You don’t have to look far to find headlines on the internet of lottery winners who win millions but end up as broke as they were before they won the lottery.
“An Unlucky 13 Lottery Winners Who Lost Their Millions.” –moneywise.com
“From Rags To Riches To Rags Again: 21 Lottery Winners Who Lost Everything.” –pennyhoarder.com
So when I hear politicians talk about a “redistribution of wealth,” I have to shake my head. You can’t redistribute wealth. Wealth is a state of mind.
Contrary to popular belief, most wealthy individuals are self-made. They weren’t all born with silver spoons in their mouths. As a result, they treat money differently than the middle class and the poor.
Whereas the poor treat money as a medium of exchange to buy the things they need, the wealthy treat it as a tool – something they can put to work to make them more money.
While the poor spend money, the rich invest it – but not just like everyone else. The middle class stash their money in stocks and mutual funds that are vulnerable to Wall Street shenanigans – and are unsure if they’ll ever get a return on their investment.
The rich prefer putting their money in assets they can touch and feel, which will work for them by producing income.
Why do the wealthy prefer tangible assets like businesses and real estate? Because markets for these types of assets are illiquid and not vulnerable to herd mentality.
Whereas the madness of the crowds can sink the stock market and portfolios within just a matter of weeks and days because of market liquidity, the value of businesses and real estate aren’t susceptible to the same vulnerabilities because they’re illiquid. Investors can’t just liquidate their holdings at the click of a phone screen.
Another difference between the wealthy and everyone else is they play the long game. They’re not looking to win the lottery every time. Instead, they’re content with reliable and consistent cash flow that they can re-invest to grow their current passive income stream or create additional ones.
Because they invest in tangible assets, they benefit from two sources of returns:
- Returns generated from income.
- Returns generated from the appreciation of the underlying asset.
Playing the long game allows the wealthy to take advantage of both sources of returns.
The middle class and poor never have enough money because they throw their money down the black hole of destructive assets.
Destructive assets are assets that only take money from your wallet instead of making it fat. Cars, toys, and clothes – these are all destructive assets – and contrary to popular belief, your home is not an investment. If you think about it, it’s a money pit until you sell it. Think of all the maintenance and repairs that go into owning a home, and you’ll understand what I’m saying.
People often don’t recognize the millionaire next door because they don’t flash their money. Instead, they would rather put it to use, acquiring productive assets like income-producing businesses and cash-flowing real estate that build their wealth instead of depleting it.
Throwing money at the poor won’t make them wealthy.
A shift has to occur in their attitudes towards money. This is the only way they can become wealthy – when they start looking at money as a tool to acquire productive assets instead of something they use to buy destructive assets with. Until then, it will be the same living paycheck-to-paycheck story.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.