Why Most People Stay Broke... George Antone Explains the Real Game

The idea of a 50-year mortgage is starting to be rolled out. What are your thoughts on a 50-year mortgage? Everyone should be looking into this capital structures. It is the key to wealth building.

It is the key to wealth building. I cannot stress it enough. What's the framework that you lay out for portfolio diversification? The matching of the finance and the asset is actually what gives you the power to move faster towards your goals.

You're being taxed on your entire wealth. Well, not everyone is going to have millions, tens of millions, hundreds of millions of dollars in cash. It's all tied up in assets, right? Make sure everything you buy, you can borrow against.

But when you borrow against it, you have to structure it so that the asset itself pays for the debt. You never want to be paying for that out of your pocket, ever. Hi guys, we've got George Anton, the founder of Finance in the House. George, welcome to the show.

Thanks, Mark, for having me. I'm really excited to be here. George, the pleasure is all mine. I was reading your bio and you have a very interesting story.

And I think it starts with you as the lead software developer for Quicken. and you made a surprising discovery that the secret formula within the source code was broken and kind of started this cycle where people would never profit. Tell me, how did you find this problem and what was the solution that you made to solve the problem? You know, I was working in, let's say, 1990s, late 1990s at Intuit, worked on a number of their products, one of them being Quicken.

And again, in the software, I noticed there's a formula, what we call the secret formula at the time, but it's called the break-even return. And that is, this dictates how much you must generate across your whole portfolio, right, in investments to maintain your purchasing power. And the number is pretty high. And I'm thinking, how on earth is the average person going to maintain this high return?

That means, and I want you to imagine this, Mark. If I told you this equation equates to you having to maintain, let's just say a 9% break even on your whole portfolio, not one investments, on your whole portfolio, just to be able to buy the same things every year, meaning you're purchasing power. And it's like, okay, you might beat it one year, two years, but guess what? We're talking about a 30 year, 40 year, maintaining that or beating that is impossible for most people.

And even if you beat that number, Let's just say you were able to do 12%. It doesn't make a big dent, right? So that's when I realized this proves mathematically that most people will never be able to reach their financial goals because that number is way too high. So that was in the 1990s.

And I decided I need to crack the code because this is showing people, you know, something very, very depressing. And after many years, I realized that the solution really is not buying more assets or more focusing on returns, but rather how you package things in your investments. And what I mean by that is you really need to focus on a number of factors other than just return. For example, velocity of money, how fast you move money, all these things.

And I'll tell you, it was incredible to see the results and how much faster people can get to their goals significantly faster. You know, cut that 40-year plan down to under 10 years by doing some of these things we'll talk about on the show. And you would say that, by the way, 9% return. I think Warren Buffett would probably be pretty happy with a 9% return over a 40-year span.

And where does the velocity of money, explain to me where the velocity of money plays into that idea of condensing down that return on investment? So most people think about I'm going to buy an asset and I'm going to just, the money is just going to sit there, right? The equity is just idle, the money is just idle, and they're just going to wait for it to appreciate, for example, or to generate cash flow. The problem with that is the money is sitting there doing nothing.

So what I realized is if you can invest in things that are very strategic, the sequence itself, you can actually move the same money across multiple assets. So the same dollar is doing a lot more work than just sitting there on one asset. So that's where velocity of money comes in. It's like, how can I invest strategically in a way that every asset I buy helps the next buy the next asset?

That's the synergy we're talking about. And that allows for more movement of money, which is velocity of money. In that case, the limited amount of money you have is able to buy a lot more. But you have to think through the financing part, the sequence, for example, and things like that.

Yeah, because what about the capital gains tax? If you go and realize the gains, you're going to get crushed on your capital gains, right? How can you have the velocity of cash while avoiding that capital gains tax? That's exactly correct.

And that's why we have things like, have you heard of buy, borrow, die, for example? The idea of you borrow against an asset and you buy the next one, you don't sell it, right? You always borrow and you buy the next one and make sure that every asset pays for its own debt. And that allows you to grow your money pretty fast.

And so we're growing our cash. We're taking out debt on assets, making sure that each new asset pays for the previous debt. But where does that turn into quality of life improvements for me? Because if all my wealth is tied up in property and real estate and investments, how does that translate into making my wife happy with a new purse?

Yeah, so excellent question. I love that question. So here's the thing, Mark. Let me ask you this.

If I told you that you could hyper-focus on buying things in the right order, structuring things correctly, and you can get your goals in three to seven years, for example, how would you feel about that? That's exciting. That's what we're talking about here. It's the speed and the time to your goal is more important than how much, right?

That's why most people are buying things or investing in assets, and they not accounting for efficiency for time to my goals And so what we talking about here is learn to structure things correctly which is not a major skill to learn and learn the sequence in which you buy things So, for example, you want to start with building liquidity in your portfolio. Buy things early on that you can sell in case of an emergency. So one of the things we tell people is have 20% liquidity in your portfolio.

things like ETFs or anything that you can sell relatively quickly. Then later on, if you want to buy real estate, that comes later on in the sequence. Again, this is very asset agnostic. How can you do things so that you're optimizing the decisions?

The second thing is focus on cash early on, right? And this way you always know your debt is being paid for. So we have very specific metrics we look for to make sure that you're buying things in the right sequence. The next thing is with the same sequence is make sure everything you buy, you can borrow against.

But when you borrow against it, you have to structure it so that the asset itself pays for the debt. You never want to be paying for that out of your pocket ever. Okay. So these are things we look for.

I mean, and this, so this makes sense. We want to be, we want to be cashflow positive. We want liquidity and we want assets we can borrow against. But what if we run into a problem where interest rates increase, for example?

And so I take out a loan on a property at, let's say, 5%, and then the Fed increases the interest rates. All of a sudden, we're at 7%. Oh, crap. How do I square that circle?

Excellent question. So that's why, for example, in real estate, we have you do fixed interest rates for that exact same reason. Now, early on, if you're borrowing against certain assets where you don't have fixed interest rates, we make sure you have a huge gap, a huge spread. So this way you avoid this fluctuation because you're going to get fluctuations in interest rates and yields, right?

So you have to make sure you have a good size spread. This way things are fluctuating, but you're never going into what's called negative spread. And so these are things you want to focus on. But that's why we love fixed interest rates because it removes the uncertainty of interest rates going up and you having to pay more for it.

Excellent. Talk to me more about the spread. What type of assets do you typically like for someone who's getting started in this investment framework? I would say first you want to build what we call resilience.

Resilience is make sure you have your safety buffer. You know, build up some safety, maybe six months worth of reserves. Then start focusing on, again, like we said, liquidity. Things like ETFs.

we say avoid stocks early on because you don't want that volatility, right, in your portfolio. You want things that are stable. So buy ETFs, but mix them up a little bit. Have what's called non-correlated assets.

So focus on ETFs, non-correlated assets, meaning diversification, and make sure as much as possible you focus on stability, not volatility, right? And the reason is because eventually when you start becoming more confident with this, you start borrowing against that, but you want to keep the debt on the low side, right? And this is how we first start. Start with ETFs, create liquidity.

We start making sure our members have a lot of liquidity because of every time there's uncertainty in the market, you have to have a lot of liquidity and manage your debt. So these are the first few steps I would say. Makes sense. So one of the things that makes me sad though is if we can't accept volatility that means no bitcoin no crypto yeah we're we love bitcoin however you're never going to borrow you never want to borrow against something that's volatile right that's why every asset no matter how uh what it is you have to look ask yourself what's the volatility and therefore how much can i borrow against it so for example real estate you can borrow let's say up to 80 because it's a relatively stable asset ETFs, you never want to borrow over 40%, right?

Because of the nature of the asset. Well, Bitcoin, because of the volatility, you want to manage how much you can borrow. So the example we give is this, is every asset can only carry so much weight. Just like in a gym, you're working out, you can only carry so much weight.

You have to know the weight that asset can carry, right? So ETFs, for example, I was saying no more than 40%. That's the highest. real estate 80 so for crypto you would ask yourself what is the highest i can i can borrow and you have to determine that and make sure you never exceed that okay no that makes sense to me so you know hot take here is bitcoin going to zero or to a million you know what i i uh i don't like to guess but i buy bitcoin so i love bitcoin and uh but i'm not here to to i don't like guessing but i like to make sure that my my portfolio says if it goes to zero it's okay it's not going to affect me but at the same time i do have quite a bit of bitcoin yeah i like bitcoin too but and i'm a million dollar guy but quantum computing makes me a little nervous that's it's all speculation though like exactly point you don't really want to speculate this isn't uh uh you know we're not on poly market here right we want to try to be smart and That's exactly correct.

I tell people, limit your speculation to no more than 5% to 8% of your portfolio and stick with that. And then the rest, make sure it's stable. That's going to get you to your goals. Yeah.

When we talk about loans, typically when you're purchasing a home, you're looking at a 15 or 30-year mortgage. The idea of a 50-year mortgage is starting to be rolled out. What are your thoughts on a 50-year mortgage? So let's talk first about the 15 and 30, and we're going to expand that to the 50.

So most people say borrow, get a 15-year loan, and be debt-free in 15 years. And also we're going to charge you less interest rate. That is the worst thing you can do early on in your career, the worst thing you can do. The reason is because your payments are so high, you're actually, the lender is shifting more risk to you.

because as you pay down the debt they are getting into a safer position You are taking a higher risk so they shifting the risk to you so you better off having a 30 loan and if you choose to pay it off earlier that's fine you always have that option but guess what if you have a bad year or two in a 15-year loan you're screwed right i mean if you cannot afford those payments are so high in a 30-year loan feel free to make 15-year payments and if you have a bad year or two you can adjust that.

So 30-year loans are way better for wealth building than a 15-year loan. Well, for the same reasoning, a 50-year loan is better than a 30-year loan. Now, you have to obviously look at the payments and all that stuff. But at the end of the day, here's my question to you, Mark, is if you had to make a $5,000 payment versus a $3,500 payment, again, I'm just making up some numbers here.

For someone like you, the $3,500 payment is more flexible, right? You have the option of always making the $5,000, but guess what? You can take that additional $1,500 and make more money with it with what you do, right? Every single month.

Does that make sense? Absolutely. I mean, the finance framework is built on having liquid cash available for the next opportunity. That's exactly correct.

That's exactly correct. That makes a lot of sense. So, And that's why people always feel like they're struggling month to month is because your monthly payments are so high, right? And so just be aware that a 15-year loan is made to look so attractive with a lower interest rate because the lender is trying to get you to shift the risk to you and the safety to them.

Yeah, and this makes perfect sense. I like the idea of the framework. I like the idea of cash. I like the idea of consistently taking steps up to build your equity, to build your wealth, right?

All this makes sense. One of the ideas that's starting to be floated out there in some of these states that we're looking at is this idea of a wealth tax too. And it's starting off at the billion, at billionaires plus, but like most things, it'll probably end up coming down to a hundred millionaires, then millionaires. What do you think about wealth tax and how does your framework aim to solve some of those issues there?

well we we're not solving that but i'll tell you we help people get to that point and have that problem if they have to but i am i am very much against that uh and the reason is um what's that movie or what's that book um gosh i'm sure you know it um uh i've read more dad no no no it's it's the book on on exactly this where they're being the very rich are being taxed and they move out of town um what is it called i forgot the name of it right now it's an incredible book and i highly recommend everyone read it because it actually talks about the same exact problem and for the life i cannot remember the book right now um i highly recommend people watch that and there's a movie uh with three series in it um uh it is it i'm totally against it because it's exactly what's happening right now with people moving to different states is going to happen no matter what.

I mean, these billionaires are going to move out of town and they are the ones paying for most of the taxes. People don't get that part. And so I'm totally against it. And yeah, so it's- It seems bad, especially if you want to be liquid.

Exactly. You know, because if you're being taxed on your entire wealth, well, not everyone is going to have millions, tens of millions, hundreds of millions of dollars in cash. It's all tied up in assets, right? That's exactly correct.

That's exactly. I'm curious. What do you think about it? It doesn't make any sense at all.

Yeah. It doesn't make any sense at all. I mean, you can't tax unrealized capital gains. Exactly.

You know, the first home that I bought was $164,000. We ended up selling it at over $420,000. But if they had come and taxed me before we had sold it, I don't know what we would have done, where we would have come up with the cash at that time. That's exactly correct.

That's exactly correct. And it's honestly, it's really ridiculous. A lot of people look at, you know, these billionaires and think they must be so liquid. And but they don't understand that they are paying so much in taxes already as a percentage.

And it just doesn't make sense. And they're going to move out of town. So, yeah, so it's ridiculous, I think. Yeah, it's definitely something that kind of like perked my ears up earlier this year when I heard that idea being rolled out.

I think the reality is that we are in kind of a volatile time. So does that impact the way that you see investments? Are you looking at, hey, we need to make sure we have a very diversified portfolio? What's the framework that you lay out for portfolio diversification?

Yeah, portfolio diversification is huge. And I tell people, make sure you watch Ray Dalio's video on non-correlated assets. and he makes a huge, huge point, which is as you buy more and more non-correlated assets, which is much more focused than just saying diversified a portfolio, what that does is it lowers your bottom, your what's called drawdown, your downside, and while maintaining your upside. And so it's a huge thing we follow.

And I tell people, find it on the internet, find it on YouTube, rate value, and I forgot what it's called, the video, but it's essentially on non-correlated assets. That makes sense. I mean, maybe Michael Saylor should consider watching that video because he's going all in, which I do respect to a point. So after working with all the investors, after being in this field for decades, George, what is the most common mistake that you see new investors making?

I'll tell you, most investors think there are many mistakes, but one of the things that stands out is they think it's the asset, whatever the asset is they're investing in. That's what's going to make them wealthy. So we call that the asset first approach, which is very wrong. What we talk about is the finance first approach which is matching the right assets with the right financing and make sure also you have a diversified portfolio But the key is matching things correctly because that where the power is So what people think is I all real estate real estate real estate And that really hurts because I was all real estate early on.

And I'll tell you, it does a lot of disadvantages. So having diversified portfolio is critical, but more so is move away from the idea of asset first and recognize that the matching of the finance and the asset is actually what gives you the power to move faster towards your goals. That is one of the things that is untapped. And I'll tell you, it is the thing that cracks that formula we talked about early on, is the matching of the finance and the asset.

I cannot stress it enough. It's called capital structures, and everyone should be looking into this. Capital structures. It is the key to wealth building.

It is the key to wealth building. I cannot stress it enough. It does strike me that falling in love with your first idea is typically not optimal and following the money makes a lot of sense. And when we think about this idea of following where the money is, it is astounding how many tens of billions, hundreds of billions of dollars are being invested into AI infrastructure right now.

I mean, Cisco just laid off 5% of their staff. They landed over $5.4 billion to implement AI data center and infrastructure. It's blowing up.

Microsoft, tens of billions of dollars. Oracle, tens of billions of dollars. With all these tens of billions of dollars being poured into AI infrastructure, does that open up exciting new asset classes? You know, it actually is.

There's some ETFs that focus on these data centers. And I can't remember one of them, right? There's one I'm invested in and it's doing really well. And so, yes, I would tell people focus on looking at on ETFs also for energy, given what's happening.

I cannot tell you enough. There's a stock, and I literally was just looking at it this morning. It's an ETF that is blowing up. It's been blowing up for the last 12 months or 18 months.

I would tell people look into that 100%. You're absolutely right. AI infrastructure and energy. I don't see any way it's slowing down.

We've seen the meteoric rise of Claude we were talking about, now I'm philanthropic. And these software companies, these AI companies are so power and compute hungry. I don't see any reason why that would slow down. I just don't.

Absolutely. Absolutely. I agree with you. I agree.

And it's incredible times is all I can say. Incredible times. It's just our whole world is changing right before our eyes. It absolutely is.

I mean, I'm the fractional marketing officer for a SaaS company. And when you look at what's happening with SaaS, I mean, you look at the SaaS side of the S&P. it's completely crashing out. Yep, yep, absolutely.

So what do you think? Is there gold to be mined there? Or is it, hey, let's kind of be careful with the SaaS right now. By the way, not financial, but I'm not a financial advisor.

Do your own research, all that stuff. Do you think there's gold to be mined in the SaaS? In the SaaS apocalypse? I don't know.

I don't know. But I'll tell you that I've been invested in senior loans in companies that do a lot of lending, which are having this major blowups. But it's still doing well for me in terms of cash flow. These are senior loans and BDCs and things like this.

So, and I know some of them are lending to SaaS companies. But yeah, this is something to be careful about for right now, given the market. It's interesting. It's interesting.

But anyway, guys, I appreciate you logging in, listening to and investing in yourself when it comes to, well, your wealth. George, if we want to take the next step with you to learn more about your framework for building liquidity, creating assets that accumulate value and keep us cash flow positive, where can we learn more? uh people can go to finance.com finances with a quirky spelling f-y-n-a-n-c.

com f-y-n-a-n-c.com and uh check out what we're doing or even our our youtube channel we just launched um and um where we talk about different ideas of moving to your goals faster as a youtube guy myself i really like what you're doing on youtube i mean we're getting hundreds hundreds of views on videos that are very bite-sized and digestible. And I like that you're bringing out paper, pen, whiteboard, actually walking us through with diagrams and walking us through the frameworks.

I'm a very visual person and it's easier for me to draw things and, and explain things rather than trying to just explain it by, by words, because a lot of it is, is needs to be understood. You know, it's, it's a very visual thing. So yeah, so I love doing that. I agree with you there.

And I threw you a bunch of curve balls today. So I appreciate you being dynamic on your feet. I love this. This is a good conversation.

You know, Mark, I'll tell you, I'm very passionate about one thing, which is I've seen people work for their whole lives, 40, 50 years and nothing to show for it. And it kills me when all they have to do is actually stop focusing on the asset and focus on the financing part, what we call orchestrating your capital, right? Make sure your capital is moving efficiently and they can cut out 30, 40 years of that weight. Think about that for a second.

I mean, we have members, we're getting them to their goals in three to seven years, you know, under 10 years, all because of that. It's not about the asset. There is no magic asset. Okay.

Maybe crypto for you, Mark, but that's what we're talking about is focusing on a different way of thinking. So I'm very passionate about this. And we're very excited to help a lot of people. Love it.

Well, George, thanks for joining the program today. We'll have links below, ladies and gentlemen, so you can find out more and start building out your own wealth portfolio with this framework. George, thanks for joining the show. Thanks, Mark.

Thanks for having me.