Buying Habits: The Surprising Difference Between Rich People and Poor People

An important topic that doesn’t get discussed is the spending habits of rich people versus poor people. Can you guess what some of the differences are?

Assets Versus Liabilities

One of the biggest differences in spending habits between rich people versus poor people is buying assets versus liabilities. Yes, we see wealthy individuals buying fancy cars, homes and going on exotic vacations, but that’s not how they spend all their money. What we don’t see are the assets they purchase with their money.

Assets are items that can either increase in value or generate revenue. These items can be quite boring and don’t get attention on social media. Examples of assets include the following:

  • Rental property
  • Businesses
  • Precious metals (gold, silver, copper, etc.)
  • Fine art
  • Vending machines
  • Paper assets (stocks, tax free bonds, cryptocurrency, etc.)

Many of these items generate revenue, some type of passive income or become more valuable as time goes on. It is with these monies that play items and toys are purchased.

In other words, they buy something valuable FIRST, then money received from that asset is used to buy the fun stuff. On the other hand, the average person saves their money from a job, then buys their expensive items. Many times, these items are purchased on credit, which pushes them deeper and deeper into debt. As a result, they find themselves working to pay off the items they purchased.

Meanwhile, smart millionaires have over 7 streams of income, while the average person only has one job. Millionaires have assets that are making money for them, and those assets pay for the items they bought and their living expenses. The average person just has a job and it is expected to pay for everything:

  • Rent
  • Food,
  • Car payment
  • Cell phone bill.
  • Insurance
  • etc.

This is the problem. Too many people are relying on one income stream to pay for their way of life. This must change.

Change Your Mindset, Change Your Life

This slight change in thinking and buying habits is the difference between working for money and having money work for you. Instead of buying the toys first, buy the asset that can generate revenue, and use those monies received to purchase that large television, fancy car or shiny new watch. These assets aren’t flashy. Rental property, franchises and bonds are designed to generate revenue for you while you sleep, not go viral on Instagram.

For those who don’t have much money, having a long-term strategy is key. Save money to buy assets. Slowly accumulate assets and allow them to generate a revenue stream for you. In time, that revenue stream will grow. This philosophy is used to save in a 401k and can be used outside of the 401k as well.

Here’s one of the best books I ever read on the subject:

It’s important to note not all rich people think this way: many athletes, entertainers and lottery winners receive large sums of money, but go broke a few years later because they don’t buy assets with their money FIRST. Instead, they spend it all on lavish items. They also give their money to family and friends or invest in businesses that are not sound. This is where financial education comes into play. They must learn how to invest that money into assets first. Instead of buying that fancy car, buy a business, and use the money from that business to buy that car.

If you family and friends want money, don’t give them money from your salary or lottery winnings, give them money from the rental property you bought, the Popeye’s Chicken franchises, or dividends from your stocks. Invest your principle in sound business ventures, so if you can’t play pro ball anymore or you can no longer sell hit records, you still have your rental property, vending machines or dry cleaning businesses making money for you.

Putting It All Together

How people spend their money can be the difference between having generational wealth and struggling to stay afloat. This information isn’t taught in school, but is key to being financially free. See our online courses on business and entrepreneurship HERE.

Get more tips in my books Invest For Success: Millionaire Wealth Strategies Not taught in School, and Planting Seeds: The Children’s Guide to Entrepreneurship. Both Available on Amazon.

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