Tuesday, March 13, 2018

The Mindset of The Wealthy vs. The Middle Class

Once upon a time you were probably told to work hard at school, get a good job,
work your way up through the ranks and then retire with a secure financial future
ahead of you; full of cruises and cabaret! Today, this advice is not only archaic,
it’s potentially hazardous to your financial future.

Today, in a global digital economy we are having to learn about topics such as personal
branding, portfolio careers, side hustles and passive income in order to secure our
financial destiny. There’s been a huge social shift in the way we are making
money - and it’s important to get educated in this growing area of concern.

The book “Rich Dad Poor Dad” presents four categories in how people make an income:

  1. Employee
  2. Small Business Owner
  3. Big Business Owner
  4. Investor

To be an employee is the most common, yet often the most ineffective way to
go about making money, because ultimately, as an employee you are trading time
for money - and someone else is pulling the strings.
Working for a corporation at the higher level does have its perks however, such as
the fancy cars, business class travel, and decent remuneration… but being an
employee is a little like renting rather than owning a house, you’re not building
something that will become an asset (other than a pension) you are simply trading
time for money and when you stop trading time you stop receiving the money.

Many people today are taking the entrepreneurial leap to run their own small business
but often find themselves trading the comfort, stability, and reassurance of having a
regular income where they simply turn up to work do their tasks and get paid with a
whole heap of stress and uncertainty. As a small business owner, at least in the first
year, they are likely to have doubled the amount of time they are working and halved
their salary!

The financial rewards of having a small business can be substantial, but for most
people they are simply trading a job for a job they own.

Small Business owners, in this context, relate to people that ‘own their job’
such as a massage therapist or personal trainer; where they are still trading their
time for money. The limitation being that you can be a great massage therapist,
charging $100 an hour, yet there are only so many hours in each day that you can
realistically work.

Big businesses, however, leverage systems and other people to create their income.  
Let’s take an ice cream van. The small business owner mentality runs an ice cream van
generating $200 profit from selling ice creams. The big business owner, however,
goes out and buys five ice cream trucks and employs five people to serve ice cream.
He now has leverage.  He has created a system and a network that is scalable.
This is how the wealthy become wealthy - they build systems.

The investor has true leverage; rather than work for his or her money, in the
conventional sense of swapping time for money - they put their money to work for them. 
Think of it this way, if you have $500,000 in a savings account that is earning interest
of 10% each year - then, by doing nothing, that savings account is generating $50,000
a year. Now, the challenge is getting that initial $500k in the first place, but the
concept remains - investors create assets that generate income automatically in

Now that we have a grasp of the four ways of making money, let’s look at three general
principles to help you create a life of financial wealth and abundance:

You want to dream big.  Why? Because today, you can have, be and do anything
you want - you just have to walk the path that leads there.

Many highly successful people talk about the importance of having a vision board,
where you connect with your hearts desires and spend time visualising a future life
that fulfils you - just like how athletes use positive visualisation techniques to picture
themselves winning the race, you want to set yourself up for success, you want to
expect success and lean into the experiences you want.  As an example, learn more
about owning your own private aeroplane or go down to the showroom that houses your
dream car.

There’s a popular saying that states the “more you earn the more you learn”.  
This is a sound concept, however, when looking at education from a money making
perspective, it should be noted that there are many people that dropout of college
and financially surpass their well educated white collar friends by simply selling
things on eBay.  

With this in mind, it should be noted that learning is not limited to academic education;
indeed, if you were to learn how to invest in property these skills are likely to get you
much further in life, on a financial basis, than having a generic degree. There are
some academic courses that are required to enter a particular profession, and
these should be considered, but bear in mind, that oftentimes, you’ll find highly
educated white collar workers attending weekend seminars on topics such as
real estate investing, amazon trading, and digital marketing that are being led by
people that didn’t go to college - they just got out there and did it.  

The one thing to bear in mind, when it comes to learning, is to ensure the time and
money you put into the course provides a decent return on investment.

Today, you can easily start a business for under $500.  Indeed, it can be for
under $100 if you’re setting up an online business, such as a blog or online shop.
The key thing to remember is that it’s VERY hard to become wealthy by being an
employee - you need to run your own business and focus more on making a profit
rather than making a salary.

Even if you have just $100 in your bank account, start investing, get into a good
practice and build the habit of creating assets. That’s the main difference between
the “rich and the poor” - the poor tend to spend money in order to derive pleasure
or gain comfort (e.g. a fancy car, nice meal, or expensive outfit) whereas the
wealthy invest their money in order to derive long-term financial stability (e.g.
houses, savings accounts, stock portfolios).

In summary, this article has hopefully opened your mind to looking at the different
ways people make money - but if you want to be financially free, you’ve got to start
dreaming big and investing your time in building assets that generate income without
you having to swap your time for money, like an employee trapped in the rat race.

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