Monday, September 12, 2011

The Difference Between “Middle Class” and “Wealthy” Thinking

The idea for this blog post came out of an intriguing and thought provoking financial presentation that I had the privilege to listen to from a brilliant speaker named Brett Burks. Brett Burks is a multi-millionaire, who has roots growing up in the Middle Class. Brett’s experience with having been both “Middle Class” and “Wealthy” has given him an interesting introspective on the two. See how much of his comparison and contrast opinions on the two classes you agree with … or disagree with.

Brett starts off by saying that the Middle Class has had it hammered in their heads to tell their kids to get a good job with benefits; get an education; put your nose to the grindstone; kiss up to the boss; respect authority and all of this hard work will be rewarded one day. Well, then he goes on to mention that Bill Gates dropped out of Harvard. Steve Jobs, Michael Dell and Larry Ellison also dropped out of college. Furthermore, Brett’s three favorite business men Henry Ford, Ray Kroc and Andrew Carnegie never even finished high school.

Now at this point, Brett makes it clear that he is not promoting the idea that people should not go to school. He was just making the point that education doesn’t necessarily equal wealth. Education just equals knowledge. It just so happens that a lot of people continue their education with the main goal of getting more money or getting a higher paying job.

Brett goes on to say that Middle Class people want safe investments, like CDs at the bank. They think that risk is a bad thing. Wealthy people invest in equities and believe that managed risk is a good thing. They know that the higher the risk, the higher the return. And as long as you can manage that risk, you are going to make a lot more money. Middle Class people, under the wrong assumption that risk is a bad thing, miss out on money working hard for them.

One of the biggest differences between “Middle Class” and “Wealthy” thinking is how we talk about wealth. Middle Class talks about income. Middle Class want their income up while wealthy people want their income down. Wealth is not in the income. Wealth is in the ownership. Wealth is in your net worth. Every year ForbesInvesting Magazines) lists the 400 richest people in America – never is one income listed because income has nothing to do with wealth. But because the Middle Class is under that assumption they make the wrong decisions.

For instance, if you are making $400,000 and spending $470,000 you are still broke. If you are making $170,000 and only spending $70,000 and saving $100,000 a year, then you can get very wealthy very fast.
Let’s say you are 23 years old and your whole life is ahead of you and you go work at a job. How much money are you going to make the first year? Let’s say $40,000. Let’s say, you start your own business. How much do you make the first year in business? You’d be lucky to make nothing! Average businesses do not turn a profit on their first year.

If those are your two choices and you are in the Middle Class, which one do you choose? The job, of course, for the guaranteed $40,000!

If you make a decision like a wealthy person, you might think what is the value of a job? It’s really just worth whatever someone with pay for it.
How much can you sell a job for? How much can you trade it for? Nothing, right? So the value of a job is zero.

What is the worth of a business – even if it is not making any money? It’s probably still worth something. Maybe you have work vehicles. Names and numbers of contacts could be sold. And what about office supplies, computers, inventory, etc.? So, even if a business is not turning a profit, it still has worth.

Now, let’s say the worth of the business is $40,000. Same question, would you rather have the $40,000 job or the $40,000 business? In other words would you choose the job where you make $40,000 the first year and it is worth nothing or a business where you make nothing the first year, but it is worth $40,000?

What do you think 9 out of 10 people still choose? The job, right?

In Brett’s opinion, he says, “Here’s the problem, they chose wrong. They chose like the Middle Class.”

What about you? What do you think? Do you find yourself making financial decisions using “Middle Class” or “Wealthy” thinking?

I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any comments, please post them below, otherwise, feel free to contact me.
Post a Comment