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From Wikipedia, the free encyclopedia

Gold bars
Gold, considered to be the "gold standard" of wealth

Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating old English word weal, which is from an Indo-European word stem.[1] The modern concept of wealth is of significance in all areas of economics, and clearly so for growth economics and development economics, yet the meaning of wealth is context-dependent. An individual possessing a substantial net worth is known as wealthy. Net worth is defined as the current value of one's assets less liabilities (excluding the principal in trust accounts).[2]

At the most general level, economists may define wealth as "anything of value" that captures both the subjective nature of the idea and the idea that it is not a fixed or static concept. Various definitions and concepts of wealth have been asserted by various individuals and in different contexts.[3] Defining wealth can be a normative process with various ethical implications, since often wealth maximization is seen as a goal or is thought to be a normative principle of its own.[4][5] A community, region or country that possesses an abundance of such possessions or resources to the benefit of the common good is known as wealthy.

The United Nations definition of inclusive wealth is a monetary measure which includes the sum of natural, human, and physical assets.[6][7] Natural capital includes land, forests, energy resources, and minerals. Human capital is the population's education and skills. Physical (or "manufactured") capital includes such things as machinery, buildings, and infrastructure.

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Transcription

You want to have the emotion psychological strength is that's gonna carry you through when the mechanics are boring or frustrating or when things aren't working out your emotion your Psychologies will carry you it'll get you to keep doing it Everyone knows if you've done any studies dr. Seligman very famous for doing studies on optimism and in those studies you really found out People that are pessimists are much more realistic They're much more accurate if you give them a test and you ask them to look at something and give you a size measurement of it or to evaluate their own success or failure at a task and Every study Seligman's Donny due to the University I think Pennsylvania for member correctly originally what he found was that Optimists always see themselves as doing better than they really did they'd basically be ask themselves What happens the pessimist there are ten times more accurate? But here's what he found out When he found out is because the people who are accurate Never pushed themselves because they know it's never going to work anyway whereas the optimist sees it better than it is So they keep doing it because they have the illusion they did well. We'll all do even better next time and Because that optimism they did it more often and so optimists succeed and a four to five fall depending upon the task result ultimately beyond anything that a pessimists will do and they're not as accurate all that's a big way of saying is if you can develop a psychology of resilience in yourself you don't have to be Optimistic or fake you can be real the realness is whatever shows up You are larger than anything that can happen to you. You are larger than any financial challenge You could ever face who here's gone through a very tough financial time well You didn't know how you're gonna pull it off, but eventually you did how many tons before say ah? How many how this happened more than once in your life say? Ah? Then the true history could guide you to know you can get through this and not let you be overwhelmed by the moment But also the gratitude can put you in that sense of wealth so genes are wealthy whenever I bring friends They're you know we have 325 acres and three miles of ocean frontage It's unbelievable but you go up these two villages and my friends initially will say well look at their houses look at their homes and They don't really have electricity they don't have this, but they don't feel poor It's your identity The way you define the wealth determines whether you're wealthy enough So are there enough things for you knowing the two thirds the planet lives on $2 a day That you could get yourself to really feel grateful. Yes or no How much of your life do you get benefits from today that you never had to create? Think about I guess have to rode you ride on the library the books you didn't have to write All right the internet that you can access in seconds and get answers just about anything The people in your life, you didn't have to raise but are there for you Think about all the different aspects of your life if you want to be wealthy all you have to do is associate So before we do the financial part because financial independence is different than wealth Wealth is that State of Mind financial dependence is being net position. We don't ever have to work again That if you work you do it because you really Want to now give you a clue if you get financially dependent, you don't work. You'll be miserable I Can't tell you how many friends I have a solder company made fifty million dollars one man made almost a billion dollars And was really excited for a while, but after a while it was like bored His vehicle of his business gave him a sense of contribution, and he was always growing figuring how to solve problems and yet all the people he was connected to in the business all the Employees and friends and associates and he was significant because he was doing something worthwhile And he had tremendous certainty because he knew the business and also variety because it's always changing and then they had this money So the real secret is to be financially free to be financially independent. You want to get will you never have to work again? But you did Because you want to that's when life gets very cool when you don't have to work but you want to you have to work harder I Enjoy my life that I don't have to work That's one of the most killer experiences of life, so I want to tell you. I'm not just saying this as some little Positive thinking technique. I'm telling you This is the secret the real secret to shift it inside of you and to add the real value most people are trying to pursue something in the future that they already have I Want you to think of what it is you think you want that will make you wealthier financially free Tell me what it is you want from financial freedom How will you know when you're wealthy Anyone tell me raise your head, how will you know when you're truly wealthy? How will you know when you're financially free? Yes, ma'am right here when my husband is no longer stressed about financials Finances that's when you'll be financially free right then you're probably never going to be free I know that I need to find out for me What that definition is And then he will Well like Guardian will you I will I guide him to find his own definition well Here's what's interesting first of all has she defined this game in a way, she has control over yes or no So the chances of her feeling truly financially free or wealthy are Slim to none cuz could they make have you made more money have the long have you been together you and husband 33 years 33 years Wow By the way Do you love him I love him so much. I love you. Yes. Are you a rich woman? I am the most wealthy woman in the world give her half about the first RFA's ago Now notice if she Associate to that part of her wealth can she get to where she feels rich yes or no And by the way from that place. She could look at him in a different way and say Isn't it amazing that I have a man that cares so deeply for us That he really wants to make sure we're always doing well in this area and all his worry is as a way of trying to Demonstrate that he wants to take care of me and love me and take care of our family, and how lucky am I? How incredibly rich am I to have a man that cares that much? Would that be a different meaning? Yes, or no would it feel different, but if her view is that he has to give up his worry She can't control him number one number two He may think that worry is the way to demonstrate love to himself and other people and you can get financially free by defining the game in a winnable way a Certain amount of money that we meet and that covers what we're gonna call financial security Which might be your housing your cars your food and basic entertainment? How many would feel bridge if you didn't have to work if your investments alone the income from your investments the income? Covered those four items your housing for the rest of your life your food Right your travel and some entertainment. I might think that would feel pretty good say I And by the way that number is way smaller than what most of you think of when you think about being financially independent Which is everything covered of that working, so why not get the first one down pat And you know exactly what that number is for you, and what its gonna take for that number well You don't have to work to meet it then we could look at financial independence where you don't have to work and Everything is covered. Then we go to financial freedom. You don't have to work and everything you can think of is covered Anything you ever want to do for yourself or others Those you want to get that's a different level isn't it and most people think of financial freedom they come with a gigantic number that If you even figured out everything you want it's nowhere near as big as you think and because it's so big you never even start the journey And you don't think it's gonna happen so you talk about it you hope you'll get some big hits sometime with your business or something But you never get going how many follow this AI? So the first thing you got to do is shift from your wealth being to how he thinks and feels And if you can do that then I give him the space To be able to see your happy does that make sense giver began, thank you very much somebody else How do you know how you know when you're wealthy when you're financially free somebody else When I have Enough money to keep everyone around me fulfilling their dreams Okay, so when I have enough money to fulfill everyone dreams around me how many have learned that whenever people meet a dream They usually create a new one So that means basically you better never stop anything Yeah, right so you have to fill all of them And why does it take that for you to be wealthy I? Feel sometimes I'm I hate toward to use the word luck, but I feel like I'm luckier than those around me okay So so guilt as part of your motivation. Yes, okay all that coming from guilt. That's an abundant place So the truth is she can never be abundant because She has a belief system side of her which is a limitation which says if I have more than others. There's something wrong And many people have a thing where I have to give it all away And she's not in their head And that puts me more stressed than I get figure how to do it again But the most powerful way we impact other people is we impact them by our example, so don't get me wrong I mean, I think most you know I help feed millions of people each year approximately Projects all over the world I love what I get to do with my life big in the contribution gigantic not just with my words with my time not just My money my time and energy But I also have learned the balance I didn't know before cuz I used to think I earned love by giving everything yes And if I have to give you something for you to love me, then we just made a trade That's not love that's horse trading Or there are more direct terms what that could be called What do you call a person that only loves you if you give them something like money? Oh? How dare you say? But that's really what it is isn't it? So if you make that shift you can also say if I try to make everybody else's dream happen Then I get the joy of it like when I was a little kid And I had no money whenever I went to lunch I bought lunch or somebody you know I found a way I had if I we would lunch I know anybody else buy it And I did that into my early 20s because it's my way of feeling that I was a giver and not a taker Which made me feel good about myself okay, but I had one time with the dinner with this very wealthy, man He had ten times more money, but I'm gonna make sure I paid for it, and I still have that basic nature But here's the balance of me now. I don't have to cuz what Apple is this guy grab my wrist He took the check from he said are you gonna cheat me of the joy? I'm gonna have a buying you lunch He said are you that selfish? He got my full attention so it's still I don't think that pattern of being a giver is gonna leave in you I don't think it's a bad pattern gets out of balance So she can't be wealthy as long as it's a trade right if you're coming from abundance Not guilt, and you're saying wow I've got abundance in there are people that I could help make a difference here Let me help this person up that person not cuz you have to cuz you want to Then you're rich does that make sense? Give her began. Thank you very much How about show them right here? Yes, sir right here. Yes, sir come here yeah, man Well for me the financial freedom would be when I have Reached a point where I would be somebody that I would look up to in this this area the financial area Okay, a role model. Okay, so I got a question for you. Are you right now role model for somebody else Mm-hmm Possibly yes, could you be that could be yes? Yes, so you've already achieved it, but you're still not wealthy well I'm not my role model, but would you be the role model you would have had years ago would you be an example of what years ago you would hope for not even more no, I I'm financially Not in other areas of my life definitely. Okay. That's fair So what are you saying is my? Definition is it has to be something's that somebody looks up to in other words? I need to be significant as the need he wants in Financial terms and other people's eyes, and if you were significant in other people's eyes. What will that do for you? Well you know as in my eyes somebody that I would look somebody that but we're not an example But when you get there, you won't look to yourself anymore when you get there You'll just be in a different level then you'll be trying to figure some other level of what you need to get to so you would respect yourself It's good polite He always makes good points you notice that So what you're doing is here's the game you're playing. I want all of you to hear this No amount of money will ever make you wealthy Because as soon as you get there you will raise the game now Here's what's great about that to continue growing in all areas of life if you could grow emotionally should you yes or no? If you could give more should you yes or no? Yeah If you grow intellectually should you yeah if you get more love should you if you could grow more financially should you? Yes, because growth is life, but having to grow in order to feel significant enough means you will always be poor It's a game than ever ends, so here's the story listen carefully There is this great king He perceives himself to want to be greater than all of the Kings because he wants to do good So he doesn't want one Kingdom many Kings have one Kingdom he wants to That's right, two kingdoms two palaces. You know after all you need couple locations to be able moved it So he builds the second Kingdom and for a while He's pretty excited about a week or month And so everybody comes and sees his second palace and they go that's really cool You have two palaces you're unbelievable because yes, I am a role model for myself But it doesn't seem to last because after a while he thinks Maybe I need a third Kingdom And I've been to both those. Let's get kind of boring and I mean well now. What do I do? I got two kingdoms, and that's a lot of work to keep getting things going But he doesn't noticed that he doesn't notice he doesn't have as much time everything else is just like busy doing the kingdom thing And in one day he gets the answer he hears about this amazing monk this monk Wears a loincloth he has a blanket and he goes from city to city and just shares What he believes about God and happiness? And life and people gather around and most people pass him on the street. This is kind of dirty doesn't he sleeps on the street At all he asks is his blanket and he leads who the people give him because he always just adding value so he doesn't worry people give him things and He eats and does well. He has no fear He perceives himself to be a very wealthy man he has one item he just loves it was given family It's a little lamp like kind of like a Ladin's lamp It keeps it me can light it, so if he needs a little heat or a little light to read at night he can light a lamp and the King hears That if you rub this lamp and you ask it for something Unlike Aladdin's lamp or it gives it to you. It gives you twice as much as you've asked for and the King gets excited one Kingdom he comes to He says bring me this man He's a beggar. He doesn't need the lamp. He goes around and begs first food. He lives on the street Why should he have to carry such a lamp I can do so much more with it I could be a role model for myself and others I Could be significant and so what does he do he calls and he asks and sure enough you know the monk comes he's a traveling monk and What else you gonna do the King says come you come and he comes any vows to the King? You are such an amazing role model You're amazing what you've built these two palaces they're experiment if it's that they're amazing I'm so grateful to be here. I don't even belong in your presence And the King says no no I'm very fascinated by you you travel from place to place You don't have one place. You just stay there's no I travel meet people and how do you survive? I love people and share ideas and people tend to share with me when you love. You know you tend to do okay? You have nothing but I understand your loincloth and a blanket and anything else oh Yes, I have this lamp that was given to me by my family, it's just really beautiful. I love it It's not you know that valuable but it's just to me. It's valuable because it was a gift and it's beautiful. He says well That's a rather large lamp for you have to carry around you know I have some jewel encrusted lamps that are much smaller and lighter you could walk with them much easier It wouldn't be much of less of a burden on your back to have to carry this lamp He's oh no. It's no bird. It's very light. He goes no No, I really want to give you something much nicer, and he said, please give me your lamp, and he says well, sir He said please he said I'm so honored to be here with you, but this is a personal gift And I value it not beyond money or what it does or even the heat or anything. It'll do I just value it because of the gift of what it represents He said I really would like your lamp. He said sir, I would never deny you anything But I must have integrity with my own relationships, and I must go Any boughs and leaves before the king can respond and the king goes into a rage? How dare he deny me what I want how dare he take away something that could give me twice as much of Even what I'm asking for think of the role model. I could be think of the good I could do and demonstrate He doesn't need that he's poor. He doesn't even ask it for anything if he would he'd have two blankets Cooling cloths, and what would that do what that change the world no I need the lamp and he whips himself into a frenzy. He turns to his henchman and says take the lamp from him and so they go and they find him in an alley and they beat him up, and they steal his lamp and now The King is so excited. He tells everyone to leave he steps into this giant palace bedroom. Which is bigger than most people's entire Palace? And he sits down and he rubs the lamp and he says oh great lamp give me a hundred pieces of gold and a lamp says oh great king Absolutely, but why a hundred pieces why not 200 pieces Eagles yes? It's true He's just fine give me 200 pieces of gold. He said Oh King Why 200 when a king of your nature could have 400 pieces of gold? The King says fine, give me a thousand pieces of gold why not 2,000 King Fine 10,000 why settle for 10,000 King why not 20,000 a king such a few with two palaces should have at least 10,000 fine give me 10,000 one hat 20,000 Fine give me a hundred of the most beautiful women in the world why not two hundred it will keep you busy And this goes on for hours and hours throughout the night and the King gets further Forevermore and when tensing the lamp keeps expanding his point of view and he keeps thinking my god I'm thinking so small he has bigger and bigger and this goes on for three days and nights He bars the doors with anyone in just him and his lamp Hey starve to death and dies I'm sorry I get I guess hello. I Guess really what it amounts to is Being able to to contribute and help an influence yes in a positive way in somebody's life But I want to take you away as waiting to become wealthy Because other people right now in this world if I took you to Africa if I took you to Part plenty of parts of this country on the streets of many of these cities oh I took it down the street here to San Francisco in the Tenderloin district Are there someone there that right now? You could mentor and could change their life Financially as well as emotionally psychologically and physically without you already know beyond anything. They could imagine yes or no Yes, then don't wait to be wealthy Start rich, and then get financially free as well By the way Is this making sense do you see why I'm so intense about this cuz I don't want you to go through and get more money and Have plenty of money and still not be happy still not be fulfilled until you define the game and winnable ways you never win And you chase it, and you die chasing it That is not to say you shouldn't take your life to a whole nother level Financially have greater choices and greater ways to give gifts, but don't wait and if you don't wait if you can own that you're already wealthy I Can promise you you'll get to a level of riches financially ten times faster than with the identity you have of limitation Does that make sense that's the essence of what I'm talking about here, let's talk about money now not wealth, we do agree all those wealth in this room right now say I And if you really done what we have you're not just saying that at some Verbalization you can really feel it you can feel abundant you can feel wealthy from that place What does it take mechanically to get this thing called financial independence? And what does financial independence as opposed to wealth wealth is a product of the mind? Again, no amount of money you ever achieve will make you wealthy Gratitude will and living a life where you know you're contributing adding value will that's what's gonna Make you feel wealthy where you're a giver not a taker that just mean you can't receive But someone who's always looking at what am I getting out of every single thing they do is always poor because they live in scarcity, but if you want to be financially independent, that's different financial dependent means you never have to Work again in order to live your life that when you do work. You're doing it because you really want To not because you have to how many committed. I'm not only being wealthy, but also financially independent say How do we get there let me give you the lesson how to get there? It is so simple that when I tell you're gonna. Go. Thank you for the breakthrough you thought But even though you may know this intellectually you whether you're sophisticated or not you probably know this Focusing on. This is the difference Can you be a person who is honest in your values and not be honest in the moment yes or no Can you be a loving person but not be loving in this moment yes, or now why because whenever you focus on? We're focused goes energy flows So I don't care how sophisticated you are unsophisticated if you put focus and what we're gonna put in front of you right now Even if you knew it before you may not cognitively we have a linked enough emotion to be doing it consistently Or if you are and you're here you obviously want to do it more and better and what we're talking about right now is Financial wealth not just wealth as it says as an emotion as a sense if you want to be financially independent The formula for financial dependence is so simple And you can't achieve financial abundance unless you really learn to apply this not just in a concept you had but consistently in your life And that formulas simple spend less than you what? You know thank you for the break to your thought Tony But is this what most people do yes or no. No, what do most people spend More than they earn There's no way around this. No how much money you have if you spend more than you earn you got a challenge So there's no way to be financially free Financially independent without spending less than you earn, and what do you got to do with what you don't spend? You gotta invest the difference Because what I want to show you right now is how do you build? What everybody should own every one of you should leave here with your own personal money machine? You want to create a money machine a machine that while you're sleeping is making you money Right so you're no longer trading the most valuable resource you have in life your time for money you want to trade money for money You want money to go to work you want to put that money to work for you, so while you're sleeping It's making a difference you want to create a machine and that machine you want to create It's something you want to be able to feed you at some stage. Well. You don't have to work That's what the money machine is and so how do you do that first step? Spend less than you earn and invest the difference in our question How many of you currently are spending more than you earn be honest raise your hand? How many are spending less than you earn raise your hand? Fantastic now if you spend less than you earn But you don't invest that you're not gonna get much out. You know most of you say well I do invest a portion of that some I spend more I do some new spending, but I do invest a portion of it the second secret to this is you got to reinvest? How many if you've ever made a big hit in your investments and went oh my god? That's so cool, and took the money and spent it on something raise your hands say Come on. Say aye. I know you all anybody's invested has done. This if you gotta bake eight yes Is it nothing wrong with that but you got to make sure it's significant about that you reinvest your returns so you get compounded what? Compounded growth is the most basic principle in the world we all know it intellectually But are you emotionally associated enough that you're really utilizing it to its maximum capability if you don't you're not gonna get financially free You will never get financially independent by your earnings alone. Let me tell you something. There's three or four heirs your life You don't want to go an expert You don't want an expert to make the decision expert can coach you But you better make the decision one is how you raise your kids I? Mean if you gotta screw up you should be the screw up not somebody else in this area Because at least if you screw up You know you gave your all and if you screw up. You'll learn from your screw up, and you can still make a difference But letting someone else tell you how to raise your children is insane to think that they know more than you do with your own Child your own the soul you brought to this world they can go to you can learn through them But you got to make those decisions What's another area like that your physical health? If you don't learn this area because you think it's too complex I'm gonna give this decision to somebody else that's somebody else being a B totally sincere and sincerely wrong I'm not lecturing you what to do I'm just saying whatever you gonna do inform yourself To make the decision because someone else making that decision the consequences are too great for your children for your health And I'll tell you another area is really important your psychology having someone else give you a label. Tell you what to do Same thing with you know you're gonna. End up with some challenge in your body same thing and the last area there I'm talking about here is money Because what most people do is like I don't have time for this I don't stand this I need to go to an expert cuz I'm not here to sell you some financial investment or plan because if I did that I'd have a self interest the process that's not gonna serve you and That doesn't mean someone can't sell you something it just means I'm coming here to advise you on how to make better decisions Not tell you you should do this individual thing because what individually need to do changes and by the way Even if you have the best intent can you be wrong yes or no, so I'm not here as a registered investment advisor I'm not here to sell you a stock or a bond I'm here to teach you a way of evaluating so you can make better choices more of the time Because when you get to the financial area when you meet somebody what's the old phrase when a person with experience? And knowledge meets a person with money What happens? The person what the money ends up with experience and the person's experience ends up with the money and Even if the intent is purely positive if this person screws up No One is going to care about as much as your financial world as you Know one no matter how much they care the maps are committed because it's your life And if they make a mistake and they're sincere they get the learning Which will make them better in the future? But if you make the mistake and you have this concern you can have to learn it and there's valuable in that Every one of you in this room is gonna lose money Every one of you There's no way the person I work with on the top financial traders in the history of the world prop 10 in the history of the world is not even Right half the time How could you make billions of dollars you're not even right half the time not even 51% of the time I'm gonna show you in a few moments It's known as asset allocation It's the way and that's just what you do That's what's gonna shift this so first step spend less than you earn And that's the difference second step reinvest it so you get compounded growth until you reach the home run your money machine until you reach a critical mass a critical mass of capital of investment capital When you get to that critical mass and what determines the critical mass is how much you need for the lifestyle that you want Once you get that critical mass what it provides for you is what you're investing for Who knows no matter what and guess what you're doing? What are you really investing for whether you're investing in cars stocks bonds real estate Financial instruments. What are you investing for? They not fir-tree not investing for returns that illusion will keep you from getting to the endgame If you're wealthy here's what makes you wealthy income not assets Assets you can buy an assets change in value all the time you need income Some people are very wealthy on paper, but they have no liquid assets, and if something happens there in deep stuff How many very been in this place by the way I'm curious So you need income? Ultimately you're trying to build a money machine if you invest and let's say an antique car you call it investing? But you're never ever going to be willing to sell it it's not an invest it's an acquisition How many followed I'm talking about here because what you're really doing is you're wanting this car You're not wanting to ever make this build your critical mass that we have a money machine So you don't have to work when you build your critical mass when you spend less than you earn And that's the difference and then as you get compounded growth you reinvest for even more compounded growth which will walk you through You're gonna. Eventually get an amount of money That's enough that without working the interest on that money alone and secure environment Will give you the income so you never have to work again Then you have a money, which you how many be up for this process say That's different, then you have X amount of assets on your net worth Which by the way can change how fast how fast? If the marketplace changes what they feel about real estate if they change what they feel about the companies you've invested in half asking all That change how fast an art beat The valuation of the dollar or the pound or the mark or the Euro or anything else can change how fast? How many like the idea of building a money machine say I this is the only reason to invest you invest for one reason so you have an income for life without working and To do that you've got to build a critical mass of capital that the interest on it alone will give you that income and you Get the life you want without working And they want me to do that as do those first two steps spend less than you're an investment Reinvest it t hit that critical mass and we're gonna show you ways to accelerate that make it happen But the entire financial game in one paragraph or one thought so everybody here's goal is here's what you're saying I am building a money machine And its purpose is to give me income for life Without working Hallelujah How do you feel hallelujah now what say Now how to do that is actually a lot simpler than you think We make things more complex than it really is you got to think of this as your target? Now by the way You know whether you're on the path of financial freedom or financial independence or not by can you answer are you doing the first part? Why you spend less than you earn and are you investing it and are you doing the second part? Are you reinvesting and getting compounded growth and? Are you moving towards that critical mass that'll get you free and even know what that number is If it's a general giant number, and you keep moving the number You'll never get there They have to define this is what it is so think of this as the bottom line in order to Achieve what you want, will you have a money machine? Here's what you must do you must pick out a minimum financial goal for yourself? even then achieve your minimum financier goal you got to pick out a Specific amount of money that you're gonna desk every month every year no matter. What a specific percentage of your income If you don't do that forget the rest this course so waste your time cuz you're gonna make a bunch of money But you won't be practicing the fundamentals, and eventually you'll make a mistake and you'll lose it. How many fall I'm talking about here say I If you're gonna change things you really need to put yourself in a position where you say this is what I'm gonna invest This percentage my income where you pay the investments first before you pay all the other bills Because you can pay the investments first And you keep doing it and Sapir discipline it by the way the best way to do this that I know of Is to have that money taken straight out of your account as soon as it gets there? And then even though you can do it automatically you can put in a money market and then decide where to put it But it literally leaves your account the money. The money's transferred think about this success in life comes from good judgment When you make good decisions you do well in your relationships in your body with your family and when your finances with everything how many agree with me on this say I so if success in life comes from good judgment and good decisions good judgment often comes from experience and experience often comes from bad judgment The secret, that's why we come back to the 80% of psychology is when you make the mistake and you go Oh my god, my numbers came down. I'm not making progress instead of throwing I could never get there It's redoubling your efforts And I'll give you some very often it helps to have a role model as this man pointed so I was with Michael Milken Shortly after he got out of prison now Michael Milken was the junk bond dealer who made billions of dollars for himself and other people During the 1980s he funded Ted Turner if Ted Turner's start You know all kinds of companies in the 80s that really got their start all primarily because of this man Michael Milken But he also did some things that put him in jail By the way in jail how wealthy do you think he felt? Not very now he's able to keep a significant amount of money. He paid fines He gave up here to his wife, and he got out of jail and then he developed something called cancer So what good's the money So he's spent his life starting to figure how to change and even we had a lot of money He felt like he was starting over in terms of his identity his respect in the community the way people look at him So he began to try to figure how to do good works But he was really feeling defeated till he met an interesting guy a guy named Carl eller Because I asked him at the point I was talking to Michael later on I had a lunch with him one time and he Actually wanted to have me put one of my companies into his group and get a piece of it the deal wasn't the right deal For me, and I was actually looking back on. It's been a long time That was the right choice not to do with him though He's a very bright man, but he had the experience and I had the company and the money And I realized that they meant I worked out at least that particular investment I thought it through and I made fortunately an intelligent choice I didn't move forward, but when I got out of that meeting was worth more than the investment We could have made together when I got out of that meeting was a role model that I'd like to give you a nickel guides me and this man Carl eller was his role model. I said well Tell me what's so special Akkar. Larry said well. Let me give you sister e in 1952 Carl eller was a man who got involved in outdoor advertising a young man He went to work for a company and as he did this he worked there for about ten years at a particular company Then about ten years later 1962 he found himself in a position where he had learned in the And had enough compounded life experience this make sense ten years working for somebody else Learning the business learning to make intelligent choices But he said you know I'm gonna get a little money I'm gonna leverage it and I'm gonna buy my own little company in the outdoor advertising business And he did that in Arizona so a biased little company Outdoor advertising and he calls it el or advertising or el or outdoor if I remember correctly what happens next well he takes the next six years of his life roughly and He builds that company up and about six years later. He builds it up enough that now all of a sudden He looks his life and says I can merge this and get more value I can work with someone else I can see what those Guys did at the company I worked for they didn't just do things they merger the companies so he follows the model he learned and so sure enough he merges with a local radio and television station there in Arizona and The value of that company which was called si si si grew immensely So sure enough he takes another 10 years so imagine now He's been running this company six years on his own at 16 17 years into this now Do you think you can compound things over 17 years if you make intelligent choices? And you're smart yes or no he thinks all the decisions. He made were good ones. Yes or no did everything He do make money Yes or no he failed at many things, but he had the psychology that he learned from everything if it didn't work He said that's experience and one from make a better decision so over the next 16 17 years he basically moves in the position where all of a sudden he's in the place where this company has some real value and He sells it with his partners to Gannett the people who own USA today really large firm 1980. He comes chairman of Columbia Pictures and In a short period of time from 1980 to 1983 taking what he's learned from the advertising business He grows Columbia Pictures, and he helps them to merge with coca-cola So by 1983 picture this this man is working his entire life right 52. He got an advertising. It's 83. How many years? They're guys They said in 30 years right three decades long. I've been do what I've been doing that's how long the gentleman was you Accumulated for himself seventy million dollars just by investing in other people's not even having to do it You don't have to be a great entrepreneur to make money. You can invest in a great entrepreneur You know you can look over at somebody like Bill Gates And say I'm gonna own a PC him let him be the creative one. I don't have to work around the clock let him Well, I don't ways to get wealthier a lot easier than just running around business and made him is love running our own businesses this Mangos been running his businesses so by 1983 he's accumulated net worth of five hundred million dollars Thirty years five eight million dollars how many think it's pretty good say I? Come by the way five hundred dollars in nineteen eighty three eighty Three was you know decades ago, what's that worth today? I don't know but probably certainly spending power worth more than a billion That's for sure She's got five hundred million dollars, so what's he gonna do? At this stage he's you know at that stage I think he was fifty-five roughly somewhere that range mid-50s, and so he says well I got all this money, but I don't have to what I? Don't have to And so he doesn't for a while, but it makes him crazy It's like I gotta do something my life. Got some meaning. You don't rely on so many beaches you only drink so many daiquiris You know I mean I want to do something productive So he comes up with this idea that he's gonna take over a company called Circle K Circle K is a company that top stage is doing about seven hundred million in sales he goes in partners And he puts up a chunk of his money in fact virtually all of his money to make this deal happen But he thinks I'm gonna turn this thing around and guess what he does He turned Circle K. In roughly five or six years into the second-largest convenience store in the world behind 7-eleven second large in the world's got like forty five hundred stores in the United States about fourteen fifteen hundred overseas and like a Hundred countries just an amazing growth record he takes the company from seven hundred million in gross sales to over three and a half billion And gross sales and that's short period of time so now We're really looking really good wouldn't you say? We're in the early 1990s now. I've done this for six or seven years He's built this incredible piece and in two years the entire company reverses its fortunes and goes bankrupt And he loses five hundred million dollars everything he's accumulated in thirty. Here's a nice 62 years old and He has nothing he mentally has nothing he owes 100 million dollars At 62 he went from up 500 million to down a hundred million how many never have thought you were in bad financial trouble, and it wasn't that bad say ah So you thought oh, I lost my job. I lost my income home and estimate went terrible the house I bought was not worth as much I bought the stock And I lost it or you know I went through a divorce it was terrible and I lost that trust me This makes anything anybody this rooms ever experience look like nothing Now what do you do? You're 62 years old you work for roughly almost 40 years of your life You're up 500 million. Everybody respects you your name is well-known and now you're a total failure your million dollars 99.9% of planet would go bankrupt obviously, but he decided there was still time What was that mechanics or psychology my friends When did I tell you 80% of financial freedom financial independence and all of wealth is? 20% is He said, I still have time at 62 he had the guts to say all I gotta do I gotta get some money right I got time I Gotta get into compounding again, and I gotta make better choices, which at this stage will not be difficult Okay, well, I've made some bad choices here. You know what took me almost 40 years to develop I lost in roughly three years two and a half three years but if I lose in two in half three years I didn't lose the 38 years of 39 years at 37 years or 40 years of what I learned Who I am So he didn't say I'm starting over. That was the difference in the psychology. He said I'm going back to what I know and it's 63 he went back to Phoenix, Arizona and leveraged everything he could possibly get ahold of who've got people to invest and he bought a small outdoor advertising company and started Over, but he didn't call it that he said I'm going back to what I know But I could make more intelligent choices, and so what happens in less than five years He built that little company up and he compounds it in 25 cities And he builds himself to where at the age of 68 years old four and a half years later Actually said almost 69 at that stage if I remember correctly he Now is a billionaire again. He sold his company - what was the company's name Clear Channel he sold his company Clear Channel and became a billionaire in less than five years He was never a billionaire after 40 years Now this would be a lesson in one thing mechanics or psychology which one Psychology, but it's also a lesson in the next most important mechanic you better know Because everybody's gonna make some bad choices and some of them could cost you seemingly everything or you may make a conscious choice you're gonna change something and you know making a change in a Relationship can cost you much more than half of what you have to pay how your life is structured financially But it may be worth it How do you not be destroyed by that you gotta have psychology? But you also want to avoid it if he was gonna be here today, and you're gonna ask him Besides your psychology. What was the biggest mistake you made your psychology made you well but was the biggest mistake? He make he would say one thing to you and I want you to hear it now and every one have you've heard this but You may have heard it cognitively you may have understand It intellectually you don't associate enough emotion to it because you're not maximizing my guess is if you're in this room You could do more how many agree you could do more in just about anything that matters say aye That's called asset allocation He said the mistake he made was asset allocation. I'm gonna show you this now. This is not sexy This is not completely new for someone sophisticated But you better make it new for yourself right now when you're green you grow when you're right. You're right You gotta get green back on asset allocation because what happens is you get to be a sophisticated investor If you tend to look at where can I put my money where I get the largest what? Say it again. What and that's the biggest mistake you're gonna make in your life It's counterintuitive But asset allocation is the single most important decision you're gonna make in your financial future. You screw this up You can do everything else I said well and end up empty financially not unwell see if you stay associated to your psychological strength But you certainly are not going to be financially for it, and this is the mistake he made asked of allocation What does it mean it means? Every person in this room is gonna Make the wrong decisions financially at times you're gonna get the best advice You're gonna study the pass the history shows that the market is going like this or the real estate market is going like this Or gold is going like this or something is going like this It keeps growing and growing and you feel like you're missing out if you don't get in how many felt that recently in some the financial valuation of something say I And so sure enough you get this piece in you and the fear starts to happen You don't wanna miss out and it really starts the right thing and it looks like right thing and everything should be the right thing And your timing is wrong Can you do the right thing at the wrong time yes or no let me tell you another secret to life? If you do the right thing at the wrong time you get pain If you plant in the winter, I don't care how hard you work I Don't care if you work day at night, and you work to the bone, and you plant your seeds in the middle of winter What's gonna happen when fall comes are you gonna be rewarded yes or no No, so if you don't understand that the seasons are changing You're in trouble, but even if you do everything right you can think it's springtime can't you? And be wrong so how do we protect ourselves the answers asset allocation? This is the secret you must give yourself and all you I could promise you in two days. We'll forget what I'm saying right now Because in two days many of you'll be making momentum and estimates And they'll be some in this room and made three thousand dollars in the last four hours Because they're gonna make a trade and someone else make a hundred dollars, so let's make five hundred But someone else is gonna lose a thousand Or five hundred and what mostly we're gonna focus on is the person to make $3,000 And I'm gonna put all my money in this momentum investment where I could make this 10 percent return today 20 percent today who knows what I'm talking about here say I And every party goes that's how I get my money machine. I want to get compounded interest I want to get the best return I possibly can up so you put all your money in there and the worst thing that can happen to you is like when you Go to Vegas. What's the worst thing can happen when you go to Vegas you? win It's the worst thing that can pop how many know what I'm talking about here say I When I was a kid I was not into throwing my money away cuz I had so little And I was not into gambling it's like I wanted to give it share it do something fun. Do something to make people light up How many weren't going to Vegas for some friends of mine and they went in are they all bad? I said I'm just gonna enjoy going to the shows hanging out with you guys on my watch. I'm not gonna bat I was like very extreme the other side so what I do. I stop there and watching I didn't get anything to the last day The last day I thought well I'll play a little bit of blackjack I mean It's easy it's pretty simple and you can kind of anticipate the numbers There's some logic to it you rationalize the whole thing and I play blackjack and I won 18 hundred dollars when that was like I start out with 300. I'll give you a perspective That was like and I don't believe my money Cuz then once you get that jackpot, what are you always thinking? I'm gonna get it again. That's how they make money in Vegas because they've set up the compounding on their side Right they know what the ratio results are and all they're gonna do is get you to keep doing this in the house is gonna win because the house has the economic advantage the longer you go the Greater chance you can do it. Even if you do it here. You're gonna come back. You're gonna be desired That's how they can pay for a building like Steve Wynn has that's what 2.9 billion dollars to build a hotel Was the most expensive hotel in the world now, it's not there Billy a new one for 3.6 billion for hotel How can you afford that you have large margins and profits? And where does that come from people got the big hit? So the worst thing can happen is you make investments and you hit home run And you hit a home run and the home run Get you to start thinking you're really smart, and maybe you are really smart you're very sophisticated Maybe you really are, but there is a day when the whole game changes And there's really difficult sometimes to predict that sometimes impossible true or false So the asset allocation is how you protect it. What does asset allocation it means out of the money you have to invest We're gonna create three buckets Really simple way of thinking in this from now on three buckets and these three buckets are gonna Help you to understand whatever amount of money. You're gonna invest each year where you're gonna put it so for example if you have If you don't spend less than you earn you're gonna nothin invest You spend less than you earn now you have something invest right? Do you need to come up with a specific number a? Percentage or a dollar that you're gonna mask every month every year if you're gonna get to your money machine Yes or no yes or no Where are you gonna? Put that money? Whether it's $100 $1000 $10,000 $100,000 a year a million dollars a year a million a month doesn't matter We're gonna put it if you're smart you're gonna put these three buckets of asset location What are the three buckets the first bucket is the security bucket when you think about investing? think of two types of investments There are fixed income investments and most you're clear what this means what does it mean when it's a fixed income? Investment who knows what does that mean? You've got a guaranteed rate of return assuming they deliver and anyone can not deliver including the US government They haven't not delivered, but they could is there risk in any investment Yes or no, so just ratios of risk and as we know you know no risk no No reward, so if you don't invest you're gonna lose if you invest the times But if you don't - you've already lost and you can never win never of a money machine never be financially free So fixed income investments the types of Decimus you're gonna make where there's a guaranteed return You know a bond a company gives you a bond. What is a bond? They're guaranteeing you you give me your money? I will deliver at this time at this date this percentage return to you, so it's fairly. What secured less what? Risky we all understand this the second type of investment you can make and helps you understand. We're going to do something That's gonna be growth River and growth investments are investments where you probably have a much greater potential for growth Which means you get a greater return if you're successful But if you're not successful do you know the guaranteed rate of return yes or not? No, so in the growth investment you have the potential of greater return, but also greater Later loss there is no guarantee in a growth investment. No matter how long it's been going that way. There's no guarantee We start to get the illusion that it's going to always go up It isn't necessarily, so where do you put your money? If you think of things that are more secure versus not the security bucket is where you want to put Investments that are secured by their nature Because they're secure is this going to give you a huge compounded return per year yes or no But can you give you a huge compound return even if the number is small if you do it long enough yes or no So what we want to do is your first investments have to be in your security bucket and everybody wants to do the opposite Because why would you want to go put some money in something you're getting 5% 6% 7% maybe 8% on When you could go do something else that you believe you can make 20% on because the five six seven percent is totally guaranteed by that promise by that government by that company by whatever the situation may be and If you screw up in your growth investments you've got how much zero What did this man eller do he put everything in his growth bucket? How many follow when I'm talking about right now? He went why would I put money in my security bucket? I got five hundred million dollars I could do all these different things if I put all of it here I get a little jump to make his goal was to make a billion dollars, right? Instead of losing a half a billion of being a hundred million a debt end up losing six hundred million, throw But he not if I put it in there. I don't even put things in my security bucket They might say well all worked out well for him. How many Ehlers are there in the world? most people when they face financial what looks like ruin they say it's over I Can't start over again at 40 or 50 or 60 much less 63 very few people who do that and even if he did he also had to make some good choices and Probably got a little bit of luck, and you get really lucky when you work for 50 years you got Right, and you won't give up and you'll persist and you know this incredible psychology And you figure how to add value But most people didn't recover from that If there's anything he do he wouldn't had been worth billions of dollars and with man all that stress if all he'd done is put A percentage in a security bucket the question that becomes what percentage you put your security bucket what goes in there well here's some things That go in there If you don't have at least two to six months worth of cash that covers your overhead. You're in deep trouble and Today it's amazing people with enormous incomes Spend most of it They don't have six months with the cash on side if something happened where they lost their job or something happen where the economy got hit or a terrorist attack occurred and Everything got locked up. They'd be in deep doo-doo. How many know what I'm talking about here say I? The first step to getting financially secure not financially Independent is to make sure you got enough cash that something happens. You can go for six months You got the freedom now who here already has a set aside for your life raising ham Fantastic give these people a hand by the way big hand for that. Oh come on give a big hand You're like yeah easy for you you brat This has got to be a basic financial goal now nobody wants to do like it's not sexy And you're saying I can be using that money for compound growth Tony Yes, and you cannot be compounding you could lose and then you start with nothing How many follow me on this ai? How much of that should go in there two to six months a year depends on your psychology? But whatever's gonna make you feel secure its individual for every person I'm aggradation for six months then maybe two months is fine for you. Maybe for some of you you want to hear and then It's different for everybody this is what you got to start to know the truth of who you are not what you project and Some people are more certainty driven more and more security driven than other people Some people need a little more security drive right now in order to keep their life balance What else might you put in there types of investments an IRA goes in here right pretty secure? Insurance the insurance is protecting you that's part of security. What else could go in there your home Don't think of your home as an investment Because for most of you, you're eventually not gonna sell that home and eat it You're not gonna sell your home and get income off it now some of you Maybe you made a stage of life Or you're accumulating the same homes and eventually you're gonna sell and buy a smaller home and take that crate That came from selling the big home, and it's gonna take care of you for life He'd be doing that great but the place to think about your home in terms of leverage put it in your security bucket How many agree with me on this by the way say I? Cuz kind of maybe you don't have a home you're gonna Be really stressed out, right? So I gotta think of my growth outside my home really think of your compound interest outside your home or home may be a bonus For you and fixed income investments often in this category now What's the second bucket second bucket is growth two ways you're gonna learn about growth the buy-and-hold strategy, which is the strategy of an owner? And by the way that buying and holding That is less risky to some extent than momentum because the timing but it can be just as risky What is momentum trading? That's when you're no longer an owner. You're a trader a Financial trader everybody's a financial trader most of you trading time for your money here You're trading money for money here what you're looking at is you're seeing movement in prices That may or may not having to do with value can a price change just on based on perception of a company yes or no Can perception change the price or the value of real estate? Yes, or not a little or completely? But very often There is a fluctuation that can come from the event from a perception and what a momentum player is doing as they're playing For the short-term usually they're in and out when that fluctuation happens They're betting on the upper the down because as momentum players I want you understand something everything we're gonna teach you work in a bull market or a bear market I would be irresponsible to teach you a set of principles that are based on the market only being bull Cuz right now in the country you live in it's a bull market and real estate Or stocks or gold or silver or whatever it is that's irresponsible. You will be able make money No matter what happens in the market. I'm excited about this by the way say I But even if you get brilliant even if you do it can your timing be wrong yes or no Yes, can you be totally smart and make the wrong decision yes or no? So what is gonna protect you so you milk your money machine? No matter what and when it's time, and you don't want to work. You're gonna get there. What bucket is gonna protect you It grows slowly, and it grows like the grass So how much should we put in our security and by the way that what you say well? What's the third bucket Ani well there's the security bucket where we put our money first? Second bucket growth bucket. We put our money and we put a percentage in there all the time Third bucket is the dream bucket The dream bucket is you want to travel around the world the dream bucket is you depend upon the size of how you think of what you're doing or your economics you want to own a condominium in Aspen and If Aspen it seems insane at $2,000 a square foot Then you might say I want one in Mammoth. You know or I want one in Chile I want someplace else many times you get the same thing or better quality just by changing location Because the perception there isn't a better or worse You're trying to get financially themed real critical critical mass so that you can live forever in your own home in Los Angeles Or you move to Portland, Oregon Portland Oregon's greener Richer you're not probably not gonna be the first place bomb the terrorist attack Right could you have as good or greater quality of life for a third or fourth the price yes or no? So sometimes you can get you go quicker just by changing locations changing your perception of where you need to be breaking your own pattern Okay, so security bucket gets full of gold pocket But what's the dream bucket the dream market might be a second home it might be the boat it might be a trip it might Be owning a basketball team owning an island depends on the size And what it is you want to do by the way bigger isn't better? The more you have to have to feel financially free the more stress you're gonna have How many follows? It's the opposite of what you think The more you have the more you got to manage the more time the more energy the more risk the more capital That doesn't mean you shouldn't do it some of you are very very driven to create and risk That's a personality type. We know that it's crazy I Happen to be one of those types to some extent But even a crazy person's got to make sure their security is there or their craziness at one point will bite them How many follow if you can get pretty free for less do it? be wealthy now and get financially free quicker and Then walk in you would and then keep that stuff in your security bucket if you want to play a bigger game now You've already won, and everything you're playing now. That's where the house is money you Can go for something bigger? And if you if it doesn't work out you still handle your security what you're here for is totally free How many followed him talk about hearsay up? Now how do we decide to fill these up? Well your stage of life plays a role so in your security area if you're really getting started here And you don't have the security there If you're really conservative you probably need to put 40 percent of your investment capital there 40 percent so you're totally protected if you're more aggressive maybe 30 percent by the way Which one of these three buckets do most people trying to fill first one two or three Three and how do they do it borrow? Money, and what they buy it usually isn't a real asset It breaks down in value the car. You know the secondary home in an environment that the market chief. Whatever it is They don't usually make money on it long term. You lose money, and then they have no financial freedom, so they gotta go work I'm wealthy I'm wealthy I'm happy. I've loved all these things Nothing wrong with that, but why not have both What do you think the second one is to be filled for most people? What's the second one quick? Growth they go for growth because why I want a bigger web return, but a bigger return potential brings with it greater What? Risk you absolutely want to fill your growth bucket Just make your security bucket the first one Because it's the one you want to feel least and that's the one that will protect you you want to learn from Carl You don't want to wake up and say I'm starting over You don't want to have to use that psychology great if you could But use that along the way when you make mistakes not when you lose everything That's what Carl will tell you if Carl was here to support you right now. He would say to you listen to this man Listen to him. I know it's boring sounding right now. I know it's not exciting, but this is your life Spend less than you earn, and that's the difference reinvest for compounded interest, but doing these three buckets and do it the first two first Here's how I do it pick your percentage don't vary when you get a better opportunity So if you're gonna invest $1,000 a month $10,000 a year What are you gonna do with it? They're gonna say for that's going on my security bucket six - that's going on my growth And after the next few days you can decide how much of that's buy and hold how much that is momentum Where you put this they're gonna be in real estate buying hold it's not gonna be in companies Are you gonna break it up, but you keep the percentage because otherwise someone will offer you a deal And when that deal comes up, and you see the opportunity. What are you gonna say? I need to get more so I'm gonna take from my security bucket and do it. That's when you get bit I know I sound like I'm lecturing to you. I'll tell you why do you know how many people I've taught this to The millions of people over the years that I share this with and you know how few people really hear me they hear me Right now, but the minute their greed gets it the minute. They go oh my god. I got this giant return They douse this so if this feels heavy That's ok with me. If this doesn't feel sexy. That's ok with me, but remember what I'm telling you What is the secret long-term? What's the most important decision you're gonna make in your investment life your sandag and you are So right now, so this goes from conversation to reality. I want to ask you this What percentage of your current investments are in completely secure environments? If the answer is zero, this is the first thing you got to do you can still do great opportunities but that percentage has got to start building security first a percentage of it and again that number depends on your risk tolerance and It depends secondly on where you are on stage of life if you're older does you need put more insecurity or less which one quick More because you have less time to make up for a mistake if you're younger you could be little less But don't put nothing and if you become more wealthy, you know it's interesting the richer you think and feel The more abundant you seem to become because that feeling starts to affect the way you make decisions that are not made from fear They're made from gratitude and when you operate from gratitude, and you're coming from a generous place within yourself and other people It attracts a different experience. You know it's crazy in my life today today People come up to me every day of my life No exaggeration if I'm in a public if I'm in a restaurant and because I've had you know 50 million people get my books and tapes around the earth no matter where I go in the world People don't come out and tell me these great stories, but someone come over to me and they'll say They just paid for your dinner or your lunch or whatever or they want to buy this I would say no no they go though They insist I'd say no no I wanna say. Thank you. I really appreciate it. Thank you I appreciate the gift of wanting to do it, but please let me take care of it No, no no no. I think where were these people when I was broke at Denny's Where were they when they needed them When you're rich everybody wants to buy you lunch and dinner when you're successful wealthy everybody wants to do for you When you're not ironically no one wants to do a squad for you Except the few people that feel sorry for you or want to be generous in some way, but the majority don't It's ironic the more successful They were happy the more healthy the more wealthy you become you get momentum and other people are attracted to you deals opportunities experiences So 80% I've said it a million times because I want you to get it in your body is this association So you give everybody hand to this day for starters everybody has to stop Amazing Now that you have learned what it takes to create Long-term financial success take five minutes to think about how you can build your own money machine 1 are you spending less than you earn and then investing the difference What are two to three actions you can take to save more so you can in turn invest more? Could you cut back on going out to eat cooking more dinner at home or bringing your lunch to work? We negotiate costly plans such as for your cell phone or cable or Meet with a tax advisor are you taking advantage of all the opportunities available to you and your tax bracket? 2 what is the ideal asset allocation for you? How would you allocate the extra money safe within four three buckets security growth and dream? Why is this the right choice for you? You

Contents

History

Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual produce of the land and labour of the society". This "produce" is, at its simplest, that which satisfies human needs and wants of utility.

In popular usage, wealth can be described as an abundance of items of economic value, or the state of controlling or possessing such items, usually in the form of money, real estate and personal property. An individual who is considered wealthy, affluent, or rich is someone who has accumulated substantial wealth relative to others in their society or reference group.

In economics, net worth refers to the value of assets owned minus the value of liabilities owed at a point in time.[8] Wealth can be categorized into three principal categories: personal property, including homes or automobiles; monetary savings, such as the accumulation of past income; and the capital wealth of income producing assets, including real estate, stocks, bonds, and businesses.[citation needed] All these delineations make wealth an especially important part of social stratification. Wealth provides a type of individual safety net of protection against an unforeseen decline in one's living standard in the event of job loss or other emergency and can be transformed into home ownership, business ownership, or even a college education.[citation needed]

Wealth has been defined as a collection of things limited in supply, transferable, and useful in satisfying human desires.[9] Scarcity is a fundamental factor for wealth. When a desirable or valuable commodity (transferable good or skill) is abundantly available to everyone, the owner of the commodity will possess no potential for wealth. When a valuable or desirable commodity is in scarce supply, the owner of the commodity will possess great potential for wealth.

'Wealth' refers to some accumulation of resources (net asset value), whether abundant or not. 'Richness' refers to an abundance of such resources (income or flow). A wealthy individual, community, or nation thus has more accumulated resources (capital) than a poor one. The opposite of wealth is destitution. The opposite of richness is poverty.

The term implies a social contract on establishing and maintaining ownership in relation to such items which can be invoked with little or no effort and expense on the part of the owner. The concept of wealth is relative and not only varies between societies, but varies between different sections or regions in the same society. A personal net worth of US$10,000 in most parts of the United States would certainly not place a person among the wealthiest citizens of that locale. However, such an amount would constitute an extraordinary amount of wealth in impoverished developing countries.

Concepts of wealth also vary across time. Modern labor-saving inventions and the development of the sciences have vastly improved the standard of living in modern societies for even the poorest of people. This comparative wealth across time is also applicable to the future; given this trend of human advancement, it is possible that the standard of living that the wealthiest enjoy today will be considered impoverished by future generations.

Industrialization emphasized the role of technology. Many jobs were automated. Machines replaced some workers while other workers became more specialized. Labour specialization became critical to economic success. However, physical capital, as it came to be known, consisting of both the natural capital and the infrastructural capital, became the focus of the analysis of wealth.[citation needed]

Adam Smith saw wealth creation as the combination of materials, labour, land, and technology in such a way as to capture a profit (excess above the cost of production).[10] The theories of David Ricardo, John Locke, John Stuart Mill, in the 18th century and 19th century built on these views of wealth that we now call classical economics.

Marxian economics (see labor theory of value) distinguishes in the Grundrisse between material wealth and human wealth, defining human wealth as "wealth in human relations"; land and labour were the source of all material wealth. The German cultural historian Silvio Vietta links wealth/poverty to rationality. Having a leading position in the development of rational sciences, in new technologies and in economic production leads to wealth, while the opposite can be correlated with poverty.[11][12]

Wealth creation

Sir Francis Bacon

Billionaires[13] such as Bill Gates, Jeff Bezos, Warren Buffett, Elon Musk, Charlie Munger and others advise the following principles of wealth creation:

  1. Science and scientific method[14][15]
  2. Economics and continuous lifelong learning[16]
  3. Reading and education[17][18]
  4. Learning from rich people - billionaires and millionaires.[19][20]
  5. An investment in knowledge pays the best interest. - Benjamin Franklin[21]
  6. The best investment you can make is an investment in yourself. The more you learn, the more you'll earn - Warren Buffett[22]

Amount of wealth in the world

The wealth of households amounts to US$280 trillion (2017). According to the eighth edition of the Global Wealth Report, in the year to mid-2017, total global wealth rose at a rate of 6.4%, the fastest pace since 2012 and reached US$280 trillion, a gain of US$16.7 trillion. This reflected widespread gains in equity markets matched by similar rises in non-financial assets, which moved above the pre-crisis year 2007's level for the first time this year. Wealth growth also outpaced population growth, so that global mean wealth per adult grew by 4.9% and reached a new record high of US$56,540 per adult.Tim Harford has asserted that a small child has greater wealth than the 2 billion poorest people in the world combined, since a small child has no debt.[23]

Wealthiest cities

World's richest cities in 2017.[24]

Wealth in trillions
City Wealth
London $4.3 Trillion
New York $3 Trillion
Tokyo $2.5 Trillion
Silicon Valley $2.3 Trillion
Beijing $2.2 Trillion
Shanghai $2 Trillion
Los Angeles $1.4 Trillion
Hong Kong $1.3 Trillion
Sydney $1 Trillion
Singapore $1 Trillion

Philosophical analysis

In Western civilization, wealth is connected with a quantitative type of thought, invented in the ancient Greek "revolution of rationality", involving for instance the quantitative analysis of nature, the rationalization of warfare, and measurement in economics.[11][12] The invention of coined money and banking was particularly important. Aristotle describes the basic function of money as a universal instrument of quantitative measurement – “for it measures all things […]” – making things alike and comparable due to a social "agreement" of acceptance.[25] In that way, money also enables a new type of economic society and the definition of wealth in measurable quantities. In the Roman Empire, just as in modern colonialism, the main force behind the conquest of countries was the exploitation and accumulation of wealth in quantitative values like gold and money. Modern philosophers like Nietzsche criticized the fixation on measurable wealth: "Unsere ‘Reichen' – das sind die Ärmsten! Der eigentliche Zweck alles Reichtums ist vergessen!" (“Our 'rich people' – those are the poorest! The real purpose of all wealth has been forgotten!”)[26]

Economic analysis

In economics, wealth (in a commonly applied accounting sense, sometimes savings) is the net worth of a person, household, or nation – that is, the value of all assets owned net of all liabilities owed at a point in time. For national wealth as measured in the national accounts, the net liabilities are those owed to the rest of the world.[27] The term may also be used more broadly as referring to the productive capacity of a society or as a contrast to poverty.[28] Analytical emphasis may be on its determinants or distribution.[29]

Economic terminology distinguishes between wealth and income. Wealth or savings is a stock variable – that is, it is measurable at a date in time, for example the value of an orchard on December 31 minus debt owed on the orchard. For a given amount of wealth, say at the beginning of the year, income from that wealth, as measurable over say a year is a flow variable. What marks the income as a flow is its measurement per unit of time, such as the value of apples yielded from the orchard per year.

In macroeconomic theory the 'wealth effect' may refer to the increase in aggregate consumption from an increase in national wealth. One feature of its effect on economic behavior is the wealth elasticity of demand, which is the percentage change in the amount of consumption goods demanded for each one-percent change in wealth.

Wealth may be measured in nominal or real values – that is, in money value as of a given date or adjusted to net out price changes. The assets include those that are tangible (land and capital) and financial (money, bonds, etc.). Measurable wealth typically excludes intangible or nonmarketable assets such as human capital and social capital. In economics, 'wealth' corresponds to the accounting term 'net worth', but is measured differently. Accounting measures net worth in terms of the historical cost of assets while economics measures wealth in terms of current values. But analysis may adapt typical accounting conventions for economic purposes in social accounting (such as in national accounts). An example of the latter is generational accounting of social security systems to include the present value projected future outlays considered to be liabilities.[30] Macroeconomic questions include whether the issuance of government bonds affects investment and consumption through the wealth effect.[31]

Environmental assets are not usually counted in measuring wealth, in part due to the difficulty of valuation for a non-market good. Environmental or green accounting is a method of social accounting for formulating and deriving such measures on the argument that an educated valuation is superior to a value of zero (as the implied valuation of environmental assets).[32]

Sociological treatments

Wealth and social class

Social class is not identical to wealth, but the two concepts are related (particularly in Marxist theory), leading to the combined concept of socioeconomic status. Wealth refers to value of everything a person or family owns. This includes tangible items such as jewelry, housing, cars, and other personal property. Financial assets such as stocks and bonds, which can be traded for cash, also contribute to wealth. Wealth is measured as “net assets,” minus how much debt one owes. Wealth is a restrictive agent for people of different classes because some hobbies can only be participated in by the affluent, such as world travel.

Partly as a result of different economic conditions of life, members of different social classes often have different value systems and view the world in different ways. As such, there exist different "conceptions of social reality, different aspirations and hopes and fears, different conceptions of the desirable."[33] The way the various social classes in society view wealth vary and these diverse characteristics are a fundamental dividing line among the classes. According to Richard H Ropers, the concentration of wealth in the United States is inequitably distributed.[34] In 1996, the United States federal government reported that the net worth of the top 1 percent of people in the United States was approximately equal to that of the bottom 90 percent. Cross-nationally, the United States has greater wealth inequality than other developed nations.[citation needed]

The upper class

Upper class encompasses the top end of the income spectrum relative members of society as a whole. Since they have more wealth and privacy, the upper class has more personal autonomy than the rest of the population. Upper class values include higher education, and for the wealthiest people the accumulation and maintenance of wealth, the maintenance of social networks and the power that accompanies such networks. Children of the upper class are typically schooled on how to manage this power and channel this privilege in different forms. It is in large part by accessing various edifices of information,[clarification needed] associates, procedures and auspices that the upper class are able to maintain their wealth and pass it to future generations.[35] Usually, people of the upper class participate as partisans in elections and have more political power than those of lower classes due to their abundance of resources and influence.

The middle class

The middle class encompasses individuals whose financial situation falls in between those of the upper and lower classes. Generally, the population of America associates themselves as middle class. Lifestyle is a means for which individuals or families decide what to consume with their money and their way of living. The middle class places a greater emphasis on income: unlike the upper class, the middle class measures success and potential in the form of money rather than influence and power. The middle class views wealth as something for emergencies and it is seen as more of a cushion. This class comprises people that were raised with families that typically owned their own home, planned ahead and stressed the importance of education and achievement. They earn a significant amount of income and also have significant amounts of consumption. However, there is very limited savings (deferred consumption) or investments, besides retirement pensions and home ownership. They have been socialized to accumulate wealth through structured, institutionalized arrangements. Without this set structure, asset accumulation would likely not occur.[35]

The lower class

Those with the least amount of wealth are the poor. Most of the institutions that the poor encounter discourage any accumulation of assets.[35] Lower class members feel more restrictive in their options due to their lack of wealth. This could lead to complications in solving their personal dilemmas, as predicted by the Class Structure Hypothesis. There are many societal standards and designs intentional sabotage and shortcomings to explain the persistent state of yearning and want the lower classes generally experience with their lower quality and quantity of assets. Typical causes are persistent unethical/harmful mentalities and criminal tendencies: misguidedly similar to the upper class in some cases. Many individuals that are in the lower class stay in that class and very few move up in class. Many people in the lower class group believe there isn't such a thing as equal opportunity.

Distribution

Although precise data are not available, the total household wealth in the world, excluding human capital, has been estimated at $125 trillion (US$125×1012) in year 2000.[36] Including human capital, the United Nations estimated it in 2008 to be $118 trillion in the United States alone.[6][7] According to the Kuznet's Hypothesis, inequality of wealth and income increases during the early phases of economic development, stabilizes and then becomes more equitable.

About 90% of global wealth is distributed in North America, Europe, and "rich Asia-Pacific" countries,[37] and in 2008, 1% of adults were estimated to hold 40% of world wealth, a number which falls to 32% when adjusted for purchasing power parity.[38]

In 2013, 1% of adults were estimated to hold 46% of world wealth[39] and around $18.5 trillion was estimated to be stored in tax havens worldwide.[40]

Wealth in the form of land

In the western tradition, the concepts of owning land and accumulating wealth in the form of land were engendered in the rise of the first state, for a primary service and power of government was, and is to this day, the awarding and adjudication of land use rights.[citation needed] Many older ideas have resurfaced in the modern notions of ecological stewardship, bioregionalism, natural capital, and ecological economics.

Land ownership was also justified according to John Locke. He claimed that because we mix[clarification needed] our labour with the land, we thereby deserve the right to control the use of the land and benefit from the product of that land (but subject to his Lockean proviso of "at least where there is enough, and as good left in common for others.").

Additionally, in developed countries post-agrarian society (industrial society) this argument has many critics (including those influenced by Georgist and geolibertarian ideas) who argue that since land, by definition, is not a product of human labor, any claim of private property in it is a form of theft; as David Lloyd George observed, "to prove a legal title to land one must trace it back to the man who stole it."

Anthropological views

Anthropology characterizes societies, in part, based on a society's concept of wealth, and the institutional structures and power used to protect this wealth.[citation needed] Several types are defined below. They can be viewed as an evolutionary progression.

Many young adolescents have become wealthy from the inheritance of their families.

The interpersonal concept

Early hominids seem to have started with incipient ideas of wealth,[citation needed] similar to that of the great apes. But as tools, clothing, and other mobile infrastructural capital became important to survival (especially in hostile biomes), ideas such as the inheritance of wealth, political positions, leadership, and ability to control group movements (to perhaps reinforce such power) emerged. Neandertal societies had pooled funerary rites and cave painting which implies at least a notion of shared assets that could be spent for social purposes, or preserved for social purposes. Wealth may have been collective.

Accumulation of non-necessities

Humans back to and including the Cro-Magnons seem to have had clearly defined rulers and status hierarchies.[citation needed] Digs in Russia at the Sungir Archaeological Site have revealed elaborate funeral clothing on a man and a pair of children buried there approximately 28,000 years ago.[citation needed] This indicates a considerable accumulation of wealth by some individuals or families. The high artisan skill also suggest the capacity to direct specialized labor to tasks that are not of any obvious utility to the group's survival.[citation needed]

Control of arable land

The rise of irrigation and urbanization, especially in ancient Sumer and later Egypt, unified the ideas of wealth and control of land and agriculture. To feed a large stable population, it was possible and necessary to achieve universal cultivation and city-state protection. The notion of the state and the notion of war are said to have emerged at this time. Tribal cultures were formalized into what we would call feudal systems, and many rights and obligations were assumed by the monarchy and related aristocracy. Protection of infrastructural capital built up over generations became critical: city walls, irrigation systems, sewage systems, aqueducts, buildings, all impossible to replace within a single generation, and thus a matter of social survival to maintain. The social capital of entire societies was often defined in terms of its relation to infrastructural capital (e.g. castles or forts or an allied monastery, cathedral or temple), and natural capital, (i.e. the land that supplied locally grown food). Agricultural economics continues these traditions in the analyses of modern agricultural policy and related ideas of wealth, e.g. the ark of taste model of agricultural wealth.

The role of technology

Industrialization emphasized the role of technology. Many jobs were automated. Machines replaced some workers while other workers became more specialized. Labour specialization became critical to economic success. However, physical capital, as it came to be known, consisting of both the natural capital (raw materials from nature) and the infrastructural capital (facilitating technology), became the focus of the analysis of wealth. Adam Smith saw wealth creation as the combination of materials, labour, land, and technology in such a way as to capture a profit (excess above the cost of production).[10]

See also

References

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  2. ^ "The Millionaire Next Door". movies2.nytimes.com. Retrieved September 27, 2018.
  3. ^ Denis "Authentic Development: Is it Sustainable?", pp. 189–205 in Building Sustainable Societies, Dennis Pirages, ed., M.E. Sharpe, ISBN 1-56324-738-0, 978-1-56324-738-5. (1996)
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