Latest / Money Grows on Trees / #218 - Money Habits That Separate the RICH From the BROKE

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#218 - Money Habits That Separate the RICH From the BROKE · Money Grows on Trees

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The rich people do this and broke people don't, and that's to decrease
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their debt. The wealthy use debt to buy assets that pay income,
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whereas the broke, they use debt to buy things that don't produce income. What
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the wealthy do that the poor don't is they track their spending. People
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who are successful in money and wealth are also successful in
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their health and in their relationships. So straight away I can see a
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red flag if someone's overweight, unhealthy, they don't have a good relationship,
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I know straight away they're gonna be poor business partners and I wouldn't wanna do deals with them. The
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one thing that successful millionaires do that broke people
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don't is... I'm Lloyd James Ross, seven-figure investor and entrepreneur,
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and I've helped thousands of business owners and professionals turn financial
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stress into success. If you're stuck in old money habits, overwhelmed
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by investing, or unsure where to start, this is for you. I'll
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give you the mindset and strategies to take control, grow
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your wealth, and achieve financial freedom. It's time to make
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your money work for you. You see it every day, two people making
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the same salary, yet one is financially free, while the other one
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is drowning in debt. One drives a paid off car and
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has investments working for them. The other one is stuck in a cycle of
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paycheck to paycheck for survival. At first it
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seems unfair. How is it possible? They both have access to
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the same financial opportunities, yet their bank accounts tell a completely
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different story. then the truth hits you. It's not about how
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much they earn, it's about how they think and what they do with
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their money. The broke person spends everything they make swiping
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their credit card, instant gratification, buying things that lose value the
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second they leave the store. They think saving is enough, ignoring the
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fact that inflation is eating away at their cash. They
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rely on debt, thinking about, oh, I'll pay it later. Whereas
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the rich, they play a different game. They make their money work
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for them, investing in assets that grow over time. They understand that
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every dollar is either a soldier working for their financial freedom or
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a slave to their bad habit. The worst part, most
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people never even realize they're trapped. They follow the same
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habits that were taught, spend what they earn, avoid investing because
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it's risky, and believe that more income is the
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only way out. But that's why they stay broke. Because
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wealth isn't built by earning more, it's built by thinking
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differently about money and using it the right way. So
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in this episode, I'm going to talk about the seven habits that
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rich people do that broke people don't. And so
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buckle up. As I talk through each one, I'm going to give you the example of how I've applied
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this to my life so you can see that this isn't just something I've pulled from ChatGPT.
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So let's go from number one. One, rich people
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take calculated risks. And what people who
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are broke seem to think is that risk-taking is completely off
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the table. But life is a risk. When you walk out your front
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door every day, you're taking a risk. When you stay indoors every
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day, you're taking a risk. There is risks to everything.
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So the whole process of getting wealthy is not about avoiding risk like
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most people think. It's actually by taking calculated risks.
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And by not taking risks, staying in that safe job, staying
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in safety and security, you're not actually avoiding
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risk, you're just taking a different risk. The risk that nothing will change and
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the risk that you will actually die broke. So there is risk in everything, you
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just have to decide on which risk to take. And there's this process in
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investing that the very mega wealthy use, it's
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called the Dando Principle. and they look for what's
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called asymmetric returns. Opportunities where there's absolutely
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massive upside, but very limited downside. So the old saying goes,
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you want to look for investments and opportunities and take risks, where heads
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I win, tails, I don't lose that much. Whereas
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broke people think that when you take a risk, it's always, oh, heads, I
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win, tails, I lose everything. That is not effective risk
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taking. That's called gambling. If you want to do that, go to the casino and
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go and play roulette because that's what that is. But investing
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and building wealth is not avoiding risk. It's actually being able to see and
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identify that you can play a roulette table where the odds of
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you winning are almost 100%. And that's the type of investment you
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wanna participate in. And I think of wonderful
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high quality assets that you can do that with like certain businesses, stocks,
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real estate, and things you can do with your career that
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have got very limited downsides. Like when I started into network marketing, I
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realized very quickly that there was a huge upside, but very
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limited downside because if I sucked at it, which I did when I first started,
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nothing bad could happen. So I thought this is an asymmetric return opportunity
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and that's why I said yes to it and went for it. So that's an example of what you look for.
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Heads I win, tails I don't lose too much. The second thing
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that rich people do that broke people don't is
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that they actually invest a large percentage of their income in investments,
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and it's more than just the 10%. In The Richest Man in Babylon, you
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do learn that paying yourself first 10% is critical, and it is.
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But really what I tried to do was I tried to invest as much as I could, and
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wealthy people actually try and invest like 50% of their income. As
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much as you can get in early, the better. Charlie Munger has
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this saying, he had this saying before he passed away, the first 100,000 is
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a bitch, but you gotta do it. And what that means is the faster
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you can get in the 100K into your investments or in cash, the
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better it'll compound over time. The earlier you can start compounding, the better.
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So I understood this concept. So when I was living in Dubai, I was about 23 years
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of age, I had a job there, I was earning about 70 to 80,000 a year. And
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I knew I had to keep my cost very low and
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invest 50% of my income either in myself, building my
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skills, or in buying assets like shares. So how
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did I do that? Well, one of the things I did was, while everyone
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was buying cars, I went and rented a Toyota Yaris. Now, I don't know
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if you've ever driven a Toyota Yaris, but it's very emasculating. It's
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very unsexy. And so I copped that on the chin on
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this guy driving this little Toyota Yaris, leased Yaris up and down the highway. I
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went through seven Toyota Yarises because I just ran him into the ground. But
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every time I ran into the ground, I got another one. So I didn't lose from depreciation of
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buying a nice car. I just rented a crappy car, went through them and I
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kept my costs low. What else I did was we rented an apartment in
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Dubai and I shared with two other roommates. I didn't have to, but I did. I shared
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with two other roommates. We had a little media room and we even rented that out. Like
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we rented out as much as we could, because we wanted to minimize our
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cost of rent. And so I kept my car cost low, my rent cost low. I didn't travel
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a lot back then, because I wanted to build up that 100K that Charlie
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Munger said to do as fast as possible. And that's why I was able
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to, at an early age, invest 50% of everything I earned. And to this
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day, for example, if we were to earn a million dollars, my objective would
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be, and has been, to invest half of that. So I'm very
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aggressive with how much income I actually invest
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on a monthly, quarterly, and annual basis. And it is as close to 50% as
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I can get. Because right now, the reality is, I could probably go and buy six
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or seven or eight Lamborghinis for cash, easily. But it's not about buying
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those things. I'm trying to compound and build the wealth by continuing to
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invest 50%. Because I'm only 41, I've got another 25 years
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of massive compounding to get after it. Because after that, it's massively generational
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wealth. You can take your gas off it when you get to 100K, but
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you got to go for it. So 50% of everything you earn, you should be trying to save. And
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I know what you're going to say, well, Lloyd, but I'm scratching around trying to get money. Well,
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that tells me that you're not earning enough. It tells me you're not spending your evenings
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and weekends working on things that are going to bring you more money. You're
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spending too much time at leisure. And I know that sucks because you feel like you're working
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your ass off. But the truth of the matter is, what are you really doing in that time?
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Because if you're looking to make money, spend the time doing that instead of spending it,
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OK? Just quickly, if you're ready to take control of your finances but
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feel stuck, on where to start, I have a solution. My
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book, Money Bias Happiness, simplifies investing and
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wealth building with practical steps to help you achieve financial peace.
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Get your copy via the link in the show notes and let's get your money working for
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you. Now back to the episode. So number three, the
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wealthy use debt to buy assets that pay income, whereas
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the broke, they use debt to buy things that don't produce income. So
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if you're broke, it's mainly because perhaps you're using debt, like afterpay,
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credit cards, or whatever it might be, to buy things and stuff that
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doesn't produce for you. And this is how you accumulate massive amounts of debt
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without generating more income. On the flip side, the wealthy will use
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debt to buy income-producing assets. So think, for example, of
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a property investment. Let's say it's a million bucks, you borrow $800,000, you put
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a deposit in, and that particular property pays for its
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own debt repayment over time without you touching it. And over time, that
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property will grow in value, hopefully, and it'll pay itself off and you'll have a cash
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cow. That's an example of leveraging other people's money, OPM, to
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buy property. Now, how we did that recently for ourselves, there was
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a small business that we could buy, a laundromat business. Yeah, it was like a quarter of a million dollars
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to buy. And we noticed the cash flow from it was producing about 40% net
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return, okay, after costs, which is a great business. And
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because it was 40% return, we could go to the bank and we borrowed all
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the money from the bank. In fact, we borrowed 100%. a little bit more than 100% because
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we had to pay for stamp duty for the business and legal fees. But we borrowed the whole amount
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and the amount we're paying back the bank is about 8.5% to 9%. So we're generating
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40% in income from the business and we're paying out 9% to
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the bank. So that's a very simple way to see,
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well, why wouldn't we borrow someone else's money and our money is still in
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the other investments producing for us a higher rate of return. So
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it was better to use the bank's money for eight or 9% cost to
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buy a 40% asset than use our own. Does that make sense? So
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that's a way where you can identify certain deals to actually borrow
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money to actually get income producing assets instead of just buying clothes and
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buying weddings and travel, all right? The next thing, number four.
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The rich people don't do too much of anything. So when
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you work out something that's working, they don't just like bet the house on
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it. They'll bet up to a certain point and they'll let it do its thing. So
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too much of a good thing can be a problem because
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it makes sense until it doesn't. So what they won't do is always
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bet everything on one thing. They won't diversify a lot, but when
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something works, they don't just try and repeat it over and over again. At some point
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it will change and they have to pivot, right? So they'll look for
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other opportunities outside just the one thing. This is a little bit different to focusing on
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one business, but they don't do too much of anything, right,
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when it comes to deals. Number five, rich people do this, poor
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people don't. That's to decrease their taxes legally. So
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if you don't have a great accountant, I would encourage you to get one because By
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decreasing your taxes, you're literally increasing the amount of money that's in your bank
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account at the end of every single year, which allows you to give you free
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cash flow to buy assets, pay down debt, and do different things with it. But
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if you're just willy nilly going through life without understanding where your
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taxes are going or how much you're paying, you're really leaving a lot of money on the table. So
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a good account will tell you what expenses are tax deductible for business purposes, and
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you will be able to reduce your personal tax if you own things like property investments in
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your personal name, and other things like businesses provided it
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is a business expense within the laws of the tax legislation. So,
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start talking to your accountant about reducing your taxes because you can reduce
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it. And Kerry Packer, the famous multi-billionaire from Australia before
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he died, he said that, I don't know anyone who's
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smart who doesn't want to reduce their taxes because we give
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the government a certain amount and they're not doing such a great job of spending it that we want to
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give them any more. So he said that people that don't reduce
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their taxes should have their head read. That's some quote from him, right? So
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for you, I would encourage you to do that too. And every year or every quarter, actually,
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I sit with my accountant and we make sure that we're taking advantage of all
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the tax legislation available to business owners to make sure that we're not
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paying more tax than we don't need to. And a good accountant will help you do that with
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relative ease, okay? Number six, what the wealthy do that
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the poor don't. is they track their spending. You
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might think this is ridiculously simple, but you don't have any people I talk to that wanna
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get wealthy, but they have no idea where their money's going every single month. So no
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matter how wealthy people get, you still have to keep your finger
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on the pulse. It doesn't matter how, now I know billionaires, one
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particular billionaire who lives here locally, probably worth about 10 to 12 billion
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dollars. And I know for a fact that he still will look
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and write most of the checks in the business, because he still needs
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to see how much money's coming in and going out, Because when you
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know that data, you can decide on which deals you're going to take. So if
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you don't actually track your spending, like for example, if I didn't track my spending, I
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wouldn't know if we could buy that business. I wouldn't know if we can invest this
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into the stock market. I wouldn't know how much our business needs
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to go to the next level and scale with projects and team members coming
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on board because I wouldn't know how much money was there. So if
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people aren't tracking their spending, how do you know what you have left to invest? How
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do you know what you have left to pay your credit cards off? You don't, because you
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don't actually know where your money's going. So a really important step for you to take
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is every month, sit down, look at your bank statement, do a basic
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table, and figure out what's coming in, what's going out. If too much is
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going out than coming in, then change your behavior and stop spending
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bloody money. Stop. Enough. Cut, cut, cut, cut, cut. And
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then look for ways to increase your income. Number seven, the
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seventh thing that millionaires do that broke people don't
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is that they actually invest in their well-being, all right? So
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as an example, yesterday I went for a massage because I knew today would be
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a long day with creating content. We just got back from a trip to Las Vegas
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and New Zealand on an airplane for many hours and I thought this was
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a way to invest in my well-being and my wife said, go, go, go. So
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she understands too to invest in her well-being and my well-being and she
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makes sure that I do that because success, it requires compounding.
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And compounding requires a long time. So to perform at
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your best and compete, money is a combat sport. To compete with
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all the other business owners and things happening in the world, you have to be at your best. You have
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to perform at your best. And to perform at your best means you've got to be
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healthy. You have to be energetic. You have to be alert. These
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things do matter when you're going into a negotiation when you're shooting
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content, when you're doing sales, when you're running a business, when you're running a team, of
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all hours of the day and night, because we've got four businesses, two
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of them are fully international, so we have to be on the dial every
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single day at different times. Now if I was having drugs and alcohol, I
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would be like way, way below my high performance rate. So it's
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like if you owned a thoroughbred racehorse that you wanted to win the Melbourne Cup,
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you wouldn't feed it a coffee and a pack of cigarettes before it
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raced. But that's what people are doing to their bodies, and they're expecting to
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win the Melbourne Cup without looking after their bodies. So
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the best way to do that is to start looking after what you're eating, cut
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out the alcohol, certainly cut out any drugs. If you're doing drugs and smoking weed and
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stuff like that, you're gonna not be able to compete with other people. So find
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some help, move past those addictions, and hang around people who
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are healthy, because really, people who are successful in money and
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wealth are also successful in their health and
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in their relationships. So straight away I can see a red flag if
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someone's overweight, unhealthy, they don't have a good relationship, I
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know straight away they're gonna be poor business partners and I wouldn't wanna do deals with them. So
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think about how you're looking after your body, your relationships, and your money, and
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all of them will have an impact on the other. And it's one of the most underrated money
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hacks ever that wealthy people actually do that poor people don't.
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So that's seven, but the last bonus one I
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wanna give you before you finish this is this. The one thing that
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successful millionaires do that broke people don't is they fall
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in love with the game. They're more attached to the process
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than the outcome. And there's a great saying that will help you with this, marry
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the process of becoming a millionaire and divorce the
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outcome. If you do that, you'll go a lot further because the old proverb
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says that the person who loves walking the most will always walk further
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than the person who doesn't. So they're the seven habits that separate
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millionaires from those who are broke, and there's
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some examples there of how I've done them myself personally. So what I'd love to know is this, which
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one is your favorite one that resonated with you the most? Tell me in the comments
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below, pop it below, I'll come and have a chat with you in the comments. Hit the subscribe button.
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Share this with a friend who needs to hear it and go check out another video and
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I'll see you on the next episode. Thanks for listening to Money Grows on Trees. If
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