Have you ever imagine how rich people get richer, poor people get poor and broke while middle class people shrinking. You can easily identify how the middle class, poor do and rich people spend their money. Today I am going to teach you how to become rich by spending money. Before you get know the secret of how the rich people getting richer you have to know several financial terms such as.
Cash flow = money that you bring in to you (money you make)
Expenses = money that you spend (money you spend)
Assets = traditional thinking of assets is something that you own ,
but in late 90s the definition of assets was changed by the famous “Rich Dad Poor Dad” book author Robert T Kyosaki. According to Kyosaki definition asset can define as “Something that pays you”. (Pays you). According to his teaches he is much focused on to become rich by spending money on Assets creations.
Liabilities= something that costs you (cost you)
Traditional thinking your house considers as asset but real fact is house is not an asset it’s really liability.Most of people thinks to become rich by spending money on Assets on their houses is best way to have. With our revised definition of assets anything that cost you called as liability not asset. Consider if you have a mortgage on your house, it become asset to your banker because it pays your banker every month. But in some circumstances your house could be a real asset to you. For example if you buy a house and rent it out it pay positive money in to you that mean positive cash flow for you after expenses. So that house can consider as an asset.
How broke people spend money.
Broke people consist of large portion of our society and most of them having same behavior such as Live from paycheck to paycheck and On Payday broke people buy stuff (inexpensive items) that don’t really need to survive. For broke people cash flow come in and go away from their expenses and how they don’t own any assets or liabilities?. Most of their cash flow doesn’t produce more cash flow to their account. Creating wealth isn’t a mystery it’s a formula, Reason someone doesn’t create wealth is because they don’t know the formula or they don’t apply the formula. They don’t know the theory behind to become rich by spending money on Assets. So they got poor day by day due to lack of financial knowledge.
How Middle class people spend their money.
The middle class people are a group of people mistakenly think that they are rich. Sometimes middle class people may earn six digit income many of them appear as rich. The thing which buys middle class people who keeps them in prison in financially. Middle class people typically by liabilities’ and liability cost and those liabilities generate more and more expenses for middle class people. Liabilities such that cars, houses, boats and credit card debts. In most middle class and broke people income is based on only by their effort. They educate and work hard for someone’s money. Normally the money that make middle class and broke people highest tax form of income.
How rich people spend their money.
Rich people acquire assets that pay them so if you want to become rich buy assets that generate more money. Acquire assets that produce more cash flow then invest the profits from those assets for more cash flow and then invest that cash flow for it to buy more assets which create more cash flow. Stocks, Bonds, Real Estates are few examples for assets which create more cash flow. Another kind of assets that you can collect is cash generating opportunities, specially those opportunities that can create passive income. Passive income means that once you build it up the money continue to flow whether you still build it or not. Rich people are much more eager to create passive cash flow opportunities because those opportunities continue to pay them month after month and year after year. Successful businessman find passive cash flow stream that they build which continue to pay them month after month and year after year than they take those profits and invest in another passive cash flow opportunity to multiply those money and then again another . You can’t create passive cash flow unless you’re open to hear about them. Then once your find them you must be willing to see what fits you and then act. These opportunities are out there but you have to find them
Conclusion
As a summary the broke people buy stuff, Middle class people buy liabilities and the rich buy assets and cash generating opportunities that create passive cash flow. I think now you got an idea on Then they take that cash flow and invest other assets that produce more cash flow that is the wealth creation formula of rich people.
Related
The middle class people are a group of people mistakenly think that they are rich. Sometimes middle class people may earn six digit income many of them appear as rich. The thing which buys middle class people who keeps them in prison in financially. Middle class people typically by liabilities’ and liability cost and those liabilities generate more and more expenses for middle class people. Liabilities such that cars, houses, boats and credit card debts. In most middle class and broke people income is based on only by their effort. They educate and work hard for someone’s money. Normally the money that make middle class and broke people highest tax form of income.