15 Things Poor People Dont Know About Making Money

Here are 15 things poor people don’t know about making money:

• Poor people are often unaware of how to optimize taxes through business expenses.
• Making money is more about solving systems than just working hard.
• Passive income is key; trading time for money limits your wealth.
• Executing ideas is what truly brings value.
• Retirement savings should be significant to gain financial freedom.
• Building multiple income streams is essential for financial security.

Poor people are bad at making and keeping money; otherwise, they wouldn't be poor. This should come as no shock to anybody. Today, you're going to find answers to questions you didn't know you had. But for that, you need to put your feelings aside and be honest with what's actually happening in your life.

Welcome to Alux, the place where future billionaires come to get inspired.

Number one: You can pay little to no money in tax if you start a business. This should be common knowledge among everyone. But just to make sure we're going to say it again: businesses do not pay taxes on income; they pay taxes on what's left after you subtract expenses. If you spend the money the business has generated on goods and services that benefit the business, you will not pay any taxes at all. The more business expenses you have, the less amount of money is left to be taxed. That's why people spend millions on a private jet—it’s a business expense because it allows you to meet with your clients. The private jet is deductible; so is the jet fuel, meals with your clients in restaurants, traveling for work, and so on.

Now, this is the fundamental difference between businesses and individuals. Illustrated in the simplest way: the average American pays somewhere around 27% in income tax, while in Europe it's closer to 50%. The average corporation pays between 0 and 3% in taxes. You see, most people just don't think about this. There's a whole list of benefits with owning a business that are not obvious right from the start.

Number two: Making money is about system solving, not working hard. You make money when you're able to solve and put together all of the pieces in the puzzle. The only way poor people know how to make money is to work for it—exchange time and effort, and someone else will pay you for it. The value comes from your ability to create a chain of systems that transform input into money.

Here’s what we mean by that in the simplest way: poor people earn money by being a salesperson at a lemonade stand. The owner of the stand is paying you by the hour—in this case, you're just a piece of the puzzle. The lemonade stand owner has the following pieces:

1. They identify the product or service—in our case lemonade. It's the good that gets exchanged for money at the end of the chain.
2. You have the stand where the lemonade is sold.
3. The person selling the lemonade.
4. This person needs to receive the ingredients—in our case cups, lemons, water, sugar, and so on.
5. Transport the ingredients to that lemonade stand.
6. The actual ingredients that need to be purchased from what is called a supplier.

So to put the process into business terms, you've got your supplier, distribution, processing, sales, and then the consumer. See how that lemonade seller is only a piece of that puzzle while the owner needs to think about all of the different elements? As a rule of thumb, the employee gets $1 for every $10 of value they're able to generate for the owner. The reward for solving that process is a lot bigger than being a wheel in the machine. The moment you're able to solve the puzzle of processes, you can begin to take full advantage of the marketplace.

Number three: Make money while you sleep, or you will never be rich. Listen and listen very carefully: as long as you're trading your time for money, you will never be rich. Because there's a limited number of hours in a day that you could possibly trade, even if you traded all of them, you would still hit an earning wall. Your ability to generate income should not be tied to you. Don't be the machine that makes money; build the machine that makes money for you. This is why the previous point of solving the system is so important.

Unless you take back control of your time, you'll always be poor. Eight hours of your day, you sleep; eight hours you spend at work; around two hours are wasted in traffic going back and forth from work. You're left with six hours in a day to eat, do chores, invest in yourself, figure out who you are, date, and have a social life. There's not enough time for all of these things. So what do people do? Well, they sacrifice some of them without realizing that these are actually the things that make life worth living. You're not just here to wake up, go to work, pay your bills, until one day you die.

Number four: It takes the same amount of effort to make $50,000 or $1 million. This one gets people confused. It took us over five years to understand this concept because it felt so disconnected from where we were sitting in our earlier days. A mentor of ours gave us the following compliment and advice: "Wow congratulations on the effort, quality, and amount of work you're putting in; it’s a shame you’re focused on the wrong thing." Imagine our shock hearing that.

Once you're able to solve puzzles, you might as well try to solve the ones with the biggest rewards. Because what's the point of working as hard for a fraction of the reward? Here’s a clear example: if you're earning $2,000 a month selling telecom subscriptions over the phone, you could earn over $20,000 a month by selling cars or real estate. The process is quite similar, but the reward is much greater. The sales process is the same, but your focus isn't right. You might have all the skills required, but you're missing out by putting them to use in the wrong place.

Number five: Ideas are worthless without extended execution. An idea is worth a million dollars only after it's made $1 million. Everyone's got ideas. You can stop anyone on the street and they'll be able to vomit out one or two business ideas that they think are worth quite a fortune. But please, pay attention because what we're about to tell you will change the way you think about ideas for as long as you live: an idea is a multiplier to your execution. Even if you've got a killer idea that's worth a 100x multiplier, if your execution is zero, do the math: 0 * 100 equals 0. Your ability to execute is multiplied by the quality of your idea, which means you could take any mediocre idea and simply execute better on it—that is how you win.

That's why Google crushed Yahoo, Facebook crushed Myspace, TikTok won where Vine failed, and McDonald's won over the other burger franchises at the time. This is why Starbucks is still winning the coffee game. Making coffee with milk isn't a billion-dollar idea, but the way the idea was executed—well, that is. Success comes from being able to execute at a high level for extended periods of time.

Please, don’t neglect the 'extended periods of time' part; it is really important. Everything most people start is trash at the beginning. The difference is made by how long you're willing to stick with it.

Number six: Instead of cutting down costs, focus on increasing income. Poor people clip coupons; they spend hours figuring out ways to save a couple of pennies. A penny saved isn't a penny earned—it's just a penny. And do we even use those anymore? It doesn't matter if you're worth $11,000 an hour or $750; why are you wasting two hours of your life driving to three different supermarkets just to save $10 on some detergent? The return on your time is whack.

Some people spend an ungodly amount of time trying to cut down personal costs when that time could have gone toward increasing their income. If you're earning $750 an hour and have time to go to three different supermarkets, well you've got time to learn Microsoft Excel here on YouTube and find a different job that pays three times that amount. Instead of wasting time cutting costs, invest the time into becoming more valuable.

The reasoning behind this is very simple to understand. You can only cut costs by so much. There's nothing else to cut; once you reach rock bottom, you're stuck there. Now there's nowhere else to go and you can't go up, well, because you've designed your entire life around cutting lower and lower.

Number seven: $100 in passive income is worth more than $1,000 of worked income. Now this is something kind of counterintuitive to most people, and we're glad we get the opportunity to finally address it and maybe light the path forward a bit. That $1,000 is dependent on you being able to show up to perform, to secure clients, etc., while the $100 isn't—that $100 will come to you no matter what.

What happens if you get hit by a car or get sick and your ability to perform goes away? Passive income also frees up your life. Ready to have your mind blown? $40,000 a year in passive income is worth more than a $200,000 a year salary. A $200,000 salary per year will require your time, effort, your attention—at least five days a week—you know you would be working weekends as well in some form or another. It also chains you to a desk, to a location, to a country or an office.

For $200,000, you'll be stressed the hell out and have to put up with a shitty boss. With $40,000 per year, you could live almost anywhere in the world and have 100% of your time to yourself. You want to learn to tango? Sure, my friend! You want to raise bees in the wilderness? More power to you! Maybe write that book you've been planning to, or spend as much time as you want with your kids. Passive income revenue is multiplied in value by the time it frees up.

Number eight: Over 50% of your income should go toward investments. You cannot escape the rat race if you're saving 5% or 10%. You just can't. You might be able to have enough funds to overcome a hurdle, but that's not enough to buy yourself freedom. Want to hear something that's going to blow your mind? On average, rich people save and invest a minimum of 50% or up to even 90% of their income.

The only time saving money is a viable financial decision is if 1. You already earn a lot, and that amount saved is significant. For example, if you save 10% of your yearly income but make a million dollars a year, well, that's $100K right there. Or 2. It's done with a clear and well-defined purpose, like a six-month emergency fund—that's just being smart and responsible.

The average American has about $8,000 saved. Now let’s be real for a second: that will buy you pretty much nothing of real value, and it won't save you from any significant curveball that life might throw your way. Especially in the US, if you have a medical issue, you're like one ambulance ride away from losing all of your life savings. The saving mentality also tends to put you in a cutting-cost scenario where you try to save more and more. But like we said already, there’s only so much you can put aside until you're capped out.

Money saved is money not invested. You don't save money to buy a penthouse; the return on your investments are worth a penthouse. Imagine this is your earning power line. Let's say you make $3,000 a month, with $250 to spare at the end of it. If you save those $250 with no particular purpose, in which direction are you moving? Just something to think think about.

Number nine: $1 million per year isn't a lot of money. We all grew up with this idea of a millionaire, right? That $1 million was good enough to set you up for life. Because it used to be true, back in the 60s. Maybe it still feels true in some parts of the world, but money is getting devalued every single year.

Let's put this into perspective for you for a second, with the US as a main example. As of the beginning of 2020, there were $1.75 trillion worth of notes in circulation—that's actual money bills out there in the marketplace. But scared the economy would tank because of the COVID-19 pandemic, the FED decided to print another $2.3 trillion out of thin air and simply give it to people and businesses to avoid financial collapse. But look, okay: value comes from scarcity. The more something is to be found in the marketplace, the less valuable it is. Congratulations! Every dollar you have is now worth less than half of what it used to be.

This devaluation of currency is called inflation. Every year, the government prints new money, and the stash you have in your Nike shoebox is worth less and less. That's just another reason why saving money is keeping you poor. $1 million per year in 2020 is roughly the equivalent of $250,000 just 30 years ago—not because of inflation, but also the buying power. Real estate is a great barometer of this.

Here's why $1 million a year isn't that much money to begin with. The average person will work for approximately 40 years, right? Between the ages of 25 to 65, give or take. If you make $1 million a year every year of your working life—completely ignoring inflation, and you didn't spend a penny—you still wouldn't have enough money to purchase this Rothko painting that sold for $46 million, or this one by Newman that sold for $43.8 million. Imagine working for your entire life for $1 million a year and you're still unable to buy a piece of canvas with two colors on it. Yet, these types of paintings sell every single year.

The point is, the meaning of the phrase "a lot of money" keeps changing every year, which in turn makes decent money lose its value every year. To make decent money right now, well, you would have been a high-income earner 30 years ago.

Number ten: A wall gets built brick by brick—the same with wealth. Most people have no problem spending $10 to $50 on random unnecessary things, but then scoff at the idea of earning $10, $50, or $100 more—that's too little money for them. But when they have it, they're quick to throw it away on vices or things they don't need.

The average person doesn't understand that you can build passive income with as little as $10 to $50, and this has always been possible. The simplest and cheapest way to create passive income is through investing in dividend-paying companies. Write this down in your notebook!

So how do you do this? You use any investment platform like Robinhood, Revolut, or eToro—whatever. Purchase the companies that are paying dividends every quarter. These companies split the profit between shareholders. There are three dividend-paying stocks that are super accessible to begin with: Toronto Dominion Bank, that’s 5.32%; Realty Income 5.37%; and Chevron Corp 4.26%. Start off small; move some of that money into dividend-paying companies that you know and trust. This way, your wealth grows, you store value, and when these companies make some money, you get paid as well.

But building this wall requires you to put one brick down at a time every single day. That's exactly what our subscribers are doing inside the Alux app. Every single day they're delivered a brand new coaching session from what we call the five pillars of a good life. These sessions are designed to give you the most valuable insights and actionable steps to help you with your finances, your relationships, your intellect, as well as emotional and physical health. These efforts compound over time; the knowledge compounds over time. Before you know it, you've got one hell of a strong brick wall in place.

If you're ready to level up, download the app and come back here to scan this QR code on the screen and you'll get 25% off the yearly membership. It's not cheap because we've created a premium learning experience just for you. But trust us, the app pays for itself in the first month alone. Sign up for the 7-day free trial and see for yourself at alux.com/slapp.

Number eleven: Never borrow money that doesn't go toward making more money. Now, we know that many people lack access to funding in case of emergencies, which is why they're taken advantage of by predatory loan shark-like institutions. But people borrow money from payday loan companies without understanding the contracts that they're signing. They're paying 70% to 250% yearly interest on the money they're borrowing for an oversized truck. Unless people are paying you to move things with that truck, that's a really stupid purchase, and this happens all around the world. The UK has the same problem as the US and the rest of the world for that matter.

Here's an actual example: Money Shop, one of the biggest payday lenders in the UK, charges £3 to borrow £100 for a month. The second biggest player, Wonga, charges £3715 to borrow £100 for a month. If you don't pay in that month, the penalties and the interest on those penalties start to apply. Borrowing money can either make you rich or a slave to some corporation that owns the money you haven't even earned yet. The problem is, poor people cannot differentiate between the two.

Number twelve: You earn in proportion to your ability to use the tools you have at your disposal. We are so accustomed to having all this stuff around us that we forget that some of those are tools, and tools are meant to be used to generate value for your existence. Back in the very beginning, all you had was your body, so you would carry stones with your muscle and use your eyes to look for snakes in the grass and watch out for those red fruits.

There are people to this day that the only tool they use is their body. In many parts of the world, people still carry things by hand. For example, we're jumping closer to the present, and now you've got tractors to carry even the heavier stuff. People no longer have to rely on their physical strength to get the job done. All you need to do is learn how to operate the machinery, and you're immediately more valuable than the person who still carries everything by hand.

Keep this idea in mind as we progress through this point. Because people no longer understand the purpose of tools, why do you have a $1,000+ iPhone just to scroll on Instagram? If that's the only thing you're using that iPhone for, you just paid $900 more than you should have. YouTube is a tool; you can either learn new skills from it or waste 3 hours of your life watching TikTok compilations.

At the end of the day, it's a matter of consumption versus creation. The tools are the same but some people use them to consume while others use them to create.

Number thirteen: Keeping money is harder than making money. Most poor people think that making money is hard, but almost all of them have made money in the past and will be making money in the future. The hard part is keeping the money, not making it.

So let's run a simple thought experiment: imagine you pick up 10 random people and give each one of them a million dollars. If you check back with them after 10 years, how many of them do you think would still have at least $1 million? Well, the answer is probably none of them. Some of them might actually be in debt. Making money is no secret: you get a job or sell a product or service—that's basically your only two options. But very few people know how to keep it and grow it once they get it.

Just look at what the average person has of value at the end of their life at 80 years old. If you're lucky, you own a home and a rusty car. The average person manages to store less than 10% of the value they generate in their lifetimes; the rest is simply consumed.

Number fourteen: Business people hire good professionals to make them rich. This is a fundamental difference between the two types of mindset. Poor people are looking for security while rich people are looking to build wealth. The golden rule when it comes to security is being hard to replace. The harder you are to replace, the more you're worth to the marketplace. Specialize, and your salary will always be high.

The rich, on the other hand, don’t think the same way. The rich don’t think in terms of salary; they think in terms of profit—how much is there left to take home after you pay all of the professionals their salaries? The more you think about it, the more things should begin to click in your mind. A salary buys food on the table, and depending on how good you are at your job—other necessities. But profit buys you freedom.

This is why A students end up working for B and C students. The A students are very good at following orders—they've been following everything the teacher told them to do. But if you really think about it, teachers aren’t as successful as they lead you to believe they are. Almost anywhere in the world, a mechanic out earns a teacher. They never told you this, but you studied hard because they told you that’s what success is all about. And in the meantime, those B and C students learn to actually play the game of life and build the companies where A students dream of working.

You want to know the secret about the education industry? Only 25% of the money that you pay in tuition goes toward the teachers; the rest of that money goes to the chairmen of the trust funds that own the biggest universities in the country. Although universities are listed as nonprofits, they get to pay whatever salaries they want to their board. Daniel Cummings, the former managing director of real estate at Harvard, was paid over $10 million a year. All the guys at the top earn over $5 million a year in salaries from the university, and they don’t teach a single class. Now you know.

Number fifteen: You need at least three income streams to feel safe. For most people, when they hear the term "three streams of income," they're thinking of three jobs, right? Because for the majority of the population, the only stream of income they're aware of is the job they're working. In order to not be shaken by the fluctuations of the market, though, everyone should have at least three streams of income.

We've been slowly adding them one by one for years now. Let's take Alux Inc as the company, for example. We earn money from the revenue from the ads you're seeing on this video, the revenue from the strategic sponsors, the revenue from our digital courses, and the revenue from our merch line—although that one's kind of small, but hey, it still brings in some money!

Royalties from the licensing agreements on the distribution of our content to other markets, and obviously, our Alux app. We're looking to release our first book soon, and that's going to be another stream of income. On a personal level, we're earning money from multiple streams as well: salaries from our work at Alux, dividends from Alux Inc, rental income from our properties, dividends from other tech companies we're invested in that are profitable—not to mention the growth of our stock and index fund portfolio, and more.

So why is this all so important? Well, because if one of them were to fail, we would have another thing to fall back on and mitigate that damage. Your goal for the next five years is to add another stream of income that is not dependent on you. The moment you learn how to do this, life gets super exciting.

This raises the question: which of these ideas clicked with you the most? Surely one of them set up an idea domino in your mind.

For those of you still watching, we've got an additional golden nugget: your bonus today is tracking shows you the way. We cannot highlight this enough: you cannot improve what you do not measure. We're not talking about budgeting every single penny and every second of your day in your life, but you need to keep track of the things that you want to improve.

Do you want to lose weight? You need to track your food intake and your weight fluctuations. Do you want to make more money? Write down how much money you made this month. Do you want to stop wasting money? Write down how much money you spend every day. The moment you put it in writing, you're able to tell if what you're doing changes anything.

Most people just wing it; they allow things to just be, with the expectation of all of it getting better on its own. But here's the truth: your life doesn't get better unless you get better. Eat better, learn more, earn more, and stop wasting so much time.

As a business owner, you need to not only track the performance of the company as a whole but that of your employees, the quality of the product you're putting out, and constantly try to improve it. You can't do any of this unless you periodically track. If your life isn't better this month than it was the previous month, you're going the wrong way.

Making money is a numbers game, and in the words of Jay-Z, numbers don't lie. Check the scoreboard; it shows who's actually winning. If you've made it this far, well that means you're a true Aluxer. Please write the word "money" in the comment section; that way, we can spot you guys in the crowd.

We'll see you back here next time, my friend. Until then, take care.