– 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.