so there's this running joke that a billionaire wouldn't bother picking up a $100 bill off the ground because in the few seconds it takes they would earn more just by standing still but here's what most people get wrong billionaires don't earn money the way you think they do when you see headlines of big CEOs earning tens of millions of dollars as a salary they're not getting a single dollar in cash it is all equity and it's never meant to be sold this creates a system that can only be exploited by those who own assets it's called buy borrow die and this is how it works welcome to Alux the illusion of income so most people think that wealth is about income right you work you get paid maybe you get a bonus a raise or even a pizza party from HR if things go well your financial life revolves around how much money hits your account every month that's what you live on that is your income but that's not how the ultra wealthy think about money no in fact for them income is a bit of a problem because income as in money paid to you for your labor is taxed aggressively in the US high earners can lose up to 37% of their income to federal taxes and even more when you add in state and payroll taxes that is why the wealthiest people on Earth avoid it completely okay elon Musk got exactly $0 in pay from Tesla for multiple years warren Buffett gets paid $100,000 a year in base salary for the last 40 years jeff Bezos's salary for being the CEO of Amazon was around $80,000 a year mark Zuckerberg's base salary is $1 the list goes on okay you get the point so while most people earn in wages the wealthy earn equity meaning shares in companies they helped to build or invest it in their wealth isn't sitting in checking accounts it's tied up in stock private businesses investment funds and other appreciating assets and none of that wealth is taxed as long as they don't sell anything and this is where the tax system quietly benefits capital over labor it's called the realization principle so you don't pay tax on the gains of an asset until you sell it so if your investment goes up in value you're richer on paper but you owe nothing let's say you buy a house for $100,000 20 years later the same house is worth $1 million now you don't suddenly have a million in your bank account right the value is locked in the property and you'd have to sell it to access the cash and since you haven't sold anything the IRS isn't going to show up asking for taxes just because the house increased in value on paper that's what accountants call an unrealized gain if you don't sell it you don't pay taxes on it and rich people never sell anything because the moment they sell they trigger a tax bill now this is the kind of insider info a lot of people never get access to but we give it to you for free here on YouTube and if our free content is this good just imagine what we're saving for the Alux app curated lesson plans expert-led courses effectively it's a mentor in your pocket making you better stronger and wiser every day thousands of entrepreneurs CEOs and high achievers like yourself are already using the Alux app to make their lives better we've even helped mint a few millionaires so far but back to the topic at hand shall we so while most people chase income and get heavily taxed for it the rich build structures that allow them to grow wealth silently without realizing it on paper and this raises a question if they aren't getting paid in cash and they never sell anything how are they funding their lifestyles i mean some liquid cash has to come from somewhere right well they walk into a bank and ask for millions and they get it almost for free that's where the real financial games begin okay because when regular people take out loans they get trapped in debt when the rich take out loans they get even richer and they stay that way welcome to the consumer debt trap so when most people take out a loan say for a house or a car they're entering into a financial relationship where the terms are heavily stacked against them the average US household carries about $148,000 in mortgage debt part of an almost 12.6 6 trillion total mortgage burden and with the 30-year fixed mortgage rate hovering around 6.85% in midJune 2025 nearly double the rate from 2 years ago this is not easy debt so let's just do the math okay a $250,000 mortgage at 6.85% over 30 years means monthly payments of about $1600 stick with that schedule and you'll repay around $576,000 more than double what you borrowed the first decade is almost entirely interest you're paying for the privilege of living somewhere not building equity credit card rates often 18 to 25% strip away even more auto loans and student loans follow suit you're paying tripledigit interest while barely chipping away at the principal but that's only part of the burden you pay those loan payments with after tax income so let's say your mortgage payment is $19,200 a year to cover it you need to earn about $29,500 before taxes if you're in the 35% bracket that means you're paying income tax and interest simultaneously and this double squeeze is why most people never escape the rat race they take out loans with after tax money and pay the bank interest on money they never fully get to use meanwhile the bank assumes zero risk they've collateralized your asset whether it's your house your car or your business if you miss enough payments they take it back and resell it you don't own your home the bank does you're just renting it from them until the final payment clears decades later this is how the system extracts value from the working and middle classes and it's all happening because you are considered high risk so here's something that most people don't realize okay the bank doesn't really care how much you earn it cares how safe your money is if you make $150,000 in a year but you've got no savings no collateral and a volatile job you are a red flag my friend you might feel middle class but to the bank you're a walking liability they check your credit score your debt to income ratio your employment history everything that signals whether you'll make these payments reliably that's why someone making 40K with a paid off house might be more bankable than someone earning 200K and drowning in credit card debt this is why consumer loans have such high interest rates you're paying for the perceived risk of lending it to you and now we're finally getting to the buy borrow die strategy and what makes this possible so the average person borrows a huge amount of money compared to what they own to the point that it takes them literally decades of hard work to pay it back this makes them high risk the rich on the other hand borrow a small amount compared to what they currently have this makes them low risk and banks love them so the buy borrow die strategy essentially it works like this you buy assets that appreciate in value and you never sell them you borrow money against those assets so you've got money to spend then you die and everything resets and this is how you do it in detail so phase one is buy it all begins with ownership right the wealthy don't aim to stack cash they acquire appreciating assets things that grow in value over time this includes stocks real estate private businesses intellectual property and sometimes even fine art or farmland the goal isn't to flip or sell these assets quickly no it is to hold on to them for as long as possible while they increase in value that's why every big CEO is paid almost exclusively in stock options the wealth isn't sitting in a bank account somewhere it's compounding inside assets and crucially as long as those assets aren't sold they're not taxed this is the core idea behind unrealized capital gains if your stock portfolio grows from $1 million to $5 million that 4 million gain doesn't trigger any taxes unless you sell on paper you're wealthier but the IRS doesn't care until you cash out the same applies to real estate imagine buying property for $2 million a decade later it's worth $6 million unless you sell or refinance no taxes are due on that $4 million appreciation this allows wealth to snowball but appreciation alone doesn't pay the bills so what do you do if you're worth 100 million but you don't want to sell anything well that brings us to the next move phase two borrow and when you've got a sizable portfolio banks are eager to help okay so let's say you own a $100 million in Amazon stock or commercial real estate you go to a private bank like Goldman Sachs or JP Morgan and say "I want liquidity but I don't want to sell." The banker smiles and says "Well let's set up a credit facility." They'll evaluate your holdings and offer you a line of credit based on a loan to value ratio typically 50% for stocks 60 to 70% for real estate and potentially higher for more stable holdings so if you've got $100 million in real estate the bank might give you 60 to 70 million as a lowinterest loan secured by your assets no capital gains tax no selling required this is the closest thing we have to literally free money so let's make this concrete okay you take out a $50 million loan at 2.5% interest you use 5 million for lifestyle homes jets staff philanthropy you invest 20 million into new ventures or funds and then you roll the rest into more appreciating assets your annual interest payment is 1.25 million and even that might be deductible if you structured it properly meanwhile your original assets continue to grow if they rise to $150 million over the next decade you can borrow more refinance or restructure you've effectively turned paper wealth into usable capital without triggering any taxes this is the part where the rules most people live by simply don't apply if a regular person borrows money they're hit with high interest rates monthly principal payments and wages that are taxed before debt is even paid the system assumes you're a risk but when you already own the assets you are the collateral you don't owe the bank anything you're partnering with them the bank is happy to give you a small interest because you're a constant source of cash flow for them wealthy bank clients borrow hundreds of millions roll over loans for years and most likely use the same bank for investing estate planning and family office services so even at a 2 to 4% interest rate that is a massive long-term income stream for the bank that is why the rich pay less in interest less in taxes and get more access to credit which brings us to the final act phase three die because eventually you will die and the last phase is triggered so here's where the step up in basis comes in so imagine grandpa bought $1 million worth of Apple stock back in the 1990s over 30 years that stock grows to be worth $10 million if grandpa were to sell it while alive he would owe capital gains tax on the $9 million profit potentially 20% or more federally plus state taxes that's at least $1.8 million lost to taxes but grandpa doesn't sell instead he holds on to those shares until the end of his life and when he dies something remarkable happens under the current US tax law the cost basis of those shares resets to their market value on the day of death so instead of inheriting shares with a $1 million basis and $9 million in taxable gains you now inherit them with a $10 million basis you didn't gain anything technically speaking so if you sell the stock the next day you owe zero dollars in capital gains tax the tax liability vanished with grandpa now this same principle applies to real estate businesses and other assets as long as they're held until death and passed on correctly often through trusts or estate planning vehicles so what about the loans in all of this well in many cases wealthy individuals take out large life insurance policies often held inside irrevocable trusts specifically to pay off debt upon death the insurance payout settles the outstanding loans the heirs receive clean unencumbered assets the wealth transfer is smooth tax advantaged and precisely engineered the original owner lived for decades borrowing against appreciating assets paying minimal taxes enjoying incredible liquidity and then passed the wealth down to the next generation tax-free no selling no income no capital gains no estate tax if planned properly this is buy borrow die now at the end of the day the game is pretty simple own the right things and the system works for you own nothing and you work for the system thanks for spending some time with us today my friend we'll see you back here next time