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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.
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.
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.
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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