Why most middle class people never end up getting rich
Introduction
A client once told me that “middle class” people are those who are both educated and poor. Sometimes both highly-educated and poor. To be fair, we all have different definitions about “oh I don’t have a lot of money”, but “poverty” would be a stretch for many. If you have shelter and can afford to rent an apartment within 3 hours of commute, you are probably not in a state of “poverty”.
However, many are stuck during their entire lifetime in the middle of “damn I really want to quit my job and entire life” and “gotta pay the bills, but I guess it is not that bad”. Youth withers, kids are born, and eventually life drifts away between these ups and downs.
With the right combination of hard skills and soft skills, You will get richer. However, first you need to avoid falling to the “poverty trap”.
Just like Warren Buffet’s lifetime business partner and friend Charlie Munger said: tell me where I’m going to die so I never go there. Know what bad financial habits pull you down.
Rich People Are Stingy, Poor People Love “Saving Face”
Almost all the wealthy clients I’ve met, except those who enjoy chatting with their bankers for hours with only one small bottle of Mountain Dew (it’s not even water, and I got incredibly thirsty), are extremely stingy with their time.
However, “stingy” is a matter of perspective. Their time is extraordinarily precious because their net worth increases by hundreds of thousands of dollars every hour. In contrast, consider someone who sits in a library reading books all day for a living (if you don’t believe me, ask your student librarian who gets paid $14/hour at a U.S. university).
Now, sitting in front of the screen, you might be shocked by how obvious this statement is: you should be stingy with your time.
From what I have observed, if you resonate with this statement immediately, your time is probably more valuable than you think. At the very least, you are ambitious. Otherwise, you wouldn’t consider how to use your free time productively. Someone without ambition usually watches tons of movies and TV shows or spends a lot of time on TikTok or YouTube.
However, being ambitious is not enough. It is not nearly enough. You need to have a specific ambition. For example, you might want to write an expense-tracking iOS application and launch it on the App Store within four months, starting today. Or you might aspire to be the lead ballerina in next year’s big show.
Being ambitious without a specific ambition is like saying, “I want to make a lot of money, get rich and famous, and have people love me.” That’s a surefire way to lose yourself amid a multitude of career options, all ambitions of others, but not yours.
The discussion about ambition and being ambitious might seem like a digression, but it’s really not. Without a specific ambition, you likely will not achieve anything significant. Ambition can be as simple as a hobby.
Now, back to why rich people are stingy with their time. Because they know exactly what they want to do and where they want to go (and this is ambition), they focus all their time, money, and energy on those endeavors. If you do not contribute directly or indirectly to their business, they won’t want to talk to you.
Some might call this being “snobbish.” Let’s face it: 99% of people are snobbish. We just differ in the extent.
Millionaires and billionaires are also penny-pinching. This is not counterintuitive at all. If you want to make big money, you need to broaden your revenue streams and reduce your cash outflows.
In a nutshell, the one way to reduce your cash outflows is to be mindful of every single financial transaction. Buying a toothbrush because it is from Hermès? Big no. Want a new car? Does your old one not run smoothly anymore? Want a beach house because you just won the lottery? Congratulations, you will be back to “poverty” very soon.
When you are rich enough, you don’t care as much about “saving face.” You don’t need to be the billionaire who throws a few grand at the valet, but you can adopt the billionaire mindset. Right here, right now.
Golden Rule To Grow Richer
Put cash into investments. Spend as much of your cash on cash-generating assets. Do not waste money on shiny objects which are really liabilities. “Unnecessary shiny objects” succinctly incorporate everything you do not need.
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