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Eight Things the Super Rich Don’t Want You to Know

by | May 8, 2023 | Money, Passive Income

It feels like a basic money education is purposely out of reach for most.

Even though I’m not a conspiracy theorist, I’m starting to believe this. Why are the basics of money misunderstood by most?

It certainly makes it easier to get rich.

And it helps the super rich keep their fortunes and face little competition. It’s one reason I think life is a lot easier than many realize. All you need is to learn about money. Money buys back your time. And with time life gets a lot easier.

Here’s what the rich don’t want you to know (don’t slap the messenger).

This is where fortunes come from

Josh Waitzkin is one of the most interesting humans on the planet. He’s also bum chums with rich guy Tim Ferriss.

  • At 16 he became an international chess master
  • Then a 2x world champion in Tai Chi
  • Then he got a black belt under legend Marcelo Garcia

Now Josh has gone missing.

Wait, what?

Yes. Josh has disappeared. All anyone knows is he’s off mastering the sport of surfing. Until he’s done it, we won’t see him again.

Josh’s wealth formula is simple. For every field he masters he spends 5–10 years doing it. Then once he reaches the top he quits and starts all over again in a new field at level 0.

This ties back to money because what Josh figured out is to be rich and successful in life and stand out from the sheep, you need to reach mastery.

You need to stop:

  • Being impatient
  • Trying to get rich quick
  • Choosing easy over hard
  • Blaming your problems on others
  • Switching fields every few months

The richest people master one thing then monetize it. There’s no reason you can’t do the same. The timeframe just needs to be 5–10 years.

The bank account you get paid into makes a massive difference

For years I worked in banking and got paid a fat salary.

The number sounded huge. But the number was pre-tax. Before every pay week the tax got taken out first and the scraps were sent to my personal bank account. This all seemed normal.

I later learned some of my colleagues got paid their income from the same employer into their business bank account because they changed their classification from employee to contractor, freelancer, consultant, etc.

As a result no tax got taken out.

They decided when to pay taxes, and could use that cash in the meantime to invest in assets. This subtle shift made them a lot richer than me.

In the old days the employee classification was worth it. Now it’s a trash term, thanks to layoff culture fashion that clearly says “your job is not safe and you’re a line in a spreadsheet that can be deleted at any time.”

The rich use tax dollars as their legal investment fund.

Inflation is a tax

I don’t know why the average person walks around with a smug face and thinks inflation is normal.

It makes no sense why there aren’t protests against inflation.

The rich know the answer: Inflation is hard to understand. It’s hard to see. So it’s easier to rob people of their money when they don’t understand it.

One reason inflation occurs is because governments and central banks create money out of nowhere and inject that cash wherever they see fit.

When there’s more cash in the financial system it changes supply and demand. If there’s too much demand and not enough supply, prices go up. Since 2008 this has been the default model.

Whenever money is needed the governments and central banks just create it from nowhere instead of, you know, earn it. Recently, you may have seen a few US banks run out of money, like First Republic Bank.

Notice how no one lost a single dollar?

That’s thanks to this brilliant system. No one loses money but everyone who trades their time to earn money has it devalued when freely created money from nowhere enters the system.

Inflation is a polite tax the rich use to vacuum money from people’s wallets and devalue a currency. What do the rich do? They try not to hold the rat poison known as cash.

The rich store money in assets.

When more money enters the financial system it pushes up asset prices. Those who have assets are protected. Those who don’t are ruined.

Avoid liabilities. Buy assets.

The non-rich love liabilities.

It’s how they look rich instead of be rich — and I don’t blame them. It’s the default model for society if you don’t question it.

The challenge with liabilities is they’re attached to depreciating assets. One such liability is a car loan. You borrow the $20K to buy the car but every minute from when it leaves the factory it’s dropping in value.

The rich still own depreciating assets too. The difference is they put their money mostly in assets that go up in price over time.

Not all debt is bad, m’kay

People love to piss all over debt.

But debt equals leverage, and leverage can be a powerful wealth tool. The most common form of debt the rich have is for real estate.

They borrow money to buy a property in a good area and do enough research to confirm the odds of the property going up over time are high. They then purchase the property and sit on it like the hoarders they are.

Spend less money than you earn

This is a basic formula many people stuff up.

The money coming in each month to your bank account should always be higher than the money going out.

Now, the critics will say “but the income doesn’t cover all the bills. Life’s tough you know.”

And the answer is never going to change for all of human history: if the money coming in isn’t enough to cover expenses then those expenses must go down.

Yes it hurts your ego.

Yes it can feel like it’s not fair.

I’ve been there too. But there’s no other way. Money coming in must always be higher than money going out. Otherwise, hard decisions need to get made and no politician or member of society will feel sorry for you.

The one financial law most are unaware of

Where do I invest my money? is perhaps the most common question ever asked.

The rich don’t want you to know that one of the big investment classes they’ve made money off since 2000 is the exponential age.

The exponential age are typically tech-focused stocks that have access to Metcalfs law. This law states “a network’s impact is the square of the number of nodes in the network.”

This is a nerdy way of saying the value of an online network of users grows much larger than the growth in actual users. It explains the success of stocks such as Amazon, Facebook, Google, etc.

But there’s a new opportunity. Thanks to the invention of AI and the blockchain, the exponential age now works off of Reed’s Law. This law is Metcalfe’s law to the power of 2. That’s 200% more exponential than the previous era of tech.

Rich people understand both these laws and use them to compound their wealth beyond belief. No reason you can’t copy them.

Passive income is where freedom is found

Passive income can piss some people off.

It’s the idea of making money while you sleep. It’s money that doesn’t require you to endlessly trade time for to earn. It sounds like a bloody clickbait dream. It’s not.

Passive income works. Often, it just takes active work at the start until the passive nature can take over and automate the income stream.

I have many passive income streams. Two of my favorites are writing royalties and affiliate commissions.

The point of passive income is to learn about it then apply the framework to your life until you get at least one source. Income that doesn’t need daily work can protect you and the family when times get tough.

The rich don’t trade time for money. They trade time only for money that can eventually become a passive income stream.

This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.

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