10 Mistakes Poor People make Rich People Don't

hey everyone meet kevin here in this video i'm gonna go through ten money mistakes that i found that everybody makes no matter how much money or how little money you got so i figure hey you know what it's normal to make mistakes but why not make a video outlining some new perspectives that are going to help you make more money remember this isn't designed to prove anybody wrong instead i just want to explain some perspectives that a lot of people when they hear them at first they're like oh wait a minute you're right that is a good idea so why don't we give it a shot let's get right into it and keep in mind i'm my own favorite sponsor so if you want some amazing programs check out the links down below you can get life insurance in as little as five minutes that is a different company though and you can get two free stocks with weeble when you deposit a hundred dollars all right let's get started number one the biggest money mistake in my opinion that is consistently made when folks start managing their own finances is prioritizing cash flow over wealth and this is really popularized especially on youtube by well youtube creators driving lambos and driving around going cash flow yeah this is intoxicating because of course it's wonderful to have a lambo and go oh my cash flow pays for this you realize that's great because it's money that they're making while they're sleeping but there are a few big problems with passive income or cash flow or dividends here they are especially when you compare them to wealth building first something that i teach in my psychology of money and stocks course is you have to ask yourself what phase of life are you in there are two and only two and you've got to ask yourself which ride you're on are you in the growth and wealth building phase or are you in the payoff and then retire phase for 95 of us watching this video the odds are we are in the grow your wealth and make as much money as possible to grow your wealth face this is why so many of us here oh yeah let me i'm just gonna i'm gonna make passive income but kevin don't worry i'm gonna reinvest that money and i'm gonna grow my wealth even more yeah well here's the thing most of the time when we get cash flow whether it's real estate clash cash flow or dividends or from some sort of debt we lent out or whatever we come up with two big problems problem number one when we receive cash flow we're really likely to spend it on things that make it look like we're wealthy and this is normal because when money comes into our bank account we feel a little witcher and then you know what it's okay to buy thor's hammer for three thousand dollars okay this was like twenty dollars but whatever uh and it's hard to overcome the urge not to man i worked so hard this week i may as well go to the cheesecake factory and buy myself a drink tonight you know what lauren and i used to do consistently before the pandemic was we'd bring our own i don't know if you should do this but we'd bring our own drinks and just have the drinks there and order food and water never saw a problem with that don't sue me cheesecake factory anyway it's very hard to overcome when you get money in the mailbox or money by direct deposit the urge not to spend it it's actually a lot harder to reinvest it and yeah you can automatically reinvest but that brings up the second problem taxes when you're retired that is when you're in that paid off phase of life you're generally in a lower tax bracket because well you're not making money at your job anymore see when you're working a job you're paying some base taxes right when you're retired you don't have those base taxes anymore and you can start making passive income and you pay very very little tax on that first amount of passive income you make but when you're making it when you get a job and you're making money like you and your wife let's say you're each making thirty thousand dollars or each making forty thousand dollars or you and your boyfriend your husband it doesn't matter who it is it doesn't matter right when you're making money combined any cash flow you get goes on top of that and that tends to get taxed at a higher rate that means every time you get a hundred dollars or a thousand dollars in cash flow or dividends or cash flow from real estate or payments from whatever the government's coming in going good job worker b give me a share of that and i hate that i would much rather instead while i'm working focus on building my wealth because when you build your wealth guess what happens you don't have to pay taxes and in some cases you never have to pay taxes sometimes you sell and you have to pay taxes but there are ways never to pay taxes especially in real estate so for example when people ask me kevin should i buy this cash flowing four unit property in the middle of nowhere or should i buy this property that's going to increase my net worth by 150 000 when i fix it up over the next three months but it's not going to have a lot of cash flow it's going to cover its expenses but it's going to have less cash flow which one should i buy well the answer is what phase of life are you in are you building your wealth and are you trying to prevent paying more money in taxes right now or you win that retired phase where it makes sense to just double down and say you know what i don't need the tesla and the apple stock i'm just gonna get att stock and take my seven percent dividend i personally know that i am not in the retired or payoff phase i'm in the growth phase i'm in the face where i'm like let's go how big can we make the boat so to speak i sold my at t stock because i don't want to pay taxes on the dividend and i'm in california so if i get a thousand dollars in dividends california is going to take about 50 of that money away from me thanks to the very very high state income tax along with short-term capital gains tax rates it's nuts but don't worry about all that complicated stuff instead focus on what phase of life are you in you're either building wealth or you're in retired in cash flow the big mistake that people make is they straddle they're like well i want to build wealth and have cash flow all right you're just slowing yourself down because you're sharing your gains with the government and i'm not suggesting you don't want cash flow you want some cash flow so that way if things go bad at least you have something to insulate yourself right but there's a prioritization of how much you really want and where your focus should be all right number one out of the way let's get on to number two paying off the wrong type of credit this is gonna be a fun one and it's gonna make some of you think and that's the point of this we're thinking about money here folks i'm to be thinking about sparkling water here in a minute too because this sparkling water's been looking at me i'm choking on myself many uh of you have told me uh and many people have shown me their finances and their portfolios and that uh and they say they find it to be a struggle to get out of credit card debt and what i've actually done is in some cases sometimes people find that they have student loans and car loans and credit card debt and every single month they pay off their credit cards a bit but then as soon as that credit is available they spend it again and they never ever get out of debt and so this is where it's helpful to know what your personality is every time you pay that credit card down a bit maybe instead of leaving that credit available you call up the bank and go yo i need to lower my credit limit and that way it seals off it cuts off the available credit and now you're looking to pay it off again you pay off another 500 bucks boom lower the credit limit another 500 and then i know some people are like oh but kevin that my credit card utilization is gonna go don't worry about it if you're paying credit card interest rate debt right now is not the time to worry about your score your job is to pay this debt off and i don't mean be late on payments i must still be timely on everything okay so you do have to baseline worry about your score but don't worry about the utilization so much get out of this debt for some people it actually makes sense and this is the one that turned like this is the head twister okay for some people it actually makes sense if they have let's say a car loan with twenty thousand dollars of debt a ten percent interest and let's say a credit card with uh ten thousand dollars of debt at fifteen percent usually it makes sense okay let's pay off the credit card it's a smaller balance and it's a higher interest rate like it makes sense to pay that off first and yeah financially that makes a lot of sense but a lot of people get in that situation where they pay off their card and then they respect so for some it actually makes sense to pay the car loan off first even though that means they're paying more interest on their credit card but guess what you can't do really easily with your car it's really hard to take your car and swipe it on amazon you'd have to go to a bank and do an auto refinance and do paperwork and that process is so punishing you probably won't do it instead you've got a paid off card it's so hard to swipe the car so think about your personality when it comes to getting into debt again all right so we got that out of the way let's get on to the next one number three all right big mistake number three and a lot of folks do this and it's totally normal because there is so much pressure not to get into credit card debt and what happens with that is we never end up building our credit that's a really big mistake because in america you need credit to make money and to save money so i personally recommend if you don't have credit yet consider opening something like a discover it card or heck you know what i don't even know if i have it here do i have it here oh i have it here you get yourself the apple card wait we need music get something like the apple car the apple card is an unsecured credit card they have very very low credit standards to get it and kind of means anybody can get it which is a good thing it's really easy to pay off from your phone if you have an apple card otherwise get like the discover it card or whatever and at least you start building your credits so important pay it off twice a month and then you get to do this that sounds more bad a than my hammer number four delaying real estate ownership this is a huge mistake many wait until they're 40 or 45 to buy a home they wait for the perfect house and the perfect kids and the perfect family and they realize perfect never comes around and it is a horrible mistake to delay buying real estate because think about this the fact that in america you could take and really in other parts of the country as well sometimes a little harder and i'm sorry in different countries sometimes it's a little harder but realize this in america you could take ten to twenty thousand dollars and buy a house to live in you could buy a duplex triplex or floorplex to live in rent out the other rooms rent out the other units it's way easier to do it before you have kids trust me i got two kids it's way easier to move before you got kids okay because before you know it you got stuff like this sitting around in your drawers and you don't even know why okay but at least i got a star okay realize this too when you take a 15 000 down payment you can control a 300 000 property with that money so if property values appreciate 10 you literally just doubled your down payment and net worth you took your net worth from 15 grand to 45 000 now obviously there's more involved here you could get a good deal if you need to sell there are selling costs but getting a below market value deal and holding it or selling it to the tenant of the future is a great idea and you got to know how to properly screen the tenants and you know what i did a complete guide on this for free obviously you could join my real estate investing course that goes super deep into this stuff but there is an amazing guide that if you have not yet watched it you should watch it and it's on how to buy your first rental property i'll link it down below and i'll link it up here probably as well unless i forget number five with my hammer number five paying off your mortgage too early paying off your mortgage early or making an extra payment is a good idea don't get me wrong but the problem is many of us do it too soon i know too many people who just got into home ownership and they know they want to own more real estate they want to invest in more stocks they want to buy more real estate and as soon as they get into their first home they're like all right honey let's go ahead and set up making an extra payment every single year because if we just make one extra payment that 30-year mortgage will turn into a 21-year mortgage yeah great idea no it's a horrible idea because if you're planning on building your wealth why would you pay off a 30-year fixed-rate loan at like 3.25 you should save that extra money put it into stocks or index funds or whatever until you find another deal and then use that to buy another deal that's going to prevent you having to refinance and pay refinance fees and new coveted related refinance taxes that are put into place no pay off your real estate when you're within 10 to 15 years of retiring and you want to slow down your wealth building that's when you pay it all off so it's all about that phases of life again when you're in that payoff phase hey take all your cash flows start paying off one property get that property paid off take all that extra cash flow and pay off the next one it's kind of like you snowball off your debt for real estate but that comes down the road so obviously if you finance 100 of your first home you probably shouldn't buy another one with 100 debt unless you got a really good deal or you got some equity so there are limits to all of this right giving you a general perspective here okay number six number six ah drop the hammer yeah because this is um this is a hammer dropper here not investing in the stock market so many of us and i get it hate the idea of investing into stocks because we hear those horror stories of people that saw kodak trending on reddit and and then it's it's trending on on robinhood and it's trending on the internet and everybody dives in the kodak and then the next day you're like ha ha i'm up 50 of my money and then two days later you lost it all and that's why so many of us think the stock market is rigged and to some extent yeah the stock market is kind of rigged especially with companies that just ipo'd or these specs that are going around out there where all these wealth uh funds or these these uh hedge funds are taking advantage of uh you know unsophisticated investors i get it and this is where i like to say stock picking can be psychologically toxic it's psychologically painful so an easy way to start is start with like a wealth wealthfront index fund of index funds they literally put your money into like 10 different index funds and i'm not sponsored by them go to wealthfront use somebody else's referral link like i don't even have wealthfront link down below go to wealthfront and they put your money into an index fund of index funds and you could automatically put your money in there that exposes you to like everything it's it's a great way to start now something else that you could do as well if you want a little bit more control is you can open up an m1 finance account if you want i've linked a few different ideas for m1 finance for you down below here's just an example of one of them this is the 1337 v3 index it's something that i threw together you could literally throw this together too you can do whatever you want with this i love it but when i put money let's say i put 20 dollars or ten thousand dollars or a thousand dollars into the 1337 index with with m1 finance well this gives me a collection of somewhere around 42 stocks tesla's the biggest one then i get amazon apple redfin etsy dave and buster's a lot smaller paypal lemonade wayfair blizzard amd chipotle disney anyway you get the idea and the cool thing about this is it really allows me to have a lot more diversity and you see just in the last quarter it's up about seven percent obviously no guarantee of what it's going to do in the future some things are down some things are up that's just the nature of having an index but it gives you a lot less chest pain than focusing just on one stock and it's like oh my god the one stock that i paid to suck and because that's a bad feeling all right next let's get on to number seven number seven many say that it's a mistake not to invest in a roth ira and maximize it and i like to put an asterisk on that in my opinion it's a mistake to delay buying real estate because your money is tied up into a roth buy real estate first once you start owning real estate in my opinion i love the roth once you get into real estate buy into the roth maximize that you know pay your taxes put the money in the roth and grow that money tax-free remember the roth is a retirement account that allows you to grow your reserves which i use for real estate your real estate reserves allows you to grow your investments tax-free and the cool thing is if you need to take some of the money out that you invested you could take the money that you invested out tax and penalty-free that way you're just leaving the gains in there to grow without getting taxed really cool strategy obviously there are limits on the roth num eight invest every single time you get paid every single time you see your paycheck hit your bank account you should ask yourself what can i do to invest right now let me ignore what everybody else is doing let me ignore what all the hot trends are right now forget about what the latest hot stock is or whatever forget about all of that just get in the habit of every time you get paid invest i look at my money when it comes in i'm like spend it spend it quickly and i spend it on stocks and it makes me really happy notice i didn't say put your money into a high-yield savings account i personally despise savings accounts they create a false sense of security because they create this comfort zone that teaches you not to invest and not to focus on building your wealth or building your income so what i like to do is put two to three months of expenses as an emergency fund into your checking account beyond that literally everything else goes into roth 401k real estate and stocks that's because when things hit the fan you got a hammer and you have these investments as a real emergency fund and it's going to be a real emergency fund because you're not going to want to sell those unless you really have to where you could go in break the glass and take some money out as a real emergency kind of fund you know if you blow past your two to three months or whatever but the cool thing is you tend to build your wealth much faster and emergencies don't often come up so in my opinion when you have your extra savings in investments you tend to build your wealth more over the long run what i like to look at is the fact that seven out of 10 years if you do this your stocks are probably going to be a lot higher than what your savings would have been yeah there are going to be some years where it's a little lower but as long as you have that faith that in the long run america is going in the right direction boom next number nine focusing on income growth what can you do to increase the value you provide to the world even if this means getting educated spending some money to get a license like becoming a licensed contractor instead of a handy person or becoming a lender or being a real estate agent heck start a side hustle like a 3d scanning business maybe you join the youtube course i have below to help you grow a business and learn how to increase your income try some different things try to increase the value that you can provide speaking of which number 10 if you create a side hustle you might have the opportunity to write off some of your expenses so for example this thor's hammer here is a prop for my real estate set so when i spend 20 or 30 on thor's hammer i get to save somewhere around 10 to 15 in taxes and i like that so i like having a side hustle that and i'd always verify this with your personal cpa not any cpa your personal cpa because they're going to help you deal with all this make sure everything you're doing is above board but the bottom line is if i need a new ipad because i gotta have it to help me figure out what my next note is that i gotta talk about well i'd like to be able to buy an ipad for my business and if that's gonna give me some tax savings as well makes it a nice looking ipad so there you go folks there are 10 very very very important money mistakes to avoid and many things to do thank you so much for watching get yourself the apple car i'm not even sponsored by apple get two free stocks with weeble get your life insurance in the link down below in as little as five minutes check out the courses in the links and folks we'll see you next time [Music] you

Channel: Meet Kevin

Views: 161,988

Keywords: money mistakes, money, finances, credit, credit cards, real estate, stocks, credit utilization, loans, mortgages, time value of money, payoff debt, stock investing, hedge funds, investing, how to invest, roth ira, roth, roth retirement

Id: EZ8xWd-cWz0

Length: 20min 27sec (1227 seconds)

Published: Fri Aug 14 2020