If you ask Anil Ambani's assets, at least some people will know that Anil Ambani filed a bankruptcy suit, and Donald Trump has filed for bankruptcy 8 times, but have you ever wondered how they are able to do this? They are able to do this because of their knowledge of protecting their wealth and the legal system. This attitude is not necessarily shared by ordinary middle class people, the middle class is more than a social class. If you fall into this, you may not have an idea of ​​how to increase your income or increase the number of sources of income. Let's look at 8 things to keep in mind to avoid falling into the middle class trap:

Risk Reward Curve

A risk reward curve is a chart that explains the principle that for any given return, there is a risk associated with the reward. Let's take an example. When investing in the stock market, the rich always keep their portfolio balanced. They invest their investments equally in high-risk and low-risk assets. This helps them to weather the market fluctuations without incurring losses. But those with a middle class mindset, without understanding this, either put their entire investment in a risk-free option like FD or invest it all in a new app or a high-risk stock due to social pressures. Both of these methods will trap you in the middle class trap. Investments like FD take a long time and offer only small returns. If you invest all your money in something like a new app with high risk, you may lose all your savings in a day. Even if you can earn a high level of income by taking on risk, your interest in investing in such investments will be reduced. Therefore, understanding the risk-reward curve is very important.

Buying your own house

Buying your own house is the life aspiration of any middle-class person. By buying a house that does not fit into their budget in the first stage of earning, most of them end up having to pay home loan EMI for a large period of their life. However, the rich people all live on rent in the first stages of earning. By living on rent, they avoid falling into the EMI trap and earn income from the money they earn by investing it in various ways. They buy a house only when they reach the stage where they can buy two or three houses with their savings. Falling into the middle-class trap and thinking about buying a house in the first stage is not a good decision from a financial perspective.

Decisions that can destroy your savings

Let's take an example: You have been admitted to two colleges, one is the best in the country with very high fees and there is no scholarship, and the second is a fairly good college with full fee scholarship, which one would you choose? Those in the middle class trap often think that if you study in the best college, you will get a good job and therefore you will be able to pay off the loan taken to pay the fees, so you will go to the college with the highest fees. But by doing this, you will be forced to pay the loan instead of investing the income you get after your studies. It is important to avoid such decisions that can destroy your savings. Similarly, not taking insurance to face unexpected losses is also foolish from a financial point of view. Insurance is mandatory to face unexpected things like job loss, accidents, and death.

Not investing in real assets

The general perception is that investment always means in real assets, but that is not the truth. This can also be explained with an example. If you ask a middle-class person whether real gold or virtual gold like Sovereign Gold Bond is a better investment, they are more likely to say SBG. Most people think that SBG is different because they think that real gold is difficult to store and manage, and this is true. But the rich, who understand that the price of gold increases due to fluctuations in the global market, always invest in it. Similarly, the difference between real estate and the stock market is that while most people are attracted to the stock market, the rich always invest in real estate.

Not understanding the way money goes

There are only few people who have not heard of hedge funds. What is a hedge fund or hedge management? Hedge management is the process of entrusting someone else to manage your money. When the rich entrust money to an intermediary to invest in this way, they closely monitor where their money is invested. Even though ordinary people invest, they stop investing when they entrust money to a fund manager. Due to this, investors do not know anything about hidden fees or how the money is invested.

Personal loans

This can be explained through the story of Anil Ambani mentioned earlier. Although Anil Ambani filed a bankruptcy suit, all his personal wealth remains the same. This is possible because he only took business loans. Taking loans in the name of the business and not in his own name will help you avoid getting into debt in the future. Not only for those who do business, but also in general, avoiding personal loans will help you escape the middle class trap.

Not having enough knowledge about investing

Recently, we have seen many advertisements saying that you can invest in this startup and become an angel investor. Often, people with a middle class mindset are attracted to this and are ready to invest. But they do not necessarily have much knowledge about what they are investing in or how this investment can be monetized in the future. They invest thinking that they can get high returns as angel investors, and they are not even sure whether they will be able to sell these shares in the future. The rich always invest only in places that they can fully understand.

Not having more than one source of income

In these times when the inflation rate is rising, increasing income is more important than saving. Therefore, it is important to have more than one source of income. The world's billionaires have an average of 8 sources of income, but ordinary people always focus more on just one job.