 And I know what you're thinking. How can someone that makes $500,000 a year go broke? But it's easy. One would think that it's not really hard to know what being broke actually means, but it turns out it's a lot harder than you may think. Welcome back to the channel, everybody. For those of you who are new around here, my name is Michael, AKA Dr. Chlini, and I am a board certified diagnostic and interventional radiologist in New Jersey. So back to being broke. Like any of us, especially those who are in medicine, we may have heard different people from all walks of life claim that they are broke. It may be that family that just stopped sending their kids to private school because they just bought a new car and can't afford it anymore. Or it may be that doctor who just finished residency with $300,000 in debt and just bought themself a $100,000 Audi R8 because they deserved it. When you look at the bigger picture, though, you realize that all these people have one thing in common. They can't do simple math. And because of that, they will continue to be broke and make poor financial decisions. So when you picture someone being broke, what exactly do you picture? Is it someone that lives paycheck to paycheck? Or is it someone that lives out of their car? Well, what if I told you that being broke can happen to anybody? You can be a broke doctor, a broke investment banker, or even a broke lawyer. The reason being is that the amount of money you make or what career you do does not prevent you from being broke. Making poor financial decisions is what makes you broke. So what does being broke actually mean? We keep talking about it, but let's define it. It basically means you are living paycheck to paycheck and this can happen to someone making $50,000 a year just like it can happen to somebody making $500,000 per year. And I know what you're thinking. How can someone that makes $500,000 a year go broke? But it's easy. They just make poor financial decisions. So for example, say there's a doctor with $400,000 in student loan debt and continues to make poor financial decisions. They make these poor financial decisions based off if they can afford certain things or the monthly payments on certain items. And the next thing you know by doing this multiple times over, they're broke. The problem with this is that currently in our society, this is normal. It's normal to think this way because that's what most Americans do. In fact, approximately 78% of Americans are living paycheck to paycheck, which means 78% of Americans are broke. Said another way, eight out of 10 Americans do not have $1,000 in an emergency fund, which means if there's a financial catastrophe like say you lose your job or a fire burns down your house, they do not have enough money to cover the costs of such an unforeseen event. Now this is not financial advice, but a general rule of thumb that I live by and that a lot of people have told me is that you need to save up at least three to six months of your monthly expenses in an emergency fund. So for us, I calculated our monthly expenses, multiplied that number by six, and I have that money set aside if there is ever a catastrophic financial event. And I encourage you all to do the same, again, not financial advice. And while we're on this topic about being broke for the rest of this video and how it affects certain income classes, let's throw another acronym that I just learned from the article where I'm getting a lot of this data from, which I will of course link to the description below. The acronym for today is Henry, H-E-N-R-Y or high earner, not rich yet. Basically it's somebody who has an above average income, but is more likely to spend on expensive gifts rather than save or invest. They usually have an advanced degree, make solid money like above six figures and they spend money as soon as they get it. Okay, so let's get back on topic here. So now that we've identified what it means to be broke, let's talk about five ways to make sure being broke doesn't happen to you. The first way how not to be broke is stop comparing yourself to others, aka stop trying to keep up with the Joneses. I love this particular line from the article where the author states, the best way to ensure you'll have financial stress and make poor financial decisions is living with discontentment. Or said another way, you're more likely to be broke if you're not satisfied with your own possessions, status or situation. And I think social media does not help this whole thing whatsoever. Whether or not we know it, we are subconsciously comparing ourselves to others as we browse social media with a simple click or swipe. We are able to see what others have that we do not. It makes us feel like we need something better or something more rather than to be happy with what we do have. But you shouldn't equate your worth with the ability to buy things. Thinking this way will ensure that you will never be content with what you do have and will help you remain in debt forever. It's funny though, the older I get, the more I realize that these things just don't matter and they really don't mean anything. Having items that other people don't have or having the latest and greatest thing just doesn't matter as much as you get older. Well, for me at least. And as the author of this article eloquently puts, contentment cannot be reached without personal disciplines. And a few more stats while we're on this topic. Did you know that 70% of lottery winners end up broke? Usually within a couple of years. Did you know that after two years of retirement, 78% of former NFL players have gone bankrupt and are under financial distress or they're under financial strains due to joblessness or divorce? Did you also know that within five years of retirement an estimated 60% of former NBA players are broke? It just goes to show that personal discipline is the way to being content. Number two way to not be broke is changing your mindset. Like any sort of change in your life, they always begin with a mindset change. The need for this mind shift change is no different when it comes to being broke. For example, I grew up in a family that was obsessed with not having money. Everything revolved around the money that we didn't have. And we were so entrenched with what we didn't have and it was so ingrained in our lives that we didn't even have the foresight to potentially plan ahead and escape this. We were always worried about the short term. A good example of this is the whole story where you buy a cheap pair of boots multiple times over because they are cheap or inexpensive rather than buying one pair of expensive boots that will last you a lifetime. This short-sighted outlook allows for consistent poor decision-making which inhibits your ability to make good decisions. Once you change that mindset, which is easier said than done, you can slowly gain control of your finances. Unless you are tired of being broke and prevent yourself from buying things you don't need, nothing will ever change. Number three, step to avoid not being broke. Avoid money traps. Now I'm not talking about those street performers where they put like a marble under three cups and shuffle them around and you win some money maybe, but you should also avoid those now that I'm thinking about it. The types of money traps that I'm talking about is when you buy things that you can afford based off of the monthly payment which is most certainly not the same as being able to afford something. The article I keep referencing and again I will link down below gives a great example of this. Say you have a $1,000 cell phone. Most people finance these phones at 48 to 60 months because they cannot afford the $1,000 price tag. However, they convince themselves that they can afford this phone because it only costs them $50 a month with 0% interest rate. This, my friends, is a money trap. This cell phone money trap is one that I will continue to discuss here, but this is no different than one of the huge money traps which is buying a car. So what happens when we finance something that we cannot afford? Well, you end up paying $50 a month for this phone forever. Why forever? Well, because every year you're going to fall into this same trap and buy the latest and greatest phone because the technology will be replaced ever so quickly. Furthermore, you never actually experienced the pain that comes with taking that $1,000 out of your account or your wallet in pain for that phone. It's harder to grasp paying $1,000 for something that will be out of date in three years. But it's easier to grasp paying $50 a month for that phone that's going to be out of date in three years. This is just our normal psychology or kind of what we've learned over time. You only see that $50 leave your account every month versus that initial hit of 1,000, which makes you think that you're getting a deal and it makes you think it's not that expensive. And since now you didn't spend that $1,000 from your account and you only have $50 coming out of your account every month, you might as well go buy that new $2,000 TV because it's only $80 a month. And before you know it, you have multiple monthly payments coming out every single month on things you shouldn't have bought but only bought them because you felt that you can afford them and it continues to be a vicious cycle. You think you got the good deal by getting the $50 a month payment plan for the $1,000 phone, but really the company who sold you that phone is the only one that got the good deal. So in summary, if you can't afford to pay it upfront, don't buy it. Number four, avoid the net zero life. The net zero way of thinking prevents you from obtaining financial freedom. Here's how the net zero life works. Say you have $1,000 in your account. Technically, you could go out and spend $1,000 on a new iPhone because you have the money in your account. This is the net zero way of thinking. Thinking like this inhibits your chances of obtaining wealth. If you make $1,000, you can't afford to spend $1,000. Much like if you make $100,000, you can't afford to spend $100,000. And if you do, you're broke. I feel like that sound like Dave Ramsey or someone's like, still your car. And people who watch our podcast will get that reference. The same goes for people who made $40,000 a year and spend $40,000 a year. They're both broke. And the reason I keep mentioning this kind of stuff is that it's hard for a lot of people to understand this. The goal is to not spend all of the money you make. And I can't believe I actually have to say this. You must save at least some money to save for an emergency fund and also a portion to invest. If you do not do these things, you will continue to be broke and not build wealth. The key to not thinking in a net zero way is to not spend all of the money that you make and live below your means. Number five, way to not be broke. You have to understand how the money game works. Like the author of this article points out the author of Rich Dad Poor Dad. And if you haven't read that book, it's a classic book that all of you should read. I'll put a link to my description as well. And in that book, the author says, you need to know what an asset is and what a liability is. And you should only buy assets. It's as simple as that. This holds true for whatever level of earner you are. Focus on buying assets or things that put money into your pocket and avoid buying liabilities or things that take money out of your pocket. Many doctors think they are wealthy because they have a nice car or a large house, which is cool because it makes you look rich, but doesn't mean you actually are rich. Looking rich is what broke people do. Spending all of your money on things that don't put money back into your pocket is what broke people do. And they don't own assets. The rich own the assets. Broke people acquire liabilities and they think they are assets. That is the difference. And it took me a long time to realize this honestly. And as you know, I am an investor in real estate myself. I've talked about it on a number of different videos, which I'll put a link up here. And the reason I bring this up is because this is the first time I truly grasped the difference between an asset and a liability. After crunching the numbers of the first property that Adriana and I bought, a light bulb went off. By investing a portion of our saved money into that house and then renting it out, we would produce passive income that would not only cover our mortgage, but also pay us every month as well. We would also create a massive tax benefit and appreciate in value as well. It was at that time I basically decided that I needed to do more of this and I needed to figure out how to invest in more assets, not liabilities. I'd be lying if I said that saving up your money and investing it into something that has no immediate reward, like saving up $30,000 to put a down payment on a house and you just spend it and you have nothing to really show for it. It kind of is a little backwards from what we're thinking. Maybe this is because when we are kids, we usually save up our money because we want like a video game or a laptop or something. And once we save up our money, we go out and buy it and we can obtain it and we have it. We have an immediate reward after saving all of our money. When you save a lot of your money and then you put a down payment on a house, you really get nothing in return. It's almost just like you see that huge number go out of your account and you don't really get anything from it. It's not as exciting as it is as if you were buying a nice car or something that you could drive around. The excitement comes though every month after that when you start getting checks in the mail and then investing in these assets becomes addicting like any hobby. It's just like golf. You just wanna keep getting better and better and you wanna play more and more. And eventually you have enough assets to provide you with income so you don't have to work. Rather you work because it's not so bad to work when you don't have to work. I hope that makes sense. So hopefully this video may help some of you think a little differently about how you spend your money and maybe it'll prevent you from going broke or staying broke. And I'll leave you with this as the author states in the article. Once you realize that everybody in the world is after your money, the quicker you know how the money game is really being played. Just don't get played yourself. Thanks everybody for watching that officially concludes this video. Leave a comment below if you have a question or anything you wanna ask me. Please hit the subscribe button. I really appreciate the subscriber bump and like this video because it helps out with the YouTube algorithm. Follow me on Instagram and TikTok if you don't already. And like always, I'll see you all on the next video. Bye.