The Truth About Net Worth: Are You Rich or 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. Are you really middle class, or is that just what your income tells you? Here's the thing. Because if your paycheck feels comfortable, but your bank account is playing hide and seek, well, Houston, we got a net worth problem today. We're going to crack it all open for you. We're going to get into the real numbers behind wealth in America. You know, what defines lower? What defines middle? What defines upper class? But more importantly, how do you move up no matter where you're starting? This isn't about judgment. This isn't about positions or anything like that. It's about movement and progress through it. This is building your money machine, where we teach you how to master your money, eliminate financial stress, and live a life by choice. Think of it as financial education with a side of sarcasm and a whole lot of heart. See, I'm your host, Mel Abraham. And listen, when I started out, I thought that doing this meant that I was going to be doing fancy spreadsheets, sitting in a corner office, not having to talk to anyone. And after 30 years as a financial expert, entrepreneur, and money mentor, here's what I've learned. Money without meaning is like a treadmill with a view. All right, you're moving, but you're not getting anywhere. You're not even getting a chance to smell the roses. So if you're ready to stop spinning your financial wheels and start building a life of choice and not chance this, let's do this. See you in the episode.

So let me guess. Does this sound familiar? You've got decent income, a closet full of clothes you don't even wear, a bank account that sometimes says, oh, try again later. Yeah, me too. At one point, I did. All right. That's the way it was. I used to think that making more money was the answer to everything. Turns out, more money without direction is just expensive confusion. Okay, so we're going to talk about something today. We're going to talk about net worth. What does it really mean? Why does it matter? How do you build yours without selling your soul or surviving on ramen noodles? All right, let's make it happen. So let's just start out with this whole idea of what is net worth and why does it matter? So net worth sounds really fancy, like something your financial advisor would say while adjusting his tie or her tie. But really, it's simple. It's the difference between what you own and what you owe. It's what you have left over that can work for you. You know, people say that it's not how much money you make, it's how much money you keep that matters. Well, it's not even how much you keep that matters. It's how much of it that you can put to to work for you that matters. That's why the subtitle of my book is getting your money to work harder for you than you did for it. See, you might have a house, you might have a car, you have some savings, great. But you also have student loan debt, or you have a mortgage the size of some small country's gdp. Okay, yeah, that goes on the other side of the equation. So you take the assets you would, minus the. The liabilities and what you owe, and that's your net worth. But here's the quick kicker. The whole kind of thing. It doesn't matter how much any of this comes into play. If we're not building that net worth number in a way that it's going to earn us money, we're just spinning our financial tires, buying stuff on the one side of the equation, the assets, and financing that stuff on the other side of the equation, the liabilities. But if the stuff we're buying doesn't generate cash, we can never live off of it. So we've become imprisoned by stuff. So we're going to talk about net worth, but we're going to also talk about the idea of investable net worth and the things that happen. But let's just talk about how the tracking of net worth is in the country and where you might be, what it means, and what it takes takes into account. So are you rich or poor? I don't know. And the reality is, it's all contextual, because the real question isn't rich or poor. The real question is, are you living the life that you want to?

Because one person can have a million dollars and feel as. As rich as ever. Another can have 100 million and feel as poor as ever. And it all has to do with perspective, the life they want and the way that they look at life. So let's just break this down because middle class used to mean two cars and a mortgage. Now it means your Amazon cart is full in your bank account. It's not. So let's talk about lower class first. This is typically net worth. Now do not judge yourself, do not rank yourself. Do not look at it from this perspective. I just want you to understand where you might be and what to do to move you to the next level and keep you in progress, in motion. Okay, so what the data shows, it says, you know, lower class is typically a net worth of under $150,000. Now that means you own an O. That could simply be a house. This might be you starting out and, or maybe it's you starting over or just feeling financially flat. But here's the thing. You're not behind. We just, we're just warming up. This is how this thing is played. In fact, my, my net worth was negative at one point in time. So we can go from negative to, to substantial. We just got to be on the journey and understand what to do. So that's lower class. Now, middle class is a broad range. Middle class has a net worth of that 150,000 to 10 times that, a million and a half. Now when you do this, you've got, typically, you've got some wins under your belt. You probably have a home, you have some retirement funds. You probably have a Costco membership that you're proud of. But still freedom feels a little bit out of reach. But you feel like you're doing okay, but maybe not free. Okay, now the upper class is over 1, 1.5 million. You're in, if you're over 1.5 million in net worth, you are in the top 10%.

You know, with, with respect to net worth. Now, maybe with investments and income streams and a cpa, you know, you've got all these things going on because have some, some decent net worth, you're, you may not be as worried about money, but now it's about impact, it's about legacy, it's about keeping what you built. And so these are the three categories, but I don't know that the categories matter as much. I think that what we need to do is look at the characteristics and what to do in each category. So that's where I want to kind of guide this conversation is to how do you build net worth at any level? Because no matter where you land, there's a playbook. No matter where you land, there's a strategy. And in fact, I have moved through all of these levels in my career. And just so we know, I moved backwards at one point and then had to move back up. So don't feel like you're behind, don't feel like you're in a bad place or we just got to start where you're at and move through it. Because once you have the playbook, you have the recipe, you have the process and the formula, then it's a matter of just doing it. Okay? It doesn't mean that you're manifesting wealth while ignoring bills. It means that you're doing the right things that in the right priority that will move you and move the needle at that point in time. So let's just talk about this lower class level, lower net worth. This is kind of the base camp phase as I look at it. This is the time where you start to get that comfort fund in places I talk about in, in the wealth priority in my book, building your money machine, the wealth priority ladder, the comfort fund is just the duct tape to kind of keep things in place. If something happens while you're building the other things. It's not your emergency fund, it's a comfort fund. It's to allow you to breathe. It's to pay for the deductible on an insurance claim, you know, medical or something like that. It might be to cover a transmission or something like that. So I want you to start to get $1,500 or one month's expenses in that comfort fund to start. This is a place, what we're trying to do is build a base of liquidity so we don't go lower, that we have a foundation of stability to build from. This is the time also to start to cut out high interest debt. If you don't have high interest debt, consumer credit, credit cards, destructive debt as I call it, then kudos to you. Avoid it. But if you do, if you do have that kind of debt, this is a time to get you on a debt payment plan. This is a time to get, get yourself on a plan to get yourself out of it. That debt at 20, 25, 28%, even at 9% is not going to allow you to get ahead. It's just too costly of a debt. So we got to get it paid down quickly. And that's why at the lower rungs of the, the wealth priority, we start to, we start to annihilate the destructive debt. Okay? While we're building the peace of mind fund and investing and all that stuff, so, so I want you on a debt payment plan. If you're not sure how to do it, I want you to go to melabraham.com no debt grab, it's free. You grab the tool, you grab a short training, you get yourself on a debt payment plan and start dialing it in. The other thing I want you to do is this is a time for you to actually start investing. Putting money away not because you're gonna. It's gonna make you rich, but because it's gonna develop the habits you need to be rich to be wealthy. And so whether it's $5 or $10 or, or $50 or $100, it doesn't matter. I just want you to start working the muscle, start building the habits, start creating the decisions and making it happen. And at the beginning, you might just be moving it into a high yield savings account, but at some point we're going to turn around and, and move it into a brokerage account, an investment account, or maybe it's in your 401k or an IRA. We follow a recipe called the wealth priority ladder to make that happen.

This is also the place, I think the final thing here in this stage is also the place to look for ways to increase your income.

This is the place where we start to skill up. We start to look at ways to create more value for our employer, for our company, for our clients, for our customers. The more value we can create in their lives, the more we get paid. The more we get paid, the bigger the shovel we have to build our wealth. The bigger the shovel we have to build our wealth, the faster we can build the money machine. That's the game we're playing. So now's the time to start looking at what are the other skills I need to acquire to set me apart? What are the other things I can do to bring in more money? Is there a side hustle? Is there a side gig? Are there bonus things I can do? Can I do some tutoring and some things on the side? Can I do anything that maybe affiliate sales or something like that? Because the more I can bring additional funds in, the more I can start to build that net worth to move from here. Because at this stage, you're not broke. You're just in startup mode. But the tendency is to think we're broke. No, we're just in startup mode. We're bootstrapping. We're gonna make it happen, but we gotta get in the game. We gotta stay in the game to make it happen. All right, that leads me to the next, the next level, which is, you know, termed middle class. I call it the growth Engine. Okay? This is the time that now all of a sudden, we are starting to get control of things. And this is a place for you to start focusing on a couple things. One is automating your savings, automating your investing. It's not about setting it and forgetting it. It's about removing the friction from the building. Okay? If I know that when money comes in, it automatically goes to the savings account, it goes to my investing, and it's automatically invested. I don't have to think about it, I don't have to push the buttons, I don't have to log in, I don't have to figure out what my password, I don't have to do any of it. It's all done in the background. So what you're doing is you're automating it in a way that doesn't require you to be actively involved daily, weekly or monthly. Okay. It's kind of like the, the gym membership or subscription, but you're subscribing to your financial future. Okay. This is a time for you to really start to max out your tax favorite accounts, the 401k, the Roth, the HSA. Okay? Because free money is the best kind of money. All right? And sometimes we live that on the table. So follow the wealth priority ladder in this sequence because it's going to tell you exactly what to do. But at the very beginning, when we start investing, if I have access to free money, then I got to take it. Okay? Now the next one that you need to look at in this phase is kind of a caution, is that you need to guard against lifestyle creep. Because as we start to make more, then there's this demon called lifestyle creep. Well, then we up level our expenses, we up level our spending, we up level our life, we up level our brand because we're doing things, because we make make things. Now, I'm great for upgrading, but not if it's eating at our net worth at the same time. So here's, here's my thinking is that if all of a sudden the income is going up, take a portion of it to upgrade, but the portion needs to be less than the amount that you're putting to upgrade your future. Because as much as you can upgrade your car, it doesn't mean you've upgraded your net worth, because a car is a depreciating asset. Spending on stuff is not increasing your net worth. Your net worth. The net worth that we want is the stuff that will grow in value and create cash flow. That's the key. Okay? So that leads to this last piece, here is now's the time to start looking at how do I acquire and build assets that pay you. Stocks, ETFs, indexes, index funds, dividend paying stocks, rental properties, side businesses. Because your ability to, to remove yourself, to separate yourself from that earnings treadmill is going to be driven by your ability to separate from the efforts to earn it. So now how do we do that? We acquire assets that don't require your, your direct involvement on an ongoing basis. That is assets, that's residuals, that is portfolio. And we build assets the ass. These are the assets that build your money machine. That's where it starts. And then as you grow to the next phase, which is the upper class, this is what I call the legacy, the legacy zone, the legacy lab. Okay. This is the time where you get a chance to start thinking in terms of.

Legacy and not lifestyle only. This is a time to start getting strategic about the choices you make. Because now the choices you make are going to go beyond your lifetime. They're going to go beyond the things you do. The choices that I've made with my finances, with my money machine are for me, but they're also for my wife. They're also for the causes, they're also for the missions, they're also for the movements that, that I'm behind. They're also for my son and his wife and my grandkids and my brother. And indirectly they're for you. Because it's this journey that I want you on.

So we're creating something that, that transcends time and that's well beyond lifestyle. That means that we need to make sure they have the right plans in place. That means we need to make sure they have the right structure in place, whether it's trusts, insurance, entities.

In this stage, you're talking about wealth protection, you're talking about how to keep it. You're also looking at how do I transfer the skill sets that got me here. I talk about this in one of the chapters of my book. I go skill sets before assets.

See, the money machine that's built has the ability to be passed on to your heirs, to your spouse, to your kids, to your grandkids. But they don't earn, they don't get it just because their blood, they have to earn the right by showing you they can steward it. And so this is a time to bring them into the fray, to help educate them, to have your values instilled and build it. And in fact, I think you started early. I started it with my son as a Single dad. He was 10 years old is when I started teaching him about money, partly because I needed to learn it. But here's the sad thing. If you don't teach them, if you don't have the conversations, if we don't guide them in this, someone else will. And it's likely going to be TikTok. Not a good teacher, not a good. Not a good thing, okay? So this is a time to bring them in, to have the conversations, to make a difference. And it's also a time to stay humble and generous. Having a high net worth is great, but the real richness is in the freedom. It's in the freedom and it's in the peace. It's in the choice, and it's also in the generosity to be humble and not forget where we came from. I'm a son of an immigrant. My dad came here at 17 years old with nothing. He went to school. He became an engineer. Okay? We didn't grow up in any kind of lavish lifestyle. They bought a tracked home in 1958 and kept it until we sold it. You know, six, seven years ago.

I didn't come from money. I had to build it from nothing. I lost it and I built it again. I don't forget that I'm no different than you. Even though I may be in a different place. I haven't forgotten my roots. And I think that that's important, that we get a chance to be generous, that we get a chance to do the things that matter. And that when we, as we're growing, we can serve, we can support, we can help, and we can guide. It's the very reason I have the chance, the very reason I do the things that I do. All right, so when we talk about net worth, yeah, it's a number that's thrown out. But the important thing is to realize a couple things. It's what you own and what you owe. More importantly, the refined version of net worth is investable net worth. And what that is is it's the assets you own that generate cash flow and create wealth for you minus what you owe. That's your money machine. That's the thing that will support you, and that's the thing that will allow you to separate your earnings from the efforts to earn it. Look, in the end, net worth isn't the scorecard. It's a strategy. It's a metric. It's not about shame. It's about awareness. You can build wealth no matter age, stage, or circumstances. You can create freedom no matter age, stage, or circumstances. And you don't need to be some genius or some trust fund baby or some crypto wizard or tech dude to get there. I wasn't. I'm not. Okay? That's why I wrote the building your money machine book. This is why I have the money machine blueprint, and it's why I have this channel and why I do the things here. Okay? So do me a favor.

Take hold of your financial future. Ask the questions that you may don't. May not have the answers to so we can get them answered. Let's get you on that path, no matter what phase you're in on your net worth. And let's move you to a place where you're creating the life that you want, that you designed, that you desire and deserve, quite frankly. So one of the things I want you to do is to look at what is your freedom number? What does that net worth number need to be? And the easiest way to do that is to grab a tool that I have as a free tool, and it's your. Your number calculator, your freedom number calculator. You can go to melabraham.com number, grab that calculator, at least get a ballpark. Now, that number could be really high compared to what your net worth is. That's not the purpose of it. The purpose of it is to. To put it out there so you know what the target is. And make sure that you're on that path. And then follow the things that I gave you here to make that happen. And follow me, because I am giving you. I'm giving you tips, I'm giving you the tactics. And if you haven't got it already, grab my book. Because I walk you through the whole process in the book. All right? Stay with me on this channel. Stay with me on my episodes. If you have not subscribed, subscribe. Because my purpose here isn't to sell you insurance, isn't to sell you investments. It's to sell you on the fact that your dream can become a reality and to give you the path and light that path to make it that reality. All right? The choice you make over and over again, one small step at a time will define your wealth. Okay? We're not chasing money. We're building a money machine. And you can live a life by choice, not chance. All right? I hope that you found this valuable, and I hope that you'll share it out. I hope that you will reach out to me, and I hope that I get a chance to see you on your path to your financial freedom. And until I do always, always strive to live a life that I love.

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 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.