If you have been wondering how rich people get richer and why poor people get poorer, you need to listen to this episode.
If you are looking for a solution to earn more and scale your business while working less, then you are in the right place.
There people who are wondering and people ask me all the time. The rich get richer, the poor get poorer. How does that work? It's really unfair. Right. I do agree with you. It's really unfair. So wealth distribution is a big problem on this planet. But, you know, you have to live with the world you're in. So I want to explain how they get richer.
So please don't take this as financial advice or anything. I'm just telling you the way the system works. So why the rich get richer and the poor get poorer. There are various reasons and we're going to cover two.
So the first one is that you need to understand when you get taxed. This makes a big, big, big difference in the money that goes in your pocket. So this will vary from one country to the other. At the end of the year, you have to pay taxes on what you earned. So regardless what you spend, regardless what you did with the money, you pay taxes on what you earn. So the thing is that the people who are actually financing the economy are usually like middle class and stuff like that because they're the ones who get taxed a lot.
So you have to understand this. It means that they’re going to tax you. OK. So this is why when you are an employee, it's hard for you to move ahead, because even before you touch the money, bam, the money's gone. OK. Now, if you have a corporation. If you have a company. The big difference in how you can keep growing your wealth is when you get taxed. So let me explain that. So when you have a company, for example, you get taxed not before you touch your money, but after you touch your money. OK. And this is a big difference. So if you earn one hundred, you would have paid 20 percent taxes. But here's the thing. These taxes, you only have to pay them after you've deducted everything you required to run your business. So that means the salaries, your business expenses, you're traveling, buying books. You're doing this. You're doing what you need. You can expense a lot of different things. So basically in a lot of systems and for a lot of companies, you're not paying taxes on what you earned. Which is the revenue. So with the company, you earn one hundred, you spent 80 and you only have 20 left. And they're going to take 20 percent of those 20. Which is four. All right. So there is a big difference. Between 20 and four.
If you get to spend your money before you get taxed, then you can invest that money in your different ventures and blah, blah, blah. And you get to increase your portfolio and your wealth. This is how rich people get richer. This is how they do it.
The second reason is as important as the first one. So here's what happens. If you've seen, like, the athletes and like rappers and anyone that made it big. What is the first thing they do? They go and buy this big house, these big cars and the latest phones and Rolexes and all that stuff. Right. So this is what people do with their money. So they're basically putting their money into liabilities. These things, they're not gaining any value. They're actually depreciating over time. The minute you get it out of the store, that's it. 20 percent gone. So this is what people are doing with their money. They will buy this under their name.
So just by buying the wrong things, then you'll be basically killing your chances of getting richer because you're buying stuff and losing money. But the thing with these rich people who get richer. Do you know what their secret is? Rich people don't have anything under their name. You need to understand this, the richest people on the planet. If you look at their assets, what they actually possess under their name, they don't have anything under their name. Nothing. So basically, the house they live in is owned by a company, a corporation that they own. The cars are owned by an entity. OK. Why? Why is it the case?
Well, if you remember what I told you before, these companies, they're on a different tax bracket or different tax system. So they get to spend money before they get taxed. So all this all these assets and stuff, they have a lot of mechanisms in place to be able to make sure that they don't have to pay luxury tax and all that stuff on it.
These things are all tax deductible. I think you have a maximum of 12 things you can deduct. So let's say you have your house, your cars and everything under your name. Then you will have a mechanism that allows you to deduct twelve things from your taxes…
If you had these assets under a corporation, you will be able to use more than four hundred deductions instead of twelve. So that means someone who is way richer than you, has access to more deductions than you do, and they will sometimes end up paying fewer taxes than you. This is what people are complaining about saying they do. I mean, this dude is rich enough and he pays less tax. I'm the one being milked by the state and they don't pay enough taxes.
So this is why rich people get richer, because they have this financial education that allows them to use this, and these mechanisms are perfectly legal.
So if there's something of interest for you, obviously I'm not the best person to talk to. Find someone professional who specializes in that stuff to explain how it works.