Money Habits Of The Broke, Average, And Wealthy
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- You ever notice how some things in life are so predictable? For instance, the female lead in early 2000s rom-coms, always either a journalist, a columnist, or a nerd about to get a makeover. Sometimes all of them. - That's so true. - Another example, craft store employees, always named Brenda for some reason.

What's going on there? I think he's onto us. Well, there are also some pretty predictable money behaviors that people have, depending on if they're broke, wealthy, or somewhere in between. And in this video, we're going to talk about the most infamous. But first, let me kick us off with something else that's shamelessly predictable. And that's asking you to click those like and subscribe buttons before we get any further into this juicy content. Listen, I don't make the rules. I just make you follow them. That's my one job. All right.

We're going to start off with predictable things that broke people do. But first, let me just say that one of the things I hate with a specific and fiery passion, other than the new iOS update, is the fact that there's a whole predatory system designed to take advantage of people struggling financially. And honestly, changing this messed up system is what motivates me to come to work and do what I do every day. That, and, you know, the relentless pressure I get from my Frenchies to maintain their cush lifestyle. Yes, I am high maintenance.

But I think you gotta be. So that being said, here are some of the things that broke people regrettably do. First on the list is payday loans. These are short-term high interest loans that borrowers have to usually pay back by the next payday. And they're terrible, terrible, terrible. They have crazy high interest and in states without reasonable caps, which is about 30 of them, the annual interest rate is in the triple digits, averaging about 400% and rising as high as 664%. That is insane.

- Yikes. - Payday lenders are the bottom feeders of the financial industry, and this is legalized extortion. They entice poor, unfortunate souls in desperate situations that need quick cash to make it to the next payday. Please stay away from these and tell your friends to never set foot in one of these buildings.

Next up, title loans. These are high interest loans that require your car as collateral in order to borrow money. This is another one that people fall for and they go, well, I'll give them the title to my car, I'll pay it back. And guess what happens? You can't pay it back and now they own your car. Totally backfired. Do not fall for this.

Next up is tote-the-note car payments. You've seen these buy-here, pay-here car lots with signs that say, bad credit, no problem. So what's the catch? Well, the dealer is directly financing the car for you at rates that would make your grandma cuss.

Not cool, Grandma. Stay away. Next up is a cash advance. This is another short-term loan or advance against expected income or credit card, typically with very high interest rates. Are you seeing a theme here? Really terrible shortcuts that have long-term consequences.

Next up on the list is rent to own. This is an agreement to rent with the option to buy, but they often have hidden fees and can be really costly and have higher overall payments. But it sounds like a good idea. Here's the catch. They prey on people who can't buy a home because they have poor credit or can't come up with the funds necessary. And they convince them, hey, pay rent, pay the taxes. And when they can't come up with a lump sum or get approved for a loan, they take the house back. And that is predatory and evil. Stay away from these. Next up is the lottery. Now,

Now, we know that stores selling lotto tickets are disproportionately located in low-income areas, which means they are preying on these people to try to give them a little bit of hope, string them along thinking they're gonna be the ones to strike it rich and get out of their bad, desperate situations. So this is really just a tax on the poor. Now, if you don't believe me, look at the odds on this. The odds of winning the Mega Millions jackpot is one in 302 million, which is almost as many people as there are in the US. So the lottery is a guaranteed way to lose money

fast, avoid it at all costs. It's all a big scam. So why would people that are struggling financially broke and low income areas do these things? If clearly they're all basically scotch tape, keeping a bumper on. Well, I see a couple of problematic themes here. Number one, these things cover up the symptom temporarily, which might seem good at first, but makes the actual problem way worse in the long run. As you saw by those crazy interest rates that keeps you in that cycle. Number two, people either don't know how, or don't believe it's possible to get ahead financially.

Number three, it feels easier to let other people fix your problems, even if they're shady, scummy weasels and not really fixing anything. Now, if you don't do any of those things I just mentioned,

good for you. You're on the right path. But it doesn't mean you can get on your high horse quite yet because you may just be doing what average middle-class people do. And I'm not even talking about thirsting over seasonal decor, buying in bulk, or obsessing over your fitness tracker, which everyone knows you're doing, man. All right, and logging Wii bowling as a workout, Jared, minus 100 aura points. Classless. You disappoint me, brother.

You disappoint me. So what are we talking about here? Well, this is the kind of stuff that average people do. Chase after airline miles. Listen, credit card companies wouldn't waste their time handing out rewards like these if it didn't ultimately make them richer. In fact, the credit card industry was valued at over $100 billion in 2020, and it's expected to reach $107 billion by 2025.

And get this, a recent survey found that 23% of people didn't even redeem the rewards in the last 12 months. If they convince you to play the points game, you're more likely to rack up a higher balance and pay them more interest. Not to mention, spend more than you would have if you used your own money right now, like with a debit card or cash.

And the worst part is they can devalue the points at any time. They can change what it means. They can have blackout dates and all kinds of restrictions. And at the end of the day, the juice ain't worth the squeeze on these rewards. Become your own reward system, become your own bank and stop playing their games.

Next thing that average Americans do, they buy a new car with a big old new payment. Here's the deal. Used cars are less expensive overall, and they don't drop as fast in value as new cars do. And the stats show this. A new car will drop 60% in value in the first five years. So here's what that new car does. It makes you look wealthy, even though you're middle class struggling to get by. Nobody is impressed because behind the scenes, you got to go make that $600, $700 car payment, and you're not getting ahead. And

And even worse, leasing a car. Leasing is the most expensive way to operate a vehicle. And I know you can get a fancier car with a lower payment, but guess what? You're just prepaying all of that depreciation, making the dealers rich. That's why they push them on you so hard. Avoid these. This next one has to do with your home. In this case, a home equity line of credit.

This is basically a credit card attached to the equity in your home. So you can borrow cash against the current value to do stupid things like renovate a kitchen that you couldn't afford in cash or try to send your kids to college by putting yourself further into debt. And it works kind of like a credit card, but it's just another word for debt, a fancy kind of debt that puts your home at risk. It has another mortgage to your life and it's not worth it ever.

- Never, ever, ever, ever, ever times infinity. - Next up is one that millions of Americans have done, including myself, and I have regrets, and that is taking out student loans. Now we know this is a crisis in America today, so much so that we're trying to make it a political issue to get student loans forgiven. Why aren't we doing that with car loans and credit cards and all sorts of other kinds of debt?

Well, I think we feel like we got ripped off. All right, we went into all of this debt thinking this is the path to the American dream. The student loan companies were scummy and predatory. We didn't know what the interest rate was. And now we're sitting here trying to foot the bill and it's making life really difficult as adults. So here's my take on student loans. Pay them off. Don't hold on hope for forgiveness one day. Just get rid of them aggressively and never look back.

Next on the list, whole life insurance. This is a fun one. This is what your buddy from college DM'd you about to try to sell you on, and it's going to cost you hundreds and hundreds of dollars a month for a really crappy product that makes them big commissions. So what do you do instead? Get term life insurance. It's going to be about a tenth of the cost of whole life, and it's going to do the same exact thing. It's meant to replace your income if you die. The problem with whole life is that it tries to do two things at once, be an investment vehicle and be an insurance product, and it sucks absolutely.

at both, avoid these. Next up, we've got buy now, pay later programs, or as I call them, BIMPLES. - Stop trying to make- - BIMPLES. - Happen, it's not going to happen. - Now these ones seem inoffensive. They're going, "Well, George, it's no interest. I just make four payments and bada bing, bada boom, I get what I want right now." The problem here is largely psychological.

The buy now, pay later companies know that you're going to spend more when you can reduce that cart price by 75% because you only have to make one payment today and you can kick it down the road into payments. In fact, the companies out there, the buy now, pay later companies brag to retailers that consumers spend 45% more in their cart when they use these programs.

So that is the worst part, let alone all the little fees and fine print that you didn't read. You want to know what most of these things have in common? They're the result of the middle class caring more about looking rich than actually being rich. You see, these people are living average lives, living above their means, unwilling to sacrifice their lifestyle, and asking questions like how much down and how much a month rather than just

How much can I afford it in full? And that's the mindset that's keeping the middle class stuck. And in our Instagram, Instacart, Instapot culture, we want instant results and instant gratification. Treat yourself. I mean, this is insane. But let me tell you a secret that wealthy people know that middle class people struggle to learn. If you can master patience, you will have the prescription for long-term wealth. And if you can decide that I don't care what anyone else thinks, you will become unbelievably wealthy and unbelievably happy.

And we will get into what those things are. But first, did you know that there's a super sneaky, super shady industry that makes money off of selling your personal information? And if that's not creepy enough, the scammers and spammers and stalkers they sell it to, they don't need that much info to get at your money. In some cases, all they need is your phone number.

And that's why I use and recommend the sponsor of today's episode, Delete Me. They go out and they find or remove that info from hundreds of data broker sites. And afterward, they send you an easy to read report of what they did. I just got my latest report in and they've saved me 44 hours of time it would have taken me to find and remove all of that myself. So help protect yourself from the risks of online data brokers with Delete Me. And right now you can get 20% off any of their plans by going to joindeleteme.com slash George or click the link in the description.

Today's episode is also sponsored by the good folks at Laurel Road. They're an online bank with an amazing high-yield savings account. With their competitive interest rates, you can watch your savings grow beautifully while you sleep. That's a good feeling. Plus, there's a ton of other great perks. No minimum balance required to open an account. You can also get a free trial of the

Your deposits are FDIC insured, and there's no sneaky monthly maintenance fees. Oh, and my favorite perk, if you want to talk to a real human, Laurel Road's premium care team will be there to take premium care of you. Can I get an amen from the people sick of exchanging pleasantries with a chat bot? It's simply too much. It's time to make the most of your money by going to laurelroad.com slash george or click the link in the description. All right, let's get to the list of things wealthy people do, starting with getting tiny white dogs and naming them Bella.

Wrong list. Actually, that still works. It applies. Okay, first up, wealthy people don't pay interest, they earn it. You understand that? They're not going into consumer debt, buying things that go down in value. They are putting their money into things that

that make money. And our millionaire study revealed this. Nearly three-fourths of the millionaires have never carried a credit card balance in their lives. And three-fourths also said that regular, consistent investing over a long period of time is the reason for their wealth and success. They aim to have assets instead of liabilities. Liabilities

is debt, consumer crap that goes down in value over time, like your car and credit card debt and student loans. But they put their money into things like the stock market and real estate, which tend to go up in value, and that becomes an asset that creates more wealth.

The next thing they do is buy used cars. Our millionaire study found that most millionaires are driving Hondas and Toyotas, not crazy luxury vehicles like Lambos. So relax, I don't care what you saw on Instagram, that guy rented it just for the video. That's embarrassing. Another thing that wealthy people do is they pay off their homes.

That's right. They don't hang on to a 30 year mortgage and then get a HELOC and then refinance. They get rid of the mortgage and they keep it that way. We found that the average millionaire pays off their home in 10.2 years. They know that if they want to take their investing to another level, getting rid of that mortgage is key because it gives them more money to invest and build wealth and give more generously. So here's the key. They invest for the future instead of paying for the past.

In our millionaire study, 8 out of 10 millionaires invested in their company's 401k, and they said that that was a key to their financial success. 3 out of 4 also invested outside of their company plans. So get this, investing consistently over a long period of time, instead of buying crap you don't need with money you don't have, is the key to wealth.

And here's where it's gotten them. Instead of just getting a buy, they are presently getting ahead. Even when millionaires don't have to worry about money anymore, they're still careful about their spending. All right. They still get on a budget. In fact, in our millionaire study, 94% of the people studied said they live on less than they make. That is the key to building wealth. You've got to make the most of your greatest wealth building tool, your income. And the key is to have margin with what you're spending versus what you're earning.

Okay, we've looked at a lot of behaviors today, but regardless of which one you identify with the most, the reality is you're not stuck in one category. All right, this is fluid. Unless that category is your height percentile, in which case I can say from experience, you are stuck. Short kings rise up. Be proud of the tiny little person that you are.

This is especially true when it comes to money. No matter where you are today, it's not where you're destined to end up. Regardless of how you grew up, what family you came from, the mistakes you've made, I'm telling you, you can turn it around if you can still fog up a mirror. Because if you start doing this rich people stuff, you gain control of your money and you will start to build wealth and have a life you could have never dreamed of. And for the record, building wealth

isn't a bad thing either. You see, most of the wealthy people out there I know, they didn't swindle anybody. They worked hard, they saved, they sacrificed, and now they get to enjoy the results of that patience and perseverance. It's time for ordinary people to reclaim the possibility and ability of building wealth. That's called hope. And I'm living proof that it can happen. If you wanna find out exactly how I did it, keep watching this next video. I'll also drop a link in the description below. Thanks for watching. We'll see you next time.