10: Scarcity Sucks! Buy that latte!
Skipping lattes will not make you wealthy. It will make you unhappy. I don’t like that mentality.
The MAJOR DIFFERENCE BETWEEN THE WAY THE WEALTHY THINK COMPARED TO THE POOR is that they do not think of the world as a place of limited resources. They don’t think “I can’t afford that” they think “how can I afford that.”
Furthermore, the true wealthy think differently than there cousins–the mid net worth high paid professionals. Whenever high paid professionals make more money, they go ahead and buy that fancy car or boat. Effectively, they adjust their lifestyles to “use up” that extra money. That’s why even though they are making significant incomes, they never feel like they are coming out ahead. That is called the golden handcuffs.
Wealthy people expand their means first, then buy what they want with their increased means.
Let’s say you want to buy a fancy car that’s going to cost you $80K. You could go ahead and buy that car for 80K cash and get stuck with a depreciating asset from day one and nothing else. Or, you could finance that car and create ongoing depreciation (that you can’t write off) AND negative cashflow. This is what most people do who get a little money in their hands.
The mindset of the wealthy individual is to expand means first and then buy the car. Instead of buying the car outright, the expansionary mindset might invest 100K into something yielding 12 percent cash on cash and create $1000 per month to cover the car payment. Once that car is paid off and depreciated to nothing, you still have the cash flow. Your means do not contract. Your cash flow is just their for you to buy your boat!
Hopefully that makes sense. It seems obvious to me now, but I didn’t use to think this way when I first started making money. So, the next time you think of buying that car, buy a rental house or something else that cash flows first to cover the cost! Don’t skip your lattes.