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GeoPulse : Learn how to take control of your money with smart personal finance strategies, simple investing tips, and daily money hacks. In this video, we break down today’s financial news and give you practical steps to grow wealth, save smarter, and invest wisely.

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Transcript
00:00What is the wealth effect? The wealth effect is an economic theory that suggests people typically
00:05like to spend more of their money as the value of their assets go up. That's when people like
00:09to borrow against themselves. So here's what I mean. With my own stock portfolio, for example,
00:13I can do one of two things. I can either sell all of it to pay for my lifestyle or my retirement,
00:18or I could go to the bank and say, hey, Mr. Bank, you see this money? I've got money. Give me a loan.
00:23So they give me a loan at whatever interest rate. Now, as long as the interest rate of that bank
00:28loan is lower than the interest rate of what I expect to make from my portfolio, which is eight
00:34to 10% per year, as long as it's lower, that means I'll end up making money. So this theory suggests
00:39that as someone's net worth goes up, people like to do this a lot more.
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