The Silent Rules of the Financial System That Keep You Poor

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 hard truth that most people don't want to hear. The financial system is not designed to make you wealthy. It's designed to keep you busy, to keep you spending, to keep you silent. And if you've been told, just earn more, save more, and everything will work out, this episode might make you a little uncomfortable. And honestly. Good. Okay. Because today I'm exposing the silent rules of the financial system that quietly keep people broke, even. Even smart people like you. This is building your money machine, where we help you master your money, eliminate financial stress so you can live a life of choice. Because earning more doesn't make you free, but a money machine does. And I'm your host, Mel Abraham. As a CPA and entrepreneur, money mentor for 30 plus years, yes, I've been in this system. I've been on both sides of the table, and I've seen the hard way, how it keeps people stuck. But once it's exposed, it allows you to be free. So let's dive in and let's do this. All right, let me say something that might sting a little right here at the beginning. And if it does, just know I'm on your side. If you feel like you're doing all the right things with your money, working hard, being responsible, avoiding the obviously stupid decisions, and yet you still feel like you're running on a treadmill that never seems to slow down. It's not because you're bad with money. It's because you weren't given the rule book. And there are silent rules baked into the financial system. They're not written down. They're not taught in school. They're not talked about. And they quietly reward the system while confusing everyone else like us. So today we're saying quiet parts out loud. We're going to go through a few illusions and break them down. And we're going to start with rule number one. Financial silence is normalized. Okay? We don't talk about money because if we did the jig would be up. Because here's what I know. The reality is that to build wealth is actually a simple game. Now, I didn't say it's easy. I just said it's simple. And that's the truth. You just have to follow a handful of simple principles. The things that I teach, that I talk about, that are in my book and my trainings, but if we talk about it and we simplify for everyone, everyone would have access to it. And oh, my gosh, then the jig is up. See, somewhere along the way, we decided that talking about money is rude. Talking about debt is shameful. Talking about fees is awkward. And you know what's actually not awkward? Waking up 10 years later wondering where your. Where your money went. See, silence doesn't protect people. Silence protects bad systems. And because when people don't talk about money, then they don't compare notes, they don't notice patterns, and they assume they must be the problem. And you're not. See, spoiler alert here. Most people are just as confused. They're not as clear. Some of them are just louder about it. See, silence is actually the most expensive financial habit. Nobody tracks. So if you're in an environment where you're saying, I don't want to talk about money. I was raised not to talk about money. I was raised not to talk about money. I remember asking someone at the dinner table, how much do you make? My mom almost spit her food out. One of the biggest stressors in our life is financial stress. We can't solve stress. We can't solve problems without having conversations. We should be starting to have these conversations early on in our life, not to create greed and a focus on money, but to put money in the proper stead, in the proper perspective, as the paintbrush to create and paint the masterpiece called your life. That's all it is. It's not a scorecard. It's not the goal. The goal is your life. So we should talk about it. Because without it, our life is in someone else's hands. So here's a little micro action for you. Break the silence once. At least once this month. Ask one uncomfortable question. You know, whether it's, what am I paying for this? Whether it's, why is this structured this way? Whether it's, what happens if I do nothing. Ask some questions around your money. Ask some questions around what the fees are. Get a real understanding and start the dialogue, start the conversations. And I'm not saying to do it daily. Just do it once this month. But start to open up the conversations. And if you really want to get bold. And I think that this is a must in relationships. And you have someone that's in your life, that's your significant other, your intimate partner, your spouse. Start having the conversations around money with them. Not from a judgment standpoint, not from a what do you do standpoint, but from a value standpoint, from a vision standpoint, to understand what they want out of life and how money infiltrates it. See, awkward conversations are cheaper than lifelong confusion and silence. Let something else thrive comfortably and that something else usually isn't good. So silence around money is probably the one, one of the biggest rules, things we see out there that actually keep us broke. Let's have more conversations. That's why I do the channel, that's why I do the show, that's why I do my speaking, that's why I wrote the book, is to open up the dialogue and eliminate this. That leads me to rule number two. Rule number two is the system is designed for transaction speed, not wealth creation. See, the system doesn't care if you're wealthy. It cares if you're busy. Spending today is effortless. You can literally buy a couch at midnight, half asleep in your sweatpants. Ask me how I know. Okay, one click buying tap to pay, auto renew, everything. Buy now, regret later. Okay, all those things are set up for the speed of the transaction to remove the friction, to remove the resistance in our spending, in our going into debt, in our. Our putting things on a payment plan. But savings and investing, which are, which are the keys to wealth creation. Now all of a sudden, there's paperwork, there's waiting, there's friction, there's hoops you have to jump through. That's not accidental. See, the system profits on movement, not intention. Thinking slows money down. And when money slows down, someone loses a fee, a commission, something. And this is where you have also the problem with lifestyle creeps sneaking in like a. Like a ninja at night. You get raise and your lifestyle says, perfect, I've been waiting for you. And you start to expose it. See if every raise upgrades your lifestyle, freedom never gets a race. This is why in my world, there's a couple things that I tell people to do. One, we want to put as much friction into our buying decisions as possible. Remove your credit cards from your purchasing apps. Don't allow things to be a tap and pay kind of a thing. Two, when you do have a raise, use a 5050 rule. 50% of it you can put into your lifestyle. The other 50% you put towards your future. So both your Lifestyle and your freedom. Get a raise at the same time. All right, so a micro action here is this. Add friction back in the way that one of the ways to do it is to use a 72 hour rule. Delay non essential purchases 72 hours. Put it in the cart, leave it alone for three days. If it still excites you after three days, fine. If not, then congratulations, you kept the money. But do things that remove the immediacy, the urgency, the speed of the transaction out of the game. Friction isn't the enemy. It's your financial seatbelt when it's on the purchasing side. All right, now this is, this is exactly why most people don't actually know what they're spending is things start going too fast and a lot of times we don't even know what our lifestyle costs. So here's the deal. I've got a tool that I want you to go and download. It's totally free. Because before you chase more income, more investments, or the next shiny thing, pause it a little bit and say, what is my lifestyle costing me? It's called the lifestyle cost calculator. It shows you what it really takes to fund the life that you say you want. So you're looking at what you what your life is today, you're looking at what you want for a life tomorrow, and you get a chance to do it. We'll hook it up here. Go to melabraham.com lifestyle it is totally free, but it'll get you at least on the trajectory of where you want to go. All right, on to rule number three. Rule number three is fees are invisible by design. See, if they showed you the total cost, you'd probably flip the table. All right, nobody says this small fee will quietly cost you hundreds of thousands of dollars over your lifetime. They say, well, it's only a percent. Only a percent, but only a percent compounded over decades on everything. That's not a fee. That is a lifestyle tax. And fees hide best when they are in things that are complicated because confused people don't ask annoying questions. I'm really clear to ask the question, what are the fees? What are the commissions? How do you get paid? I'm looking for the bias everywhere. Now, I'm not saying that I don't pay fees. I pay, I pay my wealth team. I pay fees on investments. But I don't do it blindly. And too often we're doing it blindly. And so, and we look at it and we justify it because the fee as a percentage maybe seems small. But when you compound 1%. Over decades, over thousands or hundreds of thousands of dollars, that 1% starts to erode a whole lot of money that could be put towards your future. And so your job is to really understand where some of these fees are hiding. Because you don't feel the fees today because they're small. You feel their absence later when the freedom should have shown up, but it didn't because all of a sudden you don't realize that they took hundreds of thousands of dollars away in fees. Okay, so here's the micro action with this one, is I would ask this about every single account. What is this costing me per year in real dollars? Okay? And if they can't answer it, clearly, that is the answer. If they hesitate, that is the answer. They should be completely transparent about it. One of the reasons I don't bank with big banks is because I don't like their fees. I don't like their fee structure, and I certainly don't think that they give me the service that warrants it. So most of my regular banking is through credit unions to make that happen. Okay? And if they're not explaining it in plain English, it's probably not in your favor. All right, Rule number four, the default option is almost always the worst option. Okay? So if you don't choose, the system chooses for you, and it doesn't usually choose you. The default 401k funds, okay? Instead of a default 401k fund, take the time to figure out what is appropriate for age, stage and circumstances. The default contribution rates, the default insurance riders. There's defaults in everything that we do, almost. The defaults are not advice. They're just administrative convenience. And they put them in there because people don't take the time to understand it. And they just. I'll just go with the default. But a lot of times the default isn't to our benefit. And these are some of the silent things that are just eroding your ability to build wealth. And we don't know it because it's just quiet in the background. Most people will select the defaults when they go into a plan or go into a benefit plan or something like that. And then they never change them. And so they're there for decades, not because they agree, because no one told them they could. So I would examine all of the default things. I mean, I go through all my accounts once a year. Once a year, I go through all the accounts. What am I being charged? Is this working the way I want it? Do I still need it again? And I reevaluate it and in effect, they have to prove to me that they are worthwhile every single year. The default settings are for phones, not for your financial future. Okay, so here's your micro action with this. I want you to review just three defaults this year. Okay? First off, your retirement contribution. Is that something that you specifically set or did you default it? Can you push it up? Remember, we want you to push to 20 to 25% of your income as part of the wealth priority ladder to get you there. The second default is to review your insurance deductibles. If you know that you have an insurance deductible for car insurance and that is $500 and you know that, hey, if I got a $500 or $1,000 car repair or car accident, I'm probably not reporting it to insurance. Why are we defaulting to a $500 deductible when we should be at a thousand dollar deductible? Reduce our premiums and put that money towards our future. Review your insurance deductibles and then the third is to review the defaults on the payment plans. If you're in payment plans, can I change it? Can I accelerate it, Can I adjust it? Don't overhaul things. Just look for these three little tweaks. And believe it or not, this can save you thousands of dollars when you do that. All right, See, leverage money, passive money is obedient money. And obedient money rarely gets ahead. And so when we passively just allow things, oh, and I tell people that I don't like the word passive because of what it insinuates. It insinuates, you set it and forget it. You never touch it, you never look at it. But your relationship with money is just that, it's a relationship. And just like any relationship, if you looked at it in a passive way, guess what? It declines. It's the same thing with money. We don't look at it passively. We take an active role in making sure that it's doing the right things for us. Rule number five, income is taxed first, wealth is taxed last. Okay? The system doesn't reward effort, it rewards structure. Here's what I mean. If you earn a paycheck, the taxes come out first. I remember the first time I got paid when I got my first job in clothing retail and, and I thought I was going to get this check and it was half of what it was. I go, what happened? And they said, taxes. Taxes come out first, you get what's left, okay? And so here's the challenge with that, if that's your sole mechanism and we all start there and we all have that in earnings machine, but if all we have is an earnings machine, then we are going to be subject to this over and over and over again unless we build the money machine, the wealth machine. And the wealth machine comes from owning assets. Because when you own assets, you control the timing of when the tax is paid. Do I sell? Do I not sell? Do I draw down? Do I not draw down? You control the strategy. How am I investing? What am I investing in? What, what, what accounts am I investing through? Is it a Roth? Is it a 401k? Is it is a regular brokerage account? You control the outcomes. See, in a paycheck you don't control any of those things. And that's why just earning more doesn't make you free, the money machine does. Earning more just feels like you're running faster on the same treadmill. And so your job is to use the earnings, that paycheck to acquire the assets that will build cash flow and wealth down the road and give you the options to make that happen. Okay, the system doesn't hate workers, it just loves the owners more. And I want you to be an owner and to move from an earner to an owner or an earner and an owner at the same time. So your micro action here is to simply ask yourself, what do I own or what could I own? That changes how my money is taxed and changes how I can live. That ownership mindset is the mindset that you need before structure. See, income pays the bills. Ownership changes the rules for you. Rule number six, debt is marketed as a tool, but only one side wins. That's helpful right up until it owns you. See, I don't believe that all debt is the devil. But I also know that all debt has two characteristics. All debt costs, it's called interest, and all debt stresses. Now it'll stress your finances because of the interest, because of the cost, but it'll also stress your psyche because it's weighing on you. Now, I believe that debt can be useful if it's used properly, if it's used to create leverage or cash flow and build wealth. Where it's not useful though, is when it is meant to finance consumables and lifestyle. The lavish vacations, the cars you can't afford. So you put it on a seven year or eight year loan and it's depreciated to nothing before you get out of it and you're upside down. See, most people are using Debt to finance consumables and lifestyle, that's destructive. That creates a monthly hostage situation on your money. And we've been indoctrinated into a payment plan society. But before we know it, these become little money leaks in our world. And those money leaks don't feel dangerous at the beginning, but when you are swimming in them and drowning them, now they're dangerous because all of a sudden the payments start to replace strategy, they start to replace the plan, and interest steals away all of your future options. So not saying not to use debt, I am saying to make sure that if you use it, it's productive debt, not destructive debt. Productive debt is that debt that will be used to create additional cash flow and wealth down the road to be able to pay for your lifestyle, not to pay for your lifestyle. Okay, so your micro action here is to look at your debt and label it. Is this productive? Is this destructive? The awareness alone can change behaviors. And if you have a lump of destructive debt, I want to get you on a debt payment plan and get that paid off so you're not carrying that albatross on your back. Okay? See, if debt needs you to keep working to survive, it's not a tool, it's a trap. All right, rule number seven. Inflation is the quiet tax nobody votes on. See, cash isn't safe. It's just quietly bleeding away. Now we need it for liquidity and protection. In some cases, that's why we put money into a high yield savings account. But inflation is that bill that never sends a bill. It makes your money less useful each year. It's a mind game. Doing nothing feels actually safe, but it's not. So we'll minimize the cash that we have on hand to accomplish the protection that we need. But everything else we put invested because otherwise that cash, the ability to buy things with it, is, Is eroding every single day. All right, so what I want you to do, the micro action with this rule is this. To stop waiting for certainty it's not coming. You don't need the perfect timing to get into the market. You need to participate in the market. That means you have to have a plan. You have to have a process. You have to have a system to follow. If you don't, then get one. If you don't know where to get one, get my book, get my training, do something. But the fact of the matter is, if you're sitting in cash, it's more risky than taking the jump to starting to invest. And why I say that is because I can guarantee you sitting in cash, you losing purchasing power every single day. Okay, so that leads me to rule number eight, and that is you're taught to optimize products, not build systems. See, products are sold, systems set, you free. People will chase things like better accounts, better funds, better apps. But wealth doesn't come from better products. It comes from a better structure. And I ask yourself, and I just did a recent keynote to a thousand entrepreneurs about, about the money systems, the wealth systems that you need to have in place. But you got to ask yourself, because if you don't build your system, if you don't create your system, if you don't intentionally create your system, guess what? You're in someone else's system. And their system isn't built for your freedom. And that's why we need to be deliberate and intentional with creating the systems that we run our money in. The cash flow systems, the tax systems, decision systems, all these systems. It doesn't feel exciting at all. In fact, it feels boring, mundane, okay, tedious. But that's how you know that they're working. Because then the systems take over for you when maybe you feel chaotic or out of control. They're the things that protect you. They're the things that will do the things in the background that you maybe don't have the time, the effort, or the desire to do. But once it's set up, they're working for you and your money's working for you. Boring money is usually the winning money in this whole thing. Listen, I've gone through a set of rules here. Eight rules, silent rules that are sitting there insidiously in the background, eroding our wealth or our ability to build wealth. And often we don't think it through or we don't see it. I did this because I think it's important to expose where the leaks might be in your financial journey that could be keeping you stuck and gave you some things that I want you to do, little micro actions to take, to not fall prey to some of the silent rules that are in the financial system now. At the same time, if you're unsure about where you are and what your lifestyle costs, do me a favor. Like I said earlier, go grab the lifestyle cost calculator. It's free. We pop it in here and in the description so you get it. But the key is this, to be deliberate, intentional, and not fall prey to the default rules, the system rules, and. And the little things that are eroding away at your wealth. All right? Because remember this. In the end, money is a terrible master. But when you have the systems in place that are yours, it puts you back in command and it becomes a brilliant servant. And when you finally learn these rules, you're no longer a victim to them or held hostage by them. I hope you found this valuable. I hope that this helps you, and I hope that you will take to heart some of these actions, micro actions, and put them in play. All right? If you have questions or comments, I'd love to hear from you. Drop them in the comments below or send me a dm. All right? In the meantime, if you haven't subscribed, subscribe to the channel, all right? It helps me, it helps the channel, and it makes us happy and it keeps us going. All right, Until I get a chance to see you in the next show, the next episode are on your path to financial freedom. So I will say always, always strive to live a life that lose you. See you next time. 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 a favor, go to Apple, Apple podcast, 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.