Unlocking Wealth: A Conversation with Grant Cardone

Personally, I have been spending a lot of time making sure I am in the best spiritual and emotional shape of my life to handle the upcoming struggles the world will face.  My business continues to defy all the troubles in the world somehow, and we have added about $200M in real estate holdings.  Just since the last time we talked, the world seems to accelerate from one worldwide crisis to the next:  COVID-19, Ukraine, inflation, the Fed raising rates 11 times, and now Israel and the Gaza Strip, and the world is getting increasingly fragile. 

Phase 1: Earned Income.  The first phase in professional life is when you start to take care of yourself and get a job.   Earned income encompasses most of the population in America, whereby people trade time for money and attempt to unsuccessfully keep their expenses below what they earned. This is a failed experiment called the middle class that makes up not just the lower middle class but even the upper middle class.   Not because people spend too much, but because the cost of living and especially taxes on earned income rob the middle class of their ability to ever truly get ahead and build real wealth. 

Phase 2: Investment Income.  The next level of income is where wealth starts to be created independent from earned income for the investment but whereby the individual, for the first time, invests money in assets that will provide passive income independent from time invested. This is the lowest taxed income and is vital for wealth creation.  Most people improve the quality of their living standards when they get promotions, bonuses or commissions rather than investing. In contrast, those who seek to create wealth will not momentarily improve the quality of living but rather the quality of their investments to one day use passive income to improve their quality of living.    Earned income is taxed as high as 39% on the federal level, and passive income will pay tax on dividends at under 20% and from real estate, it could be zero due to some of the benefits of investing in income producing real estate. 

Phase 3: Wealth Scaling

The wealth scaling is where the individual now waits for the investments in their assets to compound over long periods of time—waiting for time to pass rather than trading time for earned income.   Wealth investment scaling is only created by making investments, holding for long periods and avoiding tax implications, which is the GREATEST thief of wealth creation. 

While I work very hard in my 11 companies, I only take a small salary from one.  I do not desire earned income. That being said, the companies need to earn income to pay salaries to over 1,000 employees and partners who work with us so they can pay their bills, improve their quality of life, but most importantly, heed my advice and invest to create long term wealth for themselves.  The easiest way to do that is to either buy a stock that provides a dividend or invest in a specific type of real estate that offers dependable and recurring passive income.    My goal is to earn more passive income than earned income because 1) it works when I don’t or can’t, and 2) it is taxed at much lower rates. 

I never believed in “get rich quick” because of my upbringing.  It was hard. I experienced struggle and a lack of good fortune (luck).  There was never a possibility of being born into it or having the right connections, so I knew I had to go the long route.  Get rich for sure, not get rich quick.  Seeking to build not just income or a big savings account, I sought ways to build wealth that would outlive my time here.   That means you have to work on more than just your talents, products, and services but invest beyond your skill set and wait for those things to take care of you when your talents or services are no longer valuable to the world.   

The people who seek financial freedom, not just money and lifestyle, tend to find it without exception.  Unfortunately, most people think the car, a watch and $1,000 shoes are the life, but they are NOT.  True financial freedom is about buying choices and is NOT sold at stores.   The ability to fire a customer, get rid of a situation, fight back against unscrupulous lawyers, and have a free voice, knowing someone may attempt to cancel you or hurt your business, are things you cannot buy and only come with true financial freedom. That being said, I know some very wealthy people who, despite their fortunes, still fear being canceled, as they are not willing to risk any of their wealth.  

Financial freedom offers many opportunities the wealthy never talk about in public.  Being able to fly the world with my family and grow my business, homeschooling my kids and sharing real life experiences as we travel the world with our kids gives my wife and me experiences we would not have if our kids were still in the school system.  Being able to hire great people. Let’s face it: money doesn’t buy everything, but it sure as hell is what super talented people expect in order to work with you.   But mostly the freedom of not worrying every time you spend money.   The freedom and quality of life that comes from NOT having to worry about every purchase is real to me because I grew up where our family worried about every dollar we spent. 

The Job Hate Trap - First off, let me say that I believe a job is one of the greatest things a person is offered in life. A job is where you can express yourself, become creative, solve problems and work with others.   A job gives you some small or large purpose daily to accomplish something.  Unfortunately, most people look at a job as a bad thing and never get great at it, so they will never be promoted or paid extra to do the work they do.   Everyone is seemingly trying to get out of a job and then traps themselves into hating the job they have to simply pay bills.  The job hate trap suggests you hate the job you have cause you have to have the job you have. Get great at those things you hate, and you will not only be promoted, but you may end up owning the entire industry. 

The Piggy Bank Trap- Saving money for a rainy day will only get you a rainy day.  Saving money is an indication of those who have no idea what to do with their money, and by the way, you aren’t saving it; you are destroying it.  Only banks and Wall Street benefit from YOU saving money.  Your money is being devalued, earning almost nothing and the very places where you “save it” don’t even leave it at their banks and instead lend the money out. 

The Misinformation Trap-  What you believe to be true and is NOT-  is keeping you from your wealth.   These I refer to as "House Rules,” “Indoctrination,” or “Money Myths.” There are many, and most of us have been indoctrinated by these myths: buy a house, save your money, don’t use debt, diversify your investments, get a college degree, prepare for retirement.”  NONE of these things are what wealthy people do to create their wealth.  And no matter how many times Warren Buffett says he would invest in EFT or index funds, he NEVER has. 

The White Picket Fence "The American Dream" Trap-  You think that house is going to make you happy, but it will not, and it is likely NOT to make you money.  It is certain to cost you money to take care of it, furnish it, paint and roof it, trap you in one location longer than you want, and cost you double in mortgage payments than it would cost.  And don’t kid yourself. You never actually own it; try not paying your property taxes, and you will find out the state owns your home.

Our kids work for us, and we pay them a salary. Only the IRS knows how much.  They have performance contracts they must fulfill. They are NOT given allowances.  I take the money they are paid each year and invest in our real estate at Cardone Capital, where they then get monthly distributions, and that is what they can spend each month.  They learn how to manage money by doing so.   By the way, the kids qualify as “write-offs,” and the investments they make each year will grow over time, and they are only spending from passive income, not their earned income. 

The way I balance my life is I don’t seek to balance life, but instead, I create a life that works for us.  I am never more than 5 minutes from my work, no matter where my offices are. That way, I am not spending time on the road. I only get involved with businesses that allow me to move from one business to the other easily, and in fact, improving one company should actually improve the other eleven.  I also don’t work with people I don’t like, and my family rolls with me 90% of the time.   This is where the financial freedom kicks in. Knowing passive income is coming in and I can depend on and trust it is coming is very freeing and allows us to move more easily through life. 

Despite the handful of times in history where the banking industry and debt markets get disturbed, real estate that cash flows and is NOT over encumbered always works.  Right now, we are going through that, and while values will be negatively impacted, the income should still be there.  Those, however, who take on too much debt and are not disciplined in the properties they buy will pay a price. 

Do NOT pay your kids an allowance; get them away from other kids, especially the entitled ones, get them working before they are out of school, and allow them to contribute to your household and start today.  Lastly, if you can figure out how to remove them from the public and private schools and instead homeschool them, you will thank me later. 

What keeps me motivated is the target. I lay out very specific targets I want to reach and then do everything possible, including meeting the right people, learning the right skills, and investing the necessary resources to achieve the target.  And all the targets are precise and very large while substantially improving the lives of those I love and our partners, investors and customers.   Keeping all that in mind, I am super grateful for where I am right now, but I am not satisfied and will not be satisfied until I make a bigger impact on improving conditions for many.

Everything is about to change, and at the same time, nothing will change.   Most people, unfortunately, will never have money because they won’t wake up to the fact of their indoctrination.  It is popular today to hate money and wealth and possessions, as though those things can somehow make people unhappy.  The truth is you can’t buy happiness if you’re rich, and you can’t rent it either.   Neither money nor poverty has a claim to happiness.  Today, technology changes with AI and the blockchain could disrupt currency exchanges, but people will still depend on people, and whoever has the greatest people skills will have an advantage. 

I only do things I am passionate about, and I never get involved in a business that cannot be profitable.    There is virtually nothing I do in my life that I don’t become passionate about and nothing where I don’t think someone can profit—even our non-profit, grantcardonefoundation.com, profits inner city kids who need direction, mentoring and financial skills. 

 I am just finishing Common Stock and Common Profits and the Psychology of Money.

With the upcoming recession that is sure to shake Americans to their core, you better learn how to think in multipliers. Not just in money but in effort.  The 10X Rule suggests if you think it is going to take X to accomplish something, multiply by 10, and you may be close. 

The wealth creation formula is a very specific step-by-step validated process used by me for 40 years and the wealth for hundreds.  Earn income >  invest in assets > reinvest in assets > only improve the quality of life from passive income > wait for assets to increase in value > borrow against assets without ever selling > and avoid taxes at all costs.