Have you ever wondered what sets apart rich people and poor people? Does luck determine our
financial destinies or do our day-to-day habits and lifestyle decisions influence our net worth?
As it turns out, your lifestyle choices can either boost or hinder your chances of attaining wealth,
which is why we'll show you five ways the rich live differently from the poor in this
video with the fifth way being one that will completely change how you look at money forever.
So, make sure to give this video a thumbs up for that YouTube algorithm,
and subscribe if you are new here.
#1. The rich focus on assets, not liabilities
The first differentiating factor between the rich and the poor lies in their investment habits.
While rich people prioritize income-producing assets, poor people often rush into buying
liabilities/ non-cash generating assets. First, let me explain what differentiates the two.
An asset simply refers to any valuable item whose value appreciates with time. In the financial
world, assets can take different forms; land, stocks, real estate property, or government bonds.
One huge benefit of acquiring assets is that they are bound to generate more revenue in the future.
Liabilities, on the other hand, are financial obligations owed to outside parties. These are
debts or non-cash producing assets that chip away at your net worth instead of adding to it.
Take a personal car, for example. Assuming you purchase a new Mercedes-Benz S class for $94,240
and pay from your pocket, you're unlikely to profit from your purchase. From the moment
you drive your car off the dealership, it's value takes a sharp nosedive. After about three years,
depreciation will have slashed a significant amount off your car's initial value.
And if you decide to sell it then, you will sell it for 70% of its
original price (on a good day). See? As much as a car may appear valuable,
it does not qualify as an asset due to its sharp depreciation tendency.
Clearly, spending on something with zero potential of earning profits isn't a wise
way to handle your finances. But sadly, poor people take this approach. They spend
lavishly on luxury watches, car loans, video-games, and overpriced apartments,
without realizing that these things are leaking money from their bank accounts.
If you want to become rich, you want to invest heavily in assets that bring additional income.
This is what rich people do. For example, you would instead invest the $94,250 into buying a
condo and rent it out. You can then save up the rental income and use it to pay off for a car.
This way, you're not eating into your net worth but rather adding onto it.
This applies to other assets like stocks and Government bonds. With bonds, for example,
you get to earn interest/dividends on a specific period of the year. So on top of
the amount you invested, you get an additional amount to top it off, without working for it.
The best part is, you can also transform your liabilities into income-producing assets. If
you have a car that's sitting idle in your garage, use it for Uber or Lyft. This will prove to be a
lucrative side-hustle if you have a few hours to spare after work. Literally, it doesn't
matter what it is that you own. Probably, someone could use it. It could be a wedding dress, a room
inside your apartment, or a whole floor in your primary residence. You can always rent it out.
2. The rich work for themselves
Another difference between rich people and poor people is in their income choices. While poor
people place employment on a pedestal, rich people prefer being their own bosses. This
is because most rich people are bold risk-takers. They thrive on facing their fears and trying out
new things. On the other hand, the average person prefers crouching behind a steady paycheck even
when he's being exploited. The average person chooses a 9-5 job because they fear failure.
"What if my business fails to pick up? What if someone else already has my idea?
Will I really manage a business on my own? "These are some of the questions that race
through an average person's mind when they think about ditching their steady paycheck.
I have nothing against employment, though. As a matter of fact, we have professionals
who claw their way up the career ladder and eventually attain financial success. However,
this is often a slow and uncertain path for achieving financial freedom.
Why is this? Because there's someone to determine whether you deserve a raise or not.
Your salary-negotiation antics could backfire. Your job-scope might change through the years,
and your company decides they don't need you anymore. Heck, it may take many years of sticking
your head through ugly company politics before you finally secure the corner office. And the
list goes on and on. Easily, working for someone else derails your wealth-building in so many ways.
Self-employment, on the other hand, makes you the sole-captain of your financial ship.
You choose when to work, where to work from, and whom to work with. And the best part is,
there's no limitation to how much money you can make. If you create a product
that benefits millions of people, you get to keep all the profits.
No doubt, entrepreneurship provides a valuable opportunity to grow and learn. It
may be backbreaking at the initial stages, but it does pay off eventually. Once your business
gets through the challenging stages, you’ll start to enjoy the fruits of your labour.
Actually, you’ll realize that most self-made millionaires are successful business owners.
If you're considering self-employment and you still work for someone else,
start with a side hustle. You don't have to resign from your job if you don't have a plan. The best
way is to set up a side business and build it to a point where you can comfortably quit your job.
3. The Rich work on their financial IQ more than their educational IQ
Do you know why most professors die poor or why some of the world's most
iconic billionaires have no degrees? It's because you don't go to school to become
rich. Schools teach you how to get a job but fail to teach you how to make money
work for you. The sooner you realize this, the higher your chances of building wealth.
The thing is the knowledge you acquire in school is barely applicable in the real world.
Educational IQ capitalizes on regurgitating examinable information and giving you a false
illusion of intelligence. You probably view education as a gateway into a high-paying job,
which I don't discount. However, it's time you realized that a high-income doesn't
necessarily imply wealth. If anything, what's the point of raking in a $50,000
salary if you're steeped in debt or lack the knowledge on how to invest your money?
This is where financial IQ comes in. It teaches you golden money principles that no school will
ever teach you. Financial IQ enables you to leverage your time to attract an income and
apportion that income to attract more. It instills a deep sense of discipline that
guides your spending habits and triggers a saving culture. Through financial IQ,
you will learn that buying a home isn't outrightly a smart idea, that your credit card is probably
just draining money from your wallet and that an economic downturn is the best time to buy
stock market shares. I can name a tad too many benefits of acquiring this type of knowledge.
So instead of spending your money on costly higher education,
you could use some of it to acquire financial IQ. As Robert Kiyosaki emphasizes in his famous book,
Rich Dad Poor Dad, the key to financial freedom is to understand how money works.
Yes, it's great that you understand calculus,
but how will it help you save money? How will the anatomy of a rabbit help
you understand the stock market? Not to be a Debby-downer, but there's no link whatsoever.
If you want to become rich, start reading financial books, taking financial courses,
and mingling with financially intelligent individuals. You won't regret it!
One more thing, if you are interested in gaining a financial education,
I’m working with a financial professional to build a course which is almost done, if you
would like to be notified when it comes out. You can sign up using the link in the descriptions.
4. The rich see opportunities where others see problems
Moving on, perspective is another boundary that alienates the poor and the rich. Most
rich people are hawk-eyed when it comes to spotting opportunities. Unlike poor people,
they've mastered a way of morphing challenges into
money-making opportunities. What do I mean by this? Here's the gist.
While an average person sees a dead-end when a river floods, a wealthy person thinks of
building a strong boat to help people cross that river. Before you know it,
you'll be paying him for a ride across that same river. And to be honest,
that's the secret-sauce for accumulating wealth. You must equip yourself with a sharp mind;
A mind that thinks out of the box and generates life-changing ideas.
I mean, would you ever imagine an online marketplace that links you
with sellers all over the world? Bezos did that by
starting Amazon and it made him one of the richest people in the world!
As you can see, opportunities lie in our mundane daily activities.
Instead of focusing on the problem, rich people focus on finding solutions. It is
this sense of pro-activeness that gives them an edge compared to poor people.
So, what's that one thing that gives you a hard time? What do your friends complain about every
single day? Is it a sore foot? How difficult planks and squats are? Listen to their problems
and try to come up with something. You never know, it could be the next big thing on Shark Tank!
5. The rich optimize their hourly earnings
Lastly, wealthy people know the value of time and honestly,
I think this is the essential difference in the lifestyle habits of rich people and poor people.
Wealthy people tend to optimize their hourly earnings by outsourcing low-value activities
for high-earning activities. Technically, they treat their time like an asset. While at it,
they prioritize the activities that attract greater reward for their time.
A rich person would rather pay someone to mow their lawn than spend 3 hours doing it
and miss out on a client. It has nothing to do with mowing the lawn, but rather,
their time. The 3 hours they would have spent mowing a lawn can be put into better use. It
could be taking a short course, meeting with a client, or completing a pending project.
A poor person, on the other hand, would hold a different view. They will probably view hiring
a lawnmower as a waste of money and do it themselves, even if they detest lawn mowing.
But come to think of it, why should you spend time doing something you hate when you can spend
it doing something you love? And more so, one that adds an extra digit to your bank account balance?
In the same vein, start perceiving your time as a valuable asset. Swap video games
with personal finance books. Invest in a machine that helps you perform a chore
faster. Hire a social media manager so you can channel more time towards other facets
of your business. Seek a video-editor to help you to release your YouTube videos faster.
Think of it as the Return of Time Invested (ROTI). This is an easy way to gauge the
effectiveness of spent time. Is the reward you obtain from doing something worth it? If the
answer is a resounding YES, then go for it. But if not, outsource it for something more valuable.
There you go! Those are the five ways rich people live differently from the poor and if you really
want to take your finances to the next level click on this next video and let’s get started!