- So in this video today,
we're gonna be talking about what separates the rich people
from the poor people out there. Now, I know this can be
an incredibly touchy subject out there
so I'm certainly not trying to offend anybody
but what I'm trying to show you guys today
is that there is a winning formula when it comes to money
and there is a losing formula when it comes to money.
And unfortunately, most people out there
are following the losing formula to this game of life
or this game of money.
Now, some people are fortunate enough
to stumble upon this idea,
whether it's from their family members
or whether it's from a book or some kind of mentor,
and what you'll find is that a lot of rich people
are passing this secret along
to different generations in different ways.
There are different ways that you may come across this,
whether it's from a book or whatever it may be,
but not everyone is exposed to this very important lesson
and so that's what I'm hoping to do
is show you guys this lesson and let you understand
why it is that the rich are getting richer
and the poor are staying poor.
Now, I know a lot of people that are watching this
have already learned this lesson
and I'm just glad that you already know it.
But what I will ask you is if you know somebody
who doesn't know this lesson,
just share this video with them
that in a way they can learn this and understand
why it is that some people end up rich
and some people end up staying poor for their entire lives.
But at the end of the day,
we all have the same 24 hours a day
and seven days per week.
So why is it that some people end up being millionaires
or billionaires or soon we're gonna have trillionaires,
meanwhile, some people never have two pennies
to rub together for their entire lives.
We all have the same time in each day
and the same opportunity to spend that time
but some people end up filthy rich
and some people never end up having any money.
Why is that the case?
The reason being is the fact that the game of life
is not necessarily a fair game.
And I learned this in two different ways:
Number one, I could remember when my dad sat down with me
and told me that when he was younger, he always imagined
there being a system of checks and balances
where everybody got their fair share in life.
And he said when he got older,
he learned that there is no such system.
Those who go out and get it are the ones
who end up with the money.
Those who just wait around for it,
well, there's no system that's gonna make sure
you're getting the money that you want.
When I heard that lesson from him,
what I realized is that you don't get ahead in life
by playing by the rules.
So if you're following the rules
that somebody else has laid out for you
particularly in school or from somebody else
who has not achieved the level of wealth you're looking for,
you're playing by a bad set of rules.
And the second place I learned this
is from Rich Dad Poor Dad, Robert Kiyosaki.
This is not anything that I have made up myself.
Recently, I saw Financial Education
did a video talking about this
and I wanted to do my take on it.
So this is by no means my own secret
or even a secret in general.
It is just a very important financial lesson
that so few actually understand.
So at the end of the day,
you can either complain about your financial circumstances
and continue to follow this losing formula over here
or you can just accept the fact
that it's not necessarily a fair game.
There's no system of checks and balances,
and play the game to win.
And I certainly hope you end up over on this side
playing this game to win.
But let's go ahead and start it off
by talking about the poor side of this equation
and what formula they are following.
The most common one that I'm seeing these days,
especially among young people is I is equal to your E.
Your income is equal to your expenses.
So for every $1 you earn, you're spending $1
and this is what you call paycheck to paycheck.
I'm sure you've heard of this before.
This is where I believe the majority of Americans
are right now is living paycheck to paycheck.
Every dollar that goes in goes out
and they're not saving any money for retirement
or expenses or vacation or anything like that.
They're just taking it day by day,
and this is not the worst place to be
but it's certainly not the best place either.
Below that is one that's even worse than that
and unfortunately, a lot of people are here as well,
that is when your income is less than your expenses
and you're actually going into debt.
A lot of people are in debt
or going into debt every single day,
and this might be where your income is a dollar
but your expenses are a $1.10.
So for every $1 you earn,
you're going another 10 cents in debt
because you are spending more than you are earning.
And these first two categories are where most people are.
Now, this bottom one is where some of the middle class are.
These would be probably the lower class,
this right here is where the middle class usually is.
This is when your income is greater than your expenses
but you're taking that surplus
and you're buying L, you're buying liabilities.
One of my favorite ways to look at this
is anything with an engine is typically a liability,
whether it's a motorcycle, a boat, a car,
and this is where the middle class go wrong.
The lower class, these people don't even have
any discretionary spending income.
Some of them don't even have enough money
to keep themselves out of debt.
But the middle class are typically
taking that extra surplus income
and dumping it into liabilities,
things that are going to depreciate in value over time.
You're gonna buy that motorcycle for $10,000
and you're gonna pay for insurance and pay for gas,
and then five years later, you're gonna sell it for $4,000.
That is not ever going to appreciate in value,
and this is exactly what the middle class
does with their surplus income,
and it puts them at the exact same level
as the people following the above two equations.
And what the rich people are doing is very, very simple.
What they are doing is they're making sure their income
is greater than their expenses
which is the same thing that the middle class is doing
but they're taking that money
and they're purchasing assets instead of liabilities.
Now, what are assets?
This could be something like the stock market,
this could be real estate,
this could be rare coins, this could be gold coins,
it doesn't matter what it is,
assets are simply things that tend
to appreciate in value over time.
Now, where is most of the wealth generated?
A lot of people are making money in real estate
and the stock market.
Yes, there are cryptocurrencies,
other assets that are newer,
but the two things that have been
making people rich the longest
are the stock market and real estate.
And I know a lot of people say the fastest way
to wealth is real estate
and I would certainly agree with that.
The stock market is more of a passive approach
to generating wealth,
but either one can get you to the same place
as long as you follow this formula.
You take your income, you make sure that your expenses
are lower than your income.
So maybe for every dollar you earn,
you have 80 cents worth of expenses
and then you take that 20 cents
and you put it towards the assets.
But what you're doing that's going to actually magnify
this process is taking your return on your investment,
your returns generated from your real estate
or your investments,
and reinvesting that back into the purchase of more assets.
That is what the rich call letting money work for you.
This is something that has been taught many times over,
earning more money from the money that you already have.
That is the simplest explanation
why the rich are getting richer
and the poor are staying poor,
it is these formulas right here.
If you think about it this way,
let's say this person here has a dollar of earnings
and they have 80 cents of expenses,
meaning every dollar they earn,
20 cents goes towards the purchase of assets,
and then let's say they have a dollar here of income
and then 10 cents of return on investment.
So then $1.10,
they still have that same 80 cents of expenses,
now 30 cents are going towards the purchase of assets
and then it will be 40, and 50, and 60.
As they're making more money,
they're investing more money,
as they're investing more money,
they're earning more of a return from their investment
and that return from their investment
is allowing them to purchase more assets
that are going to generate them more wealth.
And that right there is why people are getting rich.
They are following the winning formula
and they're playing the game
by the best set of rules possible.
Now, I'm not saying that these rich people over here
are never, ever going to spend any money
because you might be asking yourself
why do you see rich people
driving Lamborghinis or in yachts,
and it's because eventually,
they get to a point where this number right here,
their ROI, their return on their investment
can pay for their liabilities
like the things with the motors and the boats
and the fancy cars.
They're never taking their income, their active income,
and using that to purchase liabilities.
Their active incomes goes towards purchasing assets
and eventually, those assets pay
for whatever fun things that they want down the road.
So this right here is the winning formula to follow
when it comes to making money,
and these two right here are the losing formulas
that so many people are following unfortunately.
So to put it simply, you can spend very little early on
in order to be able to spend a lot of money later on
when you are basically living off
of the returns from your investments
or you can follow what the middle class do
and any money they're earning
goes towards purchasing liabilities.
That's what keeps people on the rat race.
That's what keeps people in that hamster wheel
is the fact that they are never getting ahead
'cause everything they're buying depreciates in value
and is heading to zero.
But anyways, guys, just gonna wrap up this video.
I hope you enjoyed it.
Let me know where you guys learned this lesson.
Was it from a book, from your parents,
wherever you learned it, I'm very curious.
If it's your first time learning this lesson today,
comment down below. I would love to hear that as well.
But thank you guys so much for watching.
Don't forget to share this with a friend
if you know somebody who needs to hear this lesson.
If not, I will see you guys in the next video.