In last month’s issue, we discussed how the Rich Plan their Retirement while the Poor merely HOPE they can Retire. This month, we will be looking at Rich Money Habit #7: The Rich Spend Less than they Make, the Poor Spend MORE than they Make.
There is a reason why the Rich become richer, and the Poor become poorer and get trapped in debt. The Rich become richer because they always spend less than they make. With the surplus they have, the Rich buy Assets. Assets, as you know, are things that put money into your pocket, hence making you richer. The assets the rich buy will generate dividends / interest / profits for them. The dividends / interest / profits generated will be used to buy even more assets, which in turn, would generate EVEN MORE dividends / interest / profits. So, by spending less than they make, the rich would be able to put their money to work hard for them, hence making them even richer!
The Poor on the other hand, become poorer and get trapped in debt because they spend MORE than they make. Most of the money they earned is spent buying liabilities that decrease in value. The more liabilities they buy, the deeper in debt they are. And very soon, they find themselves earning JUST ENOUGH to pay off all the debts they have accumulated. By now, all the hard work will be focused on how to get themselves out of debt. And that’s why the poor become poorer.
If you noticed, from the start, there is only a small difference in the way the rich and the poor treat their money. One spends less than they make, and the other spends more than they make. But the end results are vastly different!
So, kids, if you want to be rich, you need to learn how to Spend less than you make and invest your surplus in assets to enable your money to work hard for you!
In next month’s issue, Rich Money Habit #8: The Rich work at building Wealth, the Poor merely try to survive.
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