The Middle Class is Financially RUINED.

oh the middle class and lower classes

are getting absolutely screwed by this a

forced economic recession from the

Federal Reserve coming in the back so

printing too much freaking money take a

look at some of this data and then I'm

going to provide some suggestions

towards the end of the video first

oh boy the share of 401k Savers so

retirement Savers right who withdrew

cash for a hardship is at an all-time

high now what you need to know about

this chart is this chart goes back to

2004. there's a reason it goes back to

2004. hardship withdrawals were first

enabled at the end of 2003 so this means

in the history of hardship withdrawals

we are at the highest level of hardship

withdrawals two and a half times the

level of where we tend to Trend to half

a percent which that might not seem like

a lot but it's the info election Point

that's scary very very scary not only is

that scary but it's probably a really

bad financial decision to see two and a

half times first of all as many hardship

withdrawals and then to consider the

finance implications of this first of

all you're probably if you're you know

selling your stocks that are invested in

your 401k you're probably capitulating

maybe you're selling relatively close to

the bottom but not only are you doing

that you are taking a 10 penalty and

you're paying the tax

so if you had a hundred thousand dollars

in your retirement account and you took

a tax deduction to invest that via your

401k or you got some employment matches

or whatever now you're paying income

taxes so maybe you're paying 30 in

income taxes plus a 10 penalty you just

reduced your retirement account by about

40 percent so usually you pay less in

taxes when you go retire because you're

making less money you're retired so you

take out a little bit of money and pay

potentially no taxes or very little

money in taxes but if you're taking a

hardship withdrawal you're often doing

that while you're still working

and now what happens well you're getting

hit with a lot more in taxes and you

lose the ability to refund that money

it's not like a loan where you could pay

it back to your 401k plan and put it

back in you lose that ability so you're

back to that annual limit of being able

to put the money back in your retirement

account and just look at what the IRS

says here

the hardship with a distribution will

permanently reduce the amount you have

for retirement because again you you

can't you can't contribute uh to to uh

recoup what you've lost you can only re

uh recontribute up to the amounts that

are uh set by based on the limits every

single year you also pay tax you pay the

10 penalty unless you're 59 or older

qualified you're not able to contribute

for six months they actually ban you

from contributing to your 401k for six

months after that's incredible

that's insane so hardship withdrawals

are skyrocketing during this time but

that's not the only thing that's

happening

households are borrowing a lot more on

credit cards than they previously have

take a look at this

this goes all the way back to April of

21 what do we get here credit card

borrowing skyrocketing from this level

here sitting around the 20 threshold

skyrocketing to about 35

so a massive explosion in the amount of

credit card borrowing but what I

personally found very interesting was

that first we saw money from savings or

from selling assets increase

but that actually has decreased here

recently potentially as people don't

have any assets left to sell because the

stock market for example has fallen so

much or they've depleted their savings

so now the rate of change for credit

card borrowing is actually inflecting up

at the same time as we're getting a down

inflection in money from selling assets

or savings because people are out people

potentially out of savings they have no

stock left now they're left with

borrowing money from credit cards and

what's also interesting is even

borrowing from friends or family the

yellow line has started to Trend down

which somewhat implies that even friends

or family are running out of money

that's also quite scary but another

another thing to consider is that total

credit card spending

while it tends to decrease going into

January and basically the end of

December you get a lot of spending going

into these levels here then you get a

decrease it is still remarkable that the

green line is still actually above

2019-20 and 2021 in other words right

here that is your uh season or your um

holiday spending right here for 2022

when it's higher than all of the

previous levels so people are taking

hardship

dispersals they're using their savings

more they're using their credit cards

more and they're potentially selling

assets to continue financing the

lifestyle that they've gotten used to

after all the stimulus money that we've

received over the last few years and

what's actually happening is people are

just going into substantially more

credit card debt to be able to do that

now what's really scary about that is we

could potentially be walking into an era

where we're maybe going to see credit

delinquency rates jump as we go into a

recessionary period well we have a whole

lot more credit card debt outstanding

than we did in Prior years in 2019 there

was about a 4.19 trillion dollars of

credit outstanding total outstanding

credit

well when you roll over to where we sit

now we're about 12 percent higher at 4.7

trillion and that number continues to

rise this year now what's scary about

that is if default rates go up you

actually end up having a larger set of

defaulting than you would because the

actual number is 12 percent higher but

if the default rate goes up double what

the default rate is we're used to we

could see not only double the amount of

money that's owed not repaid but add

another 12 percent to that and then

double it because you have more

outstanding than you did before the

pandemic in 2019 so we're setting up an

environment where the middle class is

really getting screwed hardship

withdrawals more credit cards spending

more borrowing higher default rates

potentially coming as joblessness

increases people are taking more

part-time jobs just to be able to

survive and here's my my advice because

this is all pretty painful

as painful as it is when you go into a

recession it's really important in the

best way possible unless you're going

crazy and trying to start a startup in a

recession okay the best general advice

non-personal Financial advice okay

non-personalized okay it's not like a

consultation for your portfolio but in

my opinion the best thing to do is focus

on spending less money really double

down on that frugality during a

recession which ironically actually

makes recessions worse because if

everybody spends less than you create

more of a recession but you gotta look

out for yourself

work more take that second job do that

side hustle become that entrepreneur on

the side next to your white collar job

that way if you lose your job you got

the side hustle if you can maintain your

job knock on wood that you do you

potentially have more income coming in

from your side household maybe you're

right able to write off more expenses we

talk about this in the elite Hustlers

university courses hey if you're

employed you should check out the elite

Hustler's course because now you have

this potential of creating a side hustle

and getting tax write-offs for having

that side also that you otherwise would

not have had

invest but invest slowly right invest no

more than you can afford to lose at this

point invest money that you can invest

for the long term uh consider things

like Diversified

ETFs especially actively managed ETFs

which when they rebalance like say at

one particular stock runs like you're

investing in an ETF that has a lot of

Tesla or Nvidia or apple exposure let's

say and you really believe in those in

the long term if those run ordinarily

when you rebalance you'd have to pay

taxes but if you invest in an actively

managed ETF the ETF manager can exchange

a stock that ran for multiple other

stocks without passing on to capital

gains it's insane so invest where you

have a capital gains Advantage a tax

advantage and personally I think weight

on real estate I don't think there's a

lot of enthusiasm right now for saying

that you need to buy a house when

mortgage rates are six and a half

percent personally I think there's some

conditions you should wait for when we

talk about this in other videos but you

really want to wait for inflection

points to line up that say the real

estate market is in its bottoming

process we're not close we're at the

kind of part of the roller coaster where

we kind of just started this part okay

um so we're not at that you know we're

at that we're not at the oh part yet

uh so bakala it's gonna be a bumpy ride

and really the people who are getting

screwed here are the middle and lower

classes because guess what when the

stock market rebounds guess who the

first people are who are going to be

totally fine the Richer people the

people with more assets they're going to

see their net worth Skyrocket again and

they're going to go right back to buying

their Jets and doing whatever it is they

do but everybody else gets screwed

so you want to be aware of this so that

way you could be less screwed it's

painful anyway thanks so much for

watching we'll see in the next one

goodbye