Today, we are talking about the power of mindset behind getting rich. Why do the poor stay poor and the rich get richer? Stay with us and find out the both perspectives – beliefs of those being poor and those being rich. Learn the 3 general actions to get rich and discover the 3 more specific actions to get richer.
What You Will Learn About Why Do the Poor Stay Poor and the Rich Get Richer:
- Are you affected by the limiting beliefs?
- How to change your mindset and practice thinking outside the box
- Study what the rich minority is doing and do that!
- How to make yourself irreplaceable
- Earned vs. portfolio income
- The more people you impact, the more money you will make
- The biggest shortcut to creating value
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Matt Theriault: Hey, Matt here at Epic Real Estate and have you ever wondered why do the poor stay poor and the rich get richer? You’ve heard that before, right? If you go and look for the answers to this question, you’re going to find all types of answers online. You’re going to find that the two groups think differently. You’re going to find that the two groups have different habits. You’ve going to find that the two groups have morning routines, stuff like that. And that all may be true. But practically, why do the poor stay poor and the rich get richer?
And what can someone do if they want to climb the ranks to rich status? Well, the answers to those questions and so much more on today’s episode of Financial Freedom Friday. I’m going to show you what I think is the real reason the poor stay poor and the rich get richer, so that if it’s your desire to become rich, you’ll know exactly what there is for you to do. We live in a society where money is important and if you don’t have any, it can be a challenge to live a fulfilling life. Right there, when I just said that, when you’re thinking right off the bat that money can’t buy happiness, you’re right. It can’t.
But I’ve been both; I’ve been poor and I’ve been rich. And actually, I’ve been both a couple of times. I’ve gone from middle class to rich, all the way down to rags, back to rich and then I teetered with those rags again for a little while before I became my richest. And I’ll tell you, on the days where you’re not at your best, when you’re not your happiest, it’s not nearly as bad when you’ve got some money than when you don’t. And if by chance the thought also is coming to you, money is the root of all evil, if that’s crossed your mind, well, that’s not true. For the love of money can be the root of all evil, all kinds of evil, that’s true, but money itself is not evil. It’s just a tool.
It’s a resource to get things done in this society and the economy in which we live. You can use it for evil if you choose, or you can use it for good, but it itself is not evil. And the third thing I want to talk about is something I’ve noticed these days, it almost seems that if the average person, say, were to walk into a room and they saw two people standing there. One had one dollar in their hand, the other person had five dollars in their hand, the common assumption today is that the person with the five dollars somehow took it from the person with the one dollar, while not even considering that maybe the person with the five dollars earned it by working harder than the person with one dollar, which is really the more likely scenario.
But it’s not the common assumption. I start this today with these three thoughts because they are clues as to what there is for you to do about getting rich. Money can’t buy happiness. Money is the root of all evil and rich people got rich dishonestly. Those are all things that the majority of people think. The majority of people that’s what they say and it’s the majority, what they believe. And it’s the majority that’s poor. And I use that word “poor,” not as judgment, but rather as a means of just efficient communication meaning, when I say “poor,” I’m referring to those that they just don’t have as much money as they’d like. And when I say “rich,” I’m referring to those where, you know, money is in abundance and therefore, it’s just not their primary concern.
All right, so that’s rich, that’s poor. So as we move through this, when I say those two things, that’s what I mean. So let me give you three general actions to get rich and then I’m going to give you three more specific actions to get richer. First thing, do the opposite. Look what everyone else is doing and just do the opposite. That’s a good starting point. You know, after the digital download, it changed the way people consume music. It left me bankrupt. It left me divorced, left me bagging groceries and that was my big fall from riches to rags. In a six month period even, I mean, I literally went from a seven-figure salary to seven dollars an hour. And while I was bagging groceries, I was among an entirely different crowd than I was used to.
I was among the majority and the majority, they’ve got money problems. It took about six months or so, after I was done feeling sorry for myself, to wake up and recognize that, if I continue to do what I’m doing, what the majority is doing, I’m going to stay here among the majority. It’s pretty simple; if you do what someone else does, you’re most likely going to get what they got. And in this instance where I was at, that was diddly-squat. And if I continued to just punch that clock, grab that six-pack after work, go to the fellow employee’s house of the day and just flop in front of the TV and hang out, I was never going to be able to leave that grocery store.
But at the age of 34, I’d had enough life experience to recognize that this is the exact opposite thing that I should be doing. So that’s action number one: Do the opposite of what the majority is doing. Study what the rich minority is doing and do that. The easiest way to do that is just to change your environment. Find some rich people or people richer than you that you can spend more time with. At the very least, the very least, you’re going to find yourself in a different conversation and different conversations, which are going to help you keep your eyes on the prize.
But what’s more likely to happen is you’ll be inspired by new ideas. You’re going to come up with new ideas. You’re going to meet new people that can help develop those ideas and you’re going to gain access to people and resources that can make your ideas actually happen. I’ve said it here many times before and I’ll continue to say it until I no longer believe it because it’s that important: Be intentional about creating your environment. It’s the most impactful get-rich hack there is. Be intentional about that.
Number two: Become an expert. You might have heard something like that before, but maybe not like this. Here’s what I mean. You see, money follows value and they work together proportionately. If you give a lot of value, you get a lot of money. No value, no money. So if you’re not making the money that you’d like to make, the first place you’re going to want to take a look at is and evaluate is the amount of value that you’re providing. Because here’s what’s true: The society in which we live, it pays us based on the value of what we do, how well we do it and how difficult it is to replace us. And as a grocery bagger, the value that I provided, it was really small. Many people, they just go in and bat their own groceries when they go shopping, right? It’s not a critical skill, meaning anybody can do it with no training required.
So it’s very easy to become an expert at bagging groceries and because it is so easy, it is easy to replace that person. Yet, I was an expert and I was paid what expert grocery baggers were paid, seven dollars an hour. So just becoming an expert, that’s not enough, right? There’s more to it. You have to become an expert at the right thing if you want to be rich. And if we’re compensated based on the value of what we do, how well we do it and how difficult it is to replace us, that’s all we really need to know to determine what there is for us to become an expert at. So in a nutshell, the second element of getting rich is just honing a valuable skill and becoming an expert at it.
You can do that inside of a nine to five job, even. For example, if I would have stayed at the grocery store and after a year, worked my way up to grocery checker, that position, it holds more value to the company. And because I would have had a year’s worth of experience, it would have been more difficult to find somebody with my knowledge, right? I would have more difficult to find someone to replace me with that same experience. So I would be paid more than what I was when I was bagging groceries. So you can create this value for your boss or the company that you work for and you will be compensated accordingly. But there are limits to the riches that you’re going to get.
And that brings us to the third element of getting rich and that has to do with the amount of people you provide value for. M. J. DeMarco, author of Millionaire Fastlane, he said it best, in my opinion, when he said, “If you want to make millions, you have to impact millions.” And this is why the money you make working for someone else, this is why it has limits because first, you’re limited by the impact that the company you work for provides to the marketplace. And second, you’re really only impacting essentially just one person: The owner of the company that you do work for. Sure, indirectly, you are impacting the other employees and you’re impacting the company’s customers, but the monetary results of your value, it passes through your boss’ hands before they reach yours.
So your share, it gets trimmed quite a bit before it gets to you. And if you’re not cool with that, then you need to become the boss. You need to start your own business so your value can directly impact more people. And that’s the formula for getting rich. The more people you impact, the more money you will make. And if you’re not making the money that you want, a useful question to ask yourself is, “How can I impact more people?” And the answer to that question is going to lead you down the path of becoming as rich as you want to be.
So generally, if you want to get rich, one, do the opposite of the poor majority. Look at what they’re doing and do the opposite. Two, hone a valuable skill and become an expert and three, scale that skill to impact as many people as possible. Your riches will be in direct proportion to that. So that’s generally speaking, that’s generally what there is to do. Let’s get specific with an action plan for you to get rich. Let’s get really specific now. One, let’s create value. That’s the first thing, create value. And that’s going to be a result of starting a business. That solves a problem in the marketplace. The bigger the problem your business solves, the greater the value, the more you’ll be compensated.
And this is going to take some thought. So take your time with this, but stay with me because I’ve got a shortcut for you to make this value creation, to make it happen for you in a really big way, so hang out for just a sec. Two, pay yourself first. Pay you first. You see, when money comes in, I want you to pay yourself first and then pay the expenses. The expenses get paid out of what’s left over. And if you don’t have enough to cover your expenses, then the expenses need to be cut. Cut your expenses as much as you can before cutting your share. I’ve been a big proponent of this book lately, Profit First, because I see how it’s impacted my personal bottom line in the last 12 months.
And it walks you through, in great detail, how to pay yourself first without making sacrifices to everything else in your life. Highly, highly recommend it, Profit First. All right, number three: invest for income. See, running a business, it’s hard work. You’re working hard for the income that you receive so it’s only fair that you make your income work hard for you, to generate more income. And this one right here, this one right here, this could be the real key as to why the poor stay poor and the rich get richer. Simply put, and perhaps oversimplified, but I want to get to the “aha” moment for you, so that our time together, that makes a real difference for you.
The poor stay poor because they work for money and save it. The rich get richer because they work for income and invest it. And let me show you why this distinction creates such a gap between the two. So per the federal tax code, there are three types of income that you can earn. So the first is earned income and active income. You’ve heard it both ways, earned income. And this is the type of income the poor work for, like the employees, like through a job. This is the type of income that keeps them poor because it requires their labor and it requires their time. You’ve heard this before, you exchange time for money, you exchange time for dollars. The problem with this is that we each only have 24 hours in a day. So there’s a limit to how much earned income one can make.
And because there’s a limit, it creates a scarcity mindset. So the poor, they do everything that they can do to save as much as they can and they do it in savings accounts and 401Ks and just by saving, they’re playing defense. They’re playing not to lose. Getting rich is a game of offense. You got to play to win. And it gets worse. The IRS taxes this earned income the most. Doesn’t seem fair, does it? Those that seemingly work the most, they pay the most percentage-wise in taxes. But it does make sense, as it brings us right back to what we started talking about, to the government specifically, the value that you provide the government. The employee provides the least amount of value to the government, so they can take from them, the most in taxes.
The second type of income is portfolio income. This is income earned from investments and capital gains, such as when you make a profit in the stock market or from selling a property. Essentially, really, anytime you buy low and sell high and you earn a profit. And although this is an improvement to earned income, as what you earned here, it’s really the third form of income of what the rich actually work for and that is passive income. And this is income that isn’t dependent on your direct labor or time, therefore, there are no limits as to what it can become. Essentially, the opposite of earned income. And if the answer as to why the poor stay poor lies within the category of earned income, it’s here where the answer for why the rich get richer lies.
I want to show you what your options are here, as all passive income is not created equal. And if you want to be rich, it’s important that you understand these inequalities or these differences, as these differences will determine which forms of passive income are going to work best for you. So the first type of passive income that can be earned is from an investment vehicle found at your bank called a CD, a Certificate of Deposit, also known as a Certificate of Disappointment, as there’s not enough interest offered on this type of passive income vehicle for it to make sense for most people. So, not enough interest. The second type of passive income that can be earned is from the stock market, specifically, stock dividends.
This comes with two challenges: One, volatility and the second one, most people just don’t have or earn enough money to invest for the dividends to amount to anything significant. So this one is, not enough money. So the third type of passive income that can be earned is from an idea, like a hit song or a bestselling book or most commonly, an invention, like a patent. But most people just don’t have enough talent to make this one a viable option. So not enough talent. And the fourth type of passive income that can be earned … Can you guess? You probably already guessed it, right? Real estate, yep, real estate, specifically, income-producing real estate.
I promised you earlier the shortcut to creating value and impacting many, yeah, right here. It’s real estate. It’s taxed the least and it’s taxed the least because the government wants you investing in housing, as it holds the highest value for them, the government, so they tax you the least on this investment. So we’ve covered a lot and you don’t really have to remember any of it. This is all you got to do. Just buy and hold income-producing real estate, hire a good property manager and get a good CPA. And you automatically have all of your getting-rich bases. You’ve got them all covered.
And here’s the good news: Anyone can do this one and those that do, get rich. But the sad news is, most people won’t and that’s why the poor stay poor. Anyone can do it. Most people won’t and there lies your opportunity. So what would now be the best time to get your first or your next income property? If you’d like some help, I’ve got some free information that I could share with you. You can get that at cashflowsavvy.com. Go there and it’s yours. All righty, so I’ll see you next week on another episode of Financial Freedom Friday. Take care.