7 Assets Rich People Never Buy And The Poor Always Do

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my Money Machine experience. Live it is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. Here's a number that should bother you. Most people who struggled financially didn't lose money in the market. They lost it through everyday purchases they thought were actually smart. That's not what we've been told. See, we're taught wealth is about earning more, investing harder and optimizing returns. And after 30 plus years, as a CPA, as a money mentor, and someone who actually walked this journey himself, I can tell you this. Wealth is just as much about what you buy as it is about what you don't buy. And in this episode, I'm going to break down seven assets that the rich almost never touch. Why they look so attractive. How buying them at the wrong time quietly destroys your options. I'm Mel Abraham and this is Building youg Money Machine where we help you master your money, eliminate financial stress and live a life by choice. Because earning more doesn't make you free. A money machine does. Let's go do this. Let me say something that might sting a little. Most people don't stay broke because they don't earn enough money. They stay broke because they keep buying things that that look like wealth but act like sandbags, anchors onto your your life. And the rich, they. They don't buy smarter stuff. They just simply say no more often no to things that maybe feel good today but quietly mess up tomorrow. And today, let's just look at 7 of the assets that the rich almost never touch. But most people do. Not because people are dumb, not because they're reckless, but because these things are incredibly well marketed, emotionally rewarding and financially sneaky as hell. And stick with me because if you get this right, you don't need more income. You need fewer self inflicted money wounds. And so that's the thing that I want to bring to you now before we jump in, I want a quick reset before the comments light up and you start DMing me. This is not an anti luxury video. This is not a live like a monk sermon. I like nice things. I live in A nice house, I drive a nice car. We take wonderful vacations. Rich people like nice things. The difference is who pays for them. See, wealth isn't about what you can buy. It's about what you can buy without flinching later. Here's the rule that runs this entire video, this whole episode. And every asset you buy either buys you options or quietly takes them away. And most people don't realize which one they're doing until it's too late. So let's look at them and the first one is this. Luxuries bought the wrong way. Okay, let's start with this is to me like a fan favorite luxuries. This is the thing. And no, the problem isn't the car. It is not the boat. It's not the trip, it's not the watch. The second place, the toy. The, the problem is the debt pretending to be a reward. Okay? See, most people will buy luxuries with payments with future income or money that should have stayed investing. That's not a reward, okay? That's borrowing from your future you than charging interest. Here's the thing. This could be a vacation home. This could be a boat. This could be, you know, a car that you have to finance for seven years because you can't afford the payments. Okay? What we're doing is we're overextending our current financial structure by borrowing from our future so we can live a certain way today. And I'm all for living, living well, but I'm also all for living smart. That doesn't jeopardize your future. And going into a seven year loan on a depreciating asset like a car is you're mortgaging your future and you're doing it with debt. And we've lived in this society now that has got us normalized to debt and using debt in the wrong way. And so here's the line that I want you to think about. If your lifestyle needs payments to survive, that's not wealth, it's living life on a subscription service you forgot to cancel. The wealthy flip the script. They look at and they say, if I want the luxuries, how do I create? How do I buy assets that can actually generate income to allow me to pay for the luxuries? I, my wife and I take wonderful vacations and we take a couple of them a year and we don't travel on Spirit Airlines. Okay, sorry, Spirit Airlines. But the fact of the matter is, is that our assets and our income are paying for it. We're not going into debt to make it happen. And so if we're not careful, you let your luxuries drain the very assets that are trying to build. So we don't take from them, we don't bring them down by doing that. And here's where people get wrecked. They don't actually know what their lifestyle cost. Okay? So a lot of times we go into this and say, all right, I'm just going to pay for this or I'm going to put it on a card and I'll deal with it later. And when's the last time that you actually looked at how much your lifestyle costs? So I'm going to give you a tool that I want you to use to, to, to figure out your lifestyle cost. It's called the lifestyle cost calculator. Because I don't want you to guess, I don't want you to feel it, I don't want you to eyeball it. I want you to know it like the back of your hand. Because eyeballing is like taking a road trip without checking how much gas you've got. So the lifestyle cost calculator, you can go to melabraham.com lifestyle you'll have this calculator, you can put numbers in and you can get an idea of where your lifestyle costs are to make it happen. Okay, so that's the first thing is that the luxuries bought incorrectly. The second asset that is, that is bought. This is a pain. Timeshares, y'. All, I get it. You got the free stay at the, at the timeshare hotel and then you have all you got to do is sit through, through the presentation. But they got the most impressive, you know, full press court sales job that ever gets pulled off. And all of a sudden they're selling you memories, they're selling you certainty, they're selling you a vacation, they're selling you, oh, you can transfer the, the timeshare, you can look at other things and it sounds wonderful and you go look, honey, our, our vacations will be ready, we'll be planned, we'll have that flexibility. And none of it really comes to fruition. It's probably one of the worst investments, the worst places to put your money is in a timeshare. What they don't tell you and they don't sell you is the fact that there's rising fees, that there's special assessments. The resale market, if you ever wanted to get out, is basically a garage sale with sad. Timeshares are not assets, they're long term obligations and flip flops. Okay, don't get sold into them in some high pressure thing or them using reciprocity because they gave you a free stay and a free dinner. I'm fired up. I know you can tell. Here's the truth. Wealth buys flexibility. Timeshares put your money in handcuffs. The rich buy, they don't prepay for vacations, they keep their money liquid, they keep their money working for them and rent the dream when they want it. Don't get yourself into a timeshare that's a dark hole that's hard to get out of. Number three, high fee commission heavy annuities. Let's be grown ups about this one. Annuities are not evil income annuities can solve specific problems. That's not what most people buy though. What most people buy are annuities that are commission stuffed, complexity layered. That, oh, don't worry, I've got this type of product and when so and so this is an insurance product, this is a, this is something that, that is being pushed on, on folks. And they don't tell you all the details, all the fine print of what is costing you. Think about this. Someone else is getting paid a lot, so you don't ask questions. The line that they use to stop it, is that a guarantee you don't need at a price you don't understand, is not safety, it's surrender. So I get that they want to give you an annuity and they say, well, this is going to assure your future and guarantee it, but you're paying for it. And if you start to break it down and look at the returns you get on some of these complex things, your inability to get out, what happens if, God forbid, you pass away and what your heirs get, it can be a disaster because your liquidity disappears, the fees hide in the walls and the flexibility is gone. It exits the building just like Elvis exits the building. Wealthy people don't buy comfort, they buy clarity first. And if someone's trying to sell you an annuity and it's important for you to make sure you understand all the aspects of that annuity, not just the fees, how it's structured, what the caps are, what are the limitations, what's the participation percentage, they can dress it up any way they want. And trust me, this is coming from experience. I had someone sell me into a couple of different annuities that were horrible annuities before. I knew better, I know better now. And now you do. All right, that leads me to number four. And this one might ruffle some feathers, but whole life insurance as an investment now this one usually gets emails, this one usually gets comments. I get it. Whole life insurance can, can make sense for estate planning, for final expenses, for specific use cases. But what it doesn't do well is grow your money efficiently. Whole life insurance is not an investment, it is an insurance product. If I want life insurance, what's the purpose of life insurance? The purpose of life insurance is to supplement income for the people that are dependent on it. If the person that's generating the income is gone, it's to take care of the loved ones. It's not really there to build wealth, it's there to protect it. And they sell it as tax free. Guaranteed Swiss army knife of your finance. This is the key. But you know what, it's a dull knife. Your money's in and most of it's going to commissions at the beginning. And they'll turn around and give you the spiel about you're going to get cash value. The cash value doesn't build right away. And most of those policies, when you pass away, you lose the cash value. Oh, but you can borrow it out. Oh, let's put complexity on top of it. And when you look at the returns on these policies, you are far better off getting a term policy and then taking the difference and investing it in the market on your own capital gets stuck in these policies, the growth goes down to a crawl. The opportunity cost is what does real damage. Okay, Insurance is great at handling risk. It's terrible at pretending to be an investment. Rich people don't ask one product to do five jobs on average. They find one product that does one job. Great. Now I'm not saying not to have whole life. There are, like I said at the beginning, there are some reasons to have whole life. It may make sense, but 95% of the time it doesn't make sense. And it gets God awful expensive. And the only ones making money are the, are the brokers that are peddling this stuff. Okay, leads me to asset number five, rental properties bought too early. Now hear me on this. I love real estate. Real estate is powerful. But the timing of buying real estate is really important in your wealth journey. And so I'm not against real estate. What I am against is buying it too early. Your ability to make money on real estate is based on your purchase, not your sale. And if I don't buy it correctly, I can get destroyed in it. Why my wealth priority ladder is built the way it is, is to give you an unshakable financial foundation to build a critical mass in your portfolio that Gives you liquidity, safety and a foundation for growth. And the way we do it, by putting it into ETFs and index funds and everything, you have diversification along with liquidity. And when we manage the debt now, we have an unshakable foundation to make it from there. The challenge with rental properties and rental properties in the wealth priority ladder are higher up in the priority list in the sense of, of later in your investing. And here's why, and I'll just tell you a story of a friend who bought a office building. They bought the office building. He wanted to do some, he had to do some repair work on the roof. And when the contractor came in, they noticed that there's asbestos in the roof. So they said we can't do the work until the asbestos is taken out and remediated. That meant that he had to get all his tenants relocated and vacate the building. Then he had to go to the remedy, go through the remediation. Then they had to go through the repair. By this time they're six, eight months down the road. And then he had to get tenants back in the building to get money coming in and income coming in. All during that whole time, he still had to make the mortgage payment, he still had to make the property taxes, he still had to make the insurance payment, he still had to make the utility payments. And had he not had the liquidity and the unshakable foundation that was built, he couldn't have kept the building and done what he did. And this is why I say buying a rental property too early, if you buy it wrong or you get a bad tenant, or you have a tenant that decides not to pay, now you have to go through eviction and all of that type of stuff, it could destroy you financially. And if all you have, let's say you save $50,000 to get into an investment and you put it all into a rental Property, you have one property versus if I went $50,000 into a portfolio, I can have thousands of, of stocks. You have no diversification. So, so I love real estate. I just don't love it at the beginning. I want you to, to do it once you have critical mass to your portfolio. But people hear, oh, passive income and cash flow and someone else pays the mortgage. And it sounds really good. But let's get a reality check. Real estate's never passive. It's either managed by you or paid for with stress and margin. Tenants move, tenants stop paying, stuff breaks, roofs don't care about your spreadsheet. And here's the Line that most people miss. The money is made on the purchase and you need enough capital to survive a bad one. Rich investors buy rentals when they can afford a mistake. Everyone else buys hope and calls it strategy. I don't think you should be doing that. So I love real estate. I just think that, that if you do it too early, you're taking on a bunch more risk than you need to. It leads me to number six. This is ego businesses and passion projects. This one sneaks up quietly. This concept of I've always wanted to open up or I want something meaningful or I'm ready for the next chapter. And I love passion. I love that. But here's the rule. Wealthy people test passion with side money, not life money. So it isn't the dinner on the table money. It's the fringe money. No plan, no testing, no downside. Cap, that's not entrepreneurship. That's Vegas with a nicer story. So a lot of people I remember on the plane, someone says, what do you do? I said, I'm an entrepreneur. And they look at you like you look like you're diseased or something. Is it contagious? And they, oh, so you like taking risks? He said, no, I hate taking risks. An entrepreneur, a true investor, we mitigate the risks. And so we need to be mindful of that. I had a client once that his wife always wanted to own a hairstyling studio. Now, she wasn't a hairstylist, she just wanted to own it. But she wanted to own it on the most expensive street in Beverly Hills. Wilshire Boulevard, right by Rodeo Drive. The rent on that place, the rent on that place was $35,000 a month. Just the rent. And that became a black hole and almost bankrupt them. That's what happens when we, we're not careful. Now there's another side of this too, that we need to be mindful of. And, and that is if we're not careful, we have concentration risk too. And what does that mean? That means that all our eggs in one basket. If all of a sudden I take all my investments and I put it into a business or a single property or one big bet, if that goes against you, you've got nothing left. Concentration risk is where we've over invested in a single asset or a single asset class that creates more risk than you need. Okay, most of you probably won't have this if you're careful. Some of you might have it just by virtue of employment. Like my wife. She works for a publicly traded company and she gets stock from that publicly traded company. And if we don't continually diversify her portfolio by selling some of that stock and buying other stocks, her portfolio becomes mostly invested in the company she works for, which is a concentration risk that you have to be careful about because that means that her ability to generate income, her job and the investment portfolio are tied to the same thing. If the company starts to have problems, the stock price of the company is going to drop and her job is in jeopardy. We don't want to do that. So we want to look for concentration risks and make sure that we diversify out of them. So in this type of asset, there the wealthy typically avoid passion projects that have to be funded with dinner money, life money, but will put money aside specific for them and know that if it goes to zero, they're going to be pissy, they're going to be upset, but it's not going to destroy them. All right, then number seven. Number seven is illiquid assets that kill flexibility. This is the pattern behind everything you just heard. Most people don't blow up wealth with bad assets. They blow it up with illiquidy, illiquid assets at the wrong time. You put money in and it gets locked up, options are gone, life happens, and now you have a hard time getting out. Now I hear this a lot with people where they say, okay, my wealth is building and everything. What do I do now? If what you're doing is working, why are we going to change it? Let's just keep doing what's working. The same strategies, the same investments, the same things that I was doing at five figures. I did a six, seven and eight. Okay. Point being is that don't bring in complexity where you don't need it. Don't bring in illiquidity when you don't need it. And you'll hear things like, oh, the hedge funds and, and these syndications. And they're great investments and they might be, but most of them are illiquid. In other words, you can't get out without getting gouged. It's like a timeshare with your money. And so I'm fine with doing some of it, but very small percentage and only if your portfolio is fully funded and you have the critical mass to sustain it because you can't get to that money and it kills flexibility. And so I made this mistake early on because these investments sounded great. You're going to get these returns you're going to get. But if I needed the money and when I wanted to get out, I couldn't get out without without selling it at a, at a huge discount, there's no liquidity. And so these are the seven assets that I, that most wealthy people will avoid or they will make sure that if they do it, it's strategically at the right time so they don't put themselves in, in harm's way. Okay? Because when it comes to these types of assets, wealth isn't about what you can afford. It's about what you never have to sell. See, if you don't know what you, what your lifestyle costs or you don't know what your assets are, then guessing is expensive. Okay? And maybe the first thing for you to do is to make sure you know what your lifestyle cost is so you know what kind of assets you're acquiring to build a lifestyle that you want. And I'm going to give you an access to a free tool. It's called the lifestyle cost calculator. You can go to melabraham.com lifestyle we'll hook it up here and you can run it and check your numbers and run some numbers to get a ballpark of where you are because that will give you the clarity so you don't put undue pressure on you. But the fact of the matter is, is that these seven assets are assets that many wealthy will avoid or at least delay until they know they can sustain the lack of liquid, the additional risk, speculation, and the possible loss. None of these assets are evil. None of them are scams by default, okay? But they become dangerous when they kill liquidity. They become dangerous when they kill flexibility. Or that when they're bought to feel successful instead of becoming secure. Okay? See, wealth isn't about having more stuff. It's about having more choices. And every dollar you deploy, every dollar you put out there is either buying future freedom or quietly selling it. So we have to choose wisely and understand that that's why you need to follow a system. That's why you, you need, that's why the money machine blueprint is to allow you to have a system that becomes yours. Because if you don't build your own system, you will be living in someone else's and their system isn't built for your freedom. I hope that this is valuable. I hope that you'll look at this and say, well, I got to look at things a little differently and see what, where I should be investing and do it the right way to give you the highest probability of success on your path to financial freedom, that unshakable foundation, and then build the growth from there. Because I truly believe to the core of my being, that financial freedom is a birthright. I just want to light the path so you can go claim it. All right? If you found this of value, do me a favor, let me know. Subscribe and give me a thumbs up. It makes YouTube happy. Makes me happy, too. All right. And if you have any questions, DM me or pop a comment below, we'll, we'll keep this conversation going. In the meantime, as I always say, I hope to see you on your path to financial freedom. And until I do, always, always strive to live a life that outlives you. See you in the next one. Cheers. For now, thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you foreign. And that's it for this episode of Building your money machine, where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast, or wherever you're listening to this podcast and rate and review the show. It helps us transfer tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.