The Personal Finance Podcast - Rich vs Wealthy (The Life Changing Mindset Shift)

Episode Date: May 12, 2021

053 Rich vs. Wealthy (The Life-Changing Mindset Shift) Got questions? Ask me on Instagram Here. @mastermoneyco This is the fastest way to get a response from me.  Sponsors Thanks to our sponsor Manscaped (Manscaped.com) for sponsoring this episode of the podcast. Use code PFP20 at checkout for 20% off + Free Shipping! Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) Want to Support the Show? Follow on Spotify or Follow and Leave a 5-Star Review on Apple Podcasts! Today We Discuss:  What it means to be rich What it means to be wealthy  The massive mindset shift you need  How you can build wealth today  The rat race  More Episodes You Will Love:  How Much Money You Need to Retire (and Why it May be Less Than You Think) How You Can Have a Free Car For Life!  Can You Get Rich at Your Day Job?  Check out all the Stuff I Recommend!  M1 Finance Best Place to Invest  Personal Capital Free Wealth Management and Budget App  CIT BANK (Best Savings Account) Best Personal Finance Books  The Simple Path to Wealth - J L Collins  The Millionaire Next Door - Thomas Stanley I Will Teach You To Be Rich - Ramit Sethi  Rich Dad Poor Dad - Robert Kiyosaki ** Some links may be affiliate links and we earn a small commission at no extra cost to you. We only recommend products we truly believe in.  Check us out on social fam!  Twitter Dollar After Dollar Instagram www.thepersonalfinancepodcast.com Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about the difference between being rich and being wealthy. What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of dollar after dollar.com. And today on the Personal Finance Podcast, we're going to be talking about the difference between being rich versus being wealthy. If you have any questions at all about this episode,

hit me up on Instagram at dollar a F-T-R dollar and follow us on Spotify, Apple Podcasts, or whatever podcast player you love listening to this podcast too. And please, if you want to help out the show and you have not already done so, leave a five-star rating and review on Apple Podcasts. It truly does help the show out. Now, if you were not born in the top 1%, which I imagine the majority of you that are listening to this podcast, 99.9% of you that are listening to this podcast were not born in the top 1%. Then you were probably never told what I'm about to explain to you. Because what I'm about to explain to you is the opposite of what everyone else is taught throughout their entire life, whether it's within school systems,

whether it's what your parents are telling you, or whether it was how money was explained to you. See, this episode that you're about to listen to right now is an episode that could absolutely change your life if you actually get it. If you actually understand what I'm talking about in this episode, this could absolutely change the way that you see money and you see the power of money and how every single dollar can change the trajectory of your life if you allocate those dollars correctly. Because you will actually see how powerful money can be.

And see, most of us, we're not top personal finance in high school. We're not top personal finance in college. Why is that, do you think? Because a lot of school systems are not allowed to teach personal finance within the school system. Why is that? Robert Kiyosaki said that when he was teaching a group of students, a lot of them weren't getting and understanding what he was talking about. So he was asking some of his advisors who were extremely wealthy, what should I do to teach these people? They said, stop teaching them. Just let them be poor. My goal for you, my goal with this podcast is to make sure that does not happen to each and every one of you.

Each and every one of you, we are going to turn this entire ship around because I'm done with this poor mindset with everyone. And this mindset that we're going to be talking about today, that's what's going to change your life. The poor mindset needs to get out of your mind. And I'm going to explain exactly why. Because there's a difference between being rich and being wealthy. And let me tell you, friends, it's not what you've been told by your parents. It's not what you've been told by your friends. It's not what you've been taught all along the way.

Now, if you've been listening to this podcast since the beginning, you know some of these concepts. You understand what I'm about to talk about. And as you continue to listen to this podcast, you're going to see your mind open up to the possibilities of what can become. Now, before we get started, I want you to understand two terms because these are extremely important to understand while you're listening to this episode. It's the difference between assets and liabilities. Now, assets are things that you acquire that put money into your pocket. It's very simple. So you can think of things like a rental property is one of the easiest examples to think of this.

You buy a rental property, the tenant that rents out that property puts money in your pocket every single month. The other thing that we're talking about in this episode a lot is liabilities. Now, if you don't understand liabilities, it's anything that you purchase that decreases in value. A great example of this, and most of you know this, is when you buy a brand new car, it reduces in value the moment you drive it off the lot. That is an example of a liability because it goes down in value over time. And understanding the difference between the two of these is going to be massively beneficial for you once you understand it. One of the most interesting things that comes along is when surveys are done that ask people

what they think wealth is. What would it take for you to feel rich? Charles Schwab asked a thousand Americans what they thought it would take for them to feel rich. The answer, I'm going to give it away right away, was $2.4 million. But the interesting thing about this survey is when they said $2.4 million, they also asked them, well, what does being rich really mean for you? And here's what people said. 62% said spending time with their family. Fifty-five percent said having time to themselves.

49% said owning a home. 41% said eating out and having meals delivered. And 33% said having subscription services like movie or TV streaming services. And there are other things that made people feel wealthy, like having a lawn service, having a gym subscription, or having the latest tech gadgets. And almost half of the folks that were surveyed felt that investing their money was the way to achieve wealth and how to become rich. You guys have heard me talk about the book Rich Dad Poor Dad a lot. Now, Rich Dad Poor Dad has a lot of the principles that we're going to be talking about

in this episode. But one of my favorite quotes out of that book is when Robert Kiyosaki, the author of that book, asked his rich dad, what's the difference between being rich and being poor? Here's what he said. Many people think that being rich and being wealthy are the same thing. But there's a difference between the two. The rich have lots of money, but the wealthy don't worry about money. Now let me read that again, because understanding this sentence is going to change the way

you think about money. The rich have lots of money, but the wealthy don't worry. worry about money. This is where the mindset shifts sets in. Because understanding the difference between being rich and being wealthy is going to change your trajectory in life. It's going to change your financial situation dramatically. And we're going to talk about exactly why that is. Because changing your mindset is a massive, massive thing that we have to do because you've been taught certain situations throughout your entire life. And I know what you've been taught. because they talk about it in public schools.

They talk about it in private schools. Most of you have zero opportunity when it comes to learning about your personal finances and your financial literacy and understanding how to invest. All of these pieces are extremely important to understand at a young age, and yet they don't teach us about it. Why do you think that is? Well, today, we're going to change that. Let's get into what it means to be rich.

Now, most people, when they get involved in starting to think about their money and how they want to turn their personal finances around, they think, my ultimate goal is I want to be rich. That's what most people are taught to go after, is to go after being rich. But what does rich really mean? Our personal definition here at the personal finance podcast

of being rich, it usually has two parts. So the first part is that rich folks usually have lots of money. So you can think of people who have a very high income. And sometimes they're W2 employees, sometimes they're not. but folks who have a very high income, you could think of a doctor, a lawyer, a business owner,

an executive, a celebrity, an athlete. All of those examples typically have a high income. Or you could think of someone who received an inheritance or someone who got lucky and won the lottery. Now that's usually part one is having a high income. Part two of being rich is using that high income to buy lots of expensive things. Now, buying lots of expensive things in no way means that you're wealthy. Understanding the difference there is going to be a massive, massive mindset shift for you. See, rich people rely on their income as the lifeblood to their lifestyle.

Rich people use their income to buy more stuff. To buy more things. They don't take into consideration. What brings me value. What they take into consideration is what will increase my status when other people are looking at. at me. This is the backwards way to think about money. Yet throughout our entire life, through advertisements, through people we look up to, through athletes, through celebrities, all you see is folks driving Ferraris, driving Lamborghinis, buying the latest Louis Vuitton, buying designer

handbags, acquiring the latest fashion. There's nothing wrong with any of these things. But understanding that if you don't have enough wealth to be able to sustain buying these things, then you're getting yourself into a sticky situation. And what rich people have to do is they have to keep working, continuously keep working to maintain their lifestyle. You know what we call this? This is called running the rat race. And if you never talked about or heard about running the rat race, it's the fact that you

have to continuously keep working to be able to fund your lifestyle. Now, you can run the rat race and be dead, flat, broke. Maybe you don't have an high income. You can make minimum wage and have to run the rat race. But what you want to do is if you are running the rat race, you need to get yourself out of that situation. I'm going to teach you exactly how in this episode. But having to continuously keep working to continue your lifestyle is what rich people do. You can think of all sorts of examples of folks who have fancy cars, multiple houses, private school tuition, country clubs, shopping habits.

The fact of the matter is, most rich people are not wealthy because they have to spend a lot of money to show other people how rich they actually are. I know every single one of you who's listening to this podcast know someone who is like this. Maybe you grew up with a rich kid in your school. Maybe you have a friend who graduated with a PhD and they're working and spending all of their money. They've got the fancy car. They've got the big house. But they just started working and they couldn't have acquired that much wealth yet. And the problem with rich people is they negate to focus on the thing that brings them the most satisfaction.

Guess what is the biggest value in life for most people? your time. As the great Dr. Dre once said, anybody can get it. The hard part is keeping it. And what rich people don't do is they don't think through how can I keep this money?

How can this money produce more money for me? Instead, they have a high income, they use that income to buy the things they want and get themselves into sticky situations. One of the best examples of rich people are athletes and celebrities who have gone broke.

There's countless examples of athletes and celebrities who have gone broke. Why does that happen when they have such a high income? How could you spend $100 million, Mike Tyson? Here's how. Mike Tyson had to keep fighting to be able to produce enough income to sustain his lifestyle. Once Mike Tyson stopped fighting, all of a sudden the money was gone. Once athletes stopped working, all of the sudden the money dries up. Because if you don't live below your means in any situation, it doesn't matter how much money you make, you will.

go broke. There's no if ands or buts about this. You have to manage your money at any level. I don't care if you make a billion dollars a year. If you spend over a billion dollars a year, you're going to go broke. And sustainability lies in acquiring assets instead of liabilities, because all rich people do is acquire liabilities, whether it's watches, whether it's cars, whether it's multiple houses, whether it's country clubs, private school tuition. All of these things, if not purchased with an asset becomes a liability. This is the exact mindset that you want to shift your mind from. From acquiring liabilities without having assets,

you can have all of these things. That's not what I'm saying. But to have all of these things, you need to have assets paying for your liabilities. And that's what a wealthy person does. Enter the wealthy person. Because what a wealthy person does is they change their mindset

and they want to acquire liabilities with their assets. So let's get into what it means to be wealthy. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy, clothes don't fit anymore, and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in. PolicyGenius is, an insurance company. They're an online marketplace that helps you compare life insurance quotes from some of the

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Terms and conditions apply. Hiring, Indeed is all you need. Now, as I stated on the top of this show, this podcast was created to make you wealthy. That's why I created this podcast. I want each and every person who's listening to this podcast to understand that they can become generationally wealthy. Not just you, but your kids, your grandkids.

And guess what? If you understand these concepts, you can teach it to your children, who can teach it to their children, and help preserve that capital. I want you to change the lives of your family, your friends, people that are around you. And the only way to do that is with a financial education and then taking action with that education that you have. Most people will never learn this. Make sure every person in your circle can understand this. Because once they do, it will change.

your life forever. One of the wealthiest men of all time, John D. Rockefeller, has most of his wealth still preserved in his family. You want to know why? He taught his children financial education. If his children couldn't tell them exactly where they spent each piece of their allowance, they wouldn't get their allowance the next week. And as he passed down that wisdom, his children passed down that wisdom, and it's gone on

and on for generations to come. That's what you want to do with your money as well. have the financial education, teach your children, teach your family, teach your friends, and build generational wealth. So what classifies someone as wealthy? Well, the first one is, wealthy people don't have to worry about money. See, rich people make a lot of money, but they have to worry about money all the time. They're stressed out about their bills. They're stressed out about their third house. They're always stressed out. But wealthy people don't have to worry about money because they've acquired enough assets to allow themselves to be protected from any financial situation, which leads to the next one,

that wealthy people have increased their net worth by buying assets. See, the more assets you acquire, the wealthier you become because the more compounded interest starts to work for you. Let's say you want to acquire assets between stocks and real estate. Well, as you start investing into stocks, that wealth starts to compound and it's going to spit off dividends and the stock price is going to increase and your wealth is going to continuously grow. And as you start investing into real estate, you're going to collect cash flow, and you can

reinvest that cash flow into more real estate, and your portfolio is going to grow. It starts to compound and snowball. This is how it works over time, how you can build true wealth. And as you build that wealth, then you can build multiple income sources, which is a major factor in becoming wealthy, because having multiple income sources is the key to wealth. Now let me say something right off the bat here. A lot of people think that only entrepreneurs, can become wealthy, that is absolutely not true. Anybody with a job can become wealthy, and you can have a job and still have multiple income sources.

Folks with jobs can acquire assets, they can acquire businesses, they can acquire real estate, and still have your W-2 job. I don't think it's ever worth leaving your job until you absolutely have to because all your other assets are taking all of your time. You want to hold on to that job as long as possible because that's your safety net. but having multiple streams of income and allowing yourself to increase those streams of income is going to change the way you see your money

because as your streams continue to grow then you can invest more money and as you invest more money you're building wealth for your future the money is compounding it's spitting off more money and all of a sudden that snowball has grown into a giant avalanche. Wealthy people have total control over their time

imagine being able to wake up whenever you want to and do whatever you want because wealthy people have enough assets that they have complete control over their time. Wealthy people improve their financial situation every single year. So every single year, increasing the amount that you're investing, increasing the assets that you own, is going to allow you to get to the next level within your finances. If you're not where you want to be, acquiring more assets is your next step. Getting rid of debt and increasing your net worth is your next step.

That's how you make progress every single year. What if you get 1% better every day or 1%? better every single month. Well, if you got 1% better every single day, you're 365% better than you are today. Or if you get 1% better every month, you're still 12% better than you were last year. That progress over time makes a massive difference for you. Wealthy people leave wealth to their kids while the rich leave their kids with financial headaches. And this is a big one because a lot of times what happens when rich people pass away, they still have debts to pay. They still owe money on things and it's left with their kids who have to utilize either their inheritance or whatever

other money they have to pay off those debts. They leave financial problems to their children, whereas wealthy people leave generational wealth to their children. They leave assets that can continuously produce cash so that they can continuously live off that money and truly, truly be wealthy. See, leaving assets to your children, leaving assets to your family is going to be life-changing for them. You're reducing the amount of struggle that they have to go through. Those of you who are born in poverty, those of you who were born in a bad financial situation, imagine doing this for your family tree. Imagine changing your family's tree so that all of a sudden you're the one who turned it around. That's what you can do when you're starting to build wealth. That's what you

can do. Break the paycheck to paycheck cycle that your family has always had. Break the poverty mindset that your family has always had. It's up to someone in your family to do it. Why not be you? wealthy people are generous and they don't try to just use all their money to acquire more stuff. See, the other amazing thing about being wealthy is you don't have to go after every single shiny thing that comes out. Guess what? You can give money to your favorite causes, to your favorite charity. So that's one of the best things about having wealth is giving money away to people in need. If your friend needs to borrow money, you don't even have to let them borrow it. You just give it to them. Imagine being able to do that for your friends. Imagine being able to do that for your family.

When someone is in a time of need, you can actually give to them. them. That's generational wealth. That's how you build true wealth. See, what most people do is they work for money. But what the rich do is they make their money work for them. And if you can think about this every single day, well, how do I make my money work for me? You acquire more assets. Because most people acquire liabilities. But if you acquire assets, over time, you will reduce your financial struggle and eventually you will eliminate your financial struggle. So now that we understand the difference between being rich and being wealthy, let's get into what you can do today to make the switch.

So once you decide that you want to change your mindset from poverty or being rich to being wealthy, the first thing you want to change is your mindset. You have to change the way you think about money. We've talked about a bunch of principles already in this episode. But what you have to understand is stuff does not equal wealth. Assets equal wealth. Acquiring more stuff, having the latest and greatest tech gadgets, having the coolest car does not equal wealth.

It can, but not if you're not acquiring. that stuff with assets that actually produce the money to be able to buy well. See, that's how you buy well. If you've listened to the episode where we talk about how you can have a free car for life, what I talk about in that episode is acquiring assets that will actually pay your car. So, for example, you can acquire a rental property that cash flows two, three, $400 a month that pays for your $400 a month car payment. And once the car payment is done, you still have the car and you still have the house that's producing cash. That's how you acquire, like, liabilities is you buy assets to pay for your liabilities.

Because if you don't make this paradigm shift, you will continue to match your income with purchasing liabilities. And you will go nowhere doing that. Spending the same amount as you make means that you're not saving anything. You're not purchasing assets. You're not getting ahead financially. So you have to ask yourself a question. What matters more to you?

Stuff or time. Now, some of you may be thinking through and saying, hey, I love stuff. I love buying watches and clothes and things like that. more power to you. There's nothing wrong with that. But understanding the things that don't bring you value, maybe you don't care as much about your car, but you love buying clothes.

Spend lavishly on things that bring you value, but reduce your spending on things that don't bring you value. That's the paradigm shift, because once you do that, you're going to have additional income coming in. You're going to have additional money that you can use so that you can buy more assets to increase your income, and as your income increases,

you can buy more of the stuff you love. That's how this works. That's the paradigm shift that you need to understand. Number two, buying more assets. So you've got to buy things that produce cash. Number one, the easiest example is real estate. You can buy single-family rental properties. You can buy multifamily properties.

You can buy small duplexes, triplexes, quadplexes. Understanding real estate takes a little bit of time. But once you get it down, it can produce tremendous wealth through appreciation. It has tax benefits, all of these big pieces. And we're going to have a bunch of episodes about real estate coming up. So make sure you're following this podcast so that you can, hear those episodes because I've been investing in real estate for years and we're going to talk about how big of a wealth builder it can be. You can also invest in the stock market. So things like

index funds. Everyone who listen to this podcast regularly knows I love index funds. They're well diversified. They get a standard 8% return every single year historically. They're an amazing way to invest, especially if you don't care about investing. You can invest in dividend stocks, which are stocks that produce a dividend every single month. They produce cash for you. So they pay you a piece of their profits every single month. You can invest in growth stocks. Think of tech companies early on like Amazon, Netflix, all of these companies had a high growth trajectory and some people specialize in that. You can invest in value stocks. This is what Warren Buffett did, where he would find companies who were undervalued in the stock market, buy them, hold them, and then sell them

for much higher multiples. The third way you could buy assets, and this is way I'm focusing right now, this is where I'm spending a lot of my time, is you can buy existing businesses. Now, buying existing businesses is one of the coolest ways to build wealth because someone already produced the clientele and you can get a loan and buy a business that produces significant cash flow. And there's loans out there with the small business administration that you can get an SBA loan for almost 90%. So you only have to put 10% down and get 90% financed through an SBA loan. And there's all different kinds of cash flowing business that you can look into. Some of my favorite ones are the boring cash flowing business.

So things like laundromats, you just collect coins or self-serve car washes. That's straight cash and coins. Or lawn companies. You could buy a business of books, manage employees, cleaning services, fencing companies. There's so many different things that you can acquire and assets that you can actually run businesses that make significant income that already have the clientele in place. So you don't have to go chase down business every single month. Because once you already have that in place, you have a thriving business. And if the business has been in business for longer than five years and is still becoming profitable every single year, it's doing better than 99% of businesses out there.

Most businesses fail within the first five years. But look for companies in your expertise. Maybe you're an expert in tech, in IT. Look for tech companies. You can acquire websites that produce income. There's so many businesses that you can acquire out there. And it's such an underserved market. Not enough people are looking at buying small businesses.

You know how many baby boomers are going to be retiring in the next 10 years? and they all are going to need to sell their businesses. And then number three is make sure that you create a plan that allows you to keep the money you earn. So the first one is obviously having an investment plan and setting everything up automatically. So you automatically transfer money to your brokerage account so that you can invest it every single month.

You automatically transfer it to your Roth IRA or your 401K. You automatically transfer money into your savings account where you want to buy businesses with or the savings account where you want to buy rental properties. But setting up an investment plan and sticking to that plan is the biggest biggest contributor to your wealth building. Why? Because a lot of people try to rely on their willpower and they try to save their money every single month. And as you know, for most people, that doesn't

work. We only have so much willpower. And if you have to go to your job every single day and grind it out and then try to rely on your willpower to do everything else that you need to be doing, it's very difficult to do that. So making sure you have an investment plan in place will allow you to make sure that this thing runs like a machine. And then secondly, just make sure you have cash to protect yourself in any situation, which we call this an emergency fund. It's just a fund that allows you to have cash in place in case you lose your job or assets go wrong that will allow you to actually take care of that situation, stress-free, you don't have to worry about money, you don't have to figure out where am I going to get the money to fix this or where am I going to get the money

to repair my car. You have that in place so that when these situations arise, because it is a when, not an if, but when these situations arise, you have cash in place to be able to fix it. Listen, I want each and every one of you to be able to build wealth. Build real wealth. That's why this podcast exists. It's so that each and every one of you can build generational wealth. So if you have any questions, hit me up on Instagram at dollar a F-T-R dollar. Follow me on Spotify, Apple Podcasts, or whatever podcast player you love listening to this podcast

to. And please, if you want to help out the show, leave a five-star rating and review on Apple Podcast. And if you love this episode and want to hear more like this, I will put additional episodes similar to this show in the show notes for you to check out. We'll see you on the next episode. Thank you guys so much for listening. And if this is your first time listening,

consider subscribing so you never miss an episode. And share this episode with a friend. And don't forget to leave a rating and review on iTunes as well because our goal is to bring as much value to you as possible. And we're trying to spread this message that money can buy free. That's what money is there to do, is to buy more freedom. So thank you again so much for listening, and I hope you have a great day. Rosen lasagna, medium power, 15 minutes.

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