How To Manage Your Finances Like The Rich

How To Manage Your Finances Like The Rich


You think that the rich know how to manage their money? You bet they do. Even if you finished your degree with excellent grades, that doesn't ensure that you will be successful in managing money. No matter if you have studied economics, accounting or business administration, you still need to develop the right skills to manage your money correctly.


Liabilities and Assets, what are the differences?

Something that can be confusing for many that just start a business, is the difference between assets and liabilities. After reading what Robert Kiyosaki says in his book, Rich Dad Poor Dad, you might know the difference, or, like many others, you still might not fully understand it. So let's talk about the differences.

Assets are everything that makes money for you, that is generating profits in a positive way. Examples of this are: rent from rental properties, investments in stocks, shareholding in companies, and other securities. If it is generating a profit for you each month or year it is considered an asset.

Liabilities on the other hand is everything that is losing you money, we can even consider your mortgage a liability as this is, in most cases costing you money. But also things like personal loans from banks, credit cards, paying off your car etc. are all liabilities. 

Your goal is to increase your assets and decrease your liabilities. So, the first thing you should do is create a list of these things, and then analyze where you can decrease your liabilities and increase your assets. This step is one of the first you have to take in order to better manage your money.


ALSO READ: 9 Reasons To Invest In Real Estate


Save at least 10% of your income.

Like so many successful people already said before me, a rich person will save at least 10% of his earnings and invest it wisely. You might think, yes, but I always see rich people buy luxury things and spend their money. Why can I not do the same and enjoy my life? That is a good question, and I never said you shouldn't enjoy your life, but what you see isn't always what you think it is, you don't know these people, you didn't talk with them, you don't know their financial situation. They are making more money, so they can also spend more money, that doesn't mean they spent all their money on luxury items or holidays. They still have a good financial plan, which includes at least a savings plan and an investment plan.

Most "poor" people would spend their hard earned money each year on holidays and luxury items like phones, cars, clothes and go out eating. And at the end of the month leaving them with zero in the bank and zero in investments. Some are even borrowing money, just so they can have these luxury things, creating more liabilities in the process.

But to grow your assets and become financial free, you need to have financial intelligence and understand that you have to invest your money wisely by asking yourself, what you invest, where to invest, why invest. The best place to start is to look at successful people and copy their investment strategies.

Therefore you should have a good administration of your finances, this includes your marketing budget, advertising, income and expenses, etc.

Rich people are good at managing their money, they know it is very important in order to grow a business. Poor people often ignore their finances, they don't want to talk or think about it. Not knowing how much they can spend they often spend too much and end up in debt.


Also Interesting: 6 Ways to Think Like a Millionaire


Long term investing.

Rich people know they have to think in the long term. Take Amazon for example, Jeff Bezos built it over the course of decades, but he knew that if he would stick to it he would have a high chance of succeeding. He planned years ahead and did good financial planning. Poor people on the other hand often only focus short term. As soon as they have money, thee will spent it. Not thinking about the future, like saving or investing. Your business should be prepared for at least a half year of rough times, that means you should be able to pay for your expenses, like employees, inventory, marketing, etc. and building a buffer right from the start of your business is very important.


Business minded.

Rich people often think in terms of business. For them earning money comes first, second is enjoying life. They know that you can only become rich if you have your own business of some sort. Poor people only think of personal enjoyment, how does this make me comfortable and how does it entertain me. A rich person can say no for entertainment and would only spend money if it's:, A) within his spending budget. B) He will profit from it.


Manage your Net-worth.

When we talk about rich people like Jeff Bezos, we talk about his Net-worth, which basically includes all his assets. That doesn't mean this is the amount he has on his bank account, or what he is earning every year. If Jeff Bezos would sell all his assets right now, that amount is his Net-worth and that is the billions we always hear people talk about. His bank account on the other hand might have a much lower amount. 

You should make a list of all your assets and its worth, including your savings, how much is your house worth and how much do you keep after selling it? Write it all down. Every month you should analyze and see if your net-worth has gone up, which should be your number 1 goal. This will help you grown your wealth and keep track of it.


Also Interesting: How To Find A Million Dollar Business Idea?



Conclusion.

There are many things that the rich do differently than the poor. But keep in mind that being able to manage your money, in one way or the other, is key to success. Otherwise it doesn't matter how hard you try, if you can't keep your money, it is useless.

We hope this article helped you get new insights. If you have any comments or you like to add things, please let us know in the comments below.


Similar posts:


About the author:

Hello, my name is Ron Hoekstra and I am the founder of The Liberty OnDemand. I hope you like my content, and if you want to know more about me, please read more here or subscribe to my newsletter where I will keep you up to date with new posts and other useful content.


Thank you!

Ron.

Post a Comment

0 Comments