How the rich think about money
Over the last few months I have been learning to think rich. It seems that once you train your mind to think rich, things begin to change. I can actually testify to that given that I have added several thousand dollars to our family income over the last year.
There are several key differences to how money is viewed. The following is a simple but powerful example.
Poor people say, "I can not afford it".
Rich people say, "How can I afford it?".
"I can not afford it" is actually a very negative statement. It takes responsibility away from the person making the comment, and leaves little room for creativity. However, the act of turning the statement into a question stimulates the brain to begin coming up with ideas! It puts the onus back on to the person asking the question.
Another example might be of someone who would like to buy a new car. The poor or middle class person does not have the required $30,000 saved up to make the purchase. So they sign a lease agreement or take out a loan. Either way, they get into debt in order to purchase the vehicle.
The rich person, on the other hand, thinks differently. He or she will 1st buy an asset. When that asset produces enough cashflow to cover the cost of the lease payments, the rich man or woman will then go and ge the car - but not before!
An asset is typically thought of as something that is purchased that will appreciate in value over time. An example might be an antique vase. As the years go by, if it is kept in excellent condition, it will become more valuable with age. However this is not the kind of asset that the rich try to aquire.
Those who are wealthy do aquire assets, but they buy assets that generate income (or cashflow). Take a house for example. If someone buys a home they might spend $300,000. Of course they only pay the downpayment of say $80,000, the mortgage covers the rest. Then the house is rented out to someone else. The mortgage payment of $1400 per month is then covered by whoever is renting the property. But since the house is being rented for $1800 per month, the owner is making a profit of $400 per month.
This is a simplified example that does not take account of property taxes, insurances etc, but hopefully helps explain why the rich buy income producing assets. This is what cashflow is all about.
Of course it is not just real estate that can produce cashflow. One can also purchase paper assets such as shares, and rent them out using covered call options. Another option would be to generate income from royalties of songs or artwork. Someone else might choose to buy a business that is creating a healthy profit every month.
For a more detailed look at the kind of assets the rich buy, visit my website at http://www.financially-independent.com/3-kinds-of-asset/
The rich think about money differently than the poor or middle class
There are several key differences to how money is viewed. The following is a simple but powerful example.
Poor people say, "I can not afford it".
Rich people say, "How can I afford it?".
"I can not afford it" is actually a very negative statement. It takes responsibility away from the person making the comment, and leaves little room for creativity. However, the act of turning the statement into a question stimulates the brain to begin coming up with ideas! It puts the onus back on to the person asking the question.
Another example might be of someone who would like to buy a new car. The poor or middle class person does not have the required $30,000 saved up to make the purchase. So they sign a lease agreement or take out a loan. Either way, they get into debt in order to purchase the vehicle.
The rich person, on the other hand, thinks differently. He or she will 1st buy an asset. When that asset produces enough cashflow to cover the cost of the lease payments, the rich man or woman will then go and ge the car - but not before!
What does it mean to buy an asset that produces cashflow?
An asset is typically thought of as something that is purchased that will appreciate in value over time. An example might be an antique vase. As the years go by, if it is kept in excellent condition, it will become more valuable with age. However this is not the kind of asset that the rich try to aquire.
Those who are wealthy do aquire assets, but they buy assets that generate income (or cashflow). Take a house for example. If someone buys a home they might spend $300,000. Of course they only pay the downpayment of say $80,000, the mortgage covers the rest. Then the house is rented out to someone else. The mortgage payment of $1400 per month is then covered by whoever is renting the property. But since the house is being rented for $1800 per month, the owner is making a profit of $400 per month.
This is a simplified example that does not take account of property taxes, insurances etc, but hopefully helps explain why the rich buy income producing assets. This is what cashflow is all about.
Of course it is not just real estate that can produce cashflow. One can also purchase paper assets such as shares, and rent them out using covered call options. Another option would be to generate income from royalties of songs or artwork. Someone else might choose to buy a business that is creating a healthy profit every month.
For a more detailed look at the kind of assets the rich buy, visit my website at http://www.financially-independent.com/3-kinds-of-asset/
