Why So Many High Income Earners Are Not Wealthy

Many high income earners (or rich people) often do not have a large amount of wealth. Let's talk about the difference on how wealthy people and high income people use their money.

Chapters

00:00 Start Here
00:41 Rich People Buy Liabilities, Wealthy People Buy Assets
02:21 Rich People Have A High Income, Wealthy People Have A High Net Worth
03:54 Rich People Live Above Their Means, Wealthy People Live Below Their Means
05:07 Rich People Make It Known, Wealthy People Hide It
06:36 Rich People Expect The Best, Wealthy People Expect The Worst
08:20 Rich People Count Dollars, Wealthy People Count Pennies
09:49 Rich People Value Stuff, Wealthy People Value Time

Over half of six figure earners are living paycheck to paycheck and reason is become of how they view and manage their money. In this video I talk about 7 key differences between "rich" people and "wealthy" people.

1. Rich People Buy Liabilities, Wealthy People Buy Assets

The biggest difference is rich people buy liabilities, which are things you owe or bring you financial burdens like a car, debt, or high mortgages. Whereas wealthy people buy assets, which are something that generate cash flow like stocks, savings, and retirement accounts. Liabilities make it hard to grow wealth and assets make it easy to grow wealth.

2. Rich People Have A High Income, Wealthy People Have A High Net Worth

Just because you have a high income doesn't mean you have a high net worth. A person making $50,000 a year could have a higher net worth than a person making $100,000 a year because of how they spend their money. Rich people have high expenses and do not have a lot of money left over to grow there wealth. Whereas wealthy people keep their expenses low so they have more money to build their wealth.

3. Rich People Live Above Their Means, Wealthy People Live Below Their Means

It doesn't matter how much you make, if you have high expenses, you can still go broke. Rich people often live large and create high expenses cancelling out the significance of their high income. Wealthy people live below their means and use more money to build their assets.

4. Rich People Make It Known, Wealthy People Hide It

We often think that wealthy people are people who flaunt their wealth because of how the media portrays it; however, this is not true. Rich people follow this superficial imagine of wealth by making it known through their material possessions. Whereas true wealthy people hide their wealth and do not feel the need to make it known.

5. Rich People Expect The Best, Wealthy People Expect The Worst

Many people with high income think they are immune to surprise financial events like losing their job because of their high income and do not prepare for bad times. Whereas wealthy people know that they are not special and prepare for bad times. When bad times come, rich people are affected, but wealthy people are prepared.

6. Rich People Count Dollars, Wealthy People Count Pennies

Once people start making a lot of money, they no longer focus on smaller expenses, which ultimately becomes a big expenses. Wealthy people, however, focus on being intentional with every purchase because they know that small things add up.

7. Rich People Value Stuff, Wealthy People Value Time

Money can buy you two things: stuff and time. Rich people often use their money on stuff and have less time. Whereas wealthy people use less money on stuff and more on time to do the things they want.

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[ElAgustin]

What are your thoughts on the background? Shelves or other idea?!

[CliveBirse]

50 now, and everything is paid for. Fortunately, I had a college economics teacher who taught me a lesson when I was 18 years old. That lesson was: you can't buy something else for every purchase you make. Having multiple sources of income is prudent, as is living within your means. I have a 13-year-old vehicle because it is all I need, I like it, and I can do whatever I want with it. I retired with $4 million, and I can pay my bills without stress, but I don't live like I have that. I have no complaints.

[Meinvt]

Not shelves over the couch. I hope young people listen to this video. I am 60 and have never made a lot of money but have always watched the small amounts, never had a flashy life, and have no debt (including no mortgage) and am not looking at working til I die to keep the too much house and $$$ cars going. I have peers who still have monthly house, car, credit card, payments that are more than I’ve ever earned. I am happy to not have that stress.

[Tikiroomtreasure]

I would put a vintage map there. Gives you a reminder of where you’ve been and something to work towards by thinking of where you want to go

[mofly]

This is 100% true. I make a good income as do most of my friends I got my MBA with. I am the only one with investments outside of a 401k, no CC debt or student loans and an emergency fund. I'm shocked that people who are highly educated in finance and accounting have negative net worth in their 40s.

[LarchmontLady]

I would not duckorate with shelves over the sofa because you might bang your head into them when getting up or down. You need a big statement piece like a painting of the Rocky Mountains (if you miss them) or a Georgia/Atlanta scene for your new location. A wide antique mirror, or assorted personal photos arranged in a rectangular shape. The plant looks nice on the coffee table. A big one for the corner by the windows would look nice too. Enjoy duckorating! It’s fun but expensive.

[stephaniejohnson]

First of all, the apartment is looking lovely! Secondly, and importantly, I just wanted to say thank you. I've embarked on a no buy/low buy year in an attempt to pay off my debt. I don't have much compared to other people (less than £5k) but we're living on the poverty line so it's hard. Your videos have been such a help to me and have really helped with relieving some of my anxiety. So thank you!

[Amy]

Assets over liabilities always a good plan. I like something flat over my couch, like a painting or print. Shelves with plants are awesome on another wall, not over my head.

[City-Hiker]

Many years ago, a writer wrote a book about financial literacy. He indicated working won’t give you stable financial safety, but let the money work for you, and invest to create cash flow.

[monishthomasp]

Put a large painting on that wall.. Great video El Agustin ❤ as usual..

[DonnaDavidson-ub]

Great info, as always, Austin! Decorating the wall behind your couch with a good-size mirror or favorite travel photo (blown up to the appropriate size for that space) would look best. Many frame shops offer DIY framing on site which lowers the cost considerably. Plus, if you decide to change out your photos from time to time, just keep the size the same so you can keep using the same frame! Plants in varying pots that will grow at varying heights may detract from your presence behind your camera. My two cents - ha! Whatever you decide, have fun and feel proud of your accomplishments thus far 🙂

[daviddean]

Thank you very much, Austin. This was a great video and I appreciate your fine examples of the differences of the wealthy and the rich. Cheers from Nova Scotia, Austin! Keep up the great work and I hope you are enjoying Georgia.

[flyingsaucer]

Lovely minimalistic apartment Austin.
I wish I had it as clean as you.
Yes, definitely more plants on the wall in the background 🪴🪴🪴

[Mrivas]

Hi Augstin and thank you for all the useful money info! Floating shelves with some plants and other decorative items would look great as your background.

[DianaCarolinaGirl]

I would put a really colorfully picture over the couch to bring some pop and interest to your room. Plants and shelves are boring.

[rajlandicho]

Dont put anything on the wall i like it clear, very minimalist..

[miriamperez]

No Austin, no plants. You already have plants. How about artwork, some beautiful abstract art to accentuate your minimalist decor. Your place is coming along so beautifully. Gracias por todos tus consejos financieros. 👍❤️

[caroc]

Great to see you new place! Yes plants on the wall will look beautiful!

[blackgrandpa]

My house will be paid off in 3 years its worth over 1 million I have 400k in my pension investments I have no other debt I drive a 2015 honda accord I'm on pace to retire with a net worth over 2 million in 6 years🎉🎉🎉

[renesmith]

Decorate with a large painting or mirror on the wall. Some plants in the room as well 😊