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Jordan Goodman: Earn Higher Yields, Pay Off Debt, And Succeed In Business

My guest is known as America's Money Answers Man and is a nationally recognized expert on personal finance.

He is a regular guest on numerous radio and television call and shows across the country answering questions on personal finance topics, having appeared on The View, Fox News Network, Fox Business Network, CNN, CNBC and CBS and on the Get WealthFit show. He is also the author and co-author of thirteen bestselling books on personal finance.

His name is Jordan Goodman, America's Money Answers Man.

In the show, you are going to get a fire hose of information. I don't think we've ever packed this much tactical information around money in one episode in the history of the show.

We start off with five different distinct ways of paying down bad debt. If you've got a student loan, if you've got a mortgage, if you've got a car loan in any bad debt, you're going to want to know what Jordan shares on different ways to pay it down faster and save on the interest that you may be overpaying needlessly. 

Here on the Get WealthFit show, it's not all about paying down the bad debt, it's about getting greater returns. We cover multiple insights on how to get better yields, how to get greater returns on your investment.

If you are investing in real estate, if you are looking at the markets, we're going to talk about some ways to get greater returns. If you're parking your money at the bank, you're definitely going to want to know that.

Finally, for all my entrepreneurs or people that want to start their own business, we talk about what you need to know so that you don't get overpaid and you don't get trapped into tricky financial instruments that may solve a short-term problem, but will ultimately lead to your demise. How to play the personal/business credit card game?

You are going to love the show. There are so many tactical resources, ideas and strategies.

Dustin
Jordan, I want to go all the way back to when you were twelve years old because you have such a fascinating and interesting start to this world that you're into. I want to take you back to Cape Cod. You're twelve years old and you're writing a youth baseball column. Not only that, as a journalist at twelve years old, which I don't know how many of those exist or have ever existed, you're not only writing the column, you're delivering the paper and not only that, you're actually selling the
Jordan
We have a house near in Hyannis where the ferries go over to Martha's Vineyard and Nantucket. I was writing this weekly column about youth baseball, all the leagues, Dennis, Yarmouth, Falmouth and all these different places. They would have tons of newspapers left over, an overprint. I would go up and I said, "Do you mind if I take some of these?" They said, "Fine, we're going to throw them away anyway. That’s much less work for us.” The printers said, "Go take it, fine." I would take my bike, get as many papers as I could, and I would go down to the docks and I would sell the people the papers as they were getting on the boats going to Nantucket or Martha's Vineyard. The first time, they would say, "I'm going to enjoy the fresh air.” After about five minutes of sitting there with nothing to do the next time through by the time the ferry had taken off, 75% of the boat had papers and then do the next paper. I end the day with completely black hands with ink all over me. At that time, I was selling it for $0.50 a paper. I was selling it, writing for it and that's the beginning of my entrepreneurial/journalistic life.
Dustin
Originally when you're saying this, I was thinking of your skinning this animal in many different ways or set a different way, getting paid to write, selling the paper. Was that the case? Were they paying you to write or were you doing that pro bono but making your money?
Jordan
This was in the '70s. I was getting $25 a column. What they would always say to me is my column would sell more newspapers than the rest of the paper combined because every name I would put in there, “This guy pitched a no-hitter. This guy hit a home run.” The parents would buy it. They'd buy three copies for the grandparents and the uncles. I was a newspaper selling machine through my column.
Dustin
I appreciate that. We're big fans of entrepreneurialism here at the show. We often cover it a lot. You've been at the money conversation for over many years. You've written multiple books and I thought we would get into money, maybe touch on your entrepreneurial endeavors and advice there towards the back half. One big thing that we haven't covered yet and I'm excited to talk about is this idea of paying off your mortgage quickly. Most people reading the blog either have a mortgage or at one point had one and everyone's trying to figure out, “How do I minimize that being one of the greatest expenses that people have right up there?” You're an expert in this and you have a strategy for showing people how to pay your mortgage off in 5 to 7 years. How so?
Jordan
I'm going to give a strategy and at the end of each strategy, I'm going to give a specific resource phone number, a website that people can actually implement it. This is a strategy generically called Mortgage Equity Optimization. It literally allows you to pay off a 30-year mortgage in about 5 to 7 years on your existing level of income. You don't need more income. It's the way you flow your money. That makes a huge difference in making progress on the principle as opposed to making almost no progress on the principle. The existing system is you get a 30-year mortgage, you make the same payment for 30 years, the first 10 to 15 years is pretty much all interest. You're making very little progress in the principal because all the interest is front end loaded on a mortgage. Meanwhile, you keep your money, your checking account, your paycheck and all that sitting in this checking account, earning zero. This is why it works very well for the bank. They get your money for free and sometimes they even charge you fees to get your own money and you pay them interest for 30 years. Even better if you refinance the mortgage, then you start a new 30-year clock all over again. Even though the payment and rate may be lower, you threw away tens of thousands of dollars in interest you paid on the previous mortgage.
That's why the existing system works well for the banks and they think you're doing a great job. Let's reverse the tables completely and instead of having your money work for the bank, let's have it work for you. You keep your existing mortgage. Let’s say you have a good mortgage at 4% or some good rate. You get a Home Equity Line of Credit, HELOC, as they call them on top of that, which is a liquid line. Put money in. You can take money out whenever you like. You do what they call the blended strategy, where you take money from the HELOC and pay it down towards the first and then you pay off the HELOC and then you'd do it again. Meanwhile, you're keeping your income, which is normally sitting in a checking account doing nothing in the HELOC. It’s based on what's called average daily balance. How much do I owe? Every day you have money going into that HELOC, you're pushing your balance down a little bit. Instead of making almost no progress on your principle for 10 or 15 years, you're making accelerating progress on your principal literally every day that you put money in there. Let me give a super oversimplified example of how this would work because that would be helpful. Say you have a house worth $300,000 and say you had a $200,000 first mortgage at 4% some good rate. You'd go out using this mortgage optimization strategy and you'd get maybe a $50,000 HELOC.
You've opened it up. You haven't used it yet. You would then write a check on that HELOC for $50,000 towards the first. You owe $150,000 on the first and $50,000 on the HELOC. Over the next year, your money is going into that HELOC pushing the balance down every day. After a year or so, you pay that $50,000 HELOC off to zero. You do it again. You write another $50,000 check in the HELOC towards the first, you owe $100,000 in the first, $50,000 in the HELOC, you paid off over the next year and you’d do it twice more. Your first is not paid off after roughly four years and then you pay off the HELOC in the fifth year and you are mortgage free with the existing money you've already had. You see the differences.
Your money is working for you every day instead of working for the bank. What a revelation. Your money is not sitting in the checking account earning nothing. It's pushing that balance down and therefore since your balance is going down, you owe less interest because the interest is based on how much principal you owe. Since your principal is going down. You're owing less interest and now, I've told your people how to save literally tens of thousands of dollars in needless interest and 25 years or so off their mortgage. There's a free website that people can find out more about this, which is called TruthInEquity.com. What they do is model it for you. You go on there, you do what's called a personal profile.
You put in all your numbers, your income, your expenses, your mortgage, your house, all these different things and it's going to say, "Based on the numbers you gave us, it's going to take you 28.5 years to pay off your mortgage. What you're doing with the numbers you gave us, it will be 5.6 years,” whatever it comes out to be and they show you step-by-step how to do it. There are three things you need to make this work. The first thing you’ve got to have equity in your house. If you're underwater in your house, there's nothing to borrow against. The second thing you need is a decent credit score. I would say 680 or higher to qualify for the HELOC and the third thing, positive cashflow during the month. More money coming in and going out because that positive cashflow is what is pushing down that balance. The more positive cashflow you've got, the faster it gets paid off. There's a simple strategy. Most people have never heard about it before and I've saved your readers tens of thousands of dollars in needless interest.
Dustin
Jordan, I absolutely love that. I was going to give you an example and I still will because I want to clarify for not only my personal benefit here but for those reading. I have a $300,000 home that is a rental and it has equity in it. I can take out a HELOC on it. The question I have is that HELOC, let's say my mortgage is at 4%, what's the HELOC at? How does that work?
Jordan
It’s typically based on a prime rate. The prime rate is 5%. It will be 5.25%. Something in that range. It is a variable rate, but the interest rate doesn't matter as much as the terms of repayment. The bankers have you looking the wrong way. They say, "What's the rate? What's the payment?" The real question you want to ask when you take on a mortgage is, “How fast can I repay the principal?” A traditional mortgage is really slow. It’s 30 years to pay off the principal on a mortgage. Whereas with the HELOC, it's up to you. The faster you have positive cashflow, the faster it gets paid off. This is a fantastic strategy for rental properties because your tenants are paying off your mortgage faster and faster and they don't even know they're doing it. You become free and clear much faster than you ever would with a traditional 30-year mortgage. It works as well on rental properties as it does on your primary residence.
Dustin
What you're saying is obviously over the life of the loan, we're going to shortcut that. However, in the short-term, the overall payments on that property or on your home may go up because the HELOC interest rate is higher, is that correct?
Jordan
Probably not because you're paying the principal down so much faster that even if the interest rate is one point higher, you're paying a slightly higher interest rate on declining principal. Every month that goes by, your payment on the HELOC goes down because you're paying less interest on less principal. Whereas the traditional mortgage, you're paying the same interest on the same principle for 30 years, the payment never goes down. It's an amazing thing.
Dustin
Thank you big time, Jordan, for that because that's going to make a profound difference and the fact that you gave that resource there so people can actually see it and make it more real and tangible. I encourage people to check that out. Jordan, another thing that is high up on that list with a lot of people coming out of school are student loans. You have a strategy for paying down that debt. What is that strategy?
Jordan
It’s a staggering problem for this generation. The average person is graduating with $38,000 in student loan debt. A lot of people, 150,000 undergraduate graduate school. You go to business school, law school, medical school, it’s $200,000, $300,000 $400,000 debt before you get your first job. $1.6 trillion total student loan debt is by far the fastest-growing debt out there and it's going to take you 30 years, sometimes longer to pay off that student loan debt. One of the problems, you typically have many different loans at many different interest rates. Some of them federally backed, it may be Parent PLUS Loans. Those may be in the 5% or 6% range, private loans 9%, 10%, 11% much higher. I can't make them magically go away like Elizabeth Warren and Bernie Sanders could but closest to that is to consolidate them into one loan at typically a 3% interest rate. This is what's called refinancing of student loans.
There's a bunch of places out there. The one that is best is called Splash Financial and their website is SplashFinancial.com/moneyanswers. They've got a phone number, 800-349-3938. They look around the country to find the best deal for you, typically with credit unions and other kinds of non-traditional lenders. It's a clearing-house of lenders in a way. You do the refinance online very quickly. Instead of having a whole bunch of different loans at different interest rates, you have one loan at a 3% rate and you can pay it off that much more quickly. It's not going to make it disappear, but paying it off at 3% is a lot better than 6%, 11% and 12% to help you refinance. You do this Slash Money Answers, they know it's me. You get $300 off your first payment to get you off to a good start.
Dustin
Jordan, if I'm reading and I'm saying, "Jordan, why would someone want to consolidate my loans and take it at a lower?" Someone can get 6% on my student loan, why does Splash Financial, another bank or another institution take me on at 3% and acquire all this debt?
Jordan
They have done decent credit and they're earning 3% on it. The long-term treasury is 1.8%. Their cost of funds say it's a credit union, as we talked about, it's pretty much zero. If you have checking accounts where you're paying nothing. If you're earning 3%, you're earning a nice profit margin over your cost of funds. It's not as big profit margins at 6% but there are tens of credit unions willing to do it if you have decent credit to give you 3% or thereabouts.
Dustin
That's an incredible reason. I was very fortunate to go to school and graduate without student loans, but I know many friends that are under that debt, under that strain. In fact, one of my friends paid off his student loan and it took him twenty plus years to do so. That happened.
Jordan
It’s getting worse because the tuition keeps going up, the amount of borrowing and people are borrowing so much. The kids are maxed out. The parents are maxed out. They not only borrow on Parent PLUS Loans, but they do 401(k) loans, they do Home Equity Loans, they strip out their life insurance policy. Anything that's not strapped down, they'll strip clean and they're asking the grandparents to take out student loans for their grandkids because the kids and the parents are maxed out. That's how ridiculous it's getting. There are several schools that are over $70,000 a year in tuition. Can you imagine the newborn, I'd even want to think of what it's going to be in eighteen years.
Dustin
I do find comfort in what we're up to here on the show and then also at WealthFit giving people an alternative education, a path in education. That's one of our secret agendas. The founders here is leaving some education to our kids that will actually serve them financially. Another big one that plagues people all over the world is credit cards. What do we do about credit cards with big debt or even this, Jordan, what about acquiring the right credit card?
Jordan
There's about $1.1 trillion in credit card debt. The average person who is revolving balances is revolving about $8,000, 18%, 25% and 29%, ridiculously high-interest rates and most people do it. They're very passive about it. Whatever card shows up in the mail is what they sign up for. Those are the ones with the highest interest rates, the shortest grace periods, the worst perks. Obviously, they're spending money on all these mailings and giving you the worst possible deal. You want to get the best possible deal. Here's a free website to do that, MyGuideToCreditCards.com. You can get frequent flyer miles if you want to be taking trips. You can get hotel points if you're going to do hotels. You can get dining points. You can get cash rebates of up to 5% on the next thing you spend. Even if you have bad credit, you can get what's called a secured card where you put up a certain dollar amount, like $1,000. That'll give you a $1,000 credit line. 
You can reestablish credit over time. There are a million different rebates and perks, but you've got to pick what's best for you and then concentrate your spending on the card, giving you the best rewards or perks, whatever's best in your situation. You may want to be buying a GM car and you can pile up on GM points to get that car. You want to take a trip to Hawaii, Air Hawaii, whatever it may be. Everybody's got something different, but get what's best for you. How to track your spending and get the perks and rewards that are best for your situation. That's not the way most people do it. They're very passive about it. The average American has thirteen credit cards and they spread their spending amongst all of them. By the time they finally get on a frequent flyer miles for a trip, they've expired. You don't want to do that.
Dustin
Jordan, I know your advice is personal to you and I'd be remiss if I didn't ask you that. Is there one that catches your eye, one that you particularly like over the others?
Jordan
The Chase Sapphire Card has got fantastic rewards and that's become the it card. That's rewards that's cashback. That may be fine for some people, but if you want to accumulate other kinds of rewards, go for it. In general, you want to avoid the ones with the highest interest rates. For example, retail cards from Bloomingdale's, Macy's or Nordstrom's. The trap a lot of people fall into is they are in the mall and the person comes up to it, "Sign up for our credit card and you'll get 10% off everything you spend," and people say, "That's great." If you don't have the money to pay the bill when it comes in and a month later you're going to pay 25% interest for saving 10%, so it’s not a good deal. Particularly avoid doing several retail cards at the same time because that's going to hurt your credit score badly if you had a lot of what are called hard increase. People actually applying for credit. If you do it 3 or 4 of those in one day, your credit score plunged 15 to 100 points or so. You are shooting yourself in the foot.
Dustin
I can most certainly echo that. I remember signing up for one of those retail cards, saving that money and then getting the bill later and seeing what kind of rate it was. It blew me away. I thought it was criminal, quite frankly, that they could charge it high.
Jordan
That's a reason they do it. There are two states where all the credit cards are issued from, which is South Dakota and Delaware. Why? They said to the credit card companies, “Come in here, create jobs and we'll let you do whatever you want to the cardholders. We don't care.” The governor of South Dakota in 1980 said, "We have to have more jobs here than there are farmers.” How about Citibank? Citibank comes in and they say, “No, usury ceilings. You can charge whatever interest rate, whatever fees you want. Those are not my constituents. It's around the country.” They're thinking of renaming the state, the State of Citibank because they basically own the place. There are more employees at Citibank than there are farmers in South Dakota. That's why they charge these high rates because they're chartered in states that let them do whatever they want to the cardholders. 
Dustin
I'm glad you share that. I love knowing the story behind the story and knowledge is power. That's the first time I've known that, Jordan. Another big thing I want to talk about, a lot of people are obviously driving around in cars and if they're strapped for cash, they're getting car loans, if they're not paying in cash. You have some strategies or at least ideas on how to make this less of a hit. How so?
Jordan
It’s a big problem. It’s $1.3 trillion in car loans outstanding. The delinquency and default rate has roughly doubled because people got some really nice cars, but payments that they can't afford. You fall in love with a car, the smell, and the dealer showroom and all that stuff. The payments are more than you can afford. One thing you do not want visiting you at night is the repo man to take the car back but that's been happening more and more. What you want to do is to refinance your car loan to a payment that is more affordable for you. That may mean stretching out the maturity or it may mean a lower interest rate depending on how you want to do it.
Here's a free website called MyLoanGen.com. You go on there and put in four numbers about your car loan, the amount that is still left on the loan, the interest rate, your monthly payment and your credit score. Those are great whatever it may be. They give you a choice. It's a little dial. You move the dial from left to right. Left being maturity, two years up to maybe seven years and then there's another one where the interest rate and you pick which maturity in which interest rate you want and it tells you at that maturity and at that interest rate, “Here's the payment.” You're paying $600 a month in the car loans for the next three years. If you go out to six years, it will be $300 a month. You'll pay more interest in the long run, but you get the payment down to a level that you can avoid a visit from the repo man. That's a good thing. Once you pick the payment that you like, you hit confirm and then a bunch of credit unions around the country compete for your business. We'll refinance your car loan online in about five minutes. I've saved people tons of interest on these car loans and a visit from the repo man as well.
Dustin
Jordan, I'm going to go a little sideline on you. I bought a car with a car loan. I realized I had this participating whole life insurance policy and then I paid it off with that. Do you feel that is a powerful strategy if I'm using this bank on yourself concept?
Jordan
You can. With whole life insurance, you're going to pay interest on that loan. If you get a new policy, the rates can be high, like 7% or 8%. An older policy maybe 4% or 5%. It depends on what your interest rate was on the car loan. You want to make sure that the interest rate you're paying on the whole life insurance is going to be lower than the interest rate on the car loan. If you had a 0% financing on the car, it probably wouldn't make sense to do something like that. The other problem is that a car is by the nature of a depreciating asset. I don't like having capital tied up in an asset. You know it's going to fall in value. That's why I like to lease cars and I've leased my last five cars because the value of it’s going down when it's depreciated a lot. I turn it back in and start another one.
I never have a down payment trapped in a car that's going to go down in value. Everybody's driving around with car loans and they're underwater in their cars, even though they haven't driven off a bridge somewhere because the value of the car falls much faster than the loan is paid off. That's why in many cases, leasing can make sense. If you're going to drive a car for a huge amount of miles, that's not going to make sense. Say you have two cars in the family. One car you might lease, which is your short-term, you're going commuting back and forth to a station or something and then one car you're going to drive a lot for 300,000 miles. That's the one that you buy and finance. That's often a good way to have a medium of some leasing and some financing.
Dustin
Another area that people are either overpaying or not realizing where the money is leaking from the ship is with their loan and escrow payments. You know a thing or two about that. I'm curious what's going on here? 
Jordan
Here I'm going to solve a problem people don't even know they have, which is that they're being over withheld for their escrow and private mortgage insurance. The loan payment itself is often incorrect, particularly if it's an adjustable-rate loan of some kind. You can do what's called a verification to see what is right. They've been finding roughly 40% of loan payments and escrow payments are incorrect, and then you get a rebate and get your money back and bring the payment down. Let's take first, the mortgage itself. Adjust rate mortgages are based on indexes that go up and down. Usually, there's a spread over that index. It could be the prime rate, it could be the National Mortgage Contract Rate, it could be LIBOR. There are a lot of different things it's based on, but it's going up and down all the time. Banks are very incompetent at doing this and particularly a lot of mortgages are shifted from one servicer to another. A lot of mistakes happen when that thing happens. You don't know the difference, you pay whatever they tell you to pay.
These verification services will see, “Here's your original document, here's what you've been paying every month, here's what you should have been paying every month. They owe you $14,000 because you've been overpaying for the last ten years.” They write up a detailed letter saying, “Here's what it should've been. Here's what it has been. This is the amount, Mr. Banker, you have to refund to Joe Smith here and this is the new payment you have to give him.” Banks don't like getting these letters, but it's the fact. They can't stop it. The website for that is VerifyMyMortgage.com. That's the audit that they do that you can't possibly figure out what it should've been. The second one is escrow. Escrow is where money is being held aside for home insurance payments and property taxes. In many cases, you are being over escrowed. You've got all this money sitting in this escrow doing nothing for you. They're assuming property taxes or insurance is going to be higher than they really are. It’s the same thing. They can verify the escrow payments and get a rebate and get your escrow down to a more reasonable level. The website for that VerifyMyEscrow.com.
The third one is Private Mortgage Insurance, PMI. This is the insurance you pay if you have less than 20% equity in your house, which allows you to get the house the first place. In many cases, your equity goes over 20% and the PMI insurance company is not waiting, “We want to make sure that we don't charge them.” They're not going to go as long as they can because you don't know it's gone over 20% when they do a verification of this. For example, you did a major addition or improvement in your house. That can improve the value of your house. Say houses in your area are appreciating in value rapidly. That alone could make it. Say you did what we talked about in the beginning of the mortgage optimization where you’re paying your mortgage equity down much faster. That could get you over 20%. There are lots of ways to get over 20% a lot faster than you think. You prove that and then you can drop the private mortgage insurance, which can cost you hundreds of dollars a month. It's an insurance I don't like paying because you're not insuring yourself. You're insuring the lender. I'd like to get rid of that. The website for that is VerifyMyPMI.com. There are three problems you didn't even know you had that I’ve solved for you.
Dustin
Jordan, you're quite the resourceful guy and I appreciate the insights, strategies and resources that you've shared with us on debt. One of the things we talk about here at WealthFit is you need to pay off bad debt and you need to look for ways to boost investments or your own active income. You have some strategy there. I want to shift a little bit and I want to go into ways to boost returns because you are America's Money Man and you've got the answers. I want to make sure we cover that. Talk about one of the ways that people can increase the yields that they're getting from investments or in other areas of their life. 
Jordan
This is a big problem because there's about $12 trillion sitting in bank accounts, checking accounts, savings accounts, CDs, all earning either zero or way less than 1%. The banks are happy because they're paying almost nothing and they charge you higher interest rates on credit cards, student loans, mortgages, all the things we've been talking about. You've got to do something different than keeping it in the bank if you're going to earn higher yields. The one thing that's good is various real estate projects where you do not have to be an expert in real estate yourself, but there are people that vet the project for you and allow you to get into them and earn yields in the 8% to 12% range. There are two of them. One of them is called Fundrise and the other is called CrowdStreet. It's Fundrise.com and CrowdStreet.com. I've got links to them at my website, MoneyAnswers.com.
On the Fundrise one, they have apartment buildings, office buildings, shopping centers, industrial, and all kinds of different projects. You can literally get into it for as little as $500 and have a diversified portfolio of real estate. We are getting cashflow from the rents they're getting and in the long run when they sell these apartment buildings or office buildings, you get a share of the appreciation. You might get a cash return of 8% in the long run, depending on how they do 15%, 16% total return completely passively on your part. CrowdStreet does the same thing, but they get to an individual product. Sometimes it's house flipping. It could be renovations. You actually put money on individual real estate projects as opposed to a fund that has many different things. Those are two ways for people to get money. Real estate has got a different cycle than the stock market. The stock market has been doing great, but it doesn't always do great. Real estate is much more stable as far as producing income. That's a good way to go. Another downside is liquidity. You're tying your money up for five years or so, but that's the nature of it. Having some of your money be illiquid is a good idea if you're getting income out of it.
Dustin
The key line that you said there is you don't have to become the expert in it. These are ways to passively play along and for minimal amounts versus other investment opportunities that are out there. What else can people do? Where other ways that they can boost their yields?
Jordan
These are more liquid. There are other ways than publicly traded vehicles where you can get yields of 6% to as much as 12% that are relatively stable. They're not going anywhere. There are real estate investment trusts. There are Master Limited Partnerships, MLPs. There are Business Development Corporations, BDCs and preferred stock funds. REITs are Real Estate Investment Trusts. They have some specialty in a particular real estate. It could be apartment buildings, it could be office buildings, it could be shopping, malls, it could be industrial, it could be healthcare buildings. There are all kinds of different things. They have a tax break, which is as long as they distribute 90% of their income to shareholders every year, they do not pay tax at the corporate level. They got these nice yield, 6%, 7%, 8%. The highest yields are so-called mortgage REITs where they actually don't own the buildings, but they provide mortgages on commercial buildings. Those have yields in the 10%, 11%, 12% range. Those have done very well. Master Limited Partnerships, MLPs, are mostly in the energy field where they own energy pipelines that are bringing the oil and gas from the fields where they're found to the refineries and the shipping locations. They're the toll road of oil and gas. You're not getting paid based on the price of oil and gas, but the price of transporting oil and gas and that tends to be relatively stable.
Those have yields in the 6%, 7%, 8% range and they don't move up and down as much with the oil and gas prices directly. The third one, Business Development Corporations, BDCs, lend money to medium and smaller size businesses that tend to have a hard time getting traditional bank loans. As a result, they get higher yields, 7% to 9%. There are about 50 BDCs out there. The stocks are relatively stable, but you're getting a yield of 7% to 9%. The final one are preferred funds. These are funds that buy preferred stocks. Preferred stocks are issued by typically highly rated corporations, banks, insurance companies, utilities. It yields in the 6%, 7%, 8% range. It's technically a stock, but it plays a bond to some extent. There are these exchange-traded funds, there are open and mutual funds. They're closed-end funds that all do preferred. With a relatively stable portfolio, you're getting yields again the 6%, 7%, 8% range. Those are four categories that have some liquidity that also can give you much higher yields than you ever get in the bank. They're not guaranteed and they're going to move up and down a little bit, but as a way of getting higher yields, that's the way to go. 
Dustin
A lot of people ask and that sounds great, I want that, but are there minimums in order to play? Do I need to be accredited in some form or fashion? 
Jordan
No, these are publicly traded stocks. The minimum is the price of one share, which if you get a preferred share, its $30 a share. MLPs $15 to $20 a share. You don't have to be accredited at all. However much the shares go for is what you’re getting.
Dustin
You're a man after our own hearts here at WealthFit because we talk about paying off bad debt. We talk about boosting your active income or your investment income. Obviously, the last category that people know us for is entrepreneurship. Whether that's starting off as a side hustle to see if it has legs and then developing ideally that into a full-fledged business. You have expertise there. I'm very curious as someone they're in Corporate America, why do we want them to start a business? What's the benefit to them?
Jordan
It's giving you ownership in something. The way to make a lot of money is to grow equity in something that's growing. If you're an employee in a company, you may get a stock option and you're participating to some extent, but you never have a huge upside. Maybe if you've gone through a startup that goes public, you have a huge upside, but most average people in companies, they're going to do okay, but there's not a huge upside. A dramatic example, if you're Bill Gates in his dorm room at Harvard. He has this idea for this little thing called Microsoft and then he leaves Harvard and starts a thing. It's a fantastic success. He's worth $70 billion. He didn't do that all himself. He came up with an idea and now they've got tens of thousands of employees working on it and he's benefiting from that. The key to success in business is leverage. By leverage, I don't mean debt, leveraging the efforts, knowledge and contacts of others that you benefit from. He even left, he's doing his own Gates Foundation. He's giving away billions of dollars in all kinds of wonderful ways, and he's still got huge amounts of Microsoft stocks. All those people working at Microsoft are benefiting him completely passively. That's the ultimate solution is to leverage your knowledge, your contacts, your ideas so that other people can work on it and make you benefit from it while they're benefiting at the same time.
Dustin
I 100% agree with you here and I want to encourage those that are on the fence to either study up, educate and go and do that because you have found a freedom and you're doing what Jordan said which is leverage. Jordan, one of the things when I was thinking about this interview, we talk a lot about growth. We obviously talk a lot about paying off personal debt. I don't think we've ever covered business debt. I want to give people that opportunity that are struggling, that are underwater in their business and help them, what can they do?
Jordan
What a lot of people do unfortunately is they fund their business out of their both credit lines and money. They take money out of their 401(k) or their home equity to fund their business. It’s not a good idea. It's really hard to keep those two separate if you start it that way. In the best of all worlds, if you're serious about starting a business, you should set it up as a separate corporation, whether it be an LLC or a subchapter S corporation or a partnership and have its own credit cards, its own checking account, its own taxpayer ID number, and keep it separate from your personal account. You can take salaries, but you don't want to put personal money and if you don't absolutely have to do it. If you do, pay yourself back so that the company is kind of running on its own. What a lot of people do is they pile themselves under in debt, they're all enthusiastic about what the business is going to do. When the debts come in, they come in faster than the income comes in typically. The very pernicious thing that's out there is what is called Merchant Cash Advances, MCAs. There's about $600 billion in merchant cash advances aimed at small businesses. What they do is they'll make money available very quickly in 24 hours unsecured but in return for that, they're going to take a piece of your daily receivables.
Say you are a restaurant and you're swiping credit cards of your customers all day. They're going to take 1% or 2% fees every day, literally out of your receivables. It doesn't seem like much, but on an annual basis, it can be a 40% or 50% rate of return. The loans tend to be short-term, two weeks. After the two weeks comes, you don't have enough money to pay it off. You take out another merchant cash advance and this is what I call the payday loan of the small businessmen. It's killing a lot of businesses because it's very high rates and they can't keep up with it. This is a big problem out there. The solution is to do the strategy of what I like to call Debt Prioritization. Prioritization means different creditors should have different priorities. Your utility company that could turn your lights off, that's a high priority. You don't want your lights turned off. Some lawyer that did some contract a few years ago that you never went through with has very low priority. What most small business owners do is they respond to the creditors that scream the loudest. It’s not whether they have priority or not, but they want to get them off their backs. You’ve got these small businessmen carrying under their desk, not wanting to answer the phone or open the mail because they’ve got all these people chasing after them all the time.
What you want to do is to work with people that do debt prioritization for you. You make one payment to them. They dispersed them out to the creditors in the order of priority and you can get out of debt that way. There's a company called Corporate Turnaround. It’s the best at this. There’s a website for them called HelpWithPayables.com. They've been doing this for 30 years and they look at each of your creditors and they assign them a very specific score from 1 to 10. One being lots of leverage, ten being very low leverage, and they prioritize them and they make offers to each creditor. The ones will say, "We'll pay you $0.80 on the dollar in six months.” The tens that will pay $0.10 on the dollar in three years. You don't have leverage over them, they'll take whatever they can get. They combine this onto one payment. You pay them, they pay the creditors and they say that 75% to 80% of the businesses they take on actually pay their debts off and getting a good condition. 95% of their customers are coming in because of merchant cash advances.
They're overwhelmed with debt in a very short period of time. They're easy to settle because the people who are making the merchant cash advances typically are hedge funds that are earning a huge return in a very short period of time. You've given a guy a two-week loan at a 40% annual rate and he isn't able to make it, he does it again. He does five merchant cash advances. They go into privatization, they can write the whole thing off. They've already made five times their money in a month, so they'll write it down to $0.30 on the dollar. They're not going to tell you that, but that's what the people at this Corporate Turnaround know, so they can knock down dramatically what you owe and debt and help you get out and save your business in effect. The website for that is HelpWithPayables.com if you've got a lot of business debt.
Dustin
We could stop the interview and the amount of value that you've delivered has been incredible. I caught something in what you said and it's incredibly valuable to share. I’ve got one more question for you. This idea a lot of business owners get started leveraging their own personal credit to get in because it's the easiest thing. It's in their back pocket. They can get out, they can start that dream and they use it, but that's a big mistake. They get trapped up in these MCAs that you talked about if they're in trouble. What is the strategy? How do we keep these things separate and why?
Jordan
There are a lot of ways to start a business and get your own credit going without hitting your personal side. For example, you have suppliers who think you have a good idea. They may be willing to give you credit upfront to buy vendors. There are ways of establishing credit and you have a separate credit report, which is the Dun & Bradstreet report and they have what's called the PAYDEX score, the highest being 80. When you pay your bills on time, you get an 80 on your Dun and Bradstreet PAYDEX report and then you get more credit. You build it and get credit cards and bank accounts. They've cashflow from the business gets going and it's much better than mixing your personal and business. You have a personal credit score and you've got a business credit score. They're separated completely. On the business side, there's a website that can help you establish business credit and then get it to be as good as possible. Their website is called TourDeBusiness.com. On the personal side, it's called TourDeCredit.com. That's improving your Experian, Equifax, TransUnion score, which are two separate things. People mush them together and get into all kinds of trouble tax-wise legally.
Frankly, I've done this myself where I've created corporations, an LLC in Nevada. Nevada has all kinds of so-called asset protection rules that protect you if you're getting sued. It could be anywhere if having a Nevada based corporation. It's got a lot of advantages to it. That's what I've done as an overarching company over all the activities that I do. You want to get this right. I would say when you start a company, you want to make it so that it's easy to sell in the future. You're not going to live forever. A lot of people have a successful business, but their kids don't want to take over the business. What do they do? They make it easy to sell by setting up in the first place as a Nevada based LLC and it's much easier to sell later.
Dustin
Jordan, thank you big time for coming on the show. More importantly, thank you for what you're up to in the world, helping so many people live the life that they want by these strategies that you share. You've pointed to a lot of resources out there and I'm curious for people that got massive value out of this and want to continue the conversation with you, maybe follow you on podcasts and see some of the articles that you write and put out. Where's the best way for people to get in touch with you?
Jordan
I've created a special landing page for your people only, which is at Go.MoneyAnswers.com/wealthfit and they can access some of these resources. I have a monthly newsletter. I do a podcast, which you've been on actually, which is called the Money Answers Show. I do what are called the Money Answers Minutes, which are 1 or 2-minute topics on different areas of personal finance. I've got a blog. I've got resources. I've been doing this a long time and I love to help people. There's an Ask Jordan button there as well. I'll be glad to get emails from your people to follow up on all the different things. To see what we've done in our time together, Dustin, we've helped people pay their mortgage off in five years instead of 30 years. We've refinanced their student loans to 3%. We've got much better credit cards. We refinance their student loans and car loans. We verified that their mortgage Escrow and PMI are correct. We've got them yielding 8% to 12% on good real estate projects and other things. We've got their credit score, both personal and business in better shape and help them get out of debt if they're in trouble with the business. Hopefully, there are a lot of ideas that can really help you follow.
Dustin
I do want to encourage people, I want to say I'm grateful for being on the show and I'll tell you, everyone reading, go check out Jordan's stuff. If you want to find something familiar, check out that interview of me on his show, The Money Answers Show. I've never been grilled about our platform, about WealthFit, which you guys know about. You'll discover a lot there. Also too, you provided so much value. Imagine what you're going to get when you continue that conversation. If money is the name of the game that you're playing, which it should be, then definitely encourage you to check out that website and see what Jordan is up to. Thanks again. I appreciate you being on the show.
Jordan
Thanks again, Dustin. I appreciate it.

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