Investing in Philippines: Another thing that makes the rich richer and the poor poorer


Sunday, March 13, 2011

Another thing that makes the rich richer and the poor poorer

If you remember my post on the same topic, you will remember that one thing that makes such things happen is because of TAX

Now there is another thing that makes rich richer and that is what we call ATTITUDE.

If you have already read Robert Kiyosaki's book "Rich Dad, Poor Dad" I believe you get the whole idea.

For those who haven't let me dispense what so far I have learned and digested.

As Kiyosaki's rich dad, which is his friend Mike's dad, said the rich become richer because they keep on increasing their asset while the poor become poorer because they only increase their earnings.

The key ATTITUDE here lies on the definition of an asset. The poor define asset as a thing of value they owned. The rich define asset as a thing that puts money in their pocket. Because of this definitions the poor keeps on buying things which they consider has value like cars, house, and jewelries thinking that they have real value. 
This attitude is what we call the SPENDING ATTITUDE. And in order to spend they keep on working and working only to buy things for self use and the only way to feed that spending is to increase their earnings; just up to there and no other. Thus they work hours and hours to have overtime pay, slave to bosses so that they get promotion and have a raise, to the point that they try to impress the higher ups so that they get increase or bonus. This is what they call the RAT RACE; you have to work to feed that spending.

On the other hand the rich focus on one thing that is to increase their asset. They don't just buy things of value, they buy asset that put money to their pockets this is what we call INVESTING ATTITUDE. 

They buy rental property, they buy stocks that give dividends, they buy small business which runs on its own and gives them earnings, they buy  property which can be resold at a gain, and so on. They buy things that generate income and re-invest those income to get more assets that generate income thus their asset increases so their earnings increases until to the point that they don't have to work because their assets generate enough to make them retire young.

The poor complains why the rich don't work hard and yet they have luxury. The poor gets jealous thus he works to earn enough and buy the same things he sees in the rich and end broke because of so much liabilities. The true rich on the other hand waits until his earnings  from his or her income generating assets is more than enough to sustain that asset's operation. The extra earnings becomes free money for her or him to use to buy and enjoy luxury. They only buy on credit to leverage. But there are rich who doesn't know such thus they make bad spending just like the poor and end up broke losing the money they have.

It is on how one handles money. That is why to be truly rich does not necessarily mean filthy rich but rather it is the point where one does not worry where to get the money to buy one's needs and one's luxury from time to time because they have assets that work hard for them.

No comments: