Transcription
America's middle class has been getting squeezed with high inflation, high taxes, and wages that aren't keeping up. But it just got worse.
The poverty line for a family of four in America is $32,150. But Michael Green just published a new report saying this is a lie. The government has been manipulating the data and the real poverty line in America is $140,000. Let me explain.
A little over 60 years ago, the United States created a simple formula to calculate the poverty line. The poverty line is three times the cost of food based off of 1963 prices. Take a read. The United States poverty line is calculated as three times the cost of a minimum food diet in 1963 adjusted for inflation. That's a problem.
For one, the reported inflation numbers aren't always the real inflation that you might be feeling. For example, between 2020 to today, the reported inflation numbers say the grocery prices are up by 29%. Which means a $100 cart of groceries that you got in the beginning of 2020 should cost you only $129 today. Now, I don't know about you, but my groceries are a lot more expensive.
The second problem is our economy has changed. Back in 1963 when this poverty formula was created, a family was spending about a third of their income's budget on food at home. Today, according to the research, Americans are spending a smaller percentage of their income on food, 6%. While they're spending more money on things like your housing costs and your transportation costs and your health insurance and your student loans. And these are the two reasons why this report said that this formula doesn't make any more sense.
Number one, the reported inflation numbers aren't real inflation. And number two, you can't look at food costs as your basic cost of living when the cost of home ownership, the cost of owning a car, the cost of your student loans, the cost of health care have all gone up so much, while the cost of food has gone down. And this is why he [snorts] says to actually compare apples to apples, we shouldn't be using three times the cost of food because the cost of food went from 33% of budget to 6%. You should instead be doing 16 times the cost of food, which means that the real poverty line is actually closer to $140,000, not the $31 $32,000 it is today.
Now, at this point, you're probably wondering, "Okay, that's but why does it even matter?" Because you're being punished if you don't understand this. Take a look. If you make $35,000 a year, you're essentially near poverty line, but you get government benefits. You get SNAP benefits. You get Medicaid. You get child care subsidies. But if you work hard and you get a raise to $45,000 a year, you're going to get kicked off of Medicaid. And now you have to pay more health care costs. And now you're essentially worse off financially here when you make more money because you get less government benefits. And then if you keep working your way up to $65,000 a year, not only do you lose your health care benefits and your other SNAP benefits, but you're also now losing your child care subsidies as well, which means you're actually worse off here than you were here because here you're getting the government money. Here you got to do it yourself.
Now, I don't agree with the sentiment that you are worse off by doing it yourself than relying on the government. I don't think that that's a very good way to live your life to want to just rely on the government to pay your bills. I think you should want to do it yourself. I think you should strive to do it yourself and you should do it yourself because not only are you going to be able to build more wealth, you're going to have more income potential, but you're going to have more choices and options on all the things that you can spend your money on. You can have the better health insurance and see how you want to spend it. So, I don't agree that you're worse off here than here. But you can start to see the sentiment where hey, these people are getting government money here. You're not. So, financially you feel like am I being punished?
Now, this is where understandably many people got very upset and emotional. But I want to shift the gears a little bit and talk about now what do you do to actually build your wealth step by step that we don't even have to worry about what the government is offering because it's a problem if you're worried about government benefits. It's a problem when you're struggling with money. But if money is not a problem, this does not have to be a stress in your life and you can work to help other people financially. So let me break it down what you need to do step by step.
Let me talk about steps one and two together because they go hand in hand. Number one, save $2,000 as fast as possible. Number two is pay off your high interest debts like your credit card debts. And I talk about these two things together because if you are not here, if you're not done with this yet, you were in what I call the financial danger zone. And right now, you have to make the most significant sacrifices. That means no more vacations, no more eating at restaurants, and no more Netflix until you get out of these two things.
Now, you're going to say, "Just ple. What do you mean no more Netflix? It's only $15 a month." It's not about the $15 a month. It's about the two to three hours of time the average American is spending watching TV a day. Because if you don't have $2,000 saved up if you have credit card debt, you are in a situation where a small little bad event can destroy your financial situation. And right now, you need to be spending all of your extra time on earning more money or spending less money. That way, you have more money to invest. So, go out and drive Uber. Go out and do dash. Go out and work an extra shift. Go out and learn how to earn more money. go out and take a class, go out and read a book. You got to be spending your time much smarter right now because in this instance in your when you were here, you don't have that luxury to waste time.
Then step number three is create a financial system, something like 75, 15, 10, which [snorts] says for every dollar that you earn from now on, you always know how much money you're going to save, how much money you're going to invest before this money hits your bank account. So you get paid and now you can follow something like 75 10 which says 75 cents of every dollar that you earn is the maximum that you can spend. 15 cents of every dollar that you earn is the minimum that you invest. 10 cents out of every dollar that you earn is the minimum that you save. What every wealthy person understands is they know how much money they're going to save and invest before they earn the money. What the majority of people are doing is they make money, they spend their money, and then they save and invest if there's any money left. And a lot of times there's no money left. This is why you need to be investing your money first.
Now, if you're new to investing or if you want to see how you can be a better investor and find investment opportunities through research and data, I have a free investing master class that I put together where I'll walk you through how you get started as an investor and find hidden investment opportunities before everybody else. I'll even show you the exact framework that my firm and I use to research investment opportunities before they hit the headlines. So, if you want to get the investing masterass, all you have to do is register. And when you do, you're also going to get access to market briefs, which is my newsletter for investors, completely free. So, if you want to get the investing master class and markets all for free, all you have to do is register. And I have the link for you down in the description below.
Now, when it comes to the question of where do you invest your money, the three asset classes that have built more wealth than anything else over the last 100 years are stocks, real estate, and business. Now, most people should not start a business, but everybody in America needs to be a business owner. You don't have to operate the business, but as soon as you go into the stock market and you invest a dollar, you become the owner of a company. You buy one share of McDonald's, you own one piece of the McDonald's Corporation. You buy one share of Amazon, you become one piece owner of the Amazon corporation. You don't get to tell the companies what to do, and you don't have to go into work, but you get to share in their profits as the owner. And your goal as a financially savvy person, as somebody who wants to become wealthy, is to acquire ownership in assets, things like stocks, real estate, rental properties, and businesses. That way, you can continue owning the assets that are putting money in your pocket. That way, you're not just the person that's spending money and putting money into other people's pockets. This is the difference between becoming wealthy and staying broke. Wealthy people want to own the assets that are putting money in their pocket. Everybody else just keeps making everybody rich. You drive around in the BMW, you got the Gucci, you got the Rolex, you got the fancy looking stuff, you go on the vacations, but you have no assets to show for it. That's fake rich. I want you to be real rich.
Step number four is pay off your lower interest rate debts. So now we could talk about paying off your mortgage, paying off your student loans, paying off your car, all these payments. It's money that's going into the bank for allowing you to borrow money. And this is where you got to make that decision of what is a better investment for you. Do you want to pay off your mortgage one year early, which will give you a guaranteed, let's say, 6% return if you have a 6% mortgage, or do you want to put that money in the stock market where markets have historically gone up by 10%. Now, you might say, "Justy, this seems like an obvious answer. Markets go up by 10%, my mortgage is 6%. Why wouldn't I just invest my money in stocks?" Because stocks don't always go up. They don't always go up by 6%. The stock market could go up by 20%. It can go up by 10%. It can go up by 2%. It can also fall by 25%. So, you have risk when you invest your money into the stock market. When you pay off your mortgage when you're early, it's a guaranteed 6% return. And this is now going to depend on where you are in your financial situation and how much you want to invest versus paying off debt. But now you can start thinking about paying off those debts. Because at the end of the day, you want to keep your money for yourself instead of just giving it away to the bank.
And the problem that so many people make is we spend based off of what we can qualify for. I think I can afford it means I can make the payments for it. What wealthy people understand is I can afford it means I can buy it with cash. The exception is your house. So yes, you want to go and buy yourself a new car, great, buy it with cash. You want to go out and buy yourself a new iPhone? Great. Buy it with cash. You want to take a trip to Cancun? Great. Buy it with cash. And then when it comes to luxuries, I like to follow the rule of five, which is if you can't buy five of them, you can't afford one of them.
Number five is earn more money. And most people think that the way out of my financial problems is I just got to make an extra thousand a month. If I made an extra 10 grand a year, my financial problems will be solved. But what I have seen because I've been teaching financial education for a long time now is people will work to earn more money. And for some reason the financial problems don't get solved. They end up getting worse. And the reason why is because as you earn more money, you also become more creditworthy. Banks will look at you and say, "Hm, you got a new raise. How about a new credit card? How about a new line of credit?" And so now you make more money and now you qualify for more debt. And so you spend more money because we think in terms of spending. You make a little bit more, you buy a nicer car, you get a nicer house, you go on a new vacation, you get yourself a new watch because you earned it, you deserve it, right? But this is the mistake that so many people make is we earn more to spend more.
But now that you have a system, earning more money has more power. Because now what you can do is you earn more money and now you know how to use that money. You don't just spend all of it. You're going to spend some of it. But now you can invest more and now you can save more. And we know that your investments here, that's how you're going to become wealthy. Your savings are here to protect you against an emergency in case [snorts] something happens to your job, your business, your income. This is how you afford your groceries and your trips and everything else. But this is where the wealth is going to be built. And so now as you earn more money, you know what to do with it.
The last part is to protect your assets because as a licensed attorney who is at your attorney, I can tell you that when people realize that you have money because when you follow this, you're going to build your wealth. Well, they're going to want to take their hands and put it in your pocket and take some of it up for themselves. So, this is when you need to start protecting yourself. This could be having insuranceances, different types of insurance depending on what you're doing. If you're investing in real estate, having insurance for that. If you're starting businesses, having insurance for that. This can also mean having good advisorss, a good tax advisor because one of the biggest costs for Americans is your taxes. Not only do you have to pay your income tax and your payroll tax, but you also have to pay your property taxes. You also have to pay capital gains taxes anytime your investments make money. You [snorts] also have to pay sales taxes. You also have to pay corporate taxes if you own a larger corporation. You might also have to pay tariff taxes. You might also be paying state and local taxes depending on where you live. And so this is where you want to understand how you can legally pay less money in taxes, but understanding how to protect your finances. And then you also want to have good attorneys. Maybe you need a business attorney. Maybe you need a contract attorney. But at the very least, everybody as you build this wealth, you need an estate planning attorney that can help you protect your assets. Because if you have any sort of wealth, the last thing you want to happen is for you to die. And then the government decides where your money goes. And now your family is going to be fighting over who gets your money. So you can protect that by getting an estate plan earlier. That way you have a plan on what's going to be happening with your money.
So there's a lot of confusion and controversy out there about the whole poverty line stuff. The reason being it's calculated based off of an old number. It's calculated based off of food prices based off of 1963. The problem with that is number one, the reported inflation rate. It's probably not the real inflation rate. And the second problem with that is well people are spending a smaller percentage of their income on food while their other costs have been going up. So the poverty line is not actually reflecting that. And that's why some people are saying the poverty line is a whole lot higher.
Now while that probably is true, this is where you don't want to rely on the government because that is a losing proposition. You want to be able to take care of yourself and not have to rely on other people because you have the financial education, because you have the assets to do so. How do you actually do that? Well, you need a system. Unfortunately, we're never taught this stuff in school. But hey, we go. We have YouTube now, right?
Number one, save $2,000. Number two, pay off your credit card debt. Remember, this is the financial danger zone. Right now, you got to get rid of the Netflix. Stop going on vacation. Stop eating at restaurants until this is done. Then, you got to create a system for your money. 75,510 is one of the things that I talk about. You can follow whatever number that you want. But the whole idea is you're going to invest and save before you spend all of your money. And again, if you want to learn more about how you can start investing and find hidden investment opportunities, I have my investing master class for you down in the description. [snorts]
From here, now that you have a system, now you can think about how you're going to pay off your other lower interest rate debts because you want to stop paying the interest to the bank so you can keep that money in your pocket. Stop making them rich so you can make yourself rich. Number five, now you're going to work to earn more money. And you want to earn more money now because, well, you know how to use your money. And now this more money can help you actually build more wealth and invest more money. And then you got to think about protecting your assets and also giving back as well because as you have more, you can also help more.
So I hope you got value out of this video. If you did, the best thank you was a referral. So if you could please share this video with a friend, family member, colleague, or fellow investor so we can continue to spread this type of financial education. And now check out this outro music.
The majority of Americans are living paycheck to paycheck with little to no investments and drowning in debt. And things are not going to magically get easier next year. But in the middle of all this chaos is opportunity. That opportunity is ability for you to grow your wealth even faster. Assuming you don't fall into these 10 money traps that I'm going to show you in [music] this video. So please watch this video until the