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What is ‘rich’?

What some people call being rich others call being ~wealthy,TM which is well-being, or whole being. So being rich is not just about being economically well off but also being wealthy in all areas in your life. Because economic value is one of the most universal of all values for people being rich or wealthy usually boils down to having more money at the end of your life than life at the end of your money. Richness can therefore mean that your passive investment income exceeds your active working income so you donTMt have to work, you work because you love to.

 

Not many people reach that level

 

About one percent of the population obtain a state of complete financial independence. The majority of people put a higher value on buying consumables, liabilities and depreciables and spending their money more so than saving money and investing in assets and not many people know the distinction between liabilities and assets. A liability is something that you pay for and an asset is something that pays you. If you donTMt fill your financial nest egg with assets you wonTMt have richness of financial independence.

 

You may become rich through inheritance, but if you donTMt eventually know the difference between assets and liabilities then surely there is a high chance of losing your assets?

 

ITMve asked millions of people in my audiences ~How many of you want to be financially independentTM and every hand goes up. I asked them if I gave you $10m and you never had to work another day of your life what would you do with your life and the money. Quickly write what you would do down. Most people would spend money on things that go down in value. They buy clothes, a house, cars, a trip and only 1% of them would take it and invest it and double their money. The majority of people are living with the fantasy of having a lifestyle that they want instead of learning the art of building wealth. The poor people work for money all their lives, whereas the rich learn how to have money begin to work for them.

 

What about houses " are these not an appreciating asset as opposed to a liability?

 

Houses are not always considered to be investments.  They are primarily lifestyles, unless they are turned into rental properties. The majority of people think that buying a house is an investment " but not necessarily. You have costs to pay and if you have to move you pay too. The only time youTMd turn it into an asset is if you downsized to a smaller place because otherwise you would have no equity to extract from it to put into rental properties, commodities or shares. By the time you have paid it over 10, 20 or 30 years you couldTMve invested that and potentially made more. So a house is not always considered an asset - itTMs more of a lifestyle. Rental properties, commodities and buying companies or shares in companies and fine art pieces are potential assets.

 

How do you get rich?

 

To be rich you will first require a healthy work ethic and a desire to serve people. If you are not dedicated to serving people then you will have little or no source of income. There are two ways to build wealth: a non-zero sum game where you go out and offer and sell a product, a service or idea and you get paid for it. ThatTMs called a productive fair exchange transaction that builds wealth because both of you win. The other option is buying stock and share options, and futures which is a zero sum game. ItTMs gambling and youTMre not necessarily adding productivity to the economy and you are living off deals where other people are losing money. But the overall economy would not continue to work if everyone did that.  We need an adequate percentage of the people producing for other people for the economy to work. A robust economy works through people having a work ethic and helping people.

 

To be wealthy, you will second have to build a business that is efficient and that makes a profit. In business if you donTMt make a profit, there is no source of money for building wealth and so it has to be managed efficiently.

To be wealthy, you will third have to save a portion of those profits rather than spending it on consumables so that the money works for you instead. If you keep buying things that go down in value you will never get ahead.

 

Make sure you take those savings and invest of portion of them into true assets that build wealth. So you have to buy companies, shares of companies, commodities (energy or food) or you have to buy real estate properties or developments to build wealth. You can use leverage to make greater income generating assets out of them. These are real investments and the others are just expenditures. And you are wise to learn how to use such investments to work for you otherwise you are living in a fantasy.

 

But surely leveraging (borrowing) can be a liability too?

 

Smart leverage will work in your favour. When the stock market is down at the bottom and you borrow money to invest in it you can use other peopleTMs money to help you make money when you feel certain itTMs going to go up. However if you use other peopleTMs money to buy at the top of the market cycle you may be using other peopleTMs money foolishly. So you are wise to learn how to use leverage at the right time. Leverage is essential.

 

Would you say that anyone could do what you are recommending?

 

Any human being that truly has an ambition for wealth-building can do it. It doesnTMt matter what it is. Everyone has the capacity to learn. ItTMs all on the internet. There is no reason why you canTMt learn it. But if you donTMt have a high value on it you wonTMtTM take time to learn it. Money automatically goes to the person who values it the most. People who donTMt value money keep spending it and make it disappear. So thatTMs why the rich get richer and the poor get poorer.

 

WhatTMs your advice on get rich schemes?

 

There are people out there that are scam artists. A great number in the financial services industry are. Much of Wall Street is there mainly for Wall Street and not necessarily the consumer. So you have to educate yourself to know when someone is putting the wool over your eye. So if itTMs ~get rich quickTM thatTMs almost a guarantee that itTMs a scam. Get rich smart, donTMt get rich quick.

 

Bill Gates has created a product that millions of people wanted. So if you want to make millions, go out and serve millions of people. If you want to make a billion then go and serve a billion people. ThatTMs the smartest way to get rich - to serve lots of people. But if someone offers you a way to make more money thatTMs more than the average in a quick way you can bet they are probably hyping you.

 

Always make sure you have enough liquid cash. When you are dealing with real estate for example you are tying up your capital and you canTMt get access to some of it very easily. Real estate is capital intensive. You have to educate yourself and get mentorship and gradually earn the right to handle greater levels of risk. DonTMt invest in something you donTMt know.

 

You are a foreigner " would your advice work here where there is so much poverty?

 

Well anyone can argue for their limitations and excuses why it wonTMt work. Bu the stock market is the stock market and the real estate market is the real estate market itTMs the same basic vein. ITMve done purchases and stocks in different counties and itTMs the same basic thing. ThereTMs more regulation in developed countries so you have a little bit more risk, but overall if you keep buying index funds or quality rental properties even in Johannesburg you will end up with more wealth.

 

Are we programmed to spend more than invest?

 

Everybody lives by a set of priorities or values in their lives. Instead of living vicariously through other peopleTMs brands that they end of up buying to feel better about themselves when they try and please everyone else rather than living their own dreams they pay money for other peopleTMs brands rather than build brands that other people pay for. So again this is why the rich get richer because the rich build brands and the poor buy them to make themselves feel better. WeTMre not here to subordinate to anyone. But if you go out and serve people you earn the right to build and buy those brands. So give yourself permission to build the brand of your dreams and become as rich as you are willing to be.

 

Dr. John Demartini is a human behaviour specialist, educator, author and the founder of the Demartini Institute.


www.DrDemartini.com 

 
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