00:00hi everyone in this video I'm going to talk about why rich people like Elon Musk Jeff Bezos
00:09Warren Buffett all focus on growing their wealth and cash flow rather than their earned income and
00:15I'll cover three things what I mean by growing wealth and cash flow why rich people do this and
00:21how you can get started doing it yourself firstly what do I mean by growing your wealth and cash
00:27flow well if you look at some of the wealthiest people in the world I've mentioned a few already
00:31Elon Musk Warren Buffett their wealth is not based on having cash in the bank it's based on the value
00:38of the assets they own they've acquired assets such as property or businesses which increase
00:44in equity value ie the price of those assets increases in value and on top of this they also
00:51generate cash flow and money generated from positive cash flow is then reinvested in buying
00:58more assets and that cycle keeps on compounding growing the amount of assets they have and their
01:04wealth and generating larger and larger amounts of income in parallel and this is a far greater
01:10multiplying effect than trying to solely rely on growing your salary and earned income and trying
01:17to save your way to becoming a millionaire part two why do rich people do this so I've talked about
01:24the compounding effect of growing your wealth and reinvesting it another key benefit is tax now tax
01:31rules vary depending on where you are in the world but in general wealth tax such as capital gains tax is
01:38at a lower rate than income tax so by focusing your investments on growing your wealth it makes it easier
01:46to retain your money compared to earned income let's take a very simple example if I own shares in a
01:53company that I founded and the value of those shares are 1 million pounds at the start of the year and 2
01:59million pounds at the end of the year the growth in wealth won't get taxed because while I'm twice as
02:06rich I've received zero income whereas if I earned a 50,000 pound salary because it's treated as income it
02:14would be taxed in the UK we have something called capital gains tax but this is only applied if you
02:20sell the shares and realize a profit above any tax allowances you might have in a particular year on
02:26top of the tax benefit there's also a widespread tactic by the rich to borrow cash secured against
02:32their wealth again this is not income this is proceeds of a loan this creates more leverage to buy more
02:39assets and that wealth multiplier effect keeps on going so these three things the compounding effect
02:46of their investments the tax benefits and the ability to secure loans are key drivers why the rich focus on
02:54growing wealth part three how can you apply these principles to grow your wealth and cash flow there's
03:00a few ways to get started number one apply the rich dad mindset pay yourself first and get capital to
03:08invest there's a great book called rich dad poor dad by Robert Kiyosaki which talks about the concept of
03:15paying yourself first which is what rich people do versus poor people who pay themselves last and what he means
03:23by this is instead of having the mindset of as soon as you have income coming in you pay all your bills and
03:30then you've spent all your money by the end of the month so you have nothing to save and invest rich people on the
03:36other hand when money comes in they put a chunk of it to one side to invest and then they manage their
03:43budget and cost of living to be within what they have left for the month one of the things i found
03:49really helpful was to set a goal for the amount of money to save and invest when my paycheck comes in
03:55and to have an expenses tracker to talk the unnecessary expenditure so unable to manage my budget and live within my
04:04means for a particular month there are some good apps out there that can help you with this such
04:08as money dashboard or money hub number two once you have that initial capital of money invest in assets
04:16with a long-term view to generate wealth this could be buying property real estate or it could be buying
04:22small businesses cody sanchez did just that she acquired 27 businesses and made 10 million dollars by the age
04:30of 30. that's pretty impressive it sounds daunting and expensive to buy a business but you really
04:37don't need to be an expert in a business to buy it and you also don't need to be an investment banker
04:43cody buys what she calls everyday boring businesses she went out into her local community onto her local
04:50high street and spoke to business owners and she found a laundrette which was owned by someone who wanted to
04:56retire and she agreed to buy that business and it makes 67 000 per year she put in an operator someone
05:04who could run that business day to day and it's turned into regular cash flow and a wealth generator for
05:10her i love this example because it just shows investing doesn't need to be overly complicated or only done
05:17by certain privileged people it really can be done by anyone the key is to buy assets which generate a
05:23positive cash flow so you can use the money to buy more assets and grow your wealth and number three
05:31spend money on professional tax and accounting advice so you set up and manage your finances in the
05:37right way and also to protect your wealth i hired an accountant and the amount of money that i paid him
05:43is nothing compared to the amount of money that he saved me by setting up in the right way from the start
05:49so i hope this video has been helpful we've covered what it means by growing wealth why rich people do
05:58this and how you can apply some of the principles to grow your own wealth feel free to add any questions
06:05in the comments and give it a like and a subscribe i'll see you on the next video take care and bye for now
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