The Personal Finance Podcast - The 13 Differences Between Broke, Rich, and Really Rich!

Episode Date: April 17, 2023

In this episode of the Personal Finance Podcast, we're gonna talk about the 13 differences between broke, rich and really rich. How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Thanks to Ka’Chava For Sponsoring the show! Go to kachava.com/pfp and get 10% off on your first order.  Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Hello Fresh: Check out Hello Fresh www.hellofresh.com/pfp50 and use promo code PFP50 for 50% off your first order and free shipping!  Links Mentioned in This Episode:  Financial Samurai Blog: The Rise Of Stealth Wealth: Ways To Stay Invisible From Society If You Have Money How to Create a Bulletproof Wealth Protection Plan The Stairway to Wealth (Where to Put Your Money In Order!)  Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz 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 13 differences between broke, rich, and really rich. Everybody and welcome to the personal finance podcast. I'm your host, Andrew Founder of Mastermoney.com. And today on the Personal Finance Podcast, we're going to talk about the 13 differences between broke, rich, and really rich. If you guys have any questions, make sure you hit us up on Instagram or TikTok at Master Money Co. and follow us on Spotify, Apple Podcasts, or whatever podcast player, you're listening to this podcast on right now.

And if you're enjoying the show, consider leaving a five-star rating and review on Apple Podcasts or Spotify. I cannot thank you guys enough for leaving those five-star ratings and reviews. I truly appreciate and they mean the world to me. So today, we're going to be diving in to the 13 differences between being broke, rich, and really rich.

And in this episode, what I'm going to do is I'm going to go through a bunch of various things that you need to be doing with your money. and how each classification handles those things. So first thing I want to do is I want to explain the differences between each classification. So broke is going to be what a lot of people are and they don't even know it. But broke is people with either a $0 net worth or less. A lot of people have a $0 net worth, meaning the difference between their assets and their

liabilities is zero. And a lot of people may think, well, hey, I make a really high income. My net worth can't be low or zero. Well, it absolutely can be. In fact, it could be negative. If you have more debt than you do assets, then you have a negative net worth. And that's what we're talking about here when we talk about broke. And what I'm going to do in this episode is if you are in this broke classification,

I'm going to show you how to get to the next couple of levels. And I'm going to show you what you need to do to make changes to get to those next couple of levels. Now, Rich is people who have a $1 million net worth to around a $7 million net worth. Now, this is a great place to be. And this is what a lot of people strive to get to. because in this range, you are either working on getting towards financially independent or you are financially independent. And a lot of this depends on where you live, what you're doing, all those different things. Because if you have a million dollars to $7 million, that means you can live on $40,000 at the million dollar range to $280,000 in retirement on the high range.

And this is based on the 4% rule, meaning you could draw down 4% of your portfolio every single year and still be able to preserve your wealth throughout retirement. So most people in this range on the rich range are either financially independent or they have at least achieved some time freedom within this range. And like I said, many people are happy stopping here. In fact, a lot of people's freedom number is probably within this range, meaning the amount of money that you need to have in order to retire. So if you take how much you want to spend in retirement and multiply that by 25, that's going to be your freedom number. And if you hit that freedom number, you can absolutely be retired. And you can have an amazing life at this level. There is nothing wrong with the rich level.

The rich level is what I want a lot of people to aspire to do. I want you to aspire to get to this level. What I show you on this podcast and what we show you at Master Money on the YouTube channel and the newsletter is there are very simple ways that you can follow to get to this level. Now, if you live in a really high cost of living area, maybe the rich level for you is $8 million to $9 million range because that's going to allow you to spend $320,000 to $360,000 per year in retirement based on that 4% rule. So it depends on what your cost of living is, what you want to do.

maybe that is rich in your area if you live in really high cost of living areas like San Francisco, Los Angeles, San Diego, New York City, maybe some of the Chicago areas. If you live in a really high cost of living area, maybe that is something you need to consider as well, is you want to have a higher net worth. Now, really rich. What is really rich? Really rich means you have a $10 million net worth or above. So this means you could spend a lot more money in retirement. If you have $10 million, you could spend $400,000 per year in retirement. That's an amazing life. If you have $15 million, $600,000 per year. If you have $20 million, $800,000 per year. If you have $25 million, $1 million per year. So understanding that really rich is the amount where you have all this time, freedom that you have

available to you, and it is a different classification than some of these other levels. So now that we've classified what broke, rich, and really rich are, let's get into the 13 differences between the three. All right, number one is debt. Now, debt is a big classification for a lot of people and how people handle debt is going to show you what. type of financial education they have. It's very important to understand the implications of debt and how to use debt to your advantage instead of using it to your detriment. So here is what broke people do. Broke people use debt to take out loans for liabilities. This is a very common thing what the majority of people do in this country and in this world. So this is things like credit card debt.

If you have credit card debt, this is a detriment to your financial situation. It is something that makes you go backwards when it comes to building wealth. You want to make sure that you get rid of that credit card debt as fast as you possibly can. Because typically, Typically, credit card debt has a much higher interest rate than does other types of debt. The biggest culprit of going into debt when it comes to consumerism or buying liabilities is the massive change and shift here in Buy Now Pay Later. Buy Now Pay Later is something, we may have an entire episode on this because I feel so strongly about this, but Buy Now Pay Later is becoming a culprit for a lot of people where so many people

are now using Buy Now Pay Later. For some situations, sure, it's fine. But for most situations, it's not. So making sure that you avoid that almost at all cost is incredibly important. Massive car payments monthly is another thing that broke people do. They take out massive loans for liabilities. A car depreciates in value. A liability is something that goes down in value every single year.

And broke people will have these massive car payments. You see this on TikTok all the time where all these car dealerships are trying to make it a normal thing for people to have really high car payments. And they'll go around and ask everybody what their car payment is. It's $1,200, $1,500, what type of cars do you have? and they have all these souped out cars, and they make $60,000 per year. If your car payment is super high, it is killing your wealth building ability.

I feel so strongly about cars because they are depreciating assets that if you cannot get ahead in wealth, look at your car payment first, see how high it is. Furniture. People are taking out loans to have furniture inside of their house. This is one you definitely want to avoid.

This is what broke people do. Appliances. The same thing goes for appliances. Now, if your fridge goes out, you have no money for a fridge. Obviously, you're going to need a fridge. but 99% of situations, if you're trying to look to upgrade your fridge and your fridge works, then you need to save the cash to purchase that appliance.

It makes zero cents to finance appliances. Now here's what the rich do. The rich only take out loans for school, primary home, and car, and what they do is they try to pay them off as soon as they possibly can. So when it comes to taking out loans, maybe they take out loans for school so that they can have a higher earning potential. Now, studies show that if you go to college, you do have a higher earning potential. There's been a bunch of studies that have come out there.

Now, is college for everyone? There's a bunch of opportunity costs that you need to run. We're going to have an episode coming up on that, on talking about how to think through that. But making sure that you run the numbers and you say, hey, if this is going to increase my earning potential, maybe I need to go back to school. Now, the rich also take out loans on their mortgage, for example.

I am all for you having a mortgage with a lower interest rate and keeping that mortgage long term. I have a mortgage right now at a 2.7% interest rate, meaning that my interest rate is so low that it'd be silly for me to pay off this mortgage. Instead, I take these extra dollars and I put them towards income-producing activities so that I can earn more income because the amount of interest on my mortgage is so low. So that's another one. Number three is they buy cars the smart way.

So there's a bunch of different episodes we've had on buying cars, but they buy cars with 20% down. Their loan is no more than three years long. And their payments are less than 10% of their income yearly. That's a great way to buy a car. but they buy cars the smart ways. Maybe they buy them three years used so it already takes a depreciation hit. But they take out loans on their cars, but they buy them the smarter way than just taking a massive monthly payment.

Now, here's what they're really rich do. The really rich are going to leverage other people's money by assets with leveraging other people's money. So they take out debt for income producing activities. Now, is this for everyone? Absolutely not. You need to know what you're doing before you do anything like this. Let me give an example here.

I am all for taking out debt for buying rental properties, for example, because here's the reason. I would rather somebody wake up every single day, go to work, come home, my tenant, and pay off my mortgage for me. That's what happens when you invest in real estate. Or maybe you invest in a business and you get an SBA or a small business loan, meaning the government's going to loan you 90% and you can use the government's money to invest in an asset that is going to allow you to make more money in the future. This is another way that the rich will utilize debt in order to make more money. So income producing activities is what the really rich do in order to increase the amount of money that they can make every single year. So how can broke people change this?

One of which is have an automatic saving plan for liabilities, meaning you have an emergency fund or you have a savings plan for these liabilities when it comes up. If you want a new car, for example, you're taking the monthly car payment instead of having a massive monthly car payment, you're putting it into a fund that's going to allow you to have cash available to you or so you can have enough put down so that you're going to be a month actually are buying a car in a wise way. Number two is you can pay for your liabilities with assets. So we've had a whole entire episode on this, but one example of this is say, for example, you want to buy a car and that car costs you $500 every single month. Well, what if you went out

and you bought a rental property and that rental property cash flowed $500 a month and you use that rental property to pay for the car? Then once you got rid of the car, you still have that rental property available to you with $500 per month. So thinking about how can I buy assets to pay for my liabilities. Number three is always having an emergency fund, so you do not have to go into debt. Emergency fund is going to protect you from going into debt. It is your protection plan. So making sure you always have one is incredibly important. Have at least three to six months expenses. I prefer six months always. So if you're trying to figure out, should I have three, should I have six? I prefer six, go for six. And then the last one, never ever go in to credit

card debt. That is a wealth destroyer. Number two is income. So broke people are going to have a low salary or high salary, but they spend it all, meaning that they have no money left over. So if you have a low salary, what you want to do is you want to increase your income over time. But if you have a high salary and you spend it all, which is very, very common, there's a large percentage of the U.S. population that spends everything they make that makes over $100,000 per year. So if you have that salary available to you, but you spend it all and have nothing left over, then what's happening here is that you will never be able to build wealth. But we want you to be able to build wealth. So what you want to do is figure out what the gap is between your income and your

expenses and you're going to take that gap and put them towards income producing activities like stocks, bonds, real estate, all these different things. Here's what the rich do. The rich have a high salary or a high savings rate. So the rich have figured out, I need to build up skills so that I can earn more money and I can take some of that money and I can put it towards investment activities and I can put it towards things that I love. Or they have a really high savings rate. You could think of people like in the fire movement who have a very high savings rate. Maybe they make a decent income, but they take that savings rate and they have a very high savings rate to get to that $1 million to $7 million range. So they focus their time on growing their day job

income is what the rich do. They have a high salary and they take that high salary and invests it into things like their 401k, their Roth IRA, their HSA, all of the things that we talk about on this podcast all the time. You can become rich by doing that. They invest some in real estate or maybe they sell a business as well and they have a lump sum that they can invest. And so that's how they got their financial freedom is they had a small business. They built it up over the years. they reinvested into their business, then they sold that business for a couple million dollars. The rich are also consistently trying to add to their net worth. This is where they are consistently trying to take this extra income and add to their net worth

every single year they see their net worth growing over time. They're not going towards negative net worth by taking on additional debt and watching their net worth instead they're focusing on growing their net worth. And some are doing it extremely aggressively for the purpose so they can retire in the next couple of years. So the fire movement, folks are saving so aggressively so they can retire and have. have that time freedom because they prioritize time freedom over everything else. And others do it over the course of 30 years. So maybe you love your job. You're an attorney,

you're a physician, doesn't matter what you do. You're investing over the course of long term and you're taking this and you're investing your extra dollars into your 401k, your IRA, you're maxing those accounts out so that you can have that generational wealth available to you. Now, the really rich have no salary. Now, what do I mean by that? What I mean by that is they're focused on growing their passive income. And they take their income and have this financial freedom available to them. But in addition, if they do have a business or they do have a company that they're working in, they're really rich. Don't just take down a salary. What they do is they find ways to earn that income in different ways. So they earn income on their investments because your

investments are tax less than are your traditional income. So your investments are taxed on capital gains tax rates. Your income is tax based on your income tax. And if you're really rich, your income tax is probably very high if you take that massive salary. So instead, the better option is to be taxed on your passive income or your income sources in different ways. And having businesses allows you to do that. So really rich people try to earn via investing. So what can the broke do? They can learn how to handle their income by investing a portion of it. If you do not have enough money to be able to invest, then they focus on building skills and investing back in themselves so that they can earn more money. This may be reading more books. Listening to podcasts like this is the first

start. It's amazing that you're doing this if you're broke because this is going to allow you to get to that next level, and I commend you for doing that. They do things like take courses if they can afford them. They listen to mentors. They watch YouTube videos. There's so many different things that you can do so that you can learn to get to that next level and make more money. And then once they get to starting to earn more, they invest those dollars into quality assets. They're not just buying things with non-intrinsic value like crypto or gold. They're investing into quality assets, index funds, ETFs, real estate, cash flowing businesses. This is the way that you can really start to build wealth. The third one is learning. So,

When it comes to learning, this is a very important thing that I want you to understand. We just touched on it for a second there, but broke people only consume entertainment. That's all they do. There's a book called Rich Habits, and it goes through this in great detail, where Tom Corley, the author of that book, went through and studied a bunch of different really wealthy people. And what he realized was people who are wealthy spend a lot of time learning and spend a lot of dollars learning, whereas people who are not wealthy spent all of their time with entertainment. So when the work day ends, people who are typically broke will go home to watch

Netflix and they will not try to learn anything else. If you're completely broke, the first thing I want you to do is invest back in yourself. That is the best dollars that you can spend investing in learning new skills that you can earn more. Investing in a financial education so you know how to handle your money. Investing and learning how to invest those dollars. This is what you want to be doing if you want to make more money. If you want to get out of that broke mindset is incredibly powerful what you can do. Imagine if your family's been broke for your entire life. Nobody was able to teach you this. It's not your fault that you're broke. But everybody has a different privilege and the privilege they have when it comes to their financial education, it is up to you to change that. And you can change

your family's trajectory just by learning some of these simple things. Listening to this podcast is a great step. Now, here's what the rich do. The rich read one to four books a month. Now, it's been shown in a lot of different studies that rich people will at least read 30 minutes per day of a nonfiction book. I like to read one book every single week, and I do this in many different forms. Because now that I have kids, sometimes it's harder to get some of that reading in. So I like audiobooks. Sometimes I'll read on my iPad, and then I'll read physical books. Back in the day, I only read physical books because I prefer it that way. But sometimes it's the only way I can get my reading in. Reading one book per week will change your life. That's 52 books

per year. And if you do it on the subjects of earning more on the subject of investing and how to handle your money in personal finance, you will be a totally different person in one year from now. Now here's what the really rich do. The really rich invest a ton of money per year so that they can accelerate this process. Now, how do they do this with courses? They do this with masterminds. They do this with coaches.

They get personal coaches showing them how to do this. If you listen to a lot of high performers, what they do is when they're trying to learn a new skill, say, for example, you're trying to learn how to become really, really fit. They'll hire a fitness coach and they'll hire a nutritionist. And the reason why they do that is they want to accelerate the learning path so they don't have to read 1,000 different articles and said they value their time,

so they put their dollars towards learning more so that they can actually improve their lives in the future. This is an incredibly powerful way to accelerate your path to learning, and it is one of the best things that you can do to tailor. So anytime I want to learn something new now, I go and find a course on it. The reason why is because it accelerates my path

to get from point A to point Z. And that's exactly what I want to be doing. And so if you can invest those dollars, a lot of course creators now are creating them at a much more affordable rate. This is why we created Index Fund Pro at $99 because I wouldn't be affordable for a lot of people no matter where you start. So understanding that this is going to accelerate your path so you don't have to take hours and

hours and hours and hours of time. Instead, you can take one to four hours, go through a course and have a full understanding of the subject. Number four, investing. So the broke do not invest at all. And we all know that if you do not invest your dollars, you will never be able to retire. It is imperative that you invest your dollars. The rich only invest in safe investments.

So this is very typical because if you only invest in save investments, you're not going to hit a home run. And for most people, this is an amazing thing to get to. So people who are rich will invest in index funds in ETFs. People who are rich will invest in bonds, they'll invest in I bonds, all these different things. They'll put them in T bills. They'll invest in stocks, big blue chip stocks. They'll invest in dividend stocks so that they can get rich. This is how you get rich.

This is how you get your financial freedom and you get freedom with your time and energy. The really rich will invest in all of these things. They'll invest in stocks, index funds, but in a deal. and this is what can make you really, really rich is businesses. They invest back into their business because the way to get mega rich is either become like a CEO, make a ton of money and invest it all into real estate and businesses, or you have your own business. So real estate, businesses, index funds and ETFs with some of the extra capital that they

have if they don't have time to learn how to invest in stocks. They invest as a limited partner in syndications, things like real estate syndications where they can be a limited partner and then there is a partner who's actually managing that fund. So there's a bunch of different things that you can look at where when you're really rich, you can start to invest in some additional things as well with some of that extra capital. When you're trying to get to the middle level and you're trying to get rich, you want to invest in safe ass. That's the reason why you want to do that so that you can get the time freedom to be able to pursue some of these other activities. So getting you that time freedom is

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Because here's what broke people do. On anything in life, they say, I can't. I know so many people who are not getting ahead in life, and with every single thing that I mentioned to them, they say I can't. This is really important to understand the difference here, okay? Because if you say, I can't to everything, maybe you say, hey, maybe you just start investing a 50 bucks a month or 100 bucks a month. A broke person will say, I can't.

My expenses are too high. I just cannot do it. Here's what a really rich person says. And I think you need to adopt this mindset no matter where you want to land. How can I? And what that means is that they find a way no matter what to accomplish their goals. And that's how they got to that level because they find a way no matter what to accomplish what they need to accomplish.

So understanding the difference in mindset between the three of these things is going to be incredibly powerful. What I would do is make it a habit to adopt a really rich mindset when it comes to figuring out how you want to think through things. Number six is big purchases. This is a big one. I love to talk about this one. because it is something that is a major problem right now.

So on big purchases, here's what broke people ask. Broke people ask how much down and how much per month. You never want to buy a big purchase based on how it fits into your budget on how much down and how much per month. You never, ever, ever want to do that. And so to make a good financial decision, you need to make sure that you are running the numbers in different ways that do not account for how much does it cost me every single month. Here's what the rich do. How much does it cost? So they are running analysis, figuring out how much does this cost me in my big picture?

How does this impact my net worth? How does this impact my life over the long run? And how many hours do I have to work in order to pay this off? Say, for example, you want to buy a brand new car. It's $40,000 a year. You make $140,000 a year. Well, that's three months of work just working to pay off that car. So they do analysis on how much time is this going to take me and does this really make sense?

Do I actually value this big purchase? Here's what the really rich do. What is the opportunity cost? Meaning that, I want you to ask yourself this with every single financial situation. What is the opportunity cost when it comes to purchasing this thing? What is the opportunity cost if I take on this financial advisor and they charge me 2%? What is the opportunity cost if I only go 100% bond allocation? What is the opportunity cost if I buy into this brand new house and I don't have as much money to invest my dollars?

What is the opportunity cost if I take on a new mortgage at a 7%? an interest rate instead of just continuing to rent until interest rates drop. What is the opportunity cost? You need to think through what that is so that you make the most informed decision and you want to run the numbers on an investment calculator. Because if you would take those extra dollars and you would invest those dollars instead, the opportunity cost is whatever that number is in 30, 40 years. You need to make sure that you know what that number is so that you can figure out what is the

opportunity cost when it comes to my freedom. Am I losing years of freedom just to buy this house? Am I losing years of freedom just to buy this car? Am I losing years of freedom because I don't understand how to have the correct asset allocation? You need to understand these things in order to build generational wealth. Number seven is outsourcing. So outsourcing is a big one that really has been taking me a long time to figure out. And the reason why is because I am originally frugal by nature.

And so for years and years and years, I never outsourced anything. I would do everything on my own. But this is what broke people do. They outsource nothing a lot of times because they don't have money. I completely understand that. At the same time, they do all these tasks themselves. Here's what rich people do. They outsource all the activities that give them more time on the weekends or weekdays.

So what does that mean? That means they outsource lawn care or pool care or maybe even a house cleaner. But they outsource so they can get time back so maybe they can either spend that time with doing things they love or they can spend that time earning more money. Here is what they're really rich people do. What they're really rich people do is they try to outsource everything so that they can earn all their time back. So there's a great book that just came out by Dan Martel called Buy Back Your Time. And in that book, he goes through a bunch of different ways that you can buy back your time

so that you can either earn more money or you can figure out what I want to do with this extra time or these extra dollars. Because what the really rich want to do is they want to buy time. They want to buy as much time as possible because that is the most valuable asset to them. So think through outsourcing. What can you do to outsource certain things in your life if you're not earning enough money? And if you can't afford it, you can't afford it yet. If the outsource person is making more per hour than you are making, then in some situations, I wouldn't do that.

But that's just the way I'm thinking through some of this stuff. And if you need your time back, it may be a great option for you. So for example, let me give you the great example of how I started all this, is I used to mow my lawns every single weekend, and it would take me like five hours to mow my lawn because you've got to do the landscaping, you got to trim up the trees, you got to mow the lawn. And then all of a sudden I realized I could just pay $100 per month

and have somebody else mow my lawn. And I get five hours of time back weekly. So that's 20 hours back into my first. pocket for $100 per month. It's an amazing trade-off that you absolutely need to be doing. So that's one analysis to run. For most people, $100 per month for 20 hours of your time back is going to be less than you're making. So that's the first thing to consider right there is outsourcing something like lawn care or pool care or both. Look at the cleaning fees. Say, for example, you pay $150 per month to get your house clean. That might be high in some areas. I might be low in some areas. But say you pay

$150 every single week for somebody to clean your house. So it takes them four hours. You figure out how much do I make per hour? Does this make sense for me? Would I rather do it? Or do I get my time back? You got to think through all those different situations. Number eight is giving. And you know I love to give.

I give 10% of my income. So how do the broke people give? Broke, don't give it at all. The rich people, they give enough to impact their community. So maybe they give to their local churches. Maybe they give the causes they believe in. Or they give time back as well. But here's what the really rich do.

They can have a major impact on organizations or the world. So the rich impact on their communities, which is absolutely a amazing. Really rich impact on major impact on organizations or the world. So you may have heard me talk about this before because we talked about it on one episode in the past. But one of the major reasons to build wealth is to be able to give back in major ways. Let me give you an amazing example of someone who is doing this. So Brandon Turner, if you don't know who Brandon Turner is, he is the original host of the Bigger Pocket podcast. And he is a big real estate investor now. He has a big real estate and syndication called Open Door Properties. And it's a great example of how, you know,

really wealthy people will invest with him and he buys all these different apartment complexes and things of that nature. Well, he has this idea where he talked about this on all the hacks podcast with Chris Hutchins. I highly recommend that episode if you haven't heard it where he goes into detail on how he would take an apartment complex. And one idea he has is he would buy an apartment complex with a bunch of different investors. All those investors will be able to invest their money into the apartment complex. This apartment's going to appreciate over the course of five, ten, whatever years. Then they will take that appreciation. And whatever money that apartment appreciate, the money will go back to the investors,

and the appreciation will all go to a charity of choice. And he ran the numbers on this. It was something like they could give $100 million every few years if they put this plan into place that he has in his head. They could give away $100 million. That has a major impact on an organization to be able to do this. And this is what wealth can provide to you if you are really, really ambitious.

So if you want to be really rich, one of the big motivators would be to be able to give back to communities and make major changes in people's lives. Because imagine if we all learned how to build wealth and we all just got to the rich level. How much more of an impact could we make on this world if we all just got to the rich level and impacted our communities?

There are hundreds of thousands of people who listen to this podcast a month. Imagine if every single person who listens to this podcast got to that point where they could give back to their communities. How many communities could we impact? Absolutely amazing what wealth can do if you give back. And that's what we want to do here

is we want to improve the lives of others as well. That's the whole goal of this podcast. The whole goal of this podcast is to teach you how to build wealth so that you can have the freedom for your life and generational wealth for your families. I think every person in this world can build generational wealth.

I truly, truly believe that. All right, the next one is appearances. So if you've never read the book, The Millionaire Next Door, that's a great book to read when we're talking about this subject. Thomas Stanley wrote two books that I recommend. The Millionaire Next Door,

which is the book that absolutely changed my mindset when it came to building wealth. Number two is called Stop Acting Rich. And both of those are going to kind of tie into what we're talking about here. But when it comes to appearances, Here's what broke people do. They buy designer clothes that they can't afford

and cars that they can't afford to impress people that they don't even care about as well. Here's what the rich people will do. They will spend money on nice things that will last for a long time and infrequently maybe they'll buy designer or they never do it all and they take the extra money

and they invest it. Where rich people are cautious about what they buy, there's nothing wrong with liking designer. Let me put that in it. If you're not subscribed to the master money newsletter, we just recently talked about this, spending money on the things that you value. How do you do that?

My wife loves designer stuff. We were just talking about this earlier. She's in the fashion industry. I don't understand it, but whatever. If you really like designer stuff, if this is something that you really, really enjoy, you enjoy the feel, you love buying it, you love looking at it, holding it. There's nothing wrong with that. And you got to make sure that you can afford it.

And you have to make sure that you're still hitting your investment goals at the same time as being able to buy that. And so the rich do both. They hit their investment goals. They're maxing out those retirement accounts, but still being able to buy a designer because their income is maybe higher. Or they don't buy designer and they take the extra dollars and they put it into their investments because their income is maybe a little lower.

And then here's what they're really really. rich to. A lot of the really rich, the ones that are truly wealthy will practice stealth wealth. What is stealth wealth? Really rich people don't want to bring attention to themselves because they become a target if you bring attention to yourself. And a lot of really rich people do not want to do that. Maybe they buy some designer things. Obviously a lot of rich people have designer things. That's not what I'm saying. What I'm saying here, though, is the truly wealthy, the really wealthy people, a lot of them do not want to bring attention themselves. There's a great article on the blog, financial samurai and Sam goes through some of the reasons why you want to practice stealth wealth.

One of which is you can foster deeper relationships because people aren't envious of you. It takes a target off your back. There's a bunch of different things that are available there, but that's a great article. We'll link it up down below so that you can check that out. But it also helps you not getting ripped off as well where people know how wealthy you are. Now let's go to number 10. Estate planning. So at state planning, there's a big difference between broke, rich, and really rich. Broke people have no estate plan. They don't have assets. They don't have liabilities. They have no estate plan that they put into place. You should always have an estate plan if you own any possessions whatsoever.

The rich have a will. They assign their beneficiaries and their investment accounts. And maybe some of them even will have a trust. But the rich, most of them have a will and they at least assign their beneficiaries. Now, if you don't have a will, a will is a very easy and a very cheap and sometimes even free document that you can make. I use trustinwill.com. You can go to attorney and start a will. Or there's free things online that you can also set up a will for completely free.

So making sure that you at least have a will in place, especially if you have assets is really really important. Now, once your net worth gets over a million dollars and you have maybe a bunch of assets like real estate or you have a bunch of assets like a business, then you need to potentially have a trust in place. And a trust is going to allow you to do a lot of different things, including tax advantage ways to pass down some of your assets. And if you have a living trust in place, then you can control a lot of different things as well. And that's what the really rich do. They have living trusts. They have wills. They have beneficiaries. They make sure everything is put into place. They have attorneys that help them through this because once this gets more complicated,

it is much better to have an attorney there available to you so that you can put this together the right way. Number 11, financial protection. So broke people have no plan for financial protection. And we've talked about how to put together bulletproof financial protection plans. So you've got to make sure that you do that. We'll link that episode up down below so that you can learn how to do that. Maybe they have basic insurance. They get the cheapest insurance that they can get just so they have the lowest monthly payments because that's how broke people think is How low is my monthly payment on this? Here's what the rich do.

The rich have a six-month emergency fund at least funded. Inside of a high-yield saving account, maybe they use T-bills if the interest rates are high enough, but they make educated decisions on where to put that emergency fund. Most people, you want to at least start with a high-yield savings account. They have auto insurance. They have homeowner's insurance. They have term life insurance.

They have medical insurance, maybe even some other policies as well in place to make sure they are protected. They are financially protected from all different things. In addition, maybe they have some additional insurances available and they also have things to protect themselves online, like delete me, for example, where it removes your financial data online so you are less susceptible to getting scammed online. Here's what the really rich do.

The really rich have auto, homeowners, life insurance, medical insurance, umbrella policies, disability policies, ID theft policies. In addition, they have an online protection plan, a full on online protection plan so they don't get scammed or fraudulently taken advantage of. They have access to cash in a number of different ways, including an emergency fund, that is fully funded, but in addition, they also have a line of credit. They have a margin account. They really can borrow against their investments if things get really bad.

They have a bunch of different options there. They're focused on being hackproof online. And they have a bulletproof financial plan and also have additional plans to protect their business as well. This is what the really rich do. They have a bunch of different protection plans because protecting your wealth is imperative to continuously building wealth. So having this put into place is something you definitely want to be doing, having these

financial plans in place. Sure, it's not sexy. It's not fun to talk about. financial protection plans, but having them is going to change your life once you learn how to do this. Now, we talk about it a number of times in this podcast. If you haven't heard some of those episodes, we will link them up down below. Number 12, financial team. So broad people have no financial team.

They think spending money on advisors is a waste. Here's what they're really rich to do. They have an accountant and a tax strategist, which it can be the same person or can be two different people, having an accountant and a tax strategist. This saves you thousands of dollars per year. And for rich people, it can save you hundreds of thousands, if not millions of dollars per depending on how rich you are. They have a CFP on their team.

What is that? Certified financial planner. The reason why you would have a CFP is because they can give you advice at an hourly rate that's going to really benefit you in your personal situation. When you hear me talk about financial advisors, there's a CFP which is certified financial planner and there's a financial advisor. CFPs, I'm for financial advisors. I am not for.

And the reason why is a CFP can do what a financial advisor does. You can set it up on terms where they can set up an investment plan for you and you don't have to give away one to two percent of your portfolio. So there's a major difference between the two here that I want you to understand. In addition, they have an estate tourney. They have an insurance broker that walks them through all the options for their financial protection plan. They have all of these things available to you. This is what the really rich do in order to make sure that everything is running in place. They know each and every one of these things is actually saving them money. So having these in play is an incredibly valuable thing. And it's helping them earn more, save more so that they can grow their wealth even more.

This is a very valuable way to invest your dollars. And number 13, the last one we'll go through is spending. So broke people have no idea where their money is going. Rich people know where their money is going. They're utilizing a budget or a spending plan. And the really rich people know exactly where their money is going. And in addition, they have a team monitoring as well. So they spend money on accountants so they can monitor their businesses. They spend money on a team who's going to look at their finances and make sure everything

is running smoothly. But they also know exactly what is going on as well. So this is the difference between spending. Having a spending plan in place is incredibly important. If you like to do with the rich, do I use tools like Wynab, Rocket Money, just just making sure that you have a spending plan in place and you know exactly where your dollars are going is incredibly important. Listen, I hope you guys learned a ton of things about the difference between being broke, rich, and really rich. If you guys have any questions, make sure you hit us up

on Instagram, Twitter, or TikTok at Master Money Co. In addition, if you're getting value out of this podcast, make sure you share it with a family member or a friend. I cannot thank you guys enough for listening to this episode. I truly want to bring as much value as possible to each and every single one of you. We will see you on the next episode.