Lessons - The Money Mistake Keeping High Earners Broke | Jaspreet Singh - Minority Mindset Founder & Author of Make Money Easy

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In this lessons episode, discover why financial literacy and wealth building remain out of reach for so many people.

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Understand how inflation and the gap between labor and capital can shape financial outcomes.

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Explore why investing matters for long-term wealth and uncover how learning the rules of money can create greater financial independence.

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Do we have in the U.S. in particular, because I'm sure I know the answer to this, but you live in this space, so you must have some data or some insight.

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Yeah.

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do we have a massive wealth building problem?

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Like if we just look at, cause I mean, I think I'm, and definitely am super biased because I speak to entrepreneurs all day and I speak to successful people who have sold their businesses.

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So I have no, I have no understanding of the average individual and what people are going through because I'm just, it's, it's, I'm very fortunate.

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My little circle of friends here is it's, it's fabulous, but it's not the reality.

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I don't think many people are financially literate.

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I don't think many people are investing.

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If I even look at, I'll give you a personal example.

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I look at my parents, like they don't invest in real estate and stocks the way they should.

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They have a money manager and a financial manager and that's fine.

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They're not the strategies that the most successful people in my circle of friends are using, for example.

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So what's the state of wealth building in the U.S.?

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Right now, about 70% to 80% of Americans, and the reason why I give a range is because it depends on the study, but some people say 7% to 10% out of Americans are living paycheck to paycheck.

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That means they have no extra money to save, no extra money to invest.

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half of Americans are not investing at all and have not invested at all.

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That means no savings, no investments, no stock market, no gold, no real estate, no nothing, no retirement, no 401k.

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So if you walk down the street, that means for 7 out of 10 people that you see, actually closer to 8 out of 10 people that you see, but we'll round it down.

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These are people that have less to nothing in their bank account.

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More than half of Americans do not have $1,000 to their name.

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And that's the average state of America.

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Now, there's two reasons for this.

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There's the you problem and then there's the me problem.

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The me problem is I spend too much money.

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I don't know how to manage my money and I buy too many dumb things.

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That applies to everybody.

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But there's also the you problem, which is how the economic system is keeping a lot of people broke.

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And this is something that's out of our control.

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And what I mean by that is if we take a look at the last five years, between 2019 and 2024,

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the average household income in America has grown by a little bit under 18%, but I'm going to round it up to 18%.

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So the median household income in America has grown by 18%, while the average inflation rate, reported inflation, was just over 23%.

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Over that same time period, housing prices have grown by a little bit over 50%, that's renting and buying,

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And at the same time, the S&P 500 has grown by over 80%.

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So what does that mean?

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Over the last five years, the average American who works to get a salary has become poorer because their salaries have not kept up with inflation.

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That means you have to spend more of your money to buy groceries.

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You have to spend more of your money to pay for your rent or your mortgage.

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You have to spend more of your money to just survive, and you have less money to save and invest, if any.

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At the same time, the average investor has become disproportionately wealthier.

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The average rate of inflation over the last five years has been 23.1%, while at the same time, housing prices have gone up by 50%, which means if you invest in real estate, chances are your rental income has grown, chances are your...

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rental properties have grown, unless your own office buildings, which have really been hurt.

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But the stock market has also grown.

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The S&P 500 has grown by around 80%, which means investors got a windfall, the average person became poorer.

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Why?

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Because of something called inflation.

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And inflation didn't start in 2019 or 2020.

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Inflation has been happening for decades.

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But it just became a hot topic after 2020 because of how extreme it got over the period of five years.

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But this same thing has been happening decade after decade after decade.

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If you look at what the Federal Reserve Bank says, the Federal Reserve Bank is our central bank in the United States.

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And what they say is that they want 2% inflation.

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And what I'd like everybody to think about when they say that is, why 2%?

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I mean, how did they come up with that number?

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Why is it not 3%?

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Or why is it not 1%?

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Actually, why is it not 0% inflation?

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Because inflation means that you have to spend more money to buy groceries.

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You have to spend more money to buy things.

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And inflation is there to benefit the investor.

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Because when you see inflation, that means more dollars go into the hands of businesses, which means more dollars go into the hands of the investors who own those businesses.

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Inflation disproportionately benefits the investor while disproportionately hurting the average American who's not an investor.

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Because inflation means that consuming becomes more expensive at its core.

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I mean, inflation is when the value of the dollar goes down, causing the price of things to go up.

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So if you have to spend more money to buy things, like you have to spend more money to buy groceries, to buy a flight, to buy a car, that means consumption gets more expensive, which means more dollars are going into the hands of businesses, which means, again, investors who own those businesses benefit.

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And this is where now you have to understand that is happening.

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This economic shift is happening.

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It has happened in the past.

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It will continue to happen in the future.

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And as it's happened since way before the pandemic,

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The reason why the Federal Reserve Bank wants 2% inflation is because 2% inflation is known low enough that the average person doesn't notice it day to day.

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Now, during the pandemic era, we went way above that, which is why it was so extreme and now people are starting to feel that pinch of inflation.

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But 2% inflation is low enough that the average person doesn't notice it day to day.

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But it's still happening.

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Which means that if you just become a consumer and an employee and you are not an investor, you are a victim to this economic system.

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We're never taught this.

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And this is where a lot of people get upset.

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But in order for you to win now, in order for you to beat this system, you then have to look at the me problem, which is stop spending so much money on dumb stuff that you can't afford.

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And that means you've got to now cut back on your expenses.

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That way you have money to invest.

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You don't have to be a millionaire to capitalize on this.

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But you have to understand how to control your money to do it.

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When we look at this system that's really just hurting, I didn't realize that the numbers that you just mentioned, like the 70% to 80%, that's huge.

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So this is majority of Americans are not doing very well right now at all.

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And this system of inflation, if more money is supposed to flow back to the businesses, I'm assuming in theory that average wages are also supposed to rise to some degree because some money is supposed to go back, supposed to, in air quotes, supposed to go back into the workforce, but it doesn't and it doesn't keep up.

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and investors are greedy and shareholders are greedy and stock prices go up and investors get more money and they pay themselves out more.

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And I think probably very little trickles down to the average employee, which just it just squeezes their budget, like you're saying.

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So.

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So I think that.

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I'm just curious because I know that you have opinions on it.

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Why financial literacy is so poor in not just the US, I mean, coming from Canada as well, there wasn't like, I don't think there was really any financial literacy.

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I think it's a very similar education system.

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There was really not much at all.

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Why?

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I think it's because it's profitable to keep people financially stupid.

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And what I mean by that is.

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Let's just take a look at a few examples.

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Banks profit when you're in debt.

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It is in their best interest for you to not be very financially smart because if you were, maybe you wouldn't go out and put money in your credit card.

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Maybe you wouldn't finance that car.

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Maybe you wouldn't go out and pull money out of your home to buy a boat.

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Banks make money when you're in debt, so they want you in debt.

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Corporations profit when you're spent.

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It's not in their best interest for you to be financially smart because maybe you'll think twice before buying a $3,000 Gucci bag.

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The governments profit when you are just an employee.

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Now, as a licensed attorney, who is not your attorney, what I can tell you is our tax code is designed to benefit investors more than employees.

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What does that mean?

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If you are an investor, you get to qualify for either lower tax rates or B, higher tax write-offs.

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When you are a W-2 employee, you get to qualify for neither.

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As a W-2 employee, you pay what's called ordinary income tax rates, which are the highest tax rates that a tax code has to offer.

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When you are an investor, you get to qualify for long-term capital gains rates, which are lower tax rates, and or you get to qualify for lower or bigger tax write-offs.

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These are things you get when you're financially educated as an investor, but you don't get as an employee.

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You profit when you're financially educated.

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You profit when you are an investor.

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But this is where you have to learn how the system works.

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And I'm going to take this one step further.

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Because this stuff really bothers me.

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Because I never learned this.

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I did not learn any of this in school.

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I did.

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My parents are immigrants from a state in India called Punjab.

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They worked their butt off.

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They worked very hard to give me a good education.

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Because what they wanted was for their son to become an educated person.

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That way he could then become wealthy.

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But the problem with that is we assume that the way you become wealthy is by doing good in school, getting good grades.

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But there's a disconnect here.

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We live in what's called a capitalist system.

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And in a capitalist system, most people don't understand how a capitalist system works.

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Right now, it has become a political term, and still most people don't understand it.

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Yet, don't you think that we should learn what that means if we live and work in a capitalist system?

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Because I'll break it down.

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A capitalist system means that you have two ways to make money.

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You can make money off of your labor, or you can make money off of your capital, which is your money.

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School teaches you how to make money off of your labor.

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You go to school to get a job.

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That way you can work as a doctor, as an attorney, as an accountant, as an engineer, as a whatever you want to do.

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As a nurse, you can do whatever you want, but you learn to make money from your skills as a laborer.

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But if you look at the wealthiest people in this country and the world, they're not working to make money off of their labor.

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They're working to make money off of their capital, their money.

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They own investments.

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They own businesses.

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They own stocks.

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They own real estate.

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And when the value of those assets go up, they become wealthier.

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If the value of those assets go down, they lose money on paper, but they can also create income from these things.

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And so if you look at the wealthiest people, they make money from their capital.

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Our entire education system teaches us how to make money off of our labor.

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I never once learned a thing about investing.

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I never once learned a thing about dividends or royalties or rental income.

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These are things that I had to go out and learn on my own.

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And I was very lucky.

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I got lucky that I stumbled across some financial education books and started reading these things.

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And it piqued my interest.

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but the average person doesn't.

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And so you get screwed if you don't go out of your way to learn this.

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Now, I'm very happy that YouTube makes this information much more accessible, but still, you have to be the one to go out and take that first step.

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Thanks for tuning in.

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If you found this valuable, don't forget to hit that subscribe button so you never miss an episode.

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And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode.

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See you in the next one.