Is it possible to be both rich and broke? Absolutely.
A person can earn a lot of money, but if they spend it like it’s never going to end, they’ll end up broke. There are those who are rich and those who are wealthy. Neither group worries about money, but each group does it in their unique way.
The rich don’t worry about money, in that they don’t think of the consequences of spending it. The problem is, if they stop working or their single source of income stops, they have no way of meeting their financial needs or paying their debts.
The wealthy don’t worry about money because they don’t have to. They have passive sources of income that meet their needs, and they never do anything to jeopardize losing that income.
I recently came across an article that challenged readers to ask themselves whether what they’re feeding their brains is contributing to their growth or value in any way, or if it’s just taking up time and resources (i.e., social media).
Whatever you input into your brain on a daily basis, you have to ask yourself if that thing is making you grow and if it makes you become slightly better today than yesterday? Is it making you add value to other people’s lives, or is it just feeding you dopamine, keeping you distracted and entertained? When it comes to money, we should be asking the same thing.
When we spend money, is it adding to our wealth or taking away from it? Or are we just using money to satisfy a need or desire that ultimately drains resources?
The rich – and honestly everyone else – often spend trying to keep up appearances. And with the onslaught of social media, the need to keep up with the Joneses has only gotten worse. That’s why even some of the most educated, highly paid professionals are broke. They live paycheck to paycheck because their outgoing cash flow barely meets their incoming cash flow.
Living a lifestyle they cannot afford can ultimately lead to financial ruin for many of the rich. And this financial ruin can come in a heartbeat if they lose their job, or in the case of athletes and celebrities, can no longer perform.
As mentioned earlier, the wealthy don’t worry about money because they approach money differently than the rich. They ask themselves that vital question often of whether an expenditure will add to their wealth or contribute something positive to their lives, or just ultimately drain their resources. That’s not to say that the wealthy don’t go on nice vacations or make extravagant purchases. They just don’t do it to the detriment of their long-term wealth.
Asking the hard question of whether an expenditure will add or take away from wealth is what sets the rich and wealthy apart. While the rich will often spend without fear of consequences, the wealthy are more interested in using money to create more money (i.e., invest).
To stop being broke even when you’re rich will require adopting the habits of the wealthy. These habits not only include adopting new ones but eliminating old ones.
These are some of the habits of the wealthy:
Thinking long-term forces individuals to question their money decisions. By thinking about the long-term consequences of money decisions, individuals can avoid bad habits like buying things they can’t afford or going into debt for these things. This first step of thinking long-term can stop the bleeding of money and turn your attention to more positive uses for your money.
Save and Invest.
The wealthy put their money to work for them. That’s why they would rather save and invest than spend on frivolous toys, assets or entertainment. And the wealthy aren’t content to just invest in anything. They don’t speculate like the masses do. They prefer investments with a track record of success and a track record of rewarding their investors with both cash flow and appreciation. The ideal investment is one that cash flows and where that cash can be reinvested to create additional streams of cash.
The wealthy prefer productive alternative assets like commercial real estate and tangible businesses that generate cash flow but where the underlying asset appreciates at the same time.
Ignore the Noise.
Avoid social media and avoid getting caught up in what your neighbors or colleagues are buying or spending their money to avoid making the same money mistakes.
You can be both rich and broke, but to stop being broke when you’re rich will require getting rid of old habits and adopting new ones.
The next time you’re faced with a big money decision, think long-term and ask yourself whether the expenditure will add anything positive to your wealth or if it will take away or stunt it. Asking this question is why the wealthy invest first and spend second, while the broke always put spending first.
To stop being broke, try investing first and spending later.