If You Don’t Understand The K-Shaped Economy, You’ll Never Get Rich

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. What if I told you that we're not all living in the same economy? See, some people are climbing higher than ever, while others, well, they're quietly sinking. And most folks don't even realize which side they're on. See, in this episode, we're going to break down something called the K shaped economy. Why is it that there's a gap between the haves and the have nots? And why is it widening faster than ever? And how can you make sure that you end up on the right side of that? Because waiting for things to go back to normal isn't a strategy. It's a slow leak to your financial future. Okay? This is building your 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. And that freedom, it doesn't start with the next raise, the next paycheck, the next client. It starts the moment we get your money to work harder for you than you did for it. Think of this as financial education with a sight of sarcasm and a whole lot of heart. And I'm your host, Mel Abraham. And I used to think that success was a big spreadsheet and a Corner office. But 30 years later, I figured out that real wealth isn't about bigger numbers. It's about bigger choices. And trust me, I made the mistakes to prove it. So today, I'm going to show you exactly what the K shaped economy means for. For you, for your money, for your freedom, for your future. How to build your money machine, no matter what side of the K you're on. And why today, now, right now is the most important time for you in your financial future, no matter what your age, stage, or circumstance is. So grab your coffee, ditch the noise. Let's get climbing to the top arm of the K together. Let's do it.

If you don't understand the K shape economy, you'll never get rich. Not because you aren't smart enough or Motivated, but because you'll be playing the wrong game while others are actually rewriting the rules. So here's the thing. I was talking to two friends recently and both of them are in their 40s and both make about $100,000 a year. One's net worth has gone up almost $300,000 in the last three years. In other words, it's grown tremendously. The others gone down. Same income, same economy, different outcomes. Okay, that's the K shaped economy. That's what it is playing out in reality. And we are living in a time where the gap between the haves and the have nots isn't just wide, it's accelerating. And this isn't about fear mongering, this isn't about anything. This is about the reality of, I think, what's, what we're living in. And how do you navigate that? Because I truly believe that we've reached a turning point in history. A moment where waiting is the most dangerous financial strategy of all. Every day you wait, the gap between the upper arm of the K and the lower arm of the K widens. And not by inches, by compounding percentages. And the people in the upper arm of the K, they're just, they're not sitting around waiting for comp seas. They're using the storm to sail faster. And if you don't start now, the game that you're trying to win will already be over by the time you step on the field. So let's talk about this a little deeper of what you can do, what it is and how it comes about. Because most people think that the economy is a single line and it goes up and we cheer and it goes down and we panic. But that's the old way of thinking. See, I think the new reality looks more like a K. The top arm goes up and those who adapt and invest and own assets.

They'Re there and they're experiencing that. The bottom arm goes down. Those who wait, react and hope someone else fixes it.

That doesn't work out so well. So let me ground this in some numbers. The top 1% of Americans now hold over 30% of all the wealth. Okay? The bottom 50%, half the country hold less than 3%. And that gap is widening faster than any point in modern history. So when you hear the economy is recovering, remember that's true for one arm of the K. The other one is still underwater. Okay? It's like saying the average temperature of the hospital is perfect when half the patients have a fever and the other half are frozen. Averages Lie behaviors, tell the truth. So how did we get here? Why does it even matter? Because this split didn't happen overnight. This separation didn't happen overnight. But in 2008, when the housing bubble burst, people who owned assets took a temporary hit, but they recovered because they actually owned something that could rebound. But those who didn't never caught back up. See, and then we go forward to 2020 and 2020 hit hits and same movie, but a faster sequel. The pandemic didn't create inequality. It, it accelerated it. People who could work and work remote and owned ancest and were able to adapt, they thrived. They thrived. But those that were in person jobs who were living without investments, they fell behind. And it was far behind. And it's not just the math, it's the mindset. See, the top arm of the K is driven by vision, whereas the bottom arm of the K is driven much more by validation. See, one asks, they'll ask. One asks, where am I going? The other asks, do I look like I'm doing okay? Very different. One buys assets, the other buys AirPods and avocado toast on credit. Very different. And if you've been telling yourself, well, I'll get serious about money when things feel more stable, this is a wake up call. And I don't normally do episodes like this, but I think it's that important. We are at such a critical point in our history that I think that we need to take action. Stability doesn't come before action. And the reward of action is the stability, the certainty that you're looking for. And so if you're feeling uncertain around your financial future, if you're feeling, you know, kind of concerned about it, you don't wait for it to show up, you go and grab it. Every person thriving right now didn't wait for certainty. They built it. And the longer you sit still, the steeper the climb becomes. So if you're wondering, well, where, where you actually stand, maybe you're sitting back going, okay, I'm not even sure where I am on this. Well, let me help you out on this. Okay, the first is, is I've got a spot a free tool that you can get access to called the Freedom number calculator. You can go to melabraham.com forward/number. We'll hook it up here. But this will let you know where you are on your journey. What's the target number for financial freedom for you, how far you are from it, and that gap that you have to close. Now, this is not to depress you. It is simply to raise the awareness to say, hey, here's a quick tool that in five minutes or so you'll be able to at least ballpark where you are without guesswork, without overwhelm. So you can then start to put steps in place and make the right choices and decisions to move you closer and put you on the upper arm of the K shaped economy. So here's the thing. The first step to dealing with all of this is to controlling your economy. And I mean your economy. In other words, controlling the economy that you operated. And that is, that is really dying. And it starts with this idea of five decisions. If you want to know which arm of the K you're on and which you'll stay on, it comes down to these five decisions. And decision number one is this. You're spending intention. The top arm spends with purpose to build. They're using their money to invest and own things that will grow over time and create cash flow. The bottom arm spends for pleasure or perception in doing it. Two families making the same $80,000, one by status, one by stability. Ten years later, one owns assets and the other owns regret. Now I get it. Cost of living's gone up. Spending makes it is much more difficult. You've got less margin in your money every month. I get it. But that means that we have to be disciplined and we have to be deliberate. We have to be intentional. We have to manage it. Remember I said that 80% of your wealth journey is driven by behaviors, habits and choices. We might have to make some hard choices, but those hard choices today will give you easier choices tomorrow and it'll give you options tomorrow. So decision number two is in an information diet. Okay. Wealth builders, Read to learn. Okay. Wealth drifters. Scroll to react. Okay, in the sense of this, one will ask, what can I apply? And the other will ask, what's going wrong today? Okay, Very different mindsets. But remember, if it's behaviors that drive your wealth, your mindset will drive your behaviors. If your money mindset is fed by panic headlines in the media and the social media, you'll never feel safe enough to act. And what happens is we stand frozen in fear. I did this. Okay? I listened to someone speaking at a conference that I was at and it was all doomsday and we're going to hell in a handbasket. And I freaked out. I literally got up before he was even done, went out to the lobby, called my stockbroker at the time because I didn't understand the things that I'm teaching today. I Didn't have the command of it, the mastery of it that I do today. And I literally said, put me in cash. I don't want to play this game anymore because I'm concerned. And so that fear that they stirred up got me on the sidelines, actually sitting on the stands. I cashed everything out and I sat there for decades because I didn't get in, I didn't act, I didn't make a decision. Okay, so I think this decision of which arm you're going to be on has to do with the diet. What are you taking in? Are you bringing critical thinking? Are you reading to learn? Are you taking things in to understand? Or are you allowing them to infuse panic, fear, and their agenda into your world? Okay, that leads me to decision number three. And decision number three is to be income focused in the sense of this is that the top arm of the K builds multiple income streams. They have. They have more than one stream of income coming in now, mind you, I've talked about this before. Get one income stream spinning fast. Get that one driving for you. Don't try to build multiple income streams all at the same time. You're going to get one running first. Then you'll start to expand to another and another. So it could be side businesses, side gigs, it could be investments, it could be rentals. The five incomes that I talk about in, in my book, building your money machine, you're going to want to build a series of income streams over time that allows you to have stability if one of the income streams go away, or by choice, you decide to stop an income stream, like I did during my cancer journey or after my bike accident where I had to slow things down. So the top arm has an income focused, but their focus is on spreading the income out so they have multiple sources of it and not relying on one. The bottom arm, however, relies on one stream of income, one paycheck, and hopes that the boss doesn't cut their hours. And that becomes a problem. Okay. Because if I have a single path to success and that path gets blocked or there's a pothole in it, then we have a problem. And what we're trying to do is I want to give you an unshakable foundation to build your wealth. And the best way to do it is to make sure that all our eggs aren't in one basket. Just like investing, we don' invest in single stocks and one single stock and think that's the thing that's going to hit. We don't do it this. We do the same thing with our income streams. So you can't build financial freedom on a single string of income. That's not a plan, that's a prayer. So we start there, but we don't end there. We start to build other sources of income that aren't driven by our efforts. That's the leveraged income streams we talk about in the five incomes. Leads me to decision number four. Decision number four is asset choice. One group will buy assets that appreciate stocks, businesses, bonds, even, even education. Investing in yourself. The other will buy depreciating liabilities. Cars, gadgets, technology, things that rust or not or they, they, they rot, they go away. They're consumables. They may look good to the outside, but they're not building anything long term. I, look, I'm the first one to say I like nice things, okay, but only after my assets are in place to pay for them. Okay, we don't, I don't go into debt and I don't want you to go into debt to buy things to look nice for status, for, for lifestyle that are consumables. If my general rule is this, if the payment plan lasts longer than the joy you get from it, then you can't afford it. Okay, that's, that's the, that leads me to decision number five. Decision number five is this community influence. Who you hang with, wealth builders. Hang with builders, okay? They talk strategy. They're not talking sympathy, they're not talking fear. They're having real deep conversations. The colleagues that I speak, speak about to all the time. My, my peers, my friends, we have these dialogues and we are, we're constantly kicking the tires. Critical thinking, what if, what if? And, and doing that. Wealth drifters, though, they hang with the complainers. They start to talk about why nothing's working, but that's what they're focusing on. They're not looking at what's working. In fact, they're, they spend a lot of time talking about the things they can'. But if you can't control it, talking about it isn't going to give you any more control. What we should be doing is talking about the things that we can control. If everyone in your circle is broken, bitter, you're not in a circle, you're in a cage. And at some point you become bitter too. You cannot, you cannot take on living in a bet in an unsupportive environment and think that it's not going to affect you or infect you. So the community influence will have a big determinant of which arm of the K, you're on. So to start, those are the five decisions that you need to make. And when you start to look at it, let's look at an illustration of how this can play out. Okay? And let's make it, make it real. I've got one person by the name of Alex and one person by the name of Jamie. In 2020, they both earned $60,000, had a bit of debt, they dreamed of getting ahead. And now when I talk about their two paths and their two futures. Alex, Alex, he spent his time and he made, had his priorities with his income to make sure that he had first a three month emergency fund. He was following the wealth priority ladder. He was investing $200 a month automatically. He put it on autumn automatic so he didn't have to think about it. He had to push the buttons. He didn't have to push any, any levers or any of that stuff. He also, each time, each year he came to the beginning of the year. He also looked at what new skill do I need to learn to up level my value in the marketplace as an employee or as an individual and allowing that to translate into side income or additional income. Okay. Alex would buy two year lease, turn in vehicles, not a bunch of new payments. So you would get a two year car, a two year old car that got turned in that has a like new warranty on it and would do that. Well, let's contrast that with Jamie. Jamie, he used stimulus checks for upgrades and subscriptions and things like that. He literally was looking at saying, I got time, okay, I got time. I'll worry about, about saving later. Okay, now, now mind you, we, we may have time, but time is our biggest wealth driving lever. Okay. So he waits to, for a raise to start saving. So he's sitting back saying, when I get my raise, then I'll start saving. He also panics when the market dips. I mean, I'm constantly, I'm constantly getting calls when the market drops. Oh my God, oh my God, oh my God. You know, it's like every drop is Armageddon. His emotions are running away with him every time the market goes up or down. And what it causes him to do is to stop investing. See, he's not in a systematic process. He doesn't have a system that's running and getting him to, to run it properly. And he is, he's the one that I will hear over and over again saying, I'll start once things settle down. I'll start when I get more money in. I'll start when it Makes more sense. Now remember, they both were getting paid the same. So let's look at five years later for each of them. Alex has $150,000 in net worth and some peace of mind. Jamie has double the debt from when he started and double the stress. Same income, different decisions. That's the K shaped economy in action. That's what's going on. And the question you have to look at is say, well, which path am I on? Because you're on one. Whether you've chosen it or not is another question. Because a lot of times we end up on a path that we didn't consciously choose. And some of you that have listened to me or watched me for a while, you know that I've said I'm not here to tell you to not buy stuff, to not spend. I'm here to inform you to make sure that when you do that, you're fully conscious, intentional and aware. And if you're fully conscious, intentional and aware of the choices you're making, the impact of the choices you're making, hey, I'm good with it. I'm not here to judge that. You know, if you want to buy the $5,000 watch, totally fine, as long as you know what the full cost of it is in the future and today, okay? And every day you delay, making the right choices makes it harder because the gap widens. The price of switching sides goes up, the price of admission goes up. So wherever you're at, what do you need to do to move to the top arm, to stay on the top arm? Here's the good news, okay? You can switch sides today. The moment you start acting intentionally, you start climbing. The moment you change that, you start climbing. So let me give you a handful of things to consider, and these are four things to start with. The first is this. Control what you can, okay? It makes no, I can't control the stock market. I can't control what the politicians are going to do. I can't control the economy whether we do anything. I can't control what the feds do. I can control what I do. I can control my choices. I can control what I do with my money. I can control what I do with my savings, my investment. That's the key. And so it starts with this. Control what you can, prepare for what you can't. So, 1 know your numbers. What's your cash flow in and out? What's the expenses? What are your needs? What are your wants? What's your savings rate? Savings rate, the percentage of your income that you're Putting away towards investing towards your future. And if you've read my book, and you should, my recommendation, we try to get our clients to push to 20 to 25% of their income. What is your savings rate? That's probably the most critical factor in your wealth creation journey. And so, and here's the thing, let me be really clear. Even if you can't get to the 20% today, start with 1%, start with half a percent. I don't care. But starts start. Okay, number three in this is to focus on principles, not predictions. Everything that I teach, all the frameworks, everything in my book, everything that we talk about are principle based, meaning that they're a system of behaviors. They're systems that have been proven over time to work. They're not memes, they're not fads, they're not trends, they're not hyperbole, they're not those things. There are things that have worked for decades, decades, core principles. So during this time, this is when you need to up your, your financial literacy, your understanding of wealth principles, understanding the systems that drive wealth and not get caught up in the predictions and the fear and all of that stuff. Okay, so, so number one is control for what you can. Number two, I said it already. And that is prepare for what you can't. The economy is going to cycle. It's going to go down. We will have a recession at some point. Okay, I don't know when, I don't know how long, I don't know how deep, but we will because that's what economies do. The market, it will drop substantially at some point because that's what markets do. But then they come back. So this is why the, the bottom rungs of the, the wealth priority ladder. The first phases of the wealth priority ladder is all about creating an unshakable foundation. So when something happens that you can't control, like a downturn in the economy, you're okay, you've got liquidity, you've got your debt under control. So the first thing here with preparing for what you can is having that peace of mind fund. Start with an emergency fund of three to six months, then push to a peace of mind fund of nine to 18 months. That liquidity is going to sustain you if something happens. And having that liquidity in place will be your savior. If there's a downturn, a loss of job, a health issue or anything like that. It's going to allow you to take advantage of opportunities when they come up. But it's also going to give you the peace of Mind to know that you're okay, your family's okay, and your loved ones okay. Okay, same time here. Prepare for what you can't. Well, protect yourself with the right insurance and flexibility. Now, I'm not a lover of insurance, but I do believe that there are certain kinds of insurance you may need. If you are a primary wage earner, a primary income driver in your family, you might want to look at long term disability insurance to cover you if, God forbid, something happens. I have a long term disability plan that's paid multiple times during because I get hurt, you know, and I was out. I herniated three discs in my back and I was out. You know, I had a bike accident that put me out. I but it paid for my bills so I didn't have to freak out. So there are different insurances to protect yourself. Don't get caught up in some newfangled or exotic insurance instrument like index life or whole life. Start with the fundamentals, the basics to cover it. The reason we have the insurance is to protect the downside, not to create wealth, not to create, you know, our heirs into millionaires. Okay, but there may be other uses of insurance down the line, but not here. Okay? Prepare for what you can't. The next piece is to diversify your income streams. Even if you get smaller income streams, even if you're making $500 more a month by doing tutoring or something else on the side, it all starts to give you a little bit of a safety net for the things that you can't control. Okay, number three. Okay, so number three. And this is to invest in yourself. Your skills and your relationships are the highest return assets that you're ever going to invest in. So that means looking at your skill set and saying, where can I uplevel? What skills can I acquire today that will make me more valuable in the marketplace so I can set myself apart in the marketplace? What relationships can I, can I work on and deepen to allow me to have that to navigate? The other side of this is investing in your financial literacy, your understanding of financial principles. And investing in all those things will serve you for the rest of your life. The more you grow, the less you fear. Okay, and that leads me to number four. Number four. Build your money machine. Don't chase more hours. Build systems that separate your effort from your income. Look at ways to use the income to acquire the assets to build the money machine. Those assets are going to be the things that will take care of you when you choose not to work. When the money's working Harder for you than you did for it. You gain something totally priceless. Choice options. That's the reason we do this, okay? It's how to build certainty not by waiting for calm seas, but by becoming the captain who can sail through any storm. I get it. We might be in uncertain times. We are at a, I think, a juncture in our history from a financial standpoint, from an economic standpoint, from a humanity standpoint. And I see us going in two separate directions. I want you in the right direction. That chasm, that gap is going to continue to grow. The longer you wait, the harder is going to be to jump that line. And at some point, you get to the point of no return. Now, whether we'll ever have those lines converge again, I don't know. But I do know what we're operating in now when I look at the data and look at the stats. And I also know that the decisions that I gave you and the. And the action steps I gave you here will help navigate you and put you on the right track to not only survive, but to take control, to put certainty back into your financial journey and to allow you to grow and be on the upper end of that K shaped economy. All right, this is the thing, the K shaped economy. It's not the end of opportunity. It's the beginning of your awareness. But hear me really clearly. Nobody's coming to save you. Not the government, not your employer, not the markets. But then again, you don't need rescuing. You just need the plan. You need the systems. And the people who act today will own tomorrow. The people who wait for tomorrow will wish they started today.

You don't need to control the economy. You simply need to control your economy, the one you build, decision by decision. And you can start that by grabbing the Freedom number calculator so you know what your number is so you can live life on your terms. Like I said, go to melabraham.com number. We got it hooked up below so you can make that happen. But let this session, let this be the line in the sand where you said, I'm starting the climb. I'm moving from the lower arm to the upper arm. I'm moving faster. And certainty doesn't come from waiting. And I am no longer waiting. I'm going to grab my certainty. I'm going to create my certainty. I'm going to go and build it and I'm not going to sit back and wait for the world to settle down. I'm going to create the world around me. It comes from creating it. One deliberate decision at a time. You don't have to predict the future to win it. You just have to own your side of the K. And that's it. All right? I hope that you found this helpful. I hope that you start to look at it through the eyes of what I'm seeing. And I hope that you'll take control of it, as some of my students and clients are doing. To be in control of the things that are controllable, to know that you have the ability to shift and change things. I'm not saying that it's going to be easy, but it is simple. Just the fact that it's difficult doesn't make it impossible. But it starts with a choice. And that choice has to be yours. I'll guide you. I'll light the way. I will support you. I'll give you the principles. I'll do what I can to support you on the journey. But I need you to make the choice and I need you to walk the path. And if you're willing to do that, I'm here for you. All right? I can't wait to see you soar on your path to financial freedom. It's your birthright. Let's go claim it. All right? If you found this valuable, let me know. I'd love to hear from you. And do me a favor, share with a friend, all right? And if you haven't subscribed yet, hit that subscribe button, all right? Till I get a chance to see you in another episode or on the road and your path to financial freedom. As I always say, always, always strive to live a life that I will achieve. See you next one. 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 there.

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 Podcasts, or wherever you're listening to this podcast and rate and review the show. It helps us 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.