Joe Withrow, Author at Zenconomics

What to do as the world burns

Everywhere we look, it seems like the world is falling apart.

The stock market is crashing. Consumer prices are ballooning. Interest rates are on the rise.

It certainly feels like a recession is bearing down upon us. And it’s hard to feel secure about our finances in this environment.

Everywhere we turn there’s another reason to worry. Stuffing money under the mattress now seems like a good idea to many.

The good news is there is a solution.

Getting Banned From the Hospital’s Rehab Unit

Occasionally I sit back and reflect upon my life’s milestones.

Graduation. Marriage. The birth of my daughter… then my son. These were incredibly formative events.

And I just added another milestone to the list. Getting banned from the hospital’s rehab unit.

I was visiting a family member who just had a stroke last week. Upon entering the facility, the person at the front desk informed me that masks were required. And he asked me to take a mask from a box on the counter.

So I did. And then I made my way to the elevator and up to the seventh floor.

It turns out the floor’s nursing station is right there as you get off the elevator. And the director happened to be on duty.

She was talking with somebody as I made my journey towards the room. But she immediately called out as soon as she saw me. Sir, you need to have a mask.

I smiled and called back. “It’s okay – I do!”. Then I held up the mask I was carrying in my hand.

Sir, you must put the mask on! She snapped back.

I repeated that it was okay as I walked around the corner. I figured that would be the end of it.

Wrong.

What Strokes Can Teach Us About Life

I spent a lot of time in the hospital last week.

A family member endured a stroke, and my duty was to be there for him. My job was to offer support and encouragement.

I saw this as a one-sided affair at first. But I quickly realized this experience had a critical lesson to teach me. That’s what I want to share with you today.

Strokes strip people of everything they take for granted.

Speech. Eye-hand coordination. Basic motor skills. Autonomy… Strokes reveal just how precious these things are. We can lose them at any time without notice.

Strokes also strip away all those layers of social conditioning that gradually build up on us over time.

We all are conditioned to think and act in certain ways, depending on the situation and the people we are around. That’s our social conditioning. It’s about conforming to preset expectations.

Well, that all fades away when you’re lying in a hospital bed unable to speak or move.

At least that’s my observation. What’s left is purely the human spirit that exists underneath it all. It’s beautiful to behold.

To me, this is a stark reminder of what’s truly important in this life.

Family. Friends. Shared experiences. Integrity of character. I believe these are the things that matter in the end.

But there’s one problem here…

What I Learned From a Saturday in the ER

I spent all day in the emergency room (ER) last Saturday.

Not for myself. A family member endured a stroke, and I wanted to be there for moral support.

As anyone who has been through such an experience knows, there are lots of lessons hidden in this type of thing. I’m still working through some of them.

Today I want to share with you what jumped out at me very quickly in the ER. It isn’t pretty. But I think there’s a valuable insight we can take away from this.

To set the stage, there aren’t actual rooms in the ER. Patients have their own spaces separated by shower curtains.

So you hear everything going on around you. And when you’re there for over six hours, you pick up on quite a bit. Here’s what jumped out at me…

How I Came to Love Debt and Taxes: Part IX

This post is part of a series:

Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX

When we left off yesterday, we were talking about how to find properties that match our investment criteria. And we discussed the need to plug into an established investment network.

Here’s why…

The network’s job is to bring vetted properties to us. Vetted being the key word.

That means we have all the pictures and financial projections for each property. This includes market rents, estimated principal and interest payments based on current interest rates, estimated taxes and insurance, as well as property management fees.

These numbers demonstrate very quickly whether a property is likely to match our criteria or not. Then we need to do our own due diligence to verify the numbers. That’s the only way we can know for sure.

In addition, we’ll have a single point of contact in the network. That person can answer any questions we may have about any property available.

To paint you a picture of what this looks like, our network down in Dallas operates via email and phone calls.

When we get allocation to a new construction development, our contact emails us all the information on the properties that will be available. Then we do our individual due diligence and determine if we would like to reserve one or more of the properties under construction.

It may be simple. But this approach works just fine when you work with professionals you can trust.

I also invest through a larger network. It has a presence in more than a handful of major cities.

This network maintains an online investment portal for investment properties. We can simply hop online any time to see what properties are available. And we have all the financials and the pictures right there to go through.

So what we’re talking about here is really deal flow. We want the deals coming to us.

But it doesn’t stop there.

How I Came to Love Debt and Taxes: Part VIII

This post is part of a series:

Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX

Yesterday we talked about our why.

Today we are going to talk about the how. How do we become financially independent as quickly as possible?

It all starts with having a wealth strategy and specific investment criteria in place.

Think about horse racing for a minute here. I’m not big on the sport, but my old man was. I only know enough to know that when people race horses, they put blinders on them.

The blinders restrict the horses’ vision so they can only see what’s in front of them. What’s in their lane.

You know why they do that?

Because if the horse has full range of vision, it might start paying attention to what the horse in the next lane is doing. And if it does that, it runs the risk of drifting. It might even wipe out, taking a bunch of other horses down with it.

Our wealth strategy and our investment criteria do the exact same thing. They keep us focused on our own plan.

How I Came to Love Debt and Taxes: Part VII

This post is part of a series:

Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX

When we left off yesterday, we closed the loop on how debt and taxes are the key to financial freedom.

It’s all about monthly cash flow and creating a “snowball” effect. That is, we need our income to far outrun our expenses.

At the same time, this approach requires us to handle quite a few moving pieces. That’s not difficult to do. But it requires a little extra time and thought. Nothing happens without effort.

So today, let’s talk about why any of this is worth doing. Why should we strive for financial independence?

Well, the answer is easy if we are stuck working a job we hate.

I’ve been in that position. I started out in the corporate banking arena. It was soul-crushing. I just wanted out. I thought about that every day.

I am sure most people have been in that position at some point. But if we need the paycheck to pay the bills, what options do we have?

Well, not many.

But if we can start generating income from other sources, our options increase rapidly. We need the paycheck less and less as our monthly cash flow goes up.

And with the right system in place, it doesn’t take very long to build substantial cash flow. Not if our focus is on a tried and true asset like rental real estate.

Think about it this way…

How I Came to Love Debt and Taxes: Part VI

This post is part of a series:

Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX

When we left off yesterday, we had determined that we could use debt to acquire new assets in a tax-advantaged way.

And if those assets are rental real estate, they will produce monthly cash flow to pay off our debt. Plus, the real estate will provide even greater tax benefits for us.

This is why “getting into debt” is actually a solution… presuming the debt is used to buy assets that throw off cash flow.

Today we have to talk about the final nuance. Using debt to acquire cash flowing assets is just half the story.

Debt also puts the power of inflation to work for us, rather than against us. Never before in modern history has this been so important.

The term “inflation” is thrown around quite a bit today.

If you ask somebody what it means, they will probably tell you rising prices. But if you ask them what causes inflation, can they give you a meaningful answer? I’m not so sure.

I am sympathetic to the definition put forth by the Austrian School of Economics. Inflation is the expansion of the money supply. It is the act of creating new money and injecting it into the economy.

If we speak from a dollar-centric point of view, inflation occurs when the Federal Reserve (the Fed) and the U.S. Treasury pump new dollars into the system.

These dollars have to go somewhere. And wherever they go, we are likely to see rising prices follow. It’s just supply and demand economics.

How I Came to Love Debt and Taxes: Part V

This post is part of a series:

Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX

When we left off yesterday, we were borrowing dollars against our Bitcoin to buy real estate.

By doing this, we didn’t have to pay taxes on our capital gains. We could leverage their entire value into acquiring assets that produce monthly cash flow.

That’s the key. The cash flow has to pay off the debt.

This is just one way in which debt and taxes go hand-in-hand. And as I mentioned yesterday, real estate is an incredibly tax-advantaged asset.

The way the tax code is structured, we should never have to pay taxes on our rental income. No kidding.

What’s more, there’s a way to generate massive paper losses for tax purposes using rental real estate. By paper losses, I mean non-cash losses. They go on the tax return, but you didn’t actually lose money. In fact, you made money.

Think about what that could look like…

Imagine writing off $100,000 against your active income. That means whatever the gross income number at the top of your tax return is, you subtract $100k from it. Then you pay taxes on whatever’s left.

That’s the power of rental real estate, if done correctly.

How I Came to Love Debt and Taxes: Part IV

This post is part of a series:

Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX

When we left off yesterday, we came to the realization that the “nest egg” approach to retirement was a scam. That’s because it puts us in a fragile situation unnecessarily.

Plus, it takes a really long time… with no guarantees.

Fortunately, there is a better way. It’s an approach that puts us in a much stronger financial position. And it does so in a far shorter period of time.

It’s the monthly cash flow approach. Instead of focusing on capital gains, we focus on building monthly income streams.

But wait a minute.

Readers may be wondering, what does any of this have to do with debt and taxes? Isn’t that what we are supposed to be talking about?

Well, dear reader. Stay with me. We’re building up to that crescendo right now.

If you recall from Part I, I learned a single overarching principle from my experiences as an investor. Focusing on monthly cash flow is part of it. But only part.

The secret is much more nuanced. I’ll explain by getting back to my Bitcoin conundrum.

So I’m sitting there looking at my Bitcoin stash, and it’s a large number. At least large for me.

And my problem was – how do I access this value without getting hammered in taxes? It’s a big number now, but after taxes it will be substantially smaller.

Then I discovered the solution. It was debt.