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Nov 10

How to Get Rich by Spending More Than You Earn

A lot of people will tell you that the way to get rich is to work hard, live frugally and spend less than you earn. But this is not how to rich get rich. The rich get richer by spending more than they earn and I want to show you why spending less that you earn might not be the best way to get rich.

Most people subscribe to the idea that you need to live below your means in order to become rich, when in actual fact the best way to become rich is to live above your means. The rich don’t strive to live below their means, the rich strive to increase their means and often they are required to spend more than they earn to increase their means.

Most people spend more than they earn anyway. Even if they live frugally they are likely to have bought a house using the banks money. This is a way of spending more than you earn. The poor and middle class often spend more than they earn on liabilities, things that take money out of their pocket each month. A house, a car, a cell phone etc. all these things take money out of your pocket each month making you poorer.

The rich however spend more than they earn, but instead of buying liabilities like the poor and middle class they buy assets. Rich people spend more than they earn to buy assets, which are things that generate them income without them needing to work for that income.

A poor person will borrow money to buy worthless things like clothes and food, a middle class person will borrow money to buy things like a house to live in and a car to drive that will take money out of their pocket every month. But the rich borrow money to buy assets that put more money in their pocket every month.

An example of this is a rich person borrowing the banks money to buy a rental house. The rent from the house covers the interest repayments and all the expenses and still leaves some money left over each money. Say they make an extra $100 per month from this rental house, if they then go and buy another 9 rental houses like this they have effectively increased their income by $1,000 per month by spending more than they earn.

This is how to rich get richer by spending more than they earn. The best thing is that this is not rocket science. Anyone can use this technique to become rich. Instead of trying to live below your means and save money (that might earn you 2% per year, get taxed and go down in value 3% per year from inflation) you can start spending more than you earn to buy assets that will generate you income. By spending more than you earn JUST on assets, you will be constantly using debt to increase your income making you richer and richer.

So now you know that you don’t have to spend less than you earn to become rich. People who say you have to spend less than you earn are probably not very rich themselves. Instead of trying to live below your means try to increase your means. Instead of trying to live of $1,000 per month when you earn $2,000 per month so you can save $1,000. Why not try to spend more than you earn to increase your income by $1,000 per month. That way you can live a happier life (it is much easier to live off $2,000 per month than $1,000) and you can still have excess money to invest and grow your wealth.

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