I want to take this time to share some fundamental truths I’ve discovered in my recent studies of what makes the Rich really Rich and the poor really poor.
This will be an eye opener to some and to other what they know already but have not practiced it before now.
This post is not about listing the many things the Rich do that the poor don’t do, rather it is about sharing with You what is at the very core of being Rich, If You don’t understand this, You may struggle to be Rich.
Let’s Define what Richness and Poverty is All About
This is where the problem starts, most people don’t understand the meaning of being Rich and being Poor. Most people look at Riches and Having Plenty money and Poverty as lack of money. Listen to this:
Poverty and Wealth is not fundamentally and completely about Money.
You can have Money and still be poor. For Example, Africa.
According to Wikipedia, “Africa has a large quantity of natural resources, including diamonds, salt, gold, iron, cobalt, uranium, copper, bauxite, silver, petroleum and cocoa beans, woods and tropical fruits. Much of its natural resources are undiscovered or barely harnessed”.
The fact You don’t have Money does not mean You are poor… Get it right, there’s a whole lot of difference between being poor and being broke.
POOR = Absence of relevant Knowledge or passing over opportunity repeatedly
BROKE = Temporary Absence of Money.
Wealth and Riches is more about how much You know and what You do with what You know. What you know (Information at your disposal) matters a lot as far as being Rich and being poor is concerned.
If someone with a Rich blueprint gets broke, it’s only a matter of time and he/she will bounce back again.
Now that you have clearly understand the meaning of being Rich and being Poor, let’s get go straight to the main idea of this post.
Why is it that the Rich Don’t Keep Money?
The simple answer to that is FOCUS.
What the Rich and the Poor focuses on are completely different which is why they are in different Money level and sphere.
The Rich understands that it is impossible to Keep Money because they know that Money is Debt and a Depreciating Asset; any Money that is not invested is lost.
The question is, does every investment made guarantees profits? The Answer is an EMPHATIC NO!
But any Money that is not invested is Lost already. When you invest, the likeliness that you will make more money from your investment is very high, than when the money is not invested at all.
What Does the Rich Focus on?
The Rich Focuses on Cash Flow, where the money is flowing from (The Source)
The poor Focuses on Capital Gains, how much money I can make (The gain)
Here’s the Explanation
The poor focuses on saving their money and not spending it while the Rich focuses on investing Money, how they can multiply the money they have.
The Rich knows that Money is debt. They know that any Money they got and keep, they have already started losing it. so the Rich are in a hurry to Invest whatever Money they got in order not to lose it, in fact, they are willing to sacrifice some needs (not wants) to invest Money. It is only the poor that is willing to satisfy his want and suffer in the future.
Read this post for further clarification.
What Does Cash Flow Mean?
Cash Flow simply means buying Assets or making Investments that will generate consistent cash that will take care of future needs and liabilities.
As soon as a particular Asset/Investment starts generating large enough sums (cash greater than your reasonable needs/liabilities), You start searching for another Asset to buy or Invest in.
The Rich focuses on growing their Asset base (Source) slowly but steadily until the Cash Flow from their Assets (Source) can not only take care of them but their Generations.
What Does Capital Gains Mean?
This appears more lucrative in the short term but it’s mostly a bomb waiting to explode.
An average poor man wants to always be in possession of large sums of cash because that makes him feel and think they are rich.
They never invest for Cash Flow but Capital Gain; to them, cash flow is too slow, they’d rather want it fast and now now.
These class of people don’t understand that Money is debt and a Depreciating Asset; they don’t understand that the longer You hold Money in Cash, the faster You lose it.
They don’t understand that the only way You can hold Money without losing is to put it in an investment that appreciates the money.
Yo must have heard people say they were once Rich… In most cases, they were really not Rich, they were Capital Gain people.
You can not be truly Rich in Money, You can only be Rich in Assets. That’s why the rich will always invest and look for new ways to keep making money.
It is Assets that can be turn into money when you need money.
Comparisons Between Cash Flow Vs Capital Gains
- Real Estate Investment
A Cash Flow Real Estate Investor will rather build a house and rent it out. Then he will approach a Bank for loan using the house as a collateral.
He gives the Bank his Equity Contribution for the Mortgage which in most cases is 30%, and he must have made necessary calculations to be sure that after building the second house, the rent from the second house will be able to pay the Mortgage from the Bank and he will still have some balance.
In other words, he’s not the one paying the Bank from his pocket, it is his tenants paying for the Mortgage. He repeats this process until he has enough houses generating Cash Flow for him.
Note that the Cash Flow will not be much at the beginning, the most important thing is that it is consistent.
But A Capital Gain Real Estate Investor will rather build a house and sell it, Yes he will have more Money in his pocket at that moment but the compounding rate of return of that Money if he had rented the house rather than selling it would have been eroded.
In most cases, after a while they are not able to account for the Capital Gains they made because Money is debt and any Money you are holding, you are actually losing.
Don’t forget that for the Cash Flow Real Estate Investor, while the Mortgages are running on his properties, he is still making Money because the rent from the properties are more than enough to pay for the mortgage and leave him with extra cash and after the tenure of the Mortgages, the houses will become his own.
Can You compare the wealth of the Cash Flow Real Estate Investor and that of his Capital Gains counter part?
2. The Cow and the Milk
We all agree that Milk is important but the Cow that generates the milk should be and is more important, don’t you agree with me?
So also, Money is important but Assets generating Money should be more important and given more attention than the money itself.
The Rich Cash Flow Investor will rather own the Cows that generates the Milk, so that he never lacks Milk but the Poor Capital Gain Investor will rather sell the Cows so he can lay hold of the important Milk.
Most people are like the Poor Capital Gain Investor, who want to see his money rather than have assets that generates the money. Building assets may take a while but it will pay more at long run
3. Cryptocurrency Investment Vs. Cryptocurrency Trading
You may be wondering, is there a difference?
There is a whole lots of difference. One is a Cash Flow Investor, the other is a Capital Gains Investor.
The Cryptocurrency Investor, invests for Cash Flow, he never dumps all his Cryptocurrency (Assets), he’s patient enough to allow time to happen to his investment.
But for the Cryptocurrency Trader, the moment he sees a little appreciation in his Crypto Assets, he gets excited and sells off which is why you see many Cryptocurrency Traders who are just making movements and never progress.
My dear Friend, who are you? A rich cash flow investor or a poor capital gain investor. Remember money does not make one rich but assets that generates the money do. Invest more time and energy in acquiring more assets rather than chasing money. Go for the Cow and Not The Milk. The milk will surely come if the cow is available.
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