Why the rich keep getting richer while the poor keep getting poorer?
Why the rich keep getting richer while the poor keep getting poorer? The rich keep getting richer because they have certain habits that make them richer. That’s it.
A habit is a hard to give up behavior. A habit is something that you repeatedly do whether you like it or not. A habit is something that you do consciously or not consciously, it’s automated.
Think of the habit of biting your nail. it’s a bad habit but people just do it.
Think of blushing your teeth. it’s a good habit, people just do it.
Think about expending money. It doesn’t matter the amount.
It could be
- $1
- $10
- $100
- $1,000
- $10,000
- $100,000
- $1,000,000
Someone is either spending that money or earning that money. You either consuming or producing.
Someone with poor mindset has a consumption imbalance. There is more consumption than production. This is a bad thing.
Someone with a rich mindset has a production imbalance. There is more production than consumption. This is a good thing.
Let’s us look at liabilities vs assets for example.
Liability
Example of someone with poor money habits
A poor habit is to buy a $30,000 brand new car. This car will usually depreciate 20% to 30% on the first year of use. Then the following years the car will usually depreciate around 16% per year.
Depreciation mean that the car loses value as time passes. It means that the car price goes down as time passes.
It will get to a point were the value of the car is so low that you can only sell the car for parts or scraps.
Therefore, the car is a liability.
A liability is something that cost you money.
Asset
Example of someone with rich money habits.
A rich habit is to use the $30,000 and invest it into something that would generate money. Something that can increase in value as time passes.
Such as the stock market. Investing $30,000 in the stock market for the long run. At a 5% annual rate is an extra $1,500 in just the first year, so now you have $31,500.
Of course, only death and taxes is guarantee. But this ought not deter us from trying to achieve financial freedom.
So, the stock market fluctuate by going up an down. But in the long run, the stock market has always gone up. Just look at an index fund.
Therefore, profitable investing is an asset.
It doesn’t have to be stock market, that’s just an example, you can start a side hustle, a side business.
The point is you ought to start doing things that will generate you money. Invest you time and money on buying assets and not liabilities.
Eventually, you will have so many assets that are bringing you income that you become financially free or financially independence.
by this point your liabilities will be funded by your assets, not by you.
At this point your work because you want to, not because you have to.
Excuses
All that sound well and good but what if I need a car. Only your fragile ego need an Brand new $30,000 car.
Better solution :
Buy a $5,000 used car from a trusted source. Invest the remaining $25,000 on assets.
More excuses
What if I have no money? well, get a job and spend less than your earn. Now you have money to invest.
What if I have little money? We all have to start some where. Some people are more fortunate than others. There are some apps that let you invest very little money such as $5 Like acorns.
There are others platform that let you invest less than $5.
You might be missing the point
But I think you might be missing the point if you are asking these questions.
Even if you decide to invest just 5 dollars per month, The amount is not the important thing.
What’s important is to acquire the habit of investing. Once your body and mind get familiar with the process, you might decided to increase the amount.
You might notice opportunities that will make you rich.
Before, crypto currency was just a game. I think Bitcoin was like 10 cents in 2010, today is not longer a game, bitcoin has being fluctuating around $42,000
Opportunities like bitcoin will always come and go. But you have to be in the game in order to notice them.
Here is more
Look at platform like, YouTube, Facebook, Amazon, Google, etc. There are so powerful that someone might think that they will last forever.
The answer is no.
Eventually, a better platform will show up, and people will gravitate toward that new platform.
If you have being investing, there is a probability that you will notice that trend. And like any smart investor you will ride that train to more richness.
That’s it.
Take a calculated risk.
Now, start and adjust as you go.
