I have come across stories of people who were once "rich" but blew their money within a short period and are now broke. But I am yet to meet a person who blew their wealth in less than a decade (with an exception of inheritance). And that is because a rich person has a spending mentality while a wealthy person always thinks of growing and multiplying their wealth through investment.
If you are rich, you will earn that status around your peers, community, relatives and family. A rich person can be spotted when they enter a room or when you meet them in the street. That is because they wear and carry their money around. The sad part is they become role models to the low-and-middle classes who end up spending money they do not have to also look rich. These kinds of people are more into trends- they like to buy expensive cars, and designer clothes, rent penthouses in rich neighbourhoods and have a lot of meaningless costly celebrations.
How Rich people approach money
We see these trends among artists, young Forex traders, short-term crypto investors and some football players. Once they get a big cheque, all they can think of is branding themselves with a lifestyle that distinguishes them from people who have no money. In South Africa, we get a lot of former local artists and football players coming out every year to ask for donations from fans. And if you search their timeline when they were still relevant in the industry, they were trapped in living a rich life.
Surprisingly, some of them do not even invest in a good financial adviser or some time in improving their financial literacy. They would not know anything about their tax, let alone they would use their personal account for business transactions and end up owing SARS (South African Revenue Service) a lot of tax money. They get penalties as their cut that was made through business now gets eligible for income tax.
The same thing happens to crypto investors and traders. Some were lucky to buy bitcoin when it was just emerging and have made a lot of profit out of that. Some have been lucky with Forex trading. Instead of investing their money in different projects, they aimed to spend it and not even educate themselves on tax regulations. They have now lost it all and even got a severe penalty from the Revenue Service.
What baffles me is those who would rather rent an expensive penthouse in a wealthy neighbourhood instead of buying one they can afford and have to own it. Some even have a collection of cars that do not even have any sentimental meaning to them besides the satisfaction to brag about the price. It is even sad when out of all the multiple car collections, none is used to generate income but they are all for flexing.
How Wealthy people approach money
The roadmap for wealthy people is to aim to grow their own money and pay themselves out of the profit they make. They aim to build generational wealth and most of these people you can't spot in a room. Some do love a luxurious life but in most cases, some are investors in the big brands they choose to buy from.
What the rich do not know is that wealthy people would buy equity shares from their favourite luxurious hotels where they would go mostly for business meetings, and buy the latest gadgets aiming to have the benefits of upgraded security in using the tools. Some even have shares in those companies that sell their preferred gadgets brands and designer clothes. In that way, a fraction of their purchase money comes back to them as dividends and their big spending increases the sustainability of the brands they chose to invest in minimizing the chances of its market collapsing. If they are to spend money, they aim to recycle their money too.
Resolution
If you plan on growing your money through investment and diversifying, that's a good move for building wealth. One important step not to miss is to understand the tax regulations in your country if you are to invest that money short term versus long term before selling or exchanging to make gains. If you have an appetite for luxury, rather opt to spend on brands and companies where you can recycle your money by buying equity shares from those companies.
Once the money grows, if you are to spend on a big purchase that is not a matter of life and death- one can make sure the money spent is a fraction they planned to pay themselves from the profits made.
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