What is the K Shaped Economy? Rich VS Stucked Explained (Wealth Gap)

[00:00:00]What if I told you right now two completely  different financial futures are being created and you are already on one of these two paths.  One group of people is quietly building wealth, buying assets, watching their money grow even  as they sleep. The other group working harder than ever but falling further and further  behind. This is called the K-shaped economy.

[00:00:23]And the scary part is it's not even about how  hard you work anymore. is actually whether you understand how money works. So today I'm  going to break down the K-shaped divergence, why it's important you understand what is  happening right now and making sure you're on the right side of it. Hi everyone, I'm John,  one half of the corporate breakout couple. My wife Fran and I have hit our financial  independence and early retired by 2020.

[00:00:49]And it is our passion to talk about content that  helps our audience grow their financial literacy and be on the right side of things so that they  can hit their financial independence earlier. So please give a like and subscribe to our channel  as we create more content like this for you.

[00:01:07]What is the K-shaped economy? In simplified  terms, it means there's a divergence between the high income earners versus the lowincome  earners. And it's represented on this pictorial where there's a upward trajectory for people who  have high income and doing well in the K-shaped economy versus the struggling low-inccome  earners who are going downwards. And here's another pictorial that actually represents  these current sentiments. people who are doing well monetarily represented by the green arrow  the high income earners versus people who are struggling to keep up with inflation the rising  cost of living as the economy grows as they say the rich gets richer and the poor gets poorer  and this K shape actually really represents that. So the important question is which side  of the K do you want to be on and it is utmost important that if you want to be on the green  arrow the upward trajectory you make sure that you level up your financial literacy you keep up  with the financial news level up your financial health make sure you're actively making effort to  improve it. If you want to be on the upward path, one of the indicators is whether your current  main source of income, probably your job, your career is of a high income and you  are above the median income of let's say in this case in Singapore the median income is  around $5,800 for 2025. So you want to make sure that you're above that and your job has the  potential to grow faster and faster ahead of the median income so that you can be ahead of the  curve and actually be on the upward trajectory.

[00:02:43]Another important aspect to be on the upward path  is to make sure that you're investing actively and to continue building assets as you go on in life.  That's so important. Friend and I always advocate building multiple assets as you grow your wealth  because that's where you can really compound and actually grow your wealth exponentially. And  we invest in real estate. We invest in paper assets like stocks deployed through options. We  actually invest in precious metals as well. We used to invest in crypto, not anymore, but we did  have a go at different asset classes to see what portfolio fits best for us. And this is after a  decade plus of investing in trying new things, succeeding and failing along the way such that  now we are early retired. we can actually have our assets giving us the cash flow passively so that  we don't have to work if we choose to. Here's a representation of the K shaped economy where there  are two realities that is growing apart on the outward path that I mentioned to you earlier. high  income earners, asset builders and actually tech people, remote workers who are actually in the  kind of in demand jobs like AI-driven jobs and also driving businesses that actually pivot and  actually grow together with what's important, what's needed in the economy these days. These  are the people they are driving. Whereas on the other end on the downward path, people that  may have stagnated in their jobs, people who are low wage earners, people who are maybe in  the service retail industry that could have some of their jobs taken by AI and robots. And  of course, the rising cost of living, inflation, and also businesses that could be sunset are  probably not doing well. And this is two different realities that actually growing apart further and  further. two different groups of people the same starting point but drastically different outcomes  and I can share with you that this will not be a temporary thing is actually structural so the  building blocks that you have right now is utmost important to where you want your trajectory to  grow towards let's talk a little bit about asset building and here's the hack asset builders know  that while they are earning money from their main source of income probably their 9 to6 job they are  also investing actively so that what you earn plus what you invest the growth and the potential of  exponential returns from it goes so much faster.

[00:05:09]You are talking about blocks of 5 years 10 years  that's actually a very long time as evidenced by how I hit my financial independence within 5  years instead of the plan 10 years because when your assets come in and they compound they stack  on top of each other and these are passive income.

[00:05:26]If you add in your active side hustles, your other  active income together, everything grows so much faster. On the other side, if you are just a  normal wage worker, you work 9 to6, one job, your only source of income. You will earn your  income, your paycheck by the end of the month, you will spend and you will just repeat. Your  money comes in, you draw down. The max maximum you can do is to save a amount of money, but  it doesn't compound. So, it just grows slowly.

[00:05:54]And that amount of money might get eaten up by  inflation or the money you put in the savings account is running slower than how inflation can  eat up all your earnings. The point of the whole matter is invest in assets and don't acquire  liabilities. And that is the problem today because people are actually buying liabilities and  investing in zero assets. Liabilities like cars, houses, vacations, food, material things.  These are things that doesn't give you return. It doesn't give you cash flow. Whereas  when you build assets, you grow your assets, you increase your cash flow, you have a bigger  financial impact on your wealth and is eventually you will get there much faster compared to  people who are having credit card debts and paying interest. That's the worst case scenario.  And actually getting into more and more debts.

[00:06:50]It is extremely evident these days that wages  are rising much slower than inflation. Especially when you see the amount of layoffs, the tech  disruption that's coming in with AI taking a lot of jobs. Graduates finding difficult to  enter the economy and unemployment rate has gone up. So inflation and the cost of living  pressures is getting more and more real and that's something that all of us need to note  because we can no longer depend on that one single job that single source of income that  actually eventually takes us nowhere in the K shape for many people who are on the downward  path they are struggling to keep afloat they can't even tread water to stay alive to pay  their basic necessities transport housing food cost they're actually hovering into poverty  line because of the cost of living and the rising inflation and it's very real these days with the  amount of money printing if you look at the number of the amount of debt that's being created by  the US government and versus the stock market you know a lot of money is actually going to  the stock market which is where the divergence is the rich just gets richer the wealthier gets  wealthier because they own assets whereas normal wage workers who do not own a single strap of  assets assess and only have debts, liabilities, they are the one that will struggle the most. They  will swipe more of their credit card to actually afford more perhaps even their basic necessities.  They are really struggling. So it's no longer about these guys who are just treading water to  stay afloat but they actually drowning actively.

[00:08:28]Another key aspect of the K-shaped economy is  lifestyle divergence. On one side you have the wage workers who are on a downward path. They are  facing stress from all angles. They have no margin for error. Money is very tight and they have  trouble putting food on the table. Whereas on the other side, the upward trajectory, you're talking  about those who continue growing their wealth, those who have continuous cash flow, those  that have passive income from their assets.

[00:08:56]They have freedom, they have time, and they  have options. The old way of money making which is adopted from the industrial age where  people work 9 to6 get a job you know secure your job for the rest of your life one company and  then you get retired well taken care of it no longer works the old way actually gives you a  lot of financial stress a lot of anxiety and a lot of money problems. So you want to look at  the new way of creating freedom for yourself, of liberating yourself by gunning for financial  freedom, by actually having multiple assets, different skill sets that can give you passive  income from your investment and actually having different side hustle skills that can actually  have stackable amount of cash flow so that you will find your time freedom with what I shared  today about a reality that is becoming more and more stuck. You want to make sure that you are  on the right side of things. So here are three quick moves for you to consider to move towards  the correct side. And the first one is to start owning assets. As I've mentioned time and time and  again it can be anything but do work on it one at a time especially if you are new investor because  assets certainly beats liabilities. And the second one is move from a fixed income mindset. That  one job that can take you through your whole life. Drop that mindset. Drop that belief. Move  towards an asset building mindset. Asset mindset means you are actually more interested in building  things that gives you cash flow that gives you a return that gives you dividend. Any kind of asset  that actually gives you that rental income rather than you're spending a liability like a expensive  vacation that as well has certain experiences.

[00:10:38]But if you're going one too many, you're actually  throwing money down the drain. Whereas that money can actually be used to be safe and compounded.  And that's move number three where you have your main income source, you have your investment  income, you can actually compound that and grow your wealth much faster. So guys, stay strong,  stay in the game. That delay gratification is totally worth it. And I would love to hear from  you some comments about how you build your assets, what are you investing in. Do put down in the  comments so that the community people can learn about it together as we stay strong and continue  growing in this game. With that, I'm signing off.

[00:11:16]I'm John, one half of the Corporate Breakout  Couple. I hope you enjoyed today's video. Do hit the like button and subscribe so that we can  create more content like this for you. See you.