Are you POOR, MIDDLE CLASS or RICH? Assess Yourself!

in investing •  7 years ago 

Having a lot of money now does not mean that you are already rich. The next question is... for how long? You need to spend in order to live so the time period your money will last will be the ultimate question.

Consequently,  if you are poor now, it does not mean you will be poor for the rest of your life. And if you are  in the middle class, you can either upgrade to become rich or downgrade to being poor. 

So what determines whether you will be poor, middle class, or rich person? - Your SPENDING HABITS!

But before I made the distinction of the spending habits of each social status, let me first explain the difference between ASSET  and LIABILITY. 

ASSET and LIABILITY

If you attended your high school or college accounting class, your teacher or professor told you that an asset is anything that has economic value while a liability refers to a debt or an obligation that needs to be paid. 

Robert Kiyosaki, the famous author of Rich Dad Poor Dad, has a new definition for asset and liability that is different from the traditional accounting principles. According to him, an asset is anything that puts money into your wallet while liability is anything that drains money out of your wallet. 

A house in traditional accounting is an asset because it has an economic value. However, according to Kiyosaki, if you live in your house, your house is a liability because you have utility bills, real estate taxes, association dues, mortgage, and maintenance costs that you need to pay. It is a liability on you but an asset to the bank because it puts money in their balance sheet as you pay mortgage with interest income for them.

A house can also be an asset for you if it generates an income and the only way for this to happen is if you rent it out. 

A sure way to determine if what you have is an asset or a liability is to ask this question: If you lost your job, will it feed you or will it eat you?

Guess what? ASSETS WILL FEED you while LIABILITIES WILL EAT you. 

So let's examine the spending habits of each social status:

POOR

Poor people usually receives their income from their job. Once they received it, they spend it right away in both their needs and wants. They pay their rent, clothing, food, transportation, utility bills, and other expenses. Ultimately, it goes out of their pockets leaving them with no savings at all. This will leave them to work for the rest of their lives because they need to earn in order to survive.

MIDDLE-CLASS

Middle-Class people usually has a slight difference to poor people. Income also comes from their jobs. In fact, some of them have high-paying jobs. However, as their income increases, they tend to buy liabilities they think are assets. These are cars, luxury vacations, gadgets, etc. Little do they know that these are actually liabilities that depletes their money. Eventually, it will go to expenses and then finally out of their pockets. 

RICH

The difference of the rich with poor and middle-class people is that they prioritize in building their assets first. These assets are in the form of stocks, bonds, mutual funds, trust funds, real estate, etc. Since these are assets, it provides passive income for them so even though they don't work, they receive income from it. 

Life will be boring without spending on liabilities. What the rich do is that since these assets are now producing passive income for them, they use this to buy liabilities. They build more and more assets and buy less liabilities. 

THE CHOICE IS YOURS


Every time you get income from your job, you and only you have the power to determine your destiny. Spend it foolishly, you choose to be poor. Spend it in liabilities, you join the middle class. Invest it in your mind and learn to acquire assets and you will be choosing wealth as your goal and your future. The choice is your and only yours. 

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