.
Davina:Right. Right. It goes back to our chess thinking or thinking like a chess player. And are we being strategic with our wealth? We know that attorneys have training in strategy.
Davina:We go to law school for the purpose of being people say think like a lawyer. What they're saying is learn how to think strategically. But what often happens when we become business owners, what I'm always telling my clients is we're not using those strategic thinking skills in other ways. We're not using them to run our business. We're not using them to build our wealth.
Davina:We're not using those skills that we have for our own advantage. We use them for our clients, and we go there. I did my job, And we're still in that middle class mindset, that middle money mindset of I created a job for myself, and I'm doing the job. And that's and then I'm gonna do all the rules that I've learned from your typical, you know, financial guru, the Susie Ormond's and the Dave Ramsey's other world. And I'm not saying those people haven't helped a lot of people because I believe they have.
Freddie:No. Yes. I would say the same thing.
Davina:But it's so then what's next? I think that's the question that we need to be asking ourselves. If we sort of do the basics, and then instead of stopping there saying, what's next?
Freddie:Right. So
Davina:What's next for us?
Freddie:And a lot of people ask me that. I was like, where would you start? Like, well, you start by a a lot of times by playing checkers very well and, and mastering that with the mindset that you are going to switch over to chess at some point. Right? So, like I said, I don't I'm not saying checkers is wrong.
Freddie:I'm just saying you're not gonna become wealthy, playing that game, in my opinion. It's you know, at some point, you gotta switch over. And it's it's also you talk about, you know, financial pun and saying this or that. You know, I I encourage people to look at, well, how do they become wealthy? Is it is it by doing what they say, or is it by doing something else?
Freddie:Right? Or, you know, is it you know, are people teaching checkers and then playing chess? So, you gotta also kinda look at how people's feet move, not just what they say, even if the information's good. So, and, also, it's really difficult to to not take financial advice from people who love you. That's another
Davina:Oh, wow. Yeah. That's powerful. That's a powerful statement.
Freddie:It's very difficult.
Davina:We find that often in business that people have family members who, a, never been a lawyer, b, never had a law practice, c, had a law practice at a different time when the world was different. Right. And they love us, and they want to give us advice. And it's really important that you surround yourself with people who sort of are where you want to go and what you want because, you know, have they done it? I mean, my parents, I'm so they grew up in poverty.
Davina:I mean, real poverty. And they created a level of wealth from those steady paychecks and working for government and getting benefits and all of those things. So now they're very well situated. They also built their own houses. And so their houses have always been paid off because they they built built the first one, paid it off, and then they just kept building their own.
Davina:And I mean, literally building it. Mhmm. And so they're in a good financial position. But now they're sitting here, And my dad, for the first time, I about fainted. He actually asked me for financial advice on something because they're very conservative in how they grow their wealth.
Davina:And, and so now he's at he's 87. He's asking me some things. I'm like, yeah. I'm not gonna be giving you any risky strategies at this point. But, you know, so I so it's just a different era in a different time, and they're live in a different world.
Davina:So I think that, you know, there's some good value in some of that, and there's also some things that don't apply to sort of where we are in this day and age and what we're doing. So Yeah. I think that's great advice. Your you said don't don't drink and invest. Is that literal, or is that
Freddie:Oh, yeah. That goes back to the whole, like, the gambler's mentality, right, where especially when, like I said before, something perceive something, oh, this is working. Like, you found a life hack or something, and you just go start going buck wild, that usually leads to trouble. So, you know, it's yeah. Chess can be very eye opening.
Freddie:It can be, like, you know, the the blue, the the red, which pole was it? The red pole, and the and the matrix where you just your eyes are open whole another world that you didn't know existed. But you kinda have to fight that a little bit and say, okay. Wait. Pump breaks.
Freddie:They okay. Well alright. I'm gonna start implementing some of these strategies. You know, also the learning part of it. Like, people can really get stuck in that phase too where they're just constantly learning.
Freddie:Yeah. And so, again, building the team is gonna be likely be better a lot better than just reading thousands and thousands of books. I mean yeah. Or watching TV shows like, like, you know, I can I can watch that? You know, I watch the I can watch the practice on TV.
Freddie:I can watch the whole I could binge watch the whole thing. I'm not gonna be a good lawyer at the end of it. Right? So, it it's it's really just understanding, like, kinda who you are a little bit and not not not and not getting too too far ahead of yourself, which happens for a lot of people. Especially now with the Internet and YouTube, people think they can learn everything, and they make it sound so easy on those YouTube.
Davina:See that with cryptocurrency. It's a big topic, especially right now in the news the last couple of days. And I and people so you're the people fall into the camps of either I keep it's exciting. I keep reading about it, studying it, learning it, you know, and and then there are other people here like, hey. Let's just go all in.
Davina:And as opposed to sort of, you know, why don't we test the waters a little bit and just see with this money that we can afford to lose. Right?
Freddie:So I'm not against cryptocurrency. Just gotta be in the right position, and you gotta have the right mindset. And, you know, it's it's, you know, it's a it's just another asset class, in my opinion. It's you know? So it's just it's just a little bit newer.
Freddie:But it's actually not new anymore either. So it's you know, we're talking about always 10 years old already. So and how people are just gonna like, oh, wait. There's this new thing? It's like, wait.
Freddie:No. It's not really new.
Davina:I'm not sure I'm good enough at chess for that yet, though. I understand it, but my whole thing is like, yeah. But if I can't go to the store and spend it, is it money? Right? So I mean No.
Freddie:You can't if you took a block of gold to the gas station, they're they wouldn't know what to do with it. You can't
Davina:Right.
Freddie:Pay your gas and Yeah. Gold. Right? So it's like as soon as you understand it, like, you think of it in other context that you're more, you know, more, accustomed to, it becomes a lot easier to wrap that around.
Davina:Good good advice. Alright. So, Freddie, why don't you tell us how we can get your book and where we can find it and how we can connect with you?
Freddie:So the book is called Playing the Wealth Game. Looks like this. And, you can find on Amazon and, or Barnes and Nobles. And, you know, also, you can find us on our firm is Opta Financial, optafinancial.com, and anybody's welcome to schedule a complimentary consultation with us. You just go to the website.
Freddie:Top right hand corner, it says schedule a consultation, and we can see if we're a good fit for each other. And you can learn more about our firm and how we practice.
Davina:Can you work outside can you work outside of your state?
Freddie:Yes. Yes. Yeah. We can work out. Now and now with Zoom, it that, you know, definitely a silver lining to Zoom where people are more comfortable, you know, having a little bit more of a relationship.
Freddie:Doesn't mean I won't I'll fly anywhere, but, but, you know Yeah. My day. Yeah. Well,
Davina:I always think about it in terms of licensing. I'm not familiar enough with financial advisors licensing categories and stuff to know whether or not you can do that. I know, like, if you're an attorney, you you're licensed in the state or jurisdiction.
Freddie:So in this con in this in this world, all you have to do is pay the you know, if I had, you know, clients in Wyoming, I just gotta pay Wyoming for their license. And, and and then they're good. So it's not I don't I don't have to take the Wyoming financial licenses like you do.
Davina:Yeah. Yeah. Yeah. Unfortunately, for me too, Florida doesn't have reciprocity. So a lot of states have reciprocity so people can get licensed in multiple states with their law license.
Davina:And for Mhmm. All Floridians, we've gotta go and take another bar exam. Alright. Thanks so much, Freddie, for being here. I really enjoyed our conversation, and I've read the book.
Davina:I've enjoyed it. It's a good fun read for you guys, and it really has some ideas in there that kind of will open expand your mind a little bit to get you thinking a little bit different. So I really appreciate you being here to talk to us about it.
Freddie:Thanks. Appreciate you having me on. It's been great.
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