There are four ways of ways to spend your money that I’ve come across.  The way you spend your money has a lot of reasoning behind why the rich get richer and the poor seem to just get poorer and poor.

Poor Person Way to Spend Money
Spend 100% of your income.   This way of spending is bound to send you into financial ruin.  Sure you’ll have some awesome stuff, but you’re bound to wind up poor.

Even Worse Way to Spend Money
Keep borrowing money and spending even more than that.   There are people who get credit credits and use credit cards to pay off other credit cards.  It’s like a juggling act, but it won’t go on forever.

Invest 10% and spend 90%
This is the typical financial plan.  It sounds like a great idea.  But when do you actually start saving that 10%?  I’m still getting those student loans paid off.  Then you have a car bill to pay.  Then it’s a house.  By the time you start saving the 10%, it just might be too late!

Save 90% and spend 10%
Sounds impossible right?  This is one reason why the rich get richer and the poor get poorer.  The rich can continue to invest 90% of their money and easily live off a measly 10%.  Lets say you make $30,000 a month and live off $3000 a month which is quite possible.  Meanwhile you are adding in $27,000 into your account. That adds up quick.

It would take someone 18 months to save half a million dollars at $27,000 a month in income.  What happens at half a million?  You can invest that money and earn a good $25,000 a year extra on top of your income with a good 5% return rate.

The More Money You Save…
Means more money you can invest.   If you spend all your cash you can’t invest it.  It’s nice to live in the now, but someday you want to spend all day on the beach right?

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