1 - Are you really poor?
Let's start by clarifying a point, believe it or not, you are not poor. We recently watched a television show that noted that a middle class person has a lifestyle that would require more than 200 slaves in the ancient world. The point here is… rich and poor are relative terms. Just because you feel poor doesn't mean you are really poor. So, to be poor, we must find a way to make this wealth that you have, much or little, disappear.
2 - The definition of poverty
In reality, it is possible to "get poor" without your income changing. That is, being poor despite the fact that your current income does not decrease. They do not believe me? Why don't you go shopping at the most "in" or "snobby" stores that come to mind. This will make most people feel INSTANTLY poor. If this doesn't make you feel poor or you have a bigger wealth problem, try visiting a luxury car or boat store. A million dollars is hardly a down payment on a decent yacht these days. Thus, again we come to that "rich" and "poor" are relative terms.
You must find your own definition for these terms. If you think about this a few times in your head, you are sure to surprise yourself.
Our Definition of Wealth is "having more than what is needed." So, unless you're on a plane crashing on a desert island and you've finished all you can eat… As long as that doesn't happen, we basically consider you rich. But, this is our definition. Which is different for each person. If you think a bit, you will see that you are FAR from being poor and that you still have a lot of work to do to reach poverty.
3 - The only way to become poor
All philosophical argument aside, there is really only one way to become poor.
Spend more than you earn.
It's that easy. Another way to put it is… CREATE NEGATIVE CASHFLOW. If you work on this, over time you can configure your life so that each month you get poorer, simply spending more than you earn. In reality, it's very easy. Millions of people are doing it, every day!
4 - Income and expenses
The main part of your cash flow are Income (what goes into your pocket) and Expenses (what comes out of your pocket). This is really simple. If you make $ 700 per month, and you're only spending $ 500… well… you're never going to get poor that way, right? Quick! Go out and sign up for something that costs at least $ 300 a month. Let's say you buy a new car. Even if you could pay it in cash, don't. After all, your goal is to create negative cash flow every month. Buying a car that you can afford will not help you be poor. Get yourself one of those really expensive ones and pay it on creditChoose one that consumes a lot of gasoline. Also, be sure to research the cost of insurance and select a policy that has a high monthly payment. So, as you can see, increasing what comes out of your pocket is simple and gets you on the path of poverty faster than you think.
The real key to managing expenses, so that you can be poor, is to sign up and buy all kinds of completely useless things that cost you money every month. By increasing your financial obligations, you get closer to the goal of getting poor, every month, just by making all those payments, how easy!
5 - The 4 ways to make money
There are basically four ways to earn money.
(1) Have a job working for someone else.
(2) Being a self employed.
(3) Owner of a business.
(4) Be an investor.
The Money Flow Quadrant by Robert Kiyosaki.
Of these four types of income, the one that helps you the most to be poor is # 1, having a "stable" job. The reason for this is that a job does not allow you to have control over your income, you may arrive one day at work and discover that the company is going to close or that your position was given to you or someone else. In addition, your beloved local, state and national government will help you to be poor automatically through the magic deduction of the taxes that keep you in payment role. One of the easiest ways to reduce your income is through taxes.
If for some reason you are not able to get a job to help yourself be poor, being self-employed is the second best option. Normally the tax burden for self-employed is almost equal to that of employees. Plus, in some cases, they even allow you to pay your taxes up front. This helps avoid getting any kind of pesky interest that you can earn on your money. You see? Your government configures everything to help you be poor.
However, if you are a business owner, that is, you are not an employee of any kind, you will find that it becomes more difficult to pay taxes. When you make all the normal deductions for the costs of running a business, you will find that the government allows you to pay less in taxes. Well, there is a way to make yourself poor out of the window. Also, as a business owner that operates throughout the year, taxes are paid after doing the annual accounting.. This means that you can save that tax money for 12 months and you will have to deal with the annoying interest that this generates. Also, if you have a good product and you have managed the business well, it turns out that there will be many people who will look for you to buy your product, so you will have to make an effort to damage your sales and thus follow the path of poverty.
Investor, forget it, it is almost impossible for an investor to pay taxes. Here's why: Most investments that pay high returns are taxed, but most investors have losses that offset that taxed income. Now, if you invest in less profitable products, such as government bonds, it turns out that these are normally tax-free. Basically, no matter how you look at it, being an investor just isn't going to make you poor. It is much easier to reach poverty working 40+ hours per week at a job than sitting on a leather sofa owning an investment collection. Do you want to be poor? Stay and defend your job and your salary.
6 - Assets and liabilities
It seems like something that people just can't understand is the concept of Cash Flow. The best way to explain it is that in cash flow, assets "feed you" and liabilities "bleed you" every month. If you want to be poor, try to qualify for the largest mortgage you can. That money that comes out of your pocket each month will quickly lead you down the path of poverty. Now - I know what you are thinking… "A house is an asset" so it is making you money through capital gains. Incorrect! We are talking about CASH FLOW, assets and liabilities. A mortgage on a house will only decrease your monthly cash flow and will only increase it in the month that you sell it, if you can sell it at all… Some of the poorest people we know have very, very big houses.If you get a mortgage contract with the longest possible term, the longer the better, this will undoubtedly help you on the road to poverty.
7 - Make the commitment
You have to have the will, you can do it. If you can manage how to pay many, many taxes, spend all your time in a job that gives you a "safe" salary, always avoid starting your own business, never educate yourself financially or make any kind of investment, you will be poor. There is simply no way around it. You may not look poor, because to keep that monthly cash flow down, you may have to drive a big, fancy car and live in a giant house. But, as long as the expenses are greater than the income, you will be progressing towards obtaining the poverty you longed for.
It's that easy.
Spend more than you earn, every month.
Give all your money to the rich and don't forget to pay your taxes.
Simple enough, yes or no?
Now you know how to be poor. But if what interests you is the opposite, that is, having enough income to eliminate the financial problem of your life and dedicate yourself to doing what you like and interest the most, we suggest you start your financial education.
