America’s growing debt trap
Despite the rising cost of indulgences, families haven’t cut back on spending but instead covered the gap between their income and desires with credit.
A full 36% of American consumers said they were relying on debt to fund a vacation, according to Bankrate. Meanwhile, 51% of people admit to spending beyond their means to impress others, according to LendingTree.
Consequently, the nation’s collective pile of debt has been expanding in recent years. According to the Federal Reserve’s latest Household Debt and Credit Report, consumers collectively have $1.21 trillion in credit card debt and $1.66 trillion in auto loan debt at the end of the fourth quarter of 2024.
Put simply, the average family is more exposed to financial shocks and a sudden loss of income.
With this in mind, Cardone says he sets a strict guardrail on unnecessary and recreational expenses. Here’s how his model works.
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Learn MorePassive income only
“I buy bulls–t from passive income only,” Cardone explains in the video.
Fortunately, his extensive portfolio of real estate investments gives him plenty of flexibility. Claiming to own 7,000 apartment rental units, he says his annual revenue from a single 250-unit property is roughly $6.6 million.
Cash flow from this revenue stream is what he earmarks for indulgences.
“How stupid can you go? You can go as stupid as your cash flow,” he says.
A similar framework could ring-fence your personal finances, too. Reducing consumer debt and accumulating a six-month emergency fund could be the first steps. Meanwhile, a tight budget for active income can help you manage necessary expenses such as groceries, rent and transportation.
Investing excess cash flow in assets that generate passive income could give you room to indulge.
For example, dividend stocks like Realty Income Corp (O) offer a 5.86% dividend yield. Investing $10,000 in this stock could deliver $585 in annual passive income, which you could either re-invest or spend on gifts for family members or a short weekend getaway.
Cardone’s approach prioritizes necessary expenses and puts a firm limit on temptations, which is a pragmatic way to achieve financial security.
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