Spending Habits You Need to Learn from the Rich |Money Management Tips

souravghosh.com /blog/spending-habits-money-management/

Incase you think that you can get rich by earning more money, you are mistaken. Today I want to sharesomething really really important, may be more important than whatever I’ve shared with you so far.But you may not like what I am going to say. How do I know? Because I didn’t like when I was warnedabout it. I totally ignored the warning, suffered terribly, learned my lesson & since then warning asmany people as possible.

Why suddenly writing this post? Yesterday a close friend of mine excitedly told me that he bought abike worth INR 2 Lakh. I congratulated him but asked ‘How much savings do you have?’. He didn’thave any. He recently left his job and started as an entrepreneur. He spent all the money he hasearned in last few months to buy his bike. I see similar incidents regularly. And it disturbs me a lotbecause I made the same mistake few years back and paid the price heavily. Let me share about that.

How I messed up and learned this lesson

Middle class upbringing

I was born and brought up in a middle class family, where my parents struggled a lot to give us afinancially stable life. Though my parents never made me feel lack of anything, but I’ve always learnedto spend money with care & live within limited budget.

Sudden money

When I started my business at the age of 19, and after few years started making good money ( I wasmaking 20K INR/week back then, earned 40K INR in a week too), I was on top of the world. I wentcrazy seeing that much money for the first time. My parents and other well-wishers suggested to savethat money and invest, in case business takes any negative turn in future. Books like ‘Rich Dad PoorDad’ that I was reading & teaching others from, also suggested the same.

But I was over-confident. I foolishly believed that business would grow forever & started spendingmoney like crazy. Bought costly bike, watches, spec, clothes. Dined in premium restaurants, went tostar resorts … lived like a king.

Business downturn

Then life brought twist & business started going down. At the age of 26 when my first business venturecrashed & I was preparing for fresh start, I didn’t have a single paisa in my bank account. Imagine howstupid I felt! And this stupidity affected all aspects of my life in very severe manner.

Can’t go back in time, so no point regretting. But I learned the lesson. Now after rebuilding multiplesources of income stream after that crash, I’ve developed habit of living at minimum possible expenses& saving maximum amount. I don’t buy luxury from my income anymore, I build asset first & thenfinance my luxury from the return of the assets. Or at least try to save a good amount of money beforebuying anything costly. Also I try to warn as many people as possible so that they don’t make the samemistake as I did.

First Step of Better Money Management is Changing Spending Habits

So the topic is ‘Spending Habits’. You should know that wealthy people have totally different spendinghabit than common people. Common people & wealthy people buy totally different things with theirincome.

It seems I am not the only fool. Most common people make the same mistake. They earn money andbuy things from that money that would not give any return, rather sometimes will attract more futureexpenses. When their income increases, they spend more. So no matter how much they earn, theynever get rich. They keep working harder and harder, but fail to build wealth. Example? Look around.Check what people buy with their first salary or business profit? A bike / car / house / mobile etc …sometimes people even buy using Credit Card. All these things not only gives you nothing in return, butalso attract future expenses.

But if you are lucky enough to observe any wealthy people’s spending habit (or you can read about it inbooks & online), you’ll find out that they invest in assets with their income.

Asset vs Liability?

Source: ComLuv

In simplest term,

An asset puts money in your pocket. A liability takes money out of your pocket.

Click To Tweet

It can be a piece of real estate (not a house where you’ll live), or stocks or some business or someintellectual property (book / music / art / movie etc) … anything that can be a source of income for youin future.

A Laptop can even be an asset, if you are going to use it to make money (I did). Investing in yourwebsite can be an asset (for me it is), if you are going to run an online business or take your businessonline.

Financial Statement of Poor / Middle Class vs Financial Statement of Rich

So the common resistant most people feel at this point is : “So you are saying that I can’t enjoy life, door buy the things I want with the money I earn?”

What you need to understand is that if you just be a bit patient & let your assets grow, then the incomefrom your assets is going to finance everything you want.

Source: RichDad.com

Quoting Robert T. Kiyosaki

Very simply, the rich invest their money in assets that put more money in their pockets,such as real estate, stocks, bonds, notes, and intellectual property. The middle classand poor invest their money in liabilities that take money out of their pockets such asmortgages, consumer loans and credit card debt.

Imagine you have 5 Lakh from your income right now. if you buy a car with that 5 lakh, not only youwon’t have any money left for any kind of emergency but also you have to worry about the money you’llneed for its maintenance. But if you invest that amount & after 5 years that investment starts giving yougreat return, not only you’ll be able to buy a better car but also you have to worry less as you are nottouching your primary income.

Bad Spending Habits & How to Fix Them – Infographic

Bad spending habits are making life hell for not only people in Ameria but also from every parts of theworld. You can find some useful tips in this infographic.

Source: CreditLoan

How to Teach Your Child Good Spending Habits – Infographic

Like all other habits, best time to develop good spending habits is childhood. You might find thisInfographic useful to teach your kids / siblings / young students about money.

Source: eLoan

The Basic Principles of Effective Money Management

from The Richest Man in Babylon

Source: BillionairesBrain

Now that you understand the importance of good spending habits, you can find some really simple andeasy to follow suggestions in the book The Richest Man in Babylon [Flipkart Amazon]. I’ve seenmany successful and rich people recommend this book.

So tell me,

are you going to save at least 10% of your income from now on?

Click To Tweet

Where should you invest or which assets should you buy?

Now assuming that you are starting to save a portion of your income, take the next step with care –Investment / Assets.

Do not invest in anything if:

You don’t understand how the money multiplies in it OR

You don’t have any trusted expert guidance in it OR

It promises ‘get-rich-quick’ / ‘easy money’ OR

It sounds too good to be true.

There is nothing worse than losing your life’s savings to some schemes or scams.

My Suggestions:

Honestly I am no investment expert, I am learning too. But here are few suggestions I can give youfrom my own experiences & experiences of others I know & trust:

Learn about money & investment. Wealth education is not optional. Some of the classic books Ican recommend are:

Rich Dad Poor Dad & other books by Robert Kiyosaki [ Flipkart Amazon ]

The Rules of Wealth by Richard Templar [ Flipkart Amazon]

You can also get many interesting business ideas that will not only give you financial freedom buttime freedom too, from The 4 Hour Work Week by Tim Ferriss. [Flipkart Amazon]

You can invest in building multiple sources of income online. I am creating a FREE guide onthis. You can sign up for that here.

You can invest in Stock Market under my friend Prasenjit’s Guidance. I’d not haverecommended Stock Market, if I didn’t know Prasenjit (we studied in same college & currently Ilook after Digital Marketing for his company. So I know that he is a real deal). You can learnfrom his recently launched book How to Avoid Loss & Earn Consistently in the StockMarket [Flipkart Amazon ] or sign up for his Stock Tips packages.

Phew! That’s all I know / can think of, on this topic right now. Did you find the info useful? Please let meknow in the comments. If you have some suggestions to add to this post, please comment.

You know I don’t believe that money is the solution to everything. But I believe if we don’t have moneyproblem in our life, handling others problems gets easier. Isn’t it? So would you be kind enough toshare this post with as many people as possible? A simple awareness can change many lives.

Author: Sourav Ghosh (66 Posts)

Parents made engineer but self-made Entrepreneur. Inspiring people to live their bestlives. Providing different Life Coaching services like self-development training,Relationship counselling etc. If you want to start a business, want to be anEntrepreneur, or already running own business and looking for guidance, I'd be happyto help. I can also help you with Online Branding and Social Media marketing. Book a time with me andlet's explore the possibilities.