8 Middle Class Habits That Keep You Poor

Summary

This video script explores eight common middle-class habits that hinder wealth accumulation. It emphasizes the importance of curating one's inner circle, avoiding excessive debt, leveraging investments, valuing personal worth, and diversifying income streams. The speaker shares personal experiences and insights, advocating for smart financial behaviors over hard work alone, and stresses the significance of paying oneself first to build wealth and break free from the paycheck-to-paycheck cycle.

Takeaways

• 😀 The speaker initially found themselves in debt despite following conventional success paths, indicating that traditional measures of success don't always equate to financial stability.
• 🏛 Recognizing and replacing middle-class habits with wealth-building habits is crucial for financial growth, as these habits often hinder wealth accumulation.
• 🔄 The importance of curating one's inner circle cannot be overstated; surrounding oneself with wealth-minded individuals can foster similar habits and financial literacy.
• 🏠 Overspending on large assets like houses and cars can trap individuals in debt, limiting their financial flexibility and ability to invest in wealth-building opportunities.
• 💼 Leveraging, or working smarter rather than harder, is a key distinction between middle-class and wealthy individuals, with the latter using systems and investments to generate passive income.
• 📈 Understanding and utilizing financial leverage, such as real estate investments, can significantly accelerate wealth accumulation through the power of compounding returns.
• 💰 Owning and communicating one's value is essential for earning what one is worth, which is a habit often overlooked by those focused solely on hard work.
• 📊 The tax system favors different types of income, with investment income often taxed at lower rates, highlighting the benefits of diversifying income sources beyond traditional employment.
• 🤑 Creating multiple income streams reduces financial vulnerability and is a habit of the wealthy, who often have various passive and active income sources.
• 💳 Focusing on credit scores as a measure of financial success is misleading; net worth, which accounts for assets and liabilities, is a more accurate reflection of financial health.
• 💹 The habit of paying oneself first, by automatically directing a portion of income to savings, is a foundational practice for building wealth and financial independence.

Q & A

What was the speaker's financial situation at age 22 despite having a high-paying job?

The speaker found themselves $100,000 in debt, living paycheck to paycheck, and feeling broke all the time, even though they were earning an above-average salary.

What is the Global Wealth Pyramid mentioned in the script, and what percentage of people reach $1 million according to it?

The Global Wealth Pyramid is a concept mentioned in the script that illustrates the financial status of people globally. Only 7% of people ever reach $1 million, which is attributed to their operation from a set of poor and middle-class habits.

What is the first middle-class habit discussed in the script, and why is it considered a habit that keeps one from wealth accumulation?

The first middle-class habit is not curating your inner circle. It is considered a habit that keeps one from wealth accumulation because the mindset and financial literacy of those around you greatly influence your own financial behaviors and opportunities.

Why is talking about money considered taboo in some cultures, and how can it impact financial literacy?

In some cultures, such as the speaker's Korean background, talking about money is considered taboo, which can limit financial literacy and the sharing of wealth-building tips and advice among individuals.

What is the 50/30/20 budget rule mentioned in the script, and how does it relate to middle-class habits?

The 50/30/20 budget rule suggests allocating 50% of your budget to needs (including housing and car-related expenses), 30% to wants, and 20% to savings for the future. Middle-class habits often involve spending more than the recommended 50% on housing and car expenses, which can hinder wealth accumulation.

What is the significance of having a low debt-to-income ratio, and what is the recommended maximum percentage according to the script?

A low debt-to-income ratio indicates a healthier financial position with less burden from debt payments. The script recommends not exceeding a 50% debt-to-income ratio, with an ideal closer to 35%.

Why is the habit of working hard but not working smart considered a middle-class habit, and what is the alternative suggested in the script?

Working hard but not working smart is considered a middle-class habit because it often leads to linear progress with limited wealth accumulation. The alternative suggested is the use of leverage, which allows for smarter work through investments, business ownership, and passive income generation.

What is the concept of leverage in finance, and how do rich people use it to their advantage?

Leverage in finance is the use of borrowed money to increase the potential return of an investment. Rich people use leverage to multiply their wealth by investing in assets like real estate or businesses that generate passive income or appreciate in value.

Why is it important to own and communicate your value, especially when negotiating a salary?

Owning and communicating your value is important because it ensures you are compensated fairly for your work. It helps avoid underpayment and acknowledges your contributions, leading to higher earnings and better financial stability.

What is the loyalty tax mentioned in the script, and how does it impact employees financially?

The loyalty tax refers to the phenomenon where employees who stay with the same company for a long time often earn less than those who switch jobs frequently. It represents the lost income potential due to not updating one's salary in line with the market value of their role.

Why do rich people focus on net worth rather than credit score, and what does it indicate about their financial health?

Rich people focus on net worth because it is a comprehensive measure of all assets minus liabilities, reflecting true financial stability and wealth. A high net worth indicates a strong financial position and the ability to generate more wealth.

What is the habit of 'paying yourself first' and why is it a key practice for building wealth?

Paying yourself first is the practice of automatically setting aside a portion of your income for savings before spending on anything else. It is a key practice for building wealth because it ensures that you are consistently saving and investing, leading to long-term financial growth.

How does the script suggest overcoming the pressure to keep up with societal expectations and maintain a certain lifestyle?

The script suggests overcoming societal pressure by prioritizing financial goals, which may involve turning down invitations and resisting the fear of missing out (FOMO). This involves making conscious choices to save and invest first, then living within the means of what's left.

Outlines

00:00

🚀 Escaping the Middle-Class Trap

The speaker reflects on their journey from being in debt to achieving a net worth of over a million dollars. They attribute this transformation to recognizing and replacing middle-class habits with those of the wealthy. The video promises to reveal eight such habits that might be hindering viewers' financial growth, starting with the importance of curating one's inner circle to foster a wealth-building mindset.

05:01

🏠 The Burden of Overspending on Housing and Cars

This paragraph delves into the financial strain caused by excessive spending on housing and vehicles, which often leads to a high debt-to-income ratio. The speaker suggests that the middle class often falls into the trap of buying more than they can afford, just because they can manage the monthly payments. They propose the 50/30/20 budget rule as a guideline for managing expenses and emphasize the importance of not letting housing and car payments consume more than half of one's income.

10:02

🔨 The Power of Leverage in Wealth Building

The speaker contrasts the middle-class habit of hard work without smart strategies with the wealthy's use of leverage to amplify their efforts. They explain leverage as a means to achieve more with less, using examples such as rental properties and businesses to illustrate how the wealthy create passive income streams and systems that work for them even when they are not actively working.

15:03

💼 Owning Your Value and Earning Potential

Here, the speaker discusses the importance of recognizing and communicating one's value in the workplace, whether as an employee or a business owner. They emphasize that being modest and quiet about one's contributions can lead to underearning, and instead advocate for self-promotion and negotiation to ensure fair compensation that reflects one's worth and market value.

💼 The Loyalty Tax and the Importance of Income Diversification

The speaker introduces the concept of the 'loyalty tax,' highlighting how staying with one company can result in lower earnings compared to those who switch jobs frequently. They stress the importance of not being overly dependent on a single income stream and encourage viewers to develop multiple income streams to enhance financial stability and growth.

💼 The Tax Advantages of Different Income Types

This paragraph explores the tax benefits that the wealthy enjoy due to the types of income they earn, such as business and investment income, which are taxed at lower rates than earned income. The speaker suggests that understanding and leveraging these tax advantages is a key strategy for wealth accumulation.

💳 The Misplaced Focus on Credit Scores

The speaker criticizes the common focus on credit scores as a measure of financial success, arguing that net worth is a more accurate indicator. They encourage regular financial check-ins to track assets, liabilities, and net worth, advocating for the habit of paying oneself first as a means to build wealth.

🛍️ The Pressure to Keep Up Appearances and the Importance of Saving

In the final paragraph, the speaker addresses the societal pressure to maintain a certain lifestyle and the impact this can have on one's ability to save. They emphasize the importance of paying oneself first and setting up automatic savings to ensure that financial goals are met before discretionary spending occurs.

Keywords

💡Debt

Debt refers to an amount of money borrowed by one party from another, with an obligation to repay it at a later date. In the video's context, the speaker mentions being $100,000 in debt at the age of 22, which highlights the financial struggles despite having a high-paying job. The term underscores the theme of financial education and the importance of managing personal finances wisely.

💡Middle Class Habits

Middle Class Habits are behaviors and practices often associated with individuals from the middle socioeconomic class. The video discusses eight such habits that may inadvertently hinder wealth accumulation. These habits are central to the video's theme, illustrating common financial pitfalls that the speaker believes should be avoided for financial growth.

💡Wealth Pyramid

The Wealth Pyramid is a concept mentioned in the script that represents the distribution of wealth among different classes of people, with only a small percentage reaching substantial wealth levels. It is used to emphasize the rarity of achieving significant wealth and to introduce the idea that certain habits may prevent one from moving up the pyramid.

💡Inner Circle

The term 'Inner Circle' refers to the group of people one surrounds themselves with, including friends, family, and associates. The video suggests that the financial habits and mindset of one's inner circle can significantly influence personal financial behavior. The speaker contrasts the middle-class taboo around discussing money with the openness of wealthier circles to share financial insights.

💡Debt to Income Ratio

Debt to Income Ratio is a financial metric that measures the proportion of one's income that is used to pay off debt. The video uses this concept to illustrate the financial strain of having high debt payments relative to income, which can impede wealth accumulation and is a key middle-class habit the speaker advises to avoid.

💡Leverage

Leverage, in the context of the video, refers to the use of borrowed money or other resources to increase the potential return of an investment. The speaker contrasts the middle-class habit of working hard for a fixed income with the wealthy habit of using leverage to generate passive income and achieve financial freedom.

💡Compounding Returns

Compounding Returns is an investment concept where earnings are reinvested to generate additional earnings over time. The video mentions the power of compounding as a reason why investing can lead to significant wealth over the long term, emphasizing the importance of investing early and consistently.

💡Loyalty Tax

Loyalty Tax is a term coined in the video to describe the potential financial disadvantage of remaining loyal to a single employer without seeking higher-paying opportunities elsewhere. The speaker suggests that job-hopping can sometimes lead to higher earnings, avoiding the 'loyalty tax' and advocating for the importance of valuing one's work and negotiating for appropriate compensation.

💡Net Worth

Net Worth is the total value of an individual's assets minus their liabilities, serving as a comprehensive measure of personal financial health. The video emphasizes the importance of focusing on net worth rather than credit scores or income alone, suggesting that an increasing net worth is a sign of moving in the right financial direction.

💡Paying Yourself First

Paying Yourself First is a financial practice of allocating a portion of one's income to savings or investments before spending on other expenses. The video highlights this as a habit of wealthy individuals, suggesting that it is a simple yet effective strategy for building wealth and emphasizes the importance of prioritizing future financial security over immediate consumption.

💡Multiple Income Streams

Multiple Income Streams refer to having various sources of earnings beyond a primary job, which can provide financial security and opportunities for wealth accumulation. The video advises against relying solely on a single income source, such as a job, and encourages creativity and resourcefulness in developing additional streams of income.

💡Credit Score

A Credit Score is a numerical representation of an individual's creditworthiness, used by lenders to assess the risk of lending money. While the video acknowledges the practical importance of a good credit score, it contrasts the middle-class focus on credit scores with the wealthy's focus on net worth, suggesting that building wealth is a more comprehensive measure of financial success.

Highlights

The speaker found themselves in debt despite having a high-paying job and good education, attributing it to poor and middle-class habits.

Only 7% of people reach $1 million due to operating from poor and middle-class habits, according to the Global Wealth Pyramid.

Recognizing and replacing middle-class habits with wealthy habits enabled the speaker to achieve a net worth of a million dollars.

Middle-class habit number one is not curating your inner circle, which can hinder financial literacy and growth.

The importance of surrounding oneself with people who have similar financial goals and share knowledge to get richer.

Middle-class habit number two is buying more than one can afford, leading to a high debt-to-income ratio.

A good rule of thumb is to keep the debt-to-income ratio below 50%, ideally closer to 35%.

The 50/30/20 budget rule suggests allocating 50% of the budget to needs, 30% to wants, and 20% to savings.

Middle-class habit number three is working hard but not working smart, missing the concept of leverage.

Leverage allows for less effort but a huge output, exemplified by the use of rental properties and businesses.

Investing is a form of leverage, where small investments can grow exponentially over time due to compounding.

Middle-class habit number four is being modest and not owning or communicating one's value effectively.

The importance of negotiating salary and owning one's value to avoid the 'loyalty tax' and earn what one is worth.

Middle-class habit number five is not understanding the different types of income and their tax implications.

Earned income, business income, and investment income have different tax rates, with investment income often taxed the least.

Middle-class habit number six is being overly dependent on a single job as the only income stream.

The necessity of having multiple income streams for financial stability and growth.

Middle-class habit number seven is an overemphasis on credit score as a measure of financial success.

Net worth is a more accurate indicator of financial stability and success than credit score.

Middle-class habit number eight is spending before saving, which hinders wealth accumulation.

The practice of paying oneself first by automatically transferring a percentage of income to savings.

Developing the habit of paying oneself first leads to wealth accumulation and financial independence.

Transcripts

I did everything right I went to a good

school I studied hard worked hard got a

high paying job so if I did everything

right tell me why at age 22 I found

myself $100,000 in debt living paycheck

to paycheck and just felt so broke all

the time despite earning in above

average salary what did I do wrong turns

out a lot according to this Global

wealth pyramid only 7% of people ever

reach $1 million and that's because

they're operating from a set of poor and

middle- class habits and that's why they

are here instead of here and it wasn't

until I recognized these middle class

habits that I was operating from and

replac them with wealthy habits that I

was finally able to break through to a

million doll net worth and over $6,000 a

month in investment income and

essentially free myself from the rat

race and so in this video I'm going to

be sharing with you from personal

experience the eight middle class habits

that you might not even realize are

keeping you poor but if you break free

of them we'll get you from here to there

middle class habit number one back when

I was in college I was lucky enough to

end up interning for one of my

professors and although he was a college

professor he was actually super wealthy

because he also owned a bunch of

Manhattan real estate and so I ended up

working for him at his real estate

office and every Thursday he would have

friends over after hours to play high

stakes poker and just cuz I was curious

I would hang around after hours just to

see what the poker game was like so in

between dealing hands and moving chips

around the table they would just chat

about where they were investing their

money these days how their businesses

were doing and just throwing out all

this financial jargon and I feel like I

was in another world because where I

come from talking about money is so so

taboo Koreans are extremely Hush Hush

about everything I don't know if it's

the same in your culture but that's when

I started to realized middle class habit

number one which is not curating Your

Inner Circle so if you are currently

poor or middle class chances are you

also grew up around people who are poor

or middle class and yes certainly

connections play a role but bu and large

I think the most important thing about

growing in that environment is the

mindset they talk about money as easily

as they talk about the weather they they

have the financial literacy and the

jargon to talk about it and it's normal

to share tips and advice that will help

each other get richer and in fact doing

things that will make you wealthy such

as going out and starting a business

making Investments those are actually

normal things to do and so the key is to

understand the power of environment if

you put yourself in an environment where

doing things that will make you rich is

the normal thing to do then you're

automatically just going to do them you

don't have to rely on motivation or be

ultra talented it's just what everyone

around you does so thanks to my

professor and this peak into this inside

world that I had around his poker table

games I understood the importance of

seeking out people who have the same

goals as you who are already at the

place where you want to get to or are

heading there so now I have a question

for you in your circle is it normal to

depend on a job go out and buy things on

credit and talk all the time about all

the things that you're buying and

spending money on or in your circle is

it normal to talk about the businesses

that you're starting all the money that

you're investing and what's making a

return these days what is normal for you

in your circle now this Segways

perfectly into middle class habit number

two these days in America we are very

lucky to be able to buy a lot of things

on credit and be able to afford things

just because we could break it out into

monthly payments so two of the biggest

areas where people do this is with

houses and cars However the fact of the

matter is if most of your take-home pay

every month is already spoken for just

by your housing and your car then how

are you going to have any money to get

ahead and put towards your financial

goals A good rule of thumb is if you

were to add up all of your debt payments

that's car payment mortgage payments

student loan payments credit card

minimum payments any loans and monthly

payments you have to make on debt if you

were to take that total divided by your

monthly gross income that would give you

your debt to income ratio which is the

proportion of your income that's already

spoken for by monthly payments on debt

and A good rule of thumb is you don't

want your debt to income ratio to be

more than 50% and honestly 50% is on the

high side I like to see it closer to 35%

another metric to help you decide how

much house and car you can afford given

your income is following the 5030 20

budget rule which is a rule that says

50% of your budget should go towards

needs that includes housing and all car

related expenses 30% on once 20% towards

saving for your future so if your

housing and car payment are already be

Beyond 50% of your income then you

likely bought too big of a house or

bought too nice of a car given your

income and so quintessential middle

class behavior is having a huge house

and being basically a prisoner to your

monthly mortgage payments and having no

freedom to travel and having a really

nice car but having this huge car

payment that's essentially up to even a

third of your salary which is sad so

look at Warren Buffett he's driving the

same old beat up Honda that he's been

driving for decades and a lot of

millionaires I know either don't even

have cars or they just drive the same

one they've been driving for many years

and they will rarely buy a new car on

credit so here's the math on a new car

versus an old car let's say you bought a

brand new $50,000 car you put $10,000

down a 60-month auto loan at 5% interest

your monthly car payment is

$755 compare that to if you bought a

used car on credit that's $110,000 with

$3,000 down on a 60-month loan at 5%

your monthly payment would be

$132 so $750 $5 monthly payment to buy a

depreciating asset versus $132 for a car

that gets you from point A to point B

that's all you need right spending too

much on a car having way too big of a

mortgage is one of the number one wealth

Killers so that sums up very nicely

middle class habit number two which is

buying more than you can actually afford

just because you can make the monthly

payments and now on to middle class

habit number three now I don't know

about you but I'm korean-american and I

grew up learning how to work hard like

that is what Koreans do it's in our

blood now working hard is important

don't get me wrong but working hard is

only going to get you to a certain level

after that if you really want to reach

that top tier of millionaires you need

something different I'm talking about

something called Leverage Leverage is a

concept that mankind discovered way back

when in 5000 BC they discovered that by

using a lever a person could lift a huge

amount of weight exerting only a tiny

bit of effort less effort huge amount of

output that is the definition of working

smarter not harder and so growing up

middle class I was not taught anything

about leverage specifically in the area

of finances now rich people use leverage

everywhere in their lives that is why

they are rich because we all only have

24 hours in a day and if all of your

output is just one unit of input for one

unit of output your progress is going to

be very slow and linear and you're not

going to get very far so examples of how

rich people use leverage to get rich one

perfect example of this is rental

property you make one big purchase and

the Bank even loans you money to make

that purchase and for many many years to

come you have a tenant in there paying

you rent and paying your mortgage for

you so you get money in your pocket and

you have someone paying down your debt

for you that's the definition of

Leverage so putting in a lot of money

and work upfront and reaping passive

income and benefits forever and ever

into the future while doing less and

less work real estate investing also

comes with a lot of tax benefits which

we will also talk about a little bit

later in this video another example of

how rich people think about leverage

they don't want to have a job they want

to build businesses because if you show

up at a job you got to put in the time

to get the money but when you build a

company if you build a team that will do

the work for you and you put systems in

place that will make money for you in

your sleep then you don't have to put in

the hours in order to make the money

however building a company building

teams and building businesses is

actually a completely different skill

set from working hard at a job they do

both involve hard work but it's a

different skill set you need to learn

sales Market marketing team building

entrepreneurship skills and honestly

having done both when I was an employee

and building a business both of them are

equally hard they're just different

another example of how rich people use

leverage to get richer is with investing

let's say you invested $500 a month into

the stock market over the course of 30

years you would have put in $180,000 of

your own money over the course of those

30 years but because you invested in the

stock market based on the S&P 500

returns you would have ended up with

over a million dollars at the end of

those 30 years now that's leverage and

the reason your money can grow so much

even though you only put in this much is

because of the power of compounding

returns so rich people know this they

would rather invest $100 than save $100

under their mattress any other day

because they know that if they just

invest that money correctly every dollar

is going to become an employee working

for them making them richer and richer

and so that sums up perfectly middle

class habit number three which is

working hard but not working smart and

now moving right along to the next

middle middle class habit again talking

about my background I grew up

Asian-American and honestly not to be

racist but in my culture we're taught to

be very modest to work hard to be behind

the scenes be quiet keep your head down

and just work hard however I realized

people who work hard and are really good

at what they do they don't necessarily

make it to the top the people who make

the most amount of money are the people

who are not afraid to own their value

and then communicate that value to

others whether you are an employee or a

business owner you need to learn how to

own your value and then sell that value

to others so when you're negotiating a

salary at your next job you need to sell

yourself you need to own your value be

confident in it and then charge top

dollar and make sure you're not getting

paid any less than your peers doing the

same work at other jobs I also heard

about something called a loyalty tax I

wasn't in corporate long enough to

really experience this but people who

hop around from one company to another

and promote themselves each time they

tend to actually make way more money

than their peers who just stayed at the

same company and maybe got promoted

within that company so employees

actually get penalized for being loyal

to their company because by not hopping

around they don't really get a good

sense of the going market value for

their job and this results in something

called a loyalty tax which is apparently

10 to 15% that's a lot of money if you

could make 10% more by not having to pay

the Loyalty tax because you were smart

enough to own your value go to another

company and demand a higher salary or

demand and your current company to match

that then that's 10% more you could be

putting towards your financial goals

towards getting richer being able to

invest and save a lot of money first

starts with earning a lot of money in

the first place and so this next middle

class habit is not earning what you are

worth I grew up thinking I would get

brownie points for just working hard

keeping my head down and not asking for

much but honestly if you want to get

ahead you have to charge what you're

worth speak up for yourself so every

year before your annual performance

review make sure you accumulate

throughout the year sort of a brag

folder of all of the accomplishments and

impact that you made on the company

where if you can quantify things like

you did X Project which saved the

division $500,000 or you initiated this

new thing and that brought in $2 million

of Revenue whatever you can quantify

gets added to your brag file and then

you present that at your performance

review that way you have actual proof of

what you bring to the table and that's

when you demand top dollar for what

you're worth asking for what you are

worth is not rude doesn't make you

greedy it just makes you someone who's

confident and knows what they're worth

so I really want you to get into the

habit of earning what you are worth and

now for the next middle class habit did

you know that Warren Buffett famously

said in an interview that he pays a

lower tax rate than his secretary and

honestly I can personally attest to that

as well ever since jumping from

corporate employee to now making most of

my money from business and Investments

the tax rate that I'm paying compared to

back in those days is about 10% less

which is insane and so it almost seems

unfair but the rich really do pay a lot

less in taxes at least on a percentage

basis and the reason why is because of

the different types of income and how

they are taxed so not all income is

created equal so earned income that's

like your W2 salary there's very few

ways to reduce the taxes that you pay on

earned income and so the effective tax

rate ends up being 35% or more for the

most highly paid employee and then for

business income there are all sorts of

loopholes and deductions that you can

take to draft Bally reduce the taxes

that you pay on the profits of your

business for example Section 179 which

allows you to deduct the purchase of a

vehicle or a large piece of equipment as

an expense in the year that you bought

it that's why I was able to purchase my

camper van which cost over $100,000 and

deduct that as a business expense try

doing that if you're just an employee

making earned income and then the third

type of investment income which

primarily comes from capital gains when

you sell Investments at a profit and

dividend and interest income these are

taxed even less than the first two types

of income so it almost seems unfair

because rich people who make most of

their income from Investments that's why

they're rich actually pay the lowest tax

rates yeah it's kind of insane but in

some tax brackets the capital gains and

dividend tax rate is as low as 0% and so

a lot of us middle class people we just

grow up working really hard at a job and

paying maximum taxes not knowing that

there are other types of income out

there that are not only a lot more

passive create a lot more financial

freedom but also get taxed a lot less

taxes are going to be the number one

biggest expense that you ever pay in

your lifetime so it makes sense to try

to go and earn the types of income where

you can get tax the least speaking of

income I remember in my early 20s I was

so dependent on my paycheck not only did

I have a bunch of student loans to pay

off but I could see that if I just got

laid off from my job everything in my

life everything good that I enjoyed

about it would completely disappear and

was a really vulnerable place to be I

also remember very vividly back from my

childhood when my father got laid off he

was a very highly paid Tech employee but

during thec com bubble he got laid off

and our family really really struggled

because we had no other source of income

and so this next middle class habit is

being overly dependent on your job as

your one income stream you need to have

multiple income streams even if you have

a full-time job and that's your main

source of income and then you maybe do a

little bit of freelance Consulting on

the side or options trading or

deliveries or just something at least

you're not completely dependent on this

one source of income and so rich people

they've got income streams all over the

place in fact I have eight income

streams that are passive and that's not

even counting the ones that aren't

passive and yes you do need to be a

little more creative and resourceful

than just showing up at your 9 to-5 but

there's a lot of ways to make extra

income streams in fact I talk about

eight passive income streams right in

this video here so check that out for

some ideas the big idea is basic

basically to not rely too much on one

income Source especially if it's just

your paycheck all right one pet peeve I

have is how much people are overly

focused on their credit score yes it's

important to have a credit score just so

you can do some practical adulting

things like getting an apartment the

landlord is going to check your credit

score you need to have a good credit

score to get a mortgage and certain

types of loans however I just think it's

so sad that the common thing that we are

taught is your financial success is

measured by your credit score if you

have a really good credit score it must

mean you're good with money but you know

what wealthy people look at they look at

net worth net worth is all of your

assets minus all of your liabilities

meaning everything you own minus

everything you owe and the more positive

it is the more financial stability you

have and the more in assets you have

rich people have millions and billions

of dollars of net worth everything you

see on the Forbes you know richest

billionaires that's all measured by net

worth they're not ranked by credit score

I encourage you to set a weekly or a

monthly money date in your calendar sit

down check all your bills accounts

budget and take tally of all of your

debts and all of your assets and

Investments and see what your net worth

is and if over time you see that

trending upwards you're on the right

track you're making the right moves and

you're being good with money so I love

net worth as that one catchall indicator

of whether you're moving in the right

direction financially all right last but

not least middle class habit number

eight is spending before you save now

there is so much pressure to keep up

with the Joneses if you live in an

expensive city and you like to live in a

nice apartment and you have friends who

like to go to bougie dinners and they

pressure you to go to concerts and all

these trips you have to maintain a

certain lifestyle and after you do that

it might actually be hard to have

anything left to save over for your

future so this attitude of paying

yourself first it definitely involves

going against the grain but that's

really the trick maybe getting rich

isn't a matter of discover ing some

crazy fancy investment strategy and

being the smartest person in the room

maybe it's as simple as developing the

habit of paying yourself first rich

people get there by first making money

and then being able to keep that money

instead of spending it all so when I was

on my financial journey and trying to

get out of debt and start building a

little Nest Egg for myself I really had

to turn down a lot of invitations and

yes that did come with some feelings of

fomo and wondering if my friends would

stop calling me however I really had to

make that choice to put my financial

goals first so what that looks like in

real life is as soon as you get paid you

decide on a percentage it could be 1% to

start ideally it's up to 20% or as much

as you can but as soon as payday comes

and that money hits your account a

percentage of it is automatically being

directed to savings I like putting it

into your high old savings accounts you

could put it into a Roth IRA there's a

lot of different options I'll link to my

favorite high yield savings account

below but the idea is is you pay

yourself first that percentage that

you've decided and then whatever is left

in your account is what's left for you

to live on so unless you are really

living handt mouth I'm sure most of you

can handle even just a 5% automatic

savings transfer towards your future

goals and then live on the 95% that's

left honestly a lot of becoming wealthy

is just hacking your own behavior

understanding human psychology and doing

the simple things so setting up one

automatic transfer to create that habit

and telling your subconscious that you

are someone that pays yourself first is

going to make a huge difference and

months later you're going to look in

your savings account and be shocked at

how much you've accumulated and and

you'll be really proud of yourself rich

people they make money and before making

other people Rich they make themselves

Rich first and then they spend what's

left I certainly wish I had known all of

this sooner but hey it's never too late

right a lot of us weren't taught these

important Concepts about money while

growing up but the important thing is

from now on you can choose to think

about money differently and have habits

that will actually make you richer

instead of keeping you stuck in the rat

race the key is now that you know better

now you can do better that's it for this

video thank you so much for watching I

hope you got a lot out of it you might

want to check out this video next and

with that I'll see you guys next week

same time same place bye

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