Why The Rich Get Richer & The Poor Get Poorer
~By Paul Doria
Why The Rich Get Richer & The Poor Get Poorer again and again? Actually there are lots of aspect to learn to better understand the fundamentals of getting rich and how to be poor. Now, as I am applying what I’ve learned how to see transparent with money, I knew I have to train my brain to think differently to educate my self about financial literacy.
So why does the rich get richer and the poor get poorer really? My answer is simple, rich people only build or buy only assets while the poor only knows how to spend on liabilities they think it is an asset. Most people simply do not understand the definition between “asset” and “liabilities”. Remember, asset is money that gets IN to your pocket while liabilities are money that takes OUT money from your pocket. It’s that simple! The rich gets richer because rich people simple know how to manage their income, their balance sheets, their cash flow, they understand the definition and the difference of a liability and an assets, they know the difference of a bad debt versus good debt, the difference between risk and risky. For me financial intelligence is an attitude that everybody must learn in able to become rich and this takes time and lots of wisdom to truly understand it. Many of the rich gets richer because they simply buy assets and with that asset they may multiply their income and may continuously buy assets and invest in many different form of investing.
On the other side the poor buys and spend a lot of liabilities and where some buy assets that they think it is an asset. For example when a person buys a home he/she thinks it would generate income from it in the long run, they are wrong because the problem is that they buy it with their own money without the idea how to get back that money with profit. In my point of view that is money taking away from your hard-earned money – from your pocket where you need to pay years of mortgage. Imagine paying all that liabilities for years from your own sweat? That could be my life. For me, to make that into profit and work that money like the rich people, it would make them rich if they bought it and rented it out and let their tenants pay for the mortgage – and that without me working hard for it for years.
There are lots of poor and middle class people who spend a lot on shopping too, like buying expensive toys, dress, cars and luxuries and while things are transparent with me when it come to money. My consciousness and awareness about money and investing automatically reminds me that if someone buys something from the store it is automatic that there will be someone who will profit and that is the rich ones who invest and make their money work hard for them. So what happen to that person who spends money at things that won’t make money or better say liabilities? That person might not get rich enough than the real rich people out there. This is because they just spent their money on liabilities which won’t get him far to be rich. Remember that assets are something that puts money into your pocket and liability is something that takes away money from your pocket. So let me ask you a question, are you the one who spends a lot on things that may not generate revenue every time you get your pay check or are you the one who makes the buy make a sale and invest? Let me tell you this, If you would have a chance to research what a balance sheet would look like, it may be much easier for you to understand it. A balances sheet is simply where you may be able to clearly identify your expenses, income, assets and liabilities. With a balance sheet you may be able to view your cash flow – if you even got a cash flow. The rich gets richer by simply knowing where the money flows. On the other half the poor gets poorer because of buying liabilities instead of an assets and where others buys liabilities they think it is an assets.
If you want to get rich in the near future I would recommend one of my favorite authors in finance which is Robert Kiyosaki. He has been one of my favorite of all time and has really changed my life to see money transparently with no regrets. He has dozens of financial books, Audio’s, CD’s and his best-selling Cashflow games for mental taste of money. I suggest if you are a beginner to read POOR DAD RICH DAD follow-up with the Cash Flow Quadrant. – Enjoy