The ONE Thing the Rich Buy that Poor and Middle Class Don’t

If you want to be be rich, there is one simple rule that will make you financially independent if you follow it. It’s rule number one and the only rule you really need to know and is also the sole reason for why the rich gets richer, the poor gets poorer and the middle class struggles. So in this video I’m going to cut right through all the fluff and bullshit and give you the only thing you need to know to acquire wealth for the rest of your life.

So one of the reasons the rich gets richer, the poor get poorer, and the middle class struggles in debt is that the subject of money is taught at home, not in school. Schools will never teach how to make money work for people, but it does a good job in qualifying people to work for money. And if working for money is the only knowledge people have about finances, then that’s the knowledge they will pass down to their kids keeping them in the middle class with loans and debts to pay off. And a lot of people are happy with that, while some people are rich and still miserable, but just to be clear this is not a philosophical video about happiness or how to be rich in your mind but strictly a financial video and how you can make money to work for you.

The basis of this video comes from Robert Kiyosaki and his best selling books on personal finances “Rich dad poor dad” as well as “the cashflow quadrant” and I highly recommend you to check these out to learn more about it.

In short, Robert grew up with his own dad which he refers to as his “poor dad” and his friends dad which is the “rich dad.” One is very intelligent having spent a big part of his life getting an incredible education earning a Ph.D. and completed 4 years undergraduate work in less than two years. He went to prestigious schools such as Stanford and University of Chicago for advanced studies on full financial scholarships. The other one didn’t finished 8 grade but went on to became one of the richest men in Hawaii.

Even though his poor dad had a great education and a well paying respectable job, making more money didn’t necessarily solve his problems or made him rich. What made his rich dad rich was his financial iq and what he did with the money he earned.

He used to say “there’s a difference between being poor and being broke. Broke is temporary, poor is eternal.”  

The rich dad educated himself at an early age on the subject of money outside of school and learned about investments, assets and liabilities. His poor dad spent no time in developing his own finances but left that to the government to help him when he retired.

One believed that their home was their largest investment and greatest asset while the other one believed that his house is a liability and if the house is the largest investment, you’re screwed.

Even though a house increases in value over time, it takes money from you every month making it a liability. An asset is something that puts money in your pocket every month. 

The reason why the rich gets richer while the poor and middle class struggles comes down to their personal balance sheet and income statements. Their income matches their expenses no matter how many pay raises they get, and their liabilities will only grow larger leaving the asset column untouched. A bigger house, faster car, more tv channels and the newest phone is what comes to mind when they earn more money, essentially putting them farther in the rat race with more bills and expenses to pay for. These are all nice things to have if you really can afford them, but they will simply take more money out your pocket every month.

So rule number one and the only rule you need to know: Know the difference between an asset and a liability, and buy assets. That’s it. Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets.

The rich get richer because they invest their income into their asset column which over time will only generate more income until their assets cover their expenses completely and they are out of the rat race. And the assets will only grow, hence the income it produces grows with it making the rich get even richer.

So what are some of these assets that rich people buy that will keep them rich? Well I’m actually gonna give you best ones right now.

So the four asset classes are real estate, owning a business, paper assets and commodities.

One of the greatest assets to acquire is real estate. Owning a property and simply rent it out to earn passive income from the people living there. You could even rent out separate rooms from a smaller complex that would bring in some revenue while a bigger complex could help a lot of people while generating a steady cash flow each month. You can also buy it and sell it once the market has gone up but it requires a large down payment which most people can’t afford, however there are some pretty good alternatives. You can own a Real estate investment trust (REIT) meaning you basically invest in a company that uses money from many investors to buy and operate income producing real estate. You can also go to crowdfunding sites such as Peerstreet, Fundrise, and RealtyMogul amongst others which is a very similar investment to a REIT and will give you a great return on your investment.

Owning a business doesn’t necessarily mean you have to start it from scratch but you can also buy or become a partner in an existing one. You want own a corporation, which really is only a document that makes the business it’s own legal person, and not some huge building that some people might think it is. A corporation will allow you to pay taxes after expenses meaning you can cut taxes drastically. And setting up and running a business completely online has never been easier than today. YouTube along with affiliate marketing doesn’t cost anything to operate and is a fantastic way to really learn how to create something, fill demands, keywords and SEO and make profits which is really the basis of any online business. Drop shipping or Fulfilment By Amazon (FBA) are also great to start off with but requires some investment but there are huge potential profits to be made. You can watch my video here if you want to know how to get started.

Paper assets is by far the most popular type of asset because of how cheap it is. There are so many different type of paper assets you can get but I’d suggest Warren Buffett’s advice of owning a portfolio with 90 % in a low cost S&P 500 index fund and 10 % short-term government bonds.

Commodities is the last investment class containing finite resources that will increase in value over time. Some examples are metals such as gold, silver and copper. Rare stones such as diamonds and rubins as well as oil and gas. Some popular commodities wealthy people collect are rare coins, wines, art because these items have a high chance of increasing in value.

So there you have it, I’m not gonna drag it on any longer.

/Adam


3 thoughts on “The ONE Thing the Rich Buy that Poor and Middle Class Don’t

  1. Hi! I wanted to let you know that I did learn finance skills in school. This isn’t to say that you aren’t correct because several schools don’t teach it, but I learned how to pay bills and track spending in primary school.

    Like

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