3 Signs The Middle Class Is Financially Screwed (And How To Fix It)

3 Signs The Middle Class Is Financially Screwed

Middle class working Americans are always the ones that get screwed over the most. You make too much money to qualify for any government aid, you work the hardest, you pay the highest percentage of your income in taxes, and then when politicians spend money recklessly, you’re the one that gets the bill.

Over the last number of decades, we have been watching the middle class shrink significantly because the amount of money that you need to make now to feel comfortable keeps rising faster than how much money you’re making. Like today, we’re seeing more and more of the upper middle class professionals and high-income earners struggle to save or invest a piece of their paycheck.

There are a lot of factors contributing to the shrinking middle class, but it ultimately comes down to one thing: the hidden tax.

Our government doesn’t sell a product in exchange for money, so the way that our government gets money is from people like you and me, taxpayers, with their tax dollars.

So when the government spends more money than what they bring in, which is what they’ve been doing, they have to cover this money somehow.

Now one thing that they could do is say we’re going to impose a 1% tax on all income over $10 million, and then we’re going to take this money from this new tax and use this money to build roads.

If the government did that, we know exactly where they’re getting the money from to build the roads. But if they don’t do that but they still spend the bill to now go build the roads, who’s going to pay the price for that? Because this is what we’ve been seeing happen, we’ve been seeing the government run multi-trillion-dollar deficits, they have a 30 some trillion-dollar national debt, meaning they keep spending more money than what they bring in. But who is going to pay the price for this?

Well, when they spend money without passing a bill on how they’re going to spend that money, the person who pays the price is, well, everyone through the hidden tax which is inflation. Because when the government spends money on things that they don’t have the money to afford, then they have to print this money.

How do they print the money? Well, they work with the Federal Reserve Bank, which is actually not a part of the government, but the Federal Reserve Bank prints the money out of thin air, they give it to the government, and now the government has the ability to spend this money. And now the government can go spend their money to do whatever they want, and now the person who pays the bill is, well, everybody else, because now your income doesn’t stretch as far and your savings don’t have as much buying power because the value of each individual dollar is going down while the price of things keep going up.

This is the way that our system works, our system is designed to create inflation.

Even the Federal Reserve Bank very openly talks about why they want a 2% inflation target, which means that you’re going to see the value of your dollars drop by 2%.

If you see inflation rise, the value of your income, the value of your savings are dropping, which disproportionately hurts people who are not financially educated.

Now while this is happening, it doesn’t mean that you have to be a pawn in the system. This means one, you have to understand this, and then 2nd, you have to know how to break out of the cycle. And there are 3 things that I want you to be aware of that I’m about to cover in this blog post.

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You Don’t Own Any Assets

No.1 is that you don’t own any assets. You don’t own any assets. We keep hearing about this income inequality where you’re seeing the poor get poorer and you’re seeing the rich get incredibly richer, but the real reason why this is happening isn’t because you’re seeing rich people see their salaries fold, it’s because the wealth the wealthy people are seeing is in the value of their assets.

The first mistake that the majority of Americans make is they make money to spend money versus all wealthy people and wealthy-minded people, they don’t make money to spend it, they make money to grow it.

It’s a completely different way of looking at why I’m earning money because when you earn money to grow it, now you’re earning money to buy more assets and then you use your assets to fund your lifestyle, you’re using your money to buy investments so now your investments can pay for you.

While for everybody else, the majority of people are using the money to buy things which make everybody else around them rich but it keeps you broke.

Now let me give you a little hypothetical example of how this works.

 

Let’s assume that this company, we’ll just call it Amazon, made $10 billion in revenue, these are just hypothetical numbers, and then they have $5 billion worth of expenses, which means that they have $5 billion worth of profit.

Now what happens is investors look at these numbers and they say

oh, this is an attractive investment, I like how much money they’re making, let me go in and buy this stock

Now the thing that causes the stock price to rise, the investment value to rise, is when companies see revenues rise or profits rise or they see something good happening in the company.

Well, if you see inflation happen and then you see the prices of things rise, well, a couple things happen.

For 1, now Amazon is going to have to pay more money to pay for all their expenses because their employees are going to want more money.

So if the price of things rise by 10%, now their expenses might rise to $5.5 billion. But that means they’re also going to have to charge more money for things that they sell.

So now if their revenues also increase by 10%, well that means now the revenue increases to $11 billion.

Well now this also means that the profit went from $5 billion to $5.5 billion, they didn’t create any more value in this situation, what happened was inflation caused the prices of things to rise and so now more dollars are going into Amazon which now investors are saying oh, they’re making even bigger profits which then attracts even more investors because investors want to get out of cash, they want to own assets.

The people who are financially educated understand this and then you see more dollars come into these Amazon stock causing the stock price of Amazon to rise even more. This is why investors want to own assets, financially educated people and wealthy people want to own assets because when you have inflation, it disproportionately benefits asset owners over consumers.

Now the majority of Americans are only consumers, every single person is a consumer in America, every person, whether you’re rich, poor, middle class, or a business, every single person is a consumer, but only a minority of those consumers are also investors.

The majority of people only spend their money, when you only spend your money, you’re only making other people rich, but when you own the assets, well now you’re making yourself rich. And this is where now you have to understand that if you want to become wealthy and you want to win in this economic system, you have to own a piece of the economic system. And the way that works is by investing your money.

For the majority of people, the way that they think that you do that is by going out and buying your own home, that way you can build equity in your own home, that way you can own this asset. Well in reality, that is one of the worst kinds of equity that you can build. So if you ask any wealthy person, they want to build equity too. They want to build equity in companies, they want to build equity in businesses that they create, they want to build equity in real estate, not the home that they own but rental properties.

No wealthy person talks about how they got rich because they built equity in their house, they built equity in other assets that are paying them for owning it. VS everybody else is talking about how they built equity in their home.

Now don’t get me wrong here, there’s nothing wrong with owning a home, it’s not a bad thing, but you have to understand that if you’re spending all your money on your own home, your home is turning into a money pit that is sucking you financially dry, that way now you don’t have any money to go out and invest in other assets, things like stocks, things like rental properties, things like building your own business that can actually produce you a much larger return and a much more significant return because when you invest in these assets, you’re buying them for the purpose of making money.

When you buy a home, you’re buying it for the purpose of making memories. It’s a completely different way of looking at it. And this is why now you have to be an investment owner, you have to be an asset owner and this now requires you to understand the basics of financial education because our economic system is designed to benefit the asset owner.

We are going to continue to see inflation, this inflation is going to continue to benefit investment owners. Does this mean that the markets will only go up or the asset prices will only go up? No, we’re going to see ups and downs, but over the long term we are going to continue to see asset prices rise and that will also continue to create a bigger divide between the haves and the have-nots. And this is where now you want to make sure you understand this, that way you can take care of yourself, you can take care of your family, and you can take care of your community. And this requires you to 1, live below your means and then 2nd, take the money that you’re not spending and use this money to buy assets before I jump into No.2.

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You don’t have any cash flow

This brings me to No.2, which is you don’t have any cash flow. If you ask the majority of people what does it take to get rich, most of them will say I need to make more money.

The bigger your salary, the wealthier you will become. But if you ask the minority people, the wealthiest people, none of them want a bigger salary.

They want more assets, and the reason why is because when you earn more money from your salary, from your job, you are relying on you to go to work to do something. There’s a limit to how much you can earn from what you do, but there’s no limit to what you can earn from what you own. And this is where now wealthy people look at this very differently.

If now you earned a big salary, you have a lot of expenses because you make a lot of money.

So now you have a nice car, you have a nice home, you have nice vacations because you make this nice cushy salary. But then you break your leg and you can’t go to work anymore, or your company goes under, your CEO runs the company to the ground, or you get fired. Then what?

When you are solely reliant on just one income to survive, you are one paycheck away from being broke. And this is why the majority of Americans, it doesn’t matter if you’re making 6 figures or under 6 figuresm

The majority of Americans are living paycheck to paycheck because they make money to spend it. And when you make money to spend it, well now you’re relying on only one income and you own no assets. And when you rely only on one income, well you’re only one paycheck away from losing everything.

Now here’s the thing: building real sustainable cash flow from your investments is not something that happens overnight.

It’s not something that happens in a year.

It’s not even something that happens in 10 years. This is a long-term strategy where if you keep doing this over the course of a decade or more, well now you’re going to be able to build cash flow that you can also rely on. How do you do this? Well, you can invest in stocks that pay dividends.

You can invest in rental properties. You can work to build a business that’s generating a healthy profit that’s also funding you with cash flow. When you invest your money for cash flow, what you’re doing is you’re taking your money and you’re buying assets. You’re saying buy to your money, and you’re not going to see it for a long time. And then your money is going to go out to work, and it’s going to work to produce you some more money.

Maybe it’s cash flow from dividends from stocks, maybe it’s cash flow from real estate.

So now you get this cash flow and then what you can either take this money and go out and spend it, or you can use this new cash that you just got and use this money to buy even more cash flow. And this is where you really have to accept that idea of delayed gratification.

I call it the decade of sacrifice where over a decade you are going to have to live below your means.

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You’re going to have to make financial sacrifices, and you’re going to have to work to earn more money. And then this cash that you’re not spending, you put this money to work.

Now one way to spend it is for cash flow investments. I love cash flow investments because cash flow funds the guac flow. When you have cash flow coming in, well now you can spend your money and not have to stress because you’ll have another cash flow check coming in in 3 months or in 1 month or in 12 months. And so now I like cash flow for that reason. And this is where if you take your money and you go out and buy these cash flow-producing assets and then they start paying you, it might only be a couple of bucks in the beginning.

Well now you’re going to keep putting more money into these cash flow assets every time you get paid.

So every time you get paid every week, every two weeks, every month, you’re going to take some money and buy some more cash flow. Then every time you get this cash flow, you’re not going to spend it.

Remember this is a decade of sacrifice, and most people are not willing to go through this because they hear a decade, I don’t got time for that. I want to buy my new car today.

Well, if you’re willing to go through this decade of sacrifice, you’re going to be able to live a life that most people dream of without even worrying about the price because now you are working to stack your assets, and you are working to stack the cash flow.

So now every time you get paid, you buy the cash flow, your cash flow makes you cash and you use your cash to buy even more cash flow.

So now you have a machine. You’re working to earn money not to spend, but you’re working to earn money to buy more cash flow. Now your income is buying you cash flow, and

your cash flow is buying you more cash flow. And now you have this machine that’s constantly working, and each year you’re going to see it get bigger and bigger and bigger.

And if you keep doing this well now pretty soon you are going to have a hefty machine that’s producing you a solid income.

And this is where having that delayed gratification and understanding 10 years are going to go by you’re going to get older.

10 years from now, and what’s going to happen then? Are you going to be in the same position where you are today, where you have some nice stuff but no assets? Or do you want to go through the sacrifice now, build that wealth, that way then 10 years from now you can buy whatever you want and not having to worry about the money. That decision is yours.

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You have no freedom

No.3, you have no freedom.

Now this one is interesting because if you want to have more freedom, you’re going to have to sacrifice some freedom today.

You have to live imbalanced today, that way you can have more balance in the future.

Most people have this assumption that if you want to get money, you have to go and do something from 9:00 to 5 or 6:00 and then if you keep doing that that’s how you get paid and that’s how you fund your life. But for some people, the people that understand money, they understand that that’s not how it has to work.

If you have enough money, if you own enough assets to pay you enough cash flow, you don’t have to live that lifestyle. And this is where you have to give up some of the freedom today.

You have to give up some of the nice stuff that you have today if you want to have more freedom in the future. And this is where the counterargument is well I don’t know if I’m going to even be here tomorrow, so why would I want to make that sacrifice today? Well, here’s a little bit of information for you.

If you’re spending your time reading this blog post, chances are you are going to be here tomorrow.

And so now if you’re going to be here tomorrow, you can choose: would you rather be broke tomorrow or make sacrifice today that way you can be wealthy in the near future? See people don’t want money to have a big bank account.

People want money to have freedom. And this is where now understanding how much money do I need for freedom? Where now my income is covering my expenses. What is that freedom number?

Well, once you achieve that freedom number, you can go out and have that freedom. It requires a little bit of math of knowing how much money do you need, how much are your expenses and how will you actually go out and get this freedom? That’s what money can provide. But how do you actually do that? This is where now you want to work backwards.

For 1, you need to know how many assets you need to own to fund you with that cash flow. And then 2, how are you going to get the cash to buy that many assets? And when most people see that number, they get very overwhelmed.

They get very scared, and they forget it, I’ll just continue following the traditional system. And then another decade goes by, and you keep doing the same thing, and you’re in the same place as you were 10 years ago.

Then another 5 years go by, then another 5 years go by and then you say oh no maybe I should do something different. I’m so tired of living this same life each and every every day.

I want to do something different. And then you say I wish I would have started 10 years ago. That time is going to go, and this is right now.

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If you want to have the freedom, if you want to have the cash flow, if you want to own the assets, you got to start by looking at the way you spend your money. And you’re going to have to make sacrifices. This sucks because people might see you go from a BMW to a Toyota.

They’re not going to understand what happened to you.

But this is where understanding that you have to be willing to make these financial sacrifices. Then you got to put in the work to earn more money. Then you got to take this new money that you do have and not spend it. Then you’re going to put this money to work. Then you’re going to do that month after month after month year after year after year. And then pretty soon you’re going to have a whole new stream of income where all of a sudden.

Now you’re making way more money because you got the income from your job, you got the income from your assets and now you can start living a much bigger and a much nicer life. And you don’t even have to worry about the money because you got your assets funding your lifestyle.

But this starts with now you changing the way you think and then changing what you do with money. Because if you believe that you can’t do it, I can 100% guarantee that you can’t do it. But it is possible. This is where now you have to believe that it’s possible for you and stick with it.

I know it’s hard. It’s a tough process, but it is possible. But it requires you to stop doing what everybody else does.

Stop spending your money the way everybody else does and then take the money that you’re earning and use this to make yourself rich before you make everybody else around you rich.

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