15 Things Rich People Advise But Never Do
Everyone looks for advice from the rich, but advice is not universally applicable, and even they don't follow it, and for good reason. Here are 15 things rich people advise but never actually do. Welcome to Alux.
Number one: go to school. Going to school, with all its downsides, is still good advice for most people. It gives you a predictable path forward when you don't know any better. It won't put you ahead of anyone; it won't prepare you for the real world. But you know at least you're not falling behind at a dramatic pace, and that's good advice for most people. But the rich, well, they're not most people. Like we said before, the only reason you should consider not going to college or any other type of education is if you have something better to do. And the rich, well, they've always got something better to do. They know the school system is outdated, and there isn't much to gain there besides some connections and maybe some open doors. As for educating their kids? Well, that's a different story. You see, there are three kinds of schools: public schools, private schools, and exclusive schools where only the real wealthy parents send their kids. And if they don't find one, they'll just build it themselves and hire world-class professors from around the globe.
Number two: reduce spending. The first bit of advice rich people will give to those who are struggling financially is to reduce their spending. But here's something that many don't fully understand: you are not saving your way to one million dollars. When poor people look at where to cut, the rich look at where to add. It's a different mentality. You can't really tell someone just to make more money if they don't know how money really works; it'll just make them confused and annoyed. But you see, you can't really reduce your spending lower than zero. You are hard capped by how little money goes out of your pocket. Once you've got nothing left, this advice is useless. The rich never reduce their spending below what they consider necessary, and if there is a need for more disposable cash, they look at ways to generate more. There's no limit to how much money you can make, but there is one on how little you can spend.
Number three: get out of debt. The average person is notoriously bad with debt. As a matter of fact, 77 percent of Americans have had some type of debt that's not going away anytime soon. The buy now, pay later strategy is engraved in the culture. If you struggle financially, getting out of debt should definitely be a priority, which is the opposite of what rich people actually do. You see, the rich never use their own money to do anything. After all, why use your own money when you can use other people's money, AKA debt? That's how the rich get exponentially richer. Debt is an extraordinary financial tool that can either make you extremely rich or extremely poor, but if you don't know what you're doing, it's best to stay clear of it altogether.
Number four: diversify. Here's something the average individual doesn't understand. When someone invests a couple million dollars into a new type of venture, that's not diversifying; that's testing the waters because those millions represent a fraction of the available investment budget. If you look at Warren Buffett—which, by the way, we're doing a new series with money lessons from different people, and you can check out the first episode by clicking the link in the top right corner—alright, back to the point. If you look at Warren Buffett, he only holds a handful of stocks, and he's been doing that for decades. When the rich say diversify, they mean investing in the index fund, not the particular stocks, or buying the apartment complex, not just a unit. They don't spread too wide into things they don't fully understand or they simply have no interest in. Around 80 percent of their worth is safely parked in predictable investment ventures, and they guard it religiously. The other 20? Well, that's their play-around money, something to keep them busy and active that also allows them to take bigger risks than the average individual without any major drawbacks.
Number five: always stay informed. In the information age, staying informed is crucial for making sound decisions. However, the rich face an overwhelming amount of information and advice from various sources. They recognize the importance of staying informed, but they also understand the need to filter and prioritize information effectively. It's called selective ignorance. It consumes brainpower to always consume information, and that's why they hire people to make them reports. They only need to know every little detail; they're only interested in what's valuable to them. And that's exactly how we built the Alux app. It's specifically designed with the user in mind, and we spend a lot of time and resources to bring it to life. Think of it like a high-level mentor right in your pocket, giving you hand-picked nuggets of gold exactly when you need them. Go to alux.com/app and get your free trial started today.
Number six: stick to the budget. For most people, sticking to the budget is a sound plan. You don't want to overspend, and you don't want to find yourself in a position where you have to borrow money to pay for basic stuff— you know, responsible spending and all that. The rich, however, operate on a different level of financial math. You see, the average individual makes a budget and then works their way down trying to fit as many things as possible. This is also the reason why they would rather have a lot of average things instead of a few good ones. But the rich, well, they start with the desired outcome. They look at what things they need to happen and what the requirements are to make it happen. They connect the dots that make financial sense, and then the budget comes last. For example, if you spend one dollar on ads and you get 1.1 dollars in return, what's your marketing budget? Well, the correct answer is unlimited.
Number seven: get a passive income. It's that time of the video where we burst some bubbles. Alright, so passive income is one of the slowest ways to build wealth. You see, passive income makes you a lot of money when you already have a lot of money. Let's imagine for a moment that you're a world-renowned writer. Your books sell tens of thousands of copies every month, and you get paid royalties for each and every sale. That's a passive income, correct? Well, you see, by the time your book sells tens of thousands of copies each month, your speaking engagements generate at least the same amount of money in like 30 minutes. It's fairly easy to make passive income when you already have a lot to work with, and for most average people, passive income sounds like the dream. It's one of the most searched things on the internet. But you don't get rich from passive income; you get rich by having equity—owning parts of businesses that grow over time. You'll never see a rich person look for ways to make passive income, but you will always find them looking for ways to gain equity.
Number eight: don't be afraid to take risks. Many believe that taking risks is an essential part of achieving success, and in some ways, yeah, kind of is. But there's a caveat here: the rich know that not all risks are created equal, and the last thing they want to risk is it all. Contrary to popular belief, the rich play the game extremely safely. They avoid unnecessary or impulsive decisions that could jeopardize their wealth, and whenever they do take some risks, they do it with a big cushion under them. Remember, eighty percent invested safely and twenty play money. Well, they can afford to increase their risk tolerance with that twenty percent, but nothing will ever touch the other eighty. Now, if you want a more in-depth explanation of how the rich take risks, we made a great video about it, which you can check out by clicking in the top right corner.
Number nine: step out of your comfort zone. You've heard it time and time again: if you want to grow and make money, you need to step outside your comfort zone. And that's true if the comfort zone is your couch. But the rich actually stay well within their comfort zone most of the time. They understand that focusing on their strengths and mastering their craft leads to greater success and opportunities. Stepping out of their comfort zone can sometimes result in unnecessary distractions or dilution of their expertise. You see, the golden words for the rich are predictable outcomes, and they do everything in their ability to make those numbers add up in their favor. The reality is there's no reason to make it harder for you to make it.
Number ten: save for retirement. Saving for retirement seems like sound advice, right? Especially since it's highly unlikely your government will be able to take care of you when you're old. Thinking about retirement gives you a sense of long-term financial security and stability, but it's a false sense. You see, for the average individual, retirement is an age; for rich people, retirement is more like a dollar amount—it's a number. It has nothing to do with age, and it for sure has nothing to do with saving, because as we said earlier, you're not going to save your way to a million dollars, let alone enough money to last you until you're gone.
Number eleven: invest in real estate. Real estate used to be called an idiot-proof investment because it's pretty hard to mess up. But here's the reality: millionaires invest in real estate; billionaires invest in businesses with real estate. It usually takes decades until you make a profit after the property is paid off—that is, if nothing crazy happens with the housing market, interest rates, natural disasters, all that stuff. There are definitely millionaires being made in real estate, a lot of real estate, but it can only get you so far. There's a reason billionaires have most of their funds in private equity, not in real estate.
Number twelve: network extensively. Networking is considered essential for professional growth and success, and it's often emphasized as a valuable skill to develop. However, the rich, being in a different league altogether, focus more on strategic connections and high-level relationships. In other words, the average individual wants to know a lot of people; the rich want to know just a handful of people who know a lot of other people. They understand the power of a selected network of influential individuals who can provide unique opportunities and access to exclusive deals. Why need to know someone for every door when you can know someone with the keys to the entire building? Quantity is not nearly as important as quality when it comes to networking for the wealthy.
Number thirteen: follow your passions. It's true that work doesn't feel like work when you're genuinely enjoying what you're doing. But the thing is, passion is rarely financially viable unless your passion is to make money—which is kind of a weird passion to have, to be honest. And you see, even if you get lucky and manage to transform your passion into a business, you'll quickly find that bills are paid through invoices, not mood walls. The majority of people who start a business out of passion, well, they either find a way to distance themselves from an executive position or they sell the business altogether. It may happen in five years, or ten years, or fifteen, but it will happen.
Number fourteen: embrace failure. Now, we recently posted a video about failure and why it should be avoided at all costs. You see, most of the time, people don't actually learn from their failures. If anything, failure is a major drawback and a waste of time and resources. You can find a silver lining in failure, sure, but the rich do everything in their power to avoid it or at least minimize it. Failure is a teachable moment that you didn't learn beforehand.
And number fifteen: work hard. We'll end this list with the most common advice you'll ever hear, and that's to work hard. The most valuable time the rich have is the time they spend outside of the office, and it just so happens that in order to have as much of that time as possible, they need to put in the work now and then. But hard work is massively overrated. If you find yourself working really hard, you're either inefficient or under-equipped. The only exception to this rule is like crunch time, when something really big needs to happen quickly and swiftly—product releases, important deals, that type of stuff. But other than that, working hard has a lot of diminishing returns. Nobody actually works twelve hours a day unless that work is management work, which is not as taxing. The optimal work for the rich is few activities with a lot of impact—solving the big ticket items—that's the goal, my friend.
And that's the end of this video. We hope you learned something here today. Alux, see you next time!