Hey guys, it's Sasha Everyone tells you that paying off debt is the first step on the way to financial success, because the way to become rich is stupid simple right? You pay off your debt, you live a Frugal life, and you count those pennies, you build an emergency fund, then several years later because that's how long it will take you to repay all of your debt and build up a Year's worth of an emergency fund, then you can maybe start investing in the S&p500 or the Global Index or whatever you like. And if you play your cards right and you start doing this early enough and you stop spending on stupid things like you know, living your life, going out having coffee, and instead choose the path of a Frugal monk, then maybe by the time you retire, you will have a million dollars in your portfolio credit cards, stupid stupid student loans, stupid car payments, stupid on steroids, and you will then use the famous 4% rule that all of the financial gurus talk about. So after spending all of the best years of your life saving up for retirement, instead of living them, you can then retire super rich and draw down 4% of your million dollars and live like an absolute King on $40,000 a year. and I know that what I'm about to explain is going to be triggering for a lot of people because for the vast majority of people, what I said is maybe the best path in life that eliminates risk and makes sure that you will be fine.

You will have a roof over your head and you will be able to pay your bills and feed your family. And these things are incredibly important. They're all really good things, but there is a difference between making do and maybe making do quite well and becoming rich. And here is the thing.

The strategy for becoming rich is not just using the strategy for making do, but doing it for longer or maybe doing it a little bit better. The strategy for becoming rich is not being 20% more frugal than a regular person is, or starting investing in stocks 5 years earlier. Those things will definitely make things better. Don't get me wrong, not spending beyond your means and paying off dead are very good things to do.

And the whole Keeping Up With the Jones strategy that many young people seem to employ is is nauseating. No, you don't need that $200 pair of sneakers because if you don't own them, your mates will think you suck. You just need better mates and you need to smack yourself in the face. But if you want to become rich, the strategy for getting there is different.

and there are three pillars that make the path to becoming rich very different to the path to doing or right. They are not just different, they are actually the complete opposite. And before you go hating on me for telling you how it is and before you go and leave that obligatory comment saying sash are you leading people down the wrong path You're telling people that they should be in debt and not have an emergency fund and that is really bad advice. No, that is not what I'm saying at all.

In fact, the total amount owed on credit cards in the US has just gone over $1 trillion. Us households owe another $1.6 trillion in student loans, and another $1.6 trillion in car loans. Add in personal loans, home equity loans, store cards, and the average US household debt sits at $101,900 At the same time, the average average US household only has $155,000 invested in stocks and in the UK, it's even worse. only 18% of people have invested in the stock market.

It has never been easier to invest than it is today. now that we have investing apps like Weeble who are the sponsors of today's video Weeble are the super popular investing app from the US who have finally launched in the UK and you can get eight free shares for trying them out. This is a limited time offer right now. If you're watching this a few months later, the offer might be different, but right now you can get eight free shares worth up to $22,000 each just for signing up, making a deposit of any amount, and buying a stock to get your free shares.

Click my link in the description or in the pinned comment. So let's talk about the three things that you have to do where you have to do the opposite of what maybe everyone is saying. If you actually want to strike it big and to understand these three things, you have to think of yourself as a business, not as a person. The first point is, you have to prioritize growing Revenue Not optimizing profit.

Growing your income is infinitely more important if you want to do well than spending all of your time and thought on paying slightly less for groceries or switching your bank account every month so you can get that welcome bonus of $100 The second point is that growing your income is infinitely more important than optimizing the return on your existing. Capital Now imagine that you earn $50,000 a year and you are pretty good at managing your money. You're extremely Frugal You spend almost nothing. You live in a one bed apartment by yourself, so you can invest half 20 $5,000 a year and you spend all of your spare time learning about investing.

so you get really good at it. You're one of the best investors in the world, and you get a 20% return on average for 40 years until you retire. But if instead of doing that, you actually spent your time and applied your brain to earn $5 million a year, you could be a little bit less careful with your spending. You could maybe spend two or three times what you did before.

Maybe $50,000 or $75,000 a year year Live a little. Then, instead of investing $25,000 you could invest more like $4.9 million. and you can give Zero about optimizing your return. And the 10% a year from an index fund is still going to give you a heck of a lot more than 20% on that $25,000 in the first example.

If you want me to talk a bit more about these first two points on income, tell me in the comments below. I'll make some more videos, but now let's get to Point Number three, which is what this video is all about. Rich people don't treat debt as a monthly profitability or a monthly cash flow item. Neither do they treat it as a problem.

because debt is actually a balance sheet item. and this is a really important point. If you begin thinking about debt in this way, about having debt and having assets as items on a balance sheet, instead of thinking of them as monthly flows of cash, you suddenly get a very different perspective on how your finances actually work and what you can do with them. And if you want to become rich, this is maybe the most difficult thing to understand and is also one of the most powerful tools that will help you along the way.

If you want to see how difficult it is to understand, scroll down to the comment section and read those comments that I can guarantee you're going to be in there calling me stupid. All right, let's talk about not paying debt. The accepted wisdom is that debt is a burden. Something that weighs you down, ruins your life is the worst thing ever.

And so the first thing that you're meant to do before putting your money away is pay down debt. Because having investment and having debt at the same time is really dumb, right? right? Is it? Well, what If you thought of your debt as a company balance sheet item instead every company has assets and has liabilities. Assets are things that you own things like cash in your bank account or maybe your Investments. Maybe your house liabilities are things that you owe to other people like your debt.

If you buy a house, you get the house as an asset on your family balance sheet, and then you have the mortgage against that house as the liability. Your net sum of the balance sheet does not change when you buy a house. so maybe you used to have $50,000 Then you go and get a mortgage for $450,000 and you go and buy a house for $500,000 Now you have a house, an asset worth $500,000 and you have a liability of $450,000 which is the mortgage. The net difference is still $50,000 exactly as it was before.

but you now own a house. you have a permanent place to live, you get to benefit from the monthly usage of it, and you don't have to pay the rent that you used to pay every month. And when you begin thinking your total debt against your total assets in this way, it can be very eye openening because we do sometimes think about houses in this way. but we don't think about the rest of our debt and the rest of our Assets in the same way.

Because there are two kinds of debt. There is toxic debt. and there is useful debt. Toxic debt is the stuff that you probably do want to go and clear get rid of as soon as possible.

Things on extremely high Aprs: you probably don't want to have have that credit card debt that charges you 29% interest because you're throwing a lot of money away every single month. But in any equation, when you're talking about debt, when you're talking about the interest on the debt, you have to look at both sides of the equation because when you take on debt, you could put that debt to use by leveraging it to build out assets and to make assets that actually generate a return by themselves. Now let's compare two situations. Situation One: You have no spare cash in your bank account and you a credit card with a $10,000 balance that's probably going to be quite familiar sounding to some people.

And then there Situation Two: you have $50,000 in different kinds of assets. some of them liquid, some of them less liquid. Some of them may be Investments And you also have $60,000 worth of debt. The traditional Finance advisor will tell you the situation, too, is a really bad place to be because you have a load of debt and you should do the smart thing.

and you should use your assets to pay down the debt. That's what you absolutely must do because you know debt is bad. But what if your debt is not toxic? Say you have long-term loans that are fixed at a low APR until whatever you happen to pay them all off? maybe 2 or 3% Maybe you have credit card debt sitting on a threeyear 0% balance transfer deal? Maybe you have some kind of free overdraft? Whatever. but your assets might be generating a return at the same time.

Maybe some of your assets are some kind of Investments. Maybe some of them are sitting inside your business. now. Imagine that your car breaks down and you suddenly need to find $2,000 to fix it.

In situation one, you are kind of screwed. You only have one option. You have no choice. You have to go and borrow more money because you have no spare cash, you have no assets, and you don't have any cash sitting in the bank account.

In situation two, you do have a choice. You can decide if you want to add to your debt or if you want to pull money out of your assets and the relative movement on both is actually pretty small and better than in situation one. $2,000 is a big proportion of $10,000 so in the first scenario, you would be adding 20% on top of the debt you already have, which will meaningfully move the monthly cash flow and the total position. But in situation Two is actually relatively easy to swallow.

Some of your debt could be lines of credit or evolving credit, where you can easily draw down that extra $2,000 without any extra application for another credit card for another loan. For any extra kind of way of borrowing, some of your assets could be very easily sold. You might be happy to get rid of some of them because you were already thinking about it, and then you can use that money to pay for the car repair instead. Your ability to manage cash flow issues is much better in situation Two because you have considerably more options and you get to decide which of the options is preferable at any one time.

And the important question is how hard are your assets working for you compared to the cost of the debt that is de facto financing those assets, the cost of your liabilities. Let's say you are starting a business and you are not a wealthy person. so you don't have the bank of Mom and Dad and you don't have have connections that will drum up a couple of million dollars to get you going because you are just starting out, banks are not going to lend you money at low interest rates that only happens in movies and to people who happen to know people in the real world, you're going to need to finance that startup yourself often from just your personal money. Whatever you've saved up, whatever you haven't saved up, but you need for your business now.

Sure, you could go and draw some pretty PowerPoints Go around collecting funding rounds from venture capital and Angel Investors but that's also not how it actually ends up working for 99% of real businesses. Remember the first two pillars of getting rich? One grow. Revenue I.E Your income is more important than optimizing costs, and two growing revenue is more important than optimizing the return on your Capital Well, to grow your income, you need a lot of different things. You need to work hard.

You need to work on the right things. You need to be smart with how you spend your time. But sometimes actually, often times you also need money. You can grow your income by moving up a career ladder, but realistically, there are limits on how much your income can grow doing that, with very, very few very specific exceptions.

For most of us, the only realistic way ever in life to earn something like $500,000 a year or a million dollar a year or more is to go at it yourself. It is a lot more risk, but it also comes with a much higher potential reward. Now don't underestimate the risk. it is hard I've done it more than once I Can tell you it is not easy by any means.

Scraping through when you are days away from running out of cash is not for the faint-hearted, but it does depend on what you want out of life. You don't have to put yourself through that stress if you want to just do all right. if you want to be able to not have to think about paying the bills. and unfortunately, unlike all of the rubbish that you hear in Those ads on YouTube and everywhere else, getting rich is not super easy.

and you can't just go and set up a Drop Shipping business in an hour that will make you Millions while you sleep. And if you want to get rich, you probably won't get there by paying off your debt. In fact, debt is going to become one of your very best friends.