SAVING IS NOT ENOUGH; HOW THE FILTHY RICH GET RICH & HOW YOU CAN TOO!

So some time ago, I had a minor incident with a police vehicle; I was driving when I saw a large pothole ahead; I swerved slightly to the right to avoid it; just before I began to swerve, I sighted a police pickup behind me, and then the next thing I heard was “gboom!” Subsequently, I realized that just as I started to swerve, the driver in the police vehicle decided to overtake me and zoomed forward, hence the collision with my front passenger wheel.

However with the way the impact sounded, I thought my front passenger side had been all but destroyed. I just sat back in my car and stared in dismay at the police vehicle in front of me, then the driver came down and said; “So Madam, just because of this pothole, you decided to hit me right? Now park on your right!”

My dismay immediately turned to anger as I replied: “You ran into me and you’re claiming I hit you? Can you imagine?!” He then got back into his vehicle and appeared to be about to drive off; I drove to the front and blocked the vehicle.

He then came down again and asked how I dared to block his vehicle? Since we both felt that each of us was right, we resolved to go to the nearest station, which was just one pole away. I’m not sure this was smart on my part; I was with a baby and another child, and I had still not checked the car to see the extent of the damage.

But at that point, I was just so angry at the thought that the officer was trying to play a fast one. At the station, I came down and asked the officer at the front passenger side if his subordinate was trying to threaten me because they were in a police vehicle, and that they should call their insurance provider to repair the damage to my vehicle.

To my surprise, the officer was calm and actually smiling; and he calmly asked me if I wanted to go ahead with this case or if they could leave. That actually got to me and I finally decided to check the damage done to my vehicle; “WHAT!” I realized it was just a scratch that was barely noticeable on the body of the car. True, my front wheel had taken a hard hit, but it could be fixed without the process of calling up an insurance company.

“Whew!” I began to realize that the delay in making a case on my rights was not worth it at all; it was merely a waste of precious time. But by then, the driver had already appeared with a police inspector; so we had to start giving our names, and narrating different versions of how the collision occurred.

The police inspector greeted the calm officer very respectfully and profusely, then took a look at the impact on both vehicles and guess who he decided was at fault? Me! Another officer in plain clothes passed by and said: “forgive this woman.” By then my head was spinning. But your vehicle hit mine from behind! Who should forgive who?!

I later found out that the calm and smiling officer was of a very high rank; and after we had settled amicably and parted ways, I left with a lot of respect for him. I couldn’t say the same for the officer who was driving though; I had been annoyed at the way he first reacted when the incident occurred. But what stuck with me after this entire dramatic episode was the idea that had it become necessary, I would have had to draw from my savings to handle the matter legally. This was not a happy thought.

Then something clicked; in life, situations and unforseen events like this are bound to occur; they are a natural, if somewhat irritable aspect of life. Contingencies could also be good opportunities that require money to take advantage of them, as well as problems that necessitate unplanned expenses.

Drawing from our savings each time such events occur will only erode and wipe them out overtime. I’ve actually seen people’s savings unfortunately, wiped out with just one serious illness or emergency. I know of someone who recently emptied out his account to pay the ransom of his brother who was kidnapped unfortunately. So therefore savings is NOT the key to getting rich, or to wealth creation. In other words, savings is not enough, and can not guarantee your becoming rich, or remaining rich after you’ve become rich.

www.freerangestock.com

What The Rich Know That Others Don’t

So what do the filthy rich know that most people don’t? How do the super rich get rich? How do they maintain their wealth over a lifetime and sometimes over several generations? What makes them wealthy and keeps them wealthy through a lifetime with contingencies, losing some money, legal battles, generous giving and helps, and so on? What enables them, to not just pay the bills like the middle-class and the masses, but to constantly have an abundance that could be passed on as an inheritance to future generations?

After several years of observation, I finally figured out what I had always known through my years of studying the wealthy; but never been fully conscious of. You see, the filthy rich have the most powerful key which is the major secret to why they have what they have.

According to Steve Siebold, the author of “How Rich People Think”, what makes the wealthy so had little to do with money itself; but everything to do with their mindset. In this book, he listed 21 ways rich people think differently than average people.

Number 17 states that average people focus on saving but rich people focus on earning. This is perhaps, the most important difference between the rich and the poor. You see, the rich and the poor both earn money; but the vast difference is: #1 The way the money is earned and #2 The amounts and proportions of the money earned.

The poor will be content with just one source of income and then focus on spending all that money on living expenses and some other insignificant things. Yes, it’s true, but that’s what most people do; go to work and then receive money on payday, only to use it all up under the well-known excuse of; “My salary is not enough.” I used this excuse myself for some years, and it delayed me from starting out on the path to financial independence.

You see, if you earn $100, and cannot put aside $5, or $10 consistently, then even when you earn $1,000, you will not be able to set aside $50 or $100. The actual amount of money here is not the issue; the principle and the discipline to do so are the constants.

Parkinson’s law states that expenses will always rise to meet income. If you don’t want to be poor, begin to put aside a portion of your income, whether it’s your salary or profit from your business. Start with what you can; if you can’t start with 30%, start with 20%. If these percentages are too much because of the bills you have to pay, start with 10% or 5%. Even if you have to start with 2%, just start, and gradually increase it overtime, so your savings could translate into a meaningful amount.

Save to invest later on, or reinvest into your business as the case may be. According to Bill Gates, in the early years of his business Microsoft, his main concern was to save up enough money from his profits; such that there would be enough money to constantly run the business, as well as reinvest into it, even if his clients were to not pay him for an entire year. The soundness of this principle, strategy and discipline can be seen in the fact that he became the world’s richest man for several years.

The middle-class are mostly content with one major source of income; and then while they may put aside some percentage of that income in savings, they thereafter make the mistake of focusing on savings, and on growing their savings to live off it after they retire, instead of thinking, understudying, and making investments and buying and creating assets that can make their money work for them even when they’re sleeping.

I know a dear lady, bless her heart, who is retiring. I truly respect her discipline in saving up for her retirement, whereas, most of her colleagues have no savings, and are going to be relying fully on their pension, which is inadequate, and even smaller than their paychecks were. However, I think that had she started a side business much earlier, or invested in something like bonds, by now she would have been much wealthier than she is now. But because her focus was on saving to live off it, instead of saving to invest, her financial strength is not what it could have been.

Funny enough, do you know that when you just keep on saving your money in a savings account, your bank takes your money, invests it in government bonds and loans amongst others, makes profits from your money, and then throws you peanuts in the name of interest on your savings account, and oh, by the way, which they wipe off through charges on your bank account. Really interesting, right?

But the rich have gotten this all figured out. And that’s why they’re where they are, and why they’re so different from the poor and the middle-class who are usually referred to as “the masses”. The rich largely operate under very different mindsets and principles, as well as disciplines, that constantly separate them from all other classes of people.

You see, they start out earning just like everyone else, but they will NEVER make the expensive mistake of constantly spending all they earn, and then go ahead to make what I call “reasonable excuses” as to why they do not have the discipline, as well as the wisdom to regularly take a good look at their expenses and lifestyle, so as to cut off what they don’t absolutely need, or what they can do without, in order to create the future they desire, not just for themselves, but for their families.

Again, they will put aside a certain percentage of their income consistently, but will NEVER stop at saving.

Cashflow is king

Because the rich know that cashflow is king, they’ll put in their time, money and effort to buy, create and build assets that will create positive cashflow.

You see, at the root of all the talk about savings, is the fact that you don’t save for the sake of saving, or only for the rainy day. Saving for the rainy day is smart; actually it’s referred to as emergency funds; and is very important, but this on it’s own will not make you rich. We cover the importance of emergency funds and how to grow them, in-depth in our other post – The key skill school never taught us; wealth creation – the difference between lack and abundance.

What creates wealth is generating positive cashflow through investments, reinvestments, and buying or building assets. The rising costs of living and expenses are a constant, as well as contingencies and unplanned events that come up. These all require spending money. Add to all this the rising costs of education, changing government policies, and increased taxes and medical bills, and you’ll see that savings will never be enough to provide all these and still create a comfortable lifestyle, and even an abundance.

Positive cashflow from multiple income streams is the only way the rich get filthy rich. By cashflow, I’m not just talking about one major source of income that can cease or be reduced at any time due to a job loss, a pay cut, government policies, the failure of a business, increased taxation or any other circumstance. I’m talking about cashflow that comes from several assets and investments.

You see, it is said that millionaires have seven or more sources of income while the average person has just one. In reality, a lot of them have much more than that. If you’re a viewer of Shark Tank, you’ll see this practically in this very educative television show. The millionaire and billionaire investors make multiple investments in businesses they consider worthy of their time, money and business skills. Over the numerous episodes and seasons, they’ve made hundreds of investments! Seven streams of income is a joke where these filthy rich people are concerned; and yet to all other classes of people, seven sources of income would be too good to be true.

Some others have tens of income streams; they may only look fewer to the outsider because some of these income streams are closely related. For example, with an entrepreneur that runs a blog, one might see his blog as just one income stream. But that’s not true; within that blog are several other income sources he continually earns from. The blog may link the various businesses together, but most of them can bring in cashflow even if they’re run outside that particularly blog.

I know bloggers who earn from the sales of their own physical products, podcasts, webinars, ebooks, online courses, sponsored content, coaching, consulting, public speaking, banner ads and affiliate marketing. If you take a good look at these income sources, with the exception of one or two being definitely tied to the blog, most of them can be operated across other platforms.

There are people who make money from online courses and yet do not own a blog; a consultancy business and public speaking can be operated without a blog; you could sell your products online and offline without owning a blog or a website; I know of people who host webinars and make money from them without owning a blog or website. There are also authors of ebooks who sell them on various platforms but are not bloggers. You see how dynamic it all is?

The truth is when we open up our minds, the possibilities are limitless. I just only used this example of a blog here because this is one amongst others that I’m familiar with; there are thousands of investments and assets out there that could spin money for their owners for several years, some, for over a lifetime.

I also used a blog because when most people hear of investments and assets, their minds automatically go to tangible goods and products, as well as real estate. And then it becomes very easy for most people to say; “I can’t afford it.” But even your mind is an asset; the greatest asset you’ll ever own. I know a great entrepreneur that says he always sets aside a percentage of his profits to invest or reinvest into his businesses; and when those percentages are so small that he can not immediately invest them into a business, he invests into his mind by buying powerful business books.

During several financial talks and presentations I’ve done, I’ve heard people say repeatedly; you need bulk money to invest in assets. Now this is simply not true! These are the excuses that keep people where they are. If your income is so small and and all you can start putting aside is 5% or 10% of that income, you could begin by investing in the most dynamic asset you already own – your mind. Go ahead and buy some business and investment books and audio programs. Trust me, you’ll grow and expand your mind and perspective on wealth creation.

And as long as you’re consistently putting aside a portion of your income, who says you have to invest it immediately? Remember savings? This is why we save; to gradually build up funds for investments. And who says you have to wait to save up hundreds of thousands to invest in real estate as some people tell me because according to them, “it’s the best investment?” There are always several other options you could look into.

Simply think of assets as things that can put money in your pocket. It could be any type of part-time or full-time business, a book you write, and so on. If you’ll take out time to do some research and study, you’ll discover a whole new world of income producing ideas. For more detailed reading on the different types of assets you could invest in with what you have, read our post on best seasonal investments to grow your wealth faster! (Part 1)

Assets Take Time To Bring In Income Investing in assets does not mean that you’re going to earn money from them immediately. If you think in terms of immediate gratification, stick to your job, and forget investments. A job pays you a salary from the first month you start working, but that isn’t how wealth creation works. The rich are very determined and persistent people, and can wait for several months or even years to reap the dividends from their investments.

First of all, all assets are not equal. Some bring you money faster than others, but they ALL take some time to start earning you money. Some may take a few months, while others may even take several years to begin earning you any substantial income. And this is the part of getting rich that makes most people give up, while others overlook this very important factor. According to one of the world’s richest investors Warren Buffet, you can’t have a baby today by getting nine women pregnant. Every worthwhile pursuit takes time.

For instance, I know a multimillionaire who is a real estate developer. He buys houses, renovates them, and then sells or rents them out to tenants. If you take a look at this process, it definitely takes several months, or up to a year between when he invests by buying, invests further by renovations, and when he sells or rents out. Not to mention his first few years in this business when according to him, he got his fingers burnt a few times due to inexperience.

Even if you buy a perfect property outright, it’s going to take you sometime to sell it right? You may probably have to wait for it to appreciate in value. And if you can’t invest money into an asset for now due to insufficient funds, could you build one with what you already have – your time? Some assets you have to build, like side or part time businesses, full time businesses and online businesses. There are several businesses you could start up with low costs; all you need is to spend your time to do some research in this area. Even if you choose to write a book, you need to spend time first to write it, and then promote it, and then sell copies of it.

For other assets such as stocks, they’ll need time to grow and appreciate in value as well. For commodities, they’ll also need to appreciate in value before you can sell them and make profits. How assets work is similar to the farming process; the farmer first prepares the land, then plants, then waters or irrigates if need be, then gets rid of weeds, and still has to wait for his crops to yield, waits again for maturity before he can get a harvest.

Not long ago, I spoke with a friend who is a highly skilled fashion designer, and who wanted to create a second source of income apart from her fashion designing business. But there was something else I felt she wasn’t quite getting right; she wanted her investment to start bringing her income immediately which was not a bad thing in itself, but because of this, she was contemplating going into an investment which is extremely high risk and not suitable or sustainable for her scope of experience.

I had to point out to her that investing does not necessarily earn you money immediately. If that is your major concern, you’ll end up going into an investment you do not understand, and could lose your money in the process. At least take out some months to really understudy and understand whatever you’re investing in, so you don’t get taken for a ride by unscrupulous people.

At the core of all what I’ve been saying is simply this; the rich understand what most others don’t; to create sustainable wealth, you need lots of positive cashflow which means several assets that will throw off income for you. These income streams will generate much more money than you could ever earn from one single income source, and what’s more, they can be scaled to grow and generate even more, and will be also much more sustainable over time.

For example, Alex works with an oil company and earns a salary which is his only source of income. If he loses this job for any reason whatsoever, and it could range from corporate downsizing to mergers, acquisitions, or performance, he would have no source of income until he either finds another job, or starts a business which will of course take some time to generate substantial profits for him. The rich avoid this type of scenario altogether by never relying on a single income source.

Avoid Building Many Assets At The Same Time

There is also, a very important point to understand when building any type of asset. This is the fact that after having understood the importance of building or growing assets, the desire to do so might drive you to try to build several assets all at once. Now this is a loophole you must avoid at all costs; I’ve also struggled with this several times in the past. I see about 3 to 4 different business opportunities to start growing; and I’ve sometimes fallen into the temptation to attempt to start working on them altogether at the same time. However, this is a faux pas (mistake) that may end up leaving you exhausted, disorganized, over pressured and can frustrate most of your efforts. Instead, you should take the opportunity you’re most passionate about, or even most knowledgeable about at that point in time, and begin to build on it. Sometimes too, the opportunity that comes with the lowest startup costs might be the one you choose based on what you have at hand.

Remember this very wise saying of Warren Buffet: “you can’t get a baby today by getting nine women pregnant.” Building powerful things simply take time. As long as you’re putting in the daily efforts necessary in action, thinking and learning into your project, and as long as you don’t give up, you’re going to succeed. Persistence ensures that results are inevitable.

Avoid the trap of trying to build too many things at once. Instead, take up one, or at most two related things; build, get successful; and then take up another. Your success with the first will even provide leverage for you to succeed with the next.

Owning Assets Means Leverage

Finally, owning assets will cause you to employ the key principle of leverage. By this, I simply mean the concept of taking advantage of, using and employing other people’s time, skills and efforts to increase your rewards, make greater profits and grow your money. For example, we all have only 24 hours in a day; let’s say you get to work for ten hours. If you get ninety-nine other people to work on your business for ten hours each, you would have leveraged your employees time to work for one thousand hours a day. Imagine a business that has a thousand hours invested into it on a daily basis; imagine the increased cash flow and corresponding profits it will generate!

Usually, the concept of leverage is applied mostly to the financial principles of loans and investments. But in this context, we’re looking at it from the angle of using multiple sources of income and positive cashflow, as well as the time and efforts of others to grow your wealth.

If you were to own some properties that earn you money from rent and you employed a caretaker who helps oversee them and the maintenance of their facilities, his efforts and time would ensure that your assets and investments are properly maintained, so they can keep generating cashflow for you.

You can focus on your primary source, or other sources of income and still have constant inflow from your properties. Of course, you’ll still have to monitor your properties so that your caretaker doesn’t take advantage of you, but having someone handle the time consuming aspects leaves you with more time to work on other things.

I know of a very successful lady who runs a popular food blog; she first started by taking pictures of her recipes and meals herself to post on her blog, but then found out that this was taking too much of her time, and affecting the time she had to spend on other core activities such as creating the recipes, preparing the meals and promoting her blog. So as soon as she began to make some more money from the blog, she hired two people; a professional food photographer and a food stylist to handle all the images for her site; and immediately after that her blog really took off with more speed; acquired much more page views and readers and made her over 10 times more money because according to her (and she’s right about this), people eat with their eyes. So she could now focus much more time and effort on her core activities of creating and developing recipes, engaging and interacting with her readers, and networking.

She said she was at first shooting photos and videos herself for her blog, but that it would take her four hours cooking from start to finish, and then shooting, and then with adding it to her site, it would take her an entire day. With her new team however, when they would shoot at the studio, they would get through 10 to 12 recipes a day because both her food photographer and food stylist each had their own teams and assistants, and so they were all operating together like a well-oiled machine! This new system now became a much more efficient and effective way to run her website. So simply by focusing more on the things only she could do, she transformed her business and multiplied her profits. And this is the power of leverage.

Saving will never be enough. At best, it will just keep you in the middle-class, where you can pay the bills, and live at a certain level of comfort. But what happens when the next economic recession shows up? And it will; there are statistics, and historical data to prove that recessions occur every 10 to 15 years. During recessions, “comfortable” people get really uncomfortable. You don’t need “just enough”; you need an abundance.

With the prices of goods and services, as well as that of quality education and living expenses rising constantly year in year out, while on the other hand there are just slight increments on earned incomes and wages, saving will never guarantee financial independence for you and your family now or in the future.

Now that you know what the super rich know, do what they do. Cashflow is king; begin to think on how to create and build assets that will ensure ceaseless cashflow for you.

Do you already own some assets that generate a steady flow of cash for you? If you don’t, do you have some ideas on which assets you could start building? Do you need counsel from us on what might be the best strategy and steps for you to start out on the path to financial independence based on your own personal situation? Whichever stage you’re at right now, we’ll love to hear from you in our comment section below.

See you at the top – Where you belong!

Leave a Reply

Your email address will not be published. Required fields are marked *