Have ever admired the lifestyle of the rich? Especially when it comes to the kind of stuff they buy. Their wristwatches, their rides, their clothes, their houses, their hairdos, and the like?
“I can’t wait to become extremely rich so that I can equally purchase similar items and more.” Would I be right to assume that’s what you are thinking right now? Well, I guess so. That’s why you are here to find out that the one thing that the rich buy that the poor don’t.
How do the rich even make their money? I mean, how are they able to afford these things?
You see, a good number of us have it all wrong in our heads when it comes to the subject of money. We think that working extremely hard is the way to acquire wealth. So, we are programmed to think of money and riches in that light. Hence, we work hard to be the best student in the class so that we can earn a certificate of excellence.
This way, we would be able to get whatever position we desire and earn as much as possible so that we can become millionaires.
Of course, it’s a good thing to do. However, it is just about 10% of what you need to do to become rich. Knowing the one thing to buy that the rich buy that the poor don’t is extremely important if you are going to be rich.
In this blog post, we’ll be sharing with you the one thing that the rich buy that the poor don’t.
Ever heard of these words, assets, and liability?
Business Dictionary defines assets as something that an entity has acquired or purchased, and that has monetary value (its cost, book value, market value, or residual value). Simply put, assets represent the value of ownership that can be converted into cash.
Liabilities, on the other hand, are the sums of money that an organization or an individual owes. Liabilities can come in the form of accounts and wages payable, accrued rent and taxes, trade debt, short- and long-term loans, and the likes.
In other words, an asset is something that pays you, while a liability is something that costs you.
From the definition of both terms, it should be pretty much obvious what the rich buy versus what the poor buy.
In Robert Kiyosaki’s bestselling book on personal finances “Rich dad poor dad,” one of the dads is very much intelligent with an incredible educational background. He had earned a Ph.D. and completed 4 years of undergraduate work in less than 2 years.
Also, he went to one of the prestigious schools in town on full financial scholarships. The other dad, on the other hand, didn’t even finish 8 grades, yet he went on to become one of the richest men in Hawaii. How? Why? Assets.
Unlike poor people, rich people let their money create more money for them. They buy assets first, invest and then buy liabilities. On the other hand, poor people take money from their income and spend it on their expenses. They spend it buying liabilities.
Poor people buy shoes, clothes and a bunch of other “little stuff” that they think does not seemingly count, inexpensive things that end up amounting to so much money. The middle class, likewise, spends their money on things they consider better than that of the poor, but still liabilities.
For instance, the middle class buys things like big houses, nice cars, and vacations, and pays for them on credit every month. After a while, their debts catch up to their monthly income and they become trapped in the things that ought to have been a source of happiness for them.
Eventually, they are stressed out because they have to make more money to sort out their bills and buy more liabilities such as another vacation, paying for their kids’ school fees, and the like.
They literally become workaholics, working several jobs at once in order to keep up with the lifestyle they have chosen.
Note that: A person can make a lot of money and still be poor because of the way they choose to spend their earnings. In fact, it doesn’t matter how much you earn as long as you don’t buy assets, you’ll be poor in the long run.
The spending habit is what differentiates the rich from the poor.
The rich buy assets, which generate income until the assets cover their expenses completely and they no longer have to exchange their time (in terms of being a workaholic) for money. Their asset continues to grow, making their income increase further, which is why the rich get richer.
So, what assets do rich people invest their money in?
Make a list of 10 millionaires you know and show me any of them that don’t have a business. I bet it’s hard to be rich except you build a business. Now some people would say, “But it takes money to start a business”.
Well, that’s a big lie many poor people have believed for ages, but the truth is, it takes courage, not money, to build a business. Napoleon Hill said, “Capital is everywhere for whoever knows how to use it”.
2. Real estate
Owning a property and simply renting it out to people to make passive income is one of the greatest assets anyone can acquire. This can help you earn a steady cash flow every month. It could be renting out a whole apartment or renting out smaller spaces or rooms in the apartment.
You can even own a Real Estate Investment Trust (REIT). This means that you’ll invest in a company that uses money from many investors to buy and operate income-producing real estate.
3. Stocks and Bonds
You might not be able to start or own a business, but you can be a shareholder or become a partner in an existing one by investing in it via stocks and bonds.
Stocks are an equity investment that represents part ownership in a corporation and entitles you to part of that corporation’s earnings and assets while Bonds are fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental) and can be thought of as an I.O.U. between the lender and borrower which includes the details of the loan and its payments.
Certain commodities are finite resources that will increase in value over time, such as gold, silver, metals, diamonds, oil and gas, vending machines, and the like. Warren Buffett, for instance, started with a pinball machine, and today, he is one of the wealthiest men.
In conclusion, I can tell what your financial future looks like if you’ll tell me the first thing that comes to your mind whenever you earn money. If the first thing that comes to your mind is how to buy a new car or new clothes, you’re a poor person.
If, however, what comes to your mind is how to save and invest, then you’re a rich person because the rich get rich by investing in assets.