Why the middle class won't become rich (unless you do this)

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. Oh, this one's going to be a hot topic. Listen, it is titled why the middle class won't become rich unless you do this. Here's the deal. Those that become wealthy, those that find their path to financial freedom, they're doing some things they're talking about, some things they believe, some things that are different. And no matter what your age or stage of life are, you can do them, too. The problem is if you're not, and if you're not in this episode of the Affluent Entrepreneur Show, I want to change it. I want to solve it. I want to light the path to financial freedom for you. So I'll see you in the episode.

All right. This one's going to be a hot one because I'm talking about things that maybe some people don't want to talk about. The fact is, is that the middle class, if they stay with their thoughts and their actions and the things that they do, they're never going to become rich. But it doesn't have to be that way. And listen, here's the deal. I'm a son of an immigrant. My dad came here at 17 years old with nothing. He came here, went to school. I didn't come from money. I didn't have a silver spoon. I came from an engineer and a homemaker. And I went to school. I did some things. I did enough things right to be successful. I did enough things wrong to be educational. I made a whole boatload of mistakes. I've lost money left and right. But I've actually been able to grow from it and go from it. And I want you, too. So, and I say this not for any other reason other than to say, I don't care what your age or stage of life is. I don't care what the side of the tracks that you think you were born on. I don't care what your upbringing is. What I care about is that we find a solid place as you are today. Whatever happened in the past is the past. And let's figure out how we can change the trajectory for the future. How do we shift that financial future for you? And there's some things that I noticed as the decades have gone by of me working with, with people like you to build wealth, to build financial freedom, to build a business, to, to build a life in a different way that maybe hadn't come about, you know, you, there were some things you weren't talking about, there were some things you weren't weren't doing. There were some things that, that can, can happen. But here's the deal. It's not your fault. It's not your fault. I'm going to walk through 12 things that I think that until we get these straight, no matter what our age or stage are, we're not going to find the path to wealth or, or richness or financial freedom or if we do, it's going to be a rough go to get there. So let's jump in, I'm going to jump to, to the iPad and we'll write these things down. But here's the first one. And, and this is thing that, that I grew up with, and many of us grew up with, number one is not talking about it, okay? We, we are in a situation where, where what happens is that we're not talking about money. We're told how many of you actually were raised in a home where they said, well, talking about money is impolite?

I remember we called him an uncle. He wasn't an uncle, but he was driving this nice, nice sports car. I had no idea what it was. It was an Aston Martin in hindsight. But he had this phone in it way before phones were vogue. I mean, it was this big phone and you had to dial a central station and they would connect the call and all that stuff. And I remember looking at him and saying, how much do you make? My mom almost spit her food out. She was like, do not ask that. Are you kidding me? That is so impolite. And maybe it is, you know, asking what someone makes. But talking about money isn't impolite. It's actually a necessity. Here's the deal.

A recent study showed that 72%, 72% of people are stressed about money. 22% say that it's extreme stress. So if we're having stress around money, but we're not talking about it, how do we relieve the stress? How do we get, how do we learn things? See, the problem is, is that most of our money lessons are caught, not taught. We don't go through formal education they don't talk about it in school. They demonize it in the media and social media. They glamorize it sometimes in social media and make it seem like, oh, get rich quick. But then I have in real talk around real money and around real life, that's part of what the work is that I'm doing. The show, my new book, building your money Machine is all about, is to open up the conversation, because here's what I know I. Until we start to have a conversation around money, like really around money, what is it? Why does it matter? Does it, Is it the thing that's going to give you happiness? Short answer no, but, but is it the thing that's going to give you drive? Is it the thing that's going to give you meaning? You know, all those questions and then how do you, how does it work? How do you get money? How do you keep money? What does it mean to, to build wealth? So, so this is, number one is that if we're not talking about it, we need to talk about it. And in order to talk about it, it leads to number two is we got to ask ourselves, what environment are we in? Who are we hanging around with to make that happen? Because if we're living in an environment, if we're surrounding ourselves in an environment where most of the people are spenders, they're in debt, and they're having conversations about how terrible it is, how rough it is, and how they can never get ahead, it's not going to elevate you past that. And so we need to think about is what pools are we swimming in, what environments are we in? Are they nurturing, are they growing, are they challenging, are they creating uncertainty, fear, angst, lack. And I'm not saying to eliminate those out of your life just to be aware of it so you can turn around and say, I want to go somewhere else. I'm going to, I'm going to add to my environments because sometimes you can't get rid of, you know, family members and that kind of thing. But, but are we having conversations about spending money or are we having conversations around building wealth and having a meaning and, and generosity and making a difference? They're different and they're going to spur a different element of thinking, which is going to drive a different behavior, which is going to drive a different, different money result. So that's number two. Number three is they're playing the payment game. So, so what happens is this is that we, we start to buy things or we start to make.

Spending decisions based on the Monthly payment. And, and marketers know this, especially car dealers, they know this. And if they can get you to commit to a payment, they can manipulate the numbers so you actually overextend yourself and you don't realize it's little, little pieces of time. It's that whole analogy of, of if you put a frog in cold water and start to boil it, it doesn't realize that it's getting boiled until it's too late. I know it's a horrible analogy, but it's the truth. And so what ends up happening is when we play the payment game, oh, it's only 100 bucks a month. Well, if you do only 100 bucks a month, 10, 12 times, you're all of a sudden you're at 1200 bucks a month. The challenge with the payment game is what, what it does is it removes the friction from the buying decision, which makes it easier for you to buy. That's why a car dealer, a car salesperson, when you come on the lot, one of the first questions they ask you is.

What kind of payment are you looking for? Because if they know the payment, they can, they can change the numbers. Now, I, I negotiate a whole lot differently. And when they turn around and do that, I remember the last time I negotiated, I said, I'm probably going to pay for cash. But the bottom line is we're not talking about payments here. And until I decide that I want a car, you and I aren't going to have a conversation. So can I have some time to go? Look, now, I walked off lots because some of these salespeople that are, they're, they're like parasites and they won't leave you alone. Well, I, as a customer, asked them to give me space and time. And if they're not going to give me space and time, that means they don't respect me. If they don't respect me, they don't get my money. Means I walk out, even if they had the car. So, so, but the bottom line is that when you start to look at payment games, buy now, pay later, or zero down financing, or just credit card financing layaways, all those things are taking and kicking the can down the road. But sooner or later, that math equation is going to come home to roost. It has to work out. The, you know, math is going to work out. So paying the, playing the payment game is something that, that the wealthy or, or those that are moving towards wealth know that they shouldn't be playing because inevitably there's a cost to it. Even when they say it's zero percent. Nothing is for free. Zero, zero percent. Okay. It's not for free. That somehow they embedded some compensation in there for them to actually finance the purchase. So you need to be be aware of it. So we're not going to play the payment game. We're going to pay for things. We're going to buy things and do things to the extent of cash. Now, some big purchases like a car, we just got to do it right. We have some rules around buying cars. How do you buy cars? Or a house? Same thing. We have some rules around buying a house so you don't overextend yourself to a point where you can't do it. But by and large, we want to buy things in cash as best we can. Especially consumables. Especially consumables. The stuff that is lifestyle luxury items. If we're financing our clothing, if we're financing our vacations, if we're financing our daily living, then what we're doing is we're robbing from our future to live a life today that we can't afford, okay? So we need to be. We need to be smart about it. From that perspective, number four is we have no liquidity. What is liquidity? Cash. Okay? It's cash. It's, it's. How much cash do you have on hand? And the reason isn't to have cash because, you know, people have said, oh, cash is trash. You don't want cash because you're not. You're going to lose money on inflation. And they're right. However, it is important for us to have liquidity so we have peace of mind, okay? When there's an emergency, if there's an emergency, and there will be, that's just the, that's the way life is. Life will happen. And at some point you have an unplanned expense, you have an unplanned health ailment, you have an unplanned, you know, work interruption, you get, you know, laid off or something. And if we don't have liquidity.

To carry ourselves during that time, we end up having to go into debt, which means that instead of building the mountain we're trying to build, we're digging a hole to get out of. We don't want to do that. So we want to have liquidity for a few reasons. One, peace of mind. Two, so we can take care of any emergencies. Three, so we can sustain ourselves during any kind of prolonged downturn or health challenge or relationship challenge or work challenge in that way. And then, and then the other reason we want it is because there may be opportunities to buy. And if we have liquidity and cash to buy, we can negotiate much, much better. I did that with a house. I did that with my car. I do it a lot with that. So we want the liquidity to put us in a power position to make that happen. And so over time, we want you to do that. I want you to use the wealth priority ladder, which is in the book. And I explain it in detail in the book and in my trainings so you understand what to do to make that happen. Number five is being house rich, okay? Cash poor. And what I mean by this is putting too much into a house. Now, I just had a conversation with someone that said, I don't think that I'm ever going to be able to own a house. And I asked the question, is there a reason you want to own the house? Well, it's the American dream. Well, I asked the question, is the American dream your dream? I never thought about that. I just thought I was supposed to own a house. Oh, no, no, no. I don't care what the American dream is. I want to know what your dream is. There's no necessity that says you have to buy a house. There's no necessity that says you have to own a house. Is it, Is it a good investment? Well, from a pure investment standpoint, no. Because it costs you money. It's not truly investment. It's a place to live. You're paying a mortgage. There's cost to upkeep it. Okay, does it go up in value long term? Typically, real estate does. Is it a good investment? Only when you're ready to sell it. There are other investments that are more liquid and more appropriate. And the challenge is if we overextend ourselves, our housing, okay, if we overextend ourselves with our housing, we have no cash to live. We have no cash for anything else. We have no cash for liquidity, we have no cash to get out of debt. And we are just barely making ends meet. So we have to be really smart about it. I look at your housing costs. Total housing costs need to be less than 30% of your income. Less than 30% of income. If it's beyond 30%, you're starting to tiptoe towards. Towards being overextended, house rich, cash poor. Leads me to number six, separating effort and earnings. This is the whole premise of my book, Building your money machine is for you to understand how to separate your ability to earn from the efforts to earn it. The challenge right now is that most of us in order to earn money, we have to go to a job, we have to go to the business, we have to run on the treadmill. And we got to run on the treadmill. And the fact is, and I came out of that space, I'm, I, I'm an accountant. We, we, we sold hours. So unless I was churning the hours, I wasn't making money. Unless I was on that treadmill, I wasn't making money. And if I wanted to make more money, I had to run faster, longer, harder on the treadmill. Y'. All, Sooner or later something breaks down, something burns out. We can't go, we hit a ceiling, we hit a cap. And so what we need to look at is how do I separate my, my efforts to earn the money from the earnings itself, Hence the money machine? Okay, yes, I earn money by doing things, my efforts, but I also create things, assets. I buy things, assets that generate income without my efforts. The book I spent a lot of time creating, but it's going to be for selling for the next decade or more, making money. Okay? Changing lives, helping you like the path to financial freedom to give you the tools, the tactics, the strategies. It's going to be a game changing book. So it's going to be there for a while. But I did the effort once and now it goes on. Okay. Investments, real estate, rental properties. You know, there, there is, there's cash flow. It takes a lot less effort once you're in it and it's working. Other investments, portfolio investments like, like stocks and bonds and index funds and ETFs, all of those things are going to give you income without your, without as much effort. And the more that we can reduce the effort to earn, the more we have time to live our lives the way we want to. And so, so those that are wealthy, those that are rich start to understand and they, they know that at some point they have to look at how do I separate my, my efforts to earn money with the actual earnings itself? And the way to do it is to build a money machine. The number seven. Number seven is, is about leverage, but not leverage in the way you think. I'm not talking about debt leverage, but it goes back to separating effort and earnings too. But leveraging assets to create earnings without your effort, but also leveraging team. See, anything that gives us time back is going to, is leverage. Anything that gives us effort back is leverage. So I want to look for ways that I can generate my income with less effort or less time. And so I am talking about leveraging assets team and Time, Okay? And when we do that, we get it back to do it for, use it for other, other reasons. Which leads me to number eight, and that is knowing your value. This is a big one. It's a big one of not knowing your value. And if we truly want to start to leverage things, first things first. Value yourself. Value yourself. Okay? We tend to not ask for our value, and the value isn't in our hours. The value is in the solutions that we create or that we provide. The tendency is to do a math equation to say, Well, I work 40 hours and there's my hourly rate, but in that 40 hours, what's the, what's the solution you, you provide that can create.

Value in, in the hands of, of the folks that, that you're working with? So, so this, this piece, number eight.

Owning your value to look at yourself and say, I actually am valuable and I'm valuable to this extent and I'm not going to reduce my value and I'm going to own it with conviction. Okay? Number nine. This one people, you know, wish it would go away, but it won't go away. Taxes. There's two systems. There's two systems of tax systems. One, and it's not a tax system for the rich and a tax system for the poor or the middle class. That, that's not true. We all have the same tax system. We all have the access to the same tax system. But when I say two tax systems, it's the tax systems for those that are employees and those that are business owners. Because an employee pays for all their expenses after they pay their taxes, so they get their paycheck. And after they take their, get their paycheck from their paycheck, they get, let's say they get gross pay of $2,000, but the net check they get is like $1500. So there's a $500 difference. Where did that go? To pay taxes. So right out of their paycheck, they pay taxes first. They have 1500 dollars net to spend to pay for their mortgage, to pay for their car payment, to pay for expenses and to pay for all those things. But a business owner, they make the money, they pay their business expenses, and they pay tax on the net. So they actually have the opportunity to pay for things before tax. So for instance, if they use the car, the vehicle for business use, instead of paying it after taxes, they can pay a portion of it from the business, get a tax deduction for it and reduce their taxes. Understanding the two tax systems, those for investors and business owners and those for employees and using it effectively is really important to move you towards. Towards the richer side of things. Number 10, and most of you probably heard this is multiple streams of income. And here's the thing here, and I do think that we want this, but we want multiple levels of income, too. The level of effort to generate the income. And the less we are dependent on a single strand of income, the less risk we are to losing our wealth, losing our way, and losing our income. Now, here's a caveat here.

You need to start with one stream of income. You need to get that running fast and furious. You need to get it rolling really well before you start to try and develop another one. The tendency might be to try and try and create three or four streams of income at the same time, and none of them will work because you're not focused enough to give it the attention that's necessary. So get one income spinning well, that. It's like you're spinning plates. Get it spinning well first, before you go, spin another one. Okay? But over time, I want to make sure that you have multiple streams of income. All right, last two. Number 11 is not tracking your numbers. Now, one of the numbers I want you to track is your net worth. But here's the thing. I get it. Some people say I. I'm afraid to look at what it looks like. I don't want to know what it looks like. And, you know, I. I get it. But until you're willing to look it in the. In the eyes, looking in the face, until you're willing to get real with your current reality, we can't move you from there. Not about judgment, not about blame. I don't care how bad the decisions you think you made in the past, they're in the past. We're gonna make new ones. I'm gonna equip you. I'm gonna empower you. I'm gonna educate you, I'm gonna support you. I'm gonna guide you. You can make new decisions. You're going to end up with new results. Now, I'm not saying that it's easy depending on where you're at, but it will be simple. And we do that right. So tracking our numbers so we know where we are, where we're at, Tracking our numbers so we know where we're going. Tracking our net worth is a huge thing that most wealthy people are doing on a regular basis. And the last one is, this is number. Number 12 is making investing a priority in. And here's what I mean by this. Making investing a priority. It Is that if you don't, if you don't do this, here's what most people do, okay? Most people are.

Making money.

Spending money on their lifestyle and on living. And then they look at what's left and they take what's left and they invest that. They create their financial future on whatever's the leftovers. The problem is that investing isn't a priority in that equation. And what you're really doing is creating a future on the scraps. And there may be some months where you have a lot left over and there may be other months where you have no leftover. And so it's hit and miss. And you wonder why you can't get ahead. Well, because it's not a priority to get you ahead. And in order to do this, what we need to do is flip it. We make money.

We invest first. We allocate that, that 20%, 25% towards our future. And if you can't get to 20, 25%, start where you can. Maybe it's 5%, we increase it to 6 to 7. But the, the target is 20 to 25%. But more importantly is that you're creating the habit that it is the priority. And you sit back and say, I'm going to invest first and then I'm going to spend the rest on my current lifestyle.

And you might look at me and say, but Mel, if I did that, I couldn't pay my bills. Well, now we have the real question. Now we have to look at not only what your bills are, but now let's examine the income that you're bringing in. How can I increase my value and increase the flow of income so I have enough to support my investing as a priority and my lifestyle? But we don't forsake our financial future for a present that I can't afford. All right? So I hope that this makes sense. These are the, These are the 12 things that, when I look at it, when I've worked over the, over the decades with, with folks that are moving from wherever they are, middle class, even below middle class, and moving into, into the rich realm or the wealth realm or the financially free realm. Realm. These are the 12 things, okay? They're talking about money. They, they change their environment and, and they make sure they surround themselves with people that are going to challenge them, grow them and help them. They have, they're not paying the payment g payment game. They're building liquidity so they have safety and opportunity. They're not worried about being house rich and cash poor. They find a way over time to, to make sure that they separate their effort from their earnings. They leverage assets, time and team. They own their own value. They understand how to use the tax system to their advantage. They develop over time, multiple income streams. They're tracking their numbers and they make investing a priority. I hope, I hope that you use this as a checklist and you start to look at things and say, how can I make each of these happen? Because when you do now, all of a sudden you move from wherever you're at, whatever the age or stage you're at, towards the path, the financial freedom and the richness you deserve. And know that I'm with you every step of the way. I truly believe that financial freedom is your birthright. We just have to go claim it. All right? I hope you found this of value. If you have any questions or anything or comments, do me a favor and let me know. Let me know. Reach out to me. Post it below. Let's have the conversation. Let's start the money talk here, let me help light you light the path to financial freedom for you. Until I get a chance to see you on another episode or on the road as I speak, or maybe on one of my lives, always, always strive to live a life without losing. 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 entrepreneurship 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.