How To Spend Money Like The Rich

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Image courtesy of grilledahi

Myths About Being Rich

When I say the word millionaire, what pops up in your mind? I believe that you must be thinking that a millionaire must own a yacht and, live in some mansion and even drive a Ferrari. I believe that the media had influenced us to have all this mental images in when we think about millionaires, but it is not 100% true.

Most of the self made millionaire are actually frugal and they do not splurge their hard earned money on liabilities. Instead, they protect their capital and also invest it intelligently to make their money work for them instead of them working for the money.

In my pursuit of being wealthy, I am observing closely how the rich behave and what are their money habits. By observing their behavior, we can unlock the mystery of why the rich get richer and the poor get poorer.

The Poor Man Way Of Spending Money

The first thing when a poor man get his salary is thinking what he can spend his salary on to get instant gratification and it is a drastic difference from how a rich man spend his money.

The poor spend their money that they earn on liabilities instead of assets. Liabilities are things that take money out of your pocket and some examples would be the 42 inch LCD TV, home theater set or the Gucci handbags. Once the money are spent on liabilities, it is gone and the there will not be any opportunity of utilizing the money to make it work for them. This is why the poor get poorer.

The Rich Man Way Of Spending Money

How about the rich man way of spending money? When they have the money, they do not seek instant gratification and get themselves a Ferrari. Instead they are doing it the other way round. They constantly seek out assets that will help to grow their wealth.

This is the big difference between the rich and the poor. They always pay themselves first and are always finding ways to create passive income. If they keep spending their money on assets that help them to grow their wealth, they can only get wealthier and wealthier.

My Story

I was consistently broke in the past because of my poor money habits. I splurge on liabilities instead of assets and I can remember that my savings was always near the zero mark. It was until one day that I was so fed up of myself and my bank account that I begin to take action.

I started to read up books on personal development and finance and spend lots of time researching on how to become wealthy. Having done my research and equipped with my new knowledge, I begin to create budgets, track my expenses and got myself into the world of investing.

Gradually I can see my savings increase and it makes me just more thirsty for knowledge to increase my wealth.

I am seeing my friends splurging on night clubs, booze, LCD TVs and many other liabilities and it is definitely not the way I want to be like. Instead, I was slowly picking up assets like stocks and educating myself in personal finance, all this for the sake of financial freedom, because I know how much it hurts to stick to a 9 – 5 job and how valuable freedom is.

Parting Words

Start today, pay attention to what you are buying and minimize spending on liabilities. If you have debts, make a plan to clear off you debts first before the interest actually eat you up. Whenever you get your salary, make it a habit to pay yourself first and make it a consistent contribution of at least 10% of your salary into your savings account.

Having 2 bank accounts really help here. Allocate one for spending and another for savings. Make sure you do not touch your savings account and you can see it grow.

Spending your money on personal education is important as education is an asset that will increase your wealth . People can take away your physical assets but there is no way to take your knowledge away from you. Do not think that education is expensive because ignorance is even more costly. Start to invest in seminars and books to improve your financial literacy and see your money in the bank account grow.

Last but not least, take action. With all the knowledge in the world, without taking action, acquiring knowledge is just a waste of effort.

Cheers
Vincent
Personal Development Blogger

**P.S**
Do you track your expenses? Do you have frugal habits? Share with us about some of the ways you use to track your expenses. See you in the comment section. 🙂

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  1. Vincent,
    I really like this post and Robert Kiyosaki is my favorite author. It seems to be the American way to spend more than you earn. That is why people have so many credit cards (lots of interest). We really do need to learn to spend our money on more things that are less material and more inside happiness. Helping others is so gratifying. I wish to be able to do something very big to help others someday in my future. I do have to learn to save more though.

    Donna
    .-= Donna Brogan´s last blog ..Can You Visualize Your Dreams? =-.

  2. Hi Armen Shirvanian,

    I believe the misconception about how the rich handle their money is due to the media presenting to us. The rich are definitely careful with their money and that is why they are rich.

    Cheers
    Vincent
    Personal Development Blogger

  3. The way that you presented how spending differs between the two monetary categories of person is suitable because it shows that spending money like the rich doesn’t look like how people tend to imagine rich people spending money. Since it seems counter-intuitive that people with more money are more careful with it, it is helpful that you brought it up in this fashion. Preventing oneself from spending money for an instant uplifting feeling is a struggle that some would do well to take part in.

  4. Hi Rahul,

    You are welcome Rahul. It does seem like common sense yet sometimes with regards to money, people tend to act otherwise. The book Rich Dad Poor Dad will definitely to enlighten others in regards to how to spend their money 🙂

    Cheers
    Vincent
    Personal Development Blogger

  5. Vincent,

    Great article! I loved the book Rich Dad, Poor Dad, and you’ve done an excellent job explaining the main points he makes in his book through this article!

    The lessons you’re discussing here are extremely important for people to understand. It seems like such common sense, but it really isn’t. Congratulations on making a conscious effort to change your ways, and to spend money like the rich! 🙂

    Thanks for the article!

  6. @Hi Bonnie,

    We can enjoy life but we must ensure that we are not spending more than we earn.

    @Hi Arswino,

    Robert Kiyosaki definitely explain this point more in depth. I had read the 2 books you mentioned and I totally love it. 🙂

    @Hi Relax,

    I will check out that website soon. Thanks for sharing 🙂

    Cheers
    Vincent
    Personal Development Blogger

  7. Hi Vincent.

    I like this post and I’m thinking that what you say here applies well beyond material wealth as a measure of rich and poor. Those who are truly rich are those who nurture themselves first so they have more to give others.

    In my opinion, becoming rich for the sake of being rich is an empty pursuit other than to feed an over-active ego. Building wealth, whether material, intellectual, spiritual only has value if it’s shared. What good to me (or anyone else) is a million of anything if I just sit on it? Thanks for the stimulation. Ian

  8. I was also told that the poor man spend most of their money for things ‘under neck’, meanwhile the rich man spend most of their money for things ‘above neck’ (their mind).
    I have recommended books related to this article : Rich Dad Poor Dad & Cash Flow Quadrant (author Robert T. Kiyosaki).
    I like your thought, Vincent.

  9. Hi Vincent,

    I think there needs to be a balance between frugality and enjoyment of life, e.g. I will save money by buying own brands, using coupons, going to the cheaper supermarkets and buying in bulk, but at the same time I often choose quality over quantity and allow myself indulgences, like expensive organic coffee & new books. I also mostly buy organic produce, which is often more expensive but worth the extra in terms of taste & health IMO.

    When I was younger I used to hang out with a group of young Buddhists, their teacher taught a good philosophy about material possessions (realising that his student were young westerners living in a consumer society!) and taught that each time we buy a new item to not consider it ours, to consider that we’ll enjoy it for a while then give it to someone else. I often buy something like a new book and think about who I can give it to once I no longer need it, it’s a good way to avoid clutter and get more value out of things.