Spenders Are Always Winners

Dear Reader,

First off, I hope you had an amazing Thanksgiving!

On this day, the biggest shopping day of the year, I thought it would be fitting to talk about spending and why people who don’t spend are LOSERS.

The conventional wisdom of the so-called financial experts is that the best thing you can do to have financial independence is to save your money.

I don’t agree.

In fact, I believe savers are losers. I believe you should be able to spend your money on the fun things in life, but you just have to be smart about it if you want to be able to live well and at the same time grow rich!

Of course, I’m speaking of a certain kind of saver when I say savers are losers…

The one who puts money in a low-interest account and hopes that by the time they get to retirement it will have magically grown into all they need to live on.

Also, if I hear one more financial advisor tell their audience to “cut your expenses,” I may just do something I will later regret.

It’s insulting to me, and it should be to you too, if a financial “expert” thinks we are so unconscious and ignorant that the only way we could possibly reach financial security was by cutting back, reducing what we spend and living a life less than what we really want.

Saving money doesn’t work, and it’s bad financial advice.

It’s LAZY advice. It’s safe advice for the so-called “advisor” because it sounds logical and it won’t cause any flack for the advisor. It’s lazy because the advisor doesn’t have to think.

In an economy where almost everything is built to take your money, saving that money is of little value. From inflation to taxes to hidden fees in your 401(k), the system is stacked against you as a saver.

That being said, you should save, but for a very specific reason: So you can spend.

In today’s economy, spenders are winners. By this I mean people who know how to spend their money in the right places and in the right investments. Let me share a quick story to illustrate.

If you haven’t watched the movie The Big Short, you should. The movie is based on the true story of against-the-grain traders who bet against the housing market right before the 2008 collapse.

At the time, everyone thought these people were crazy.

One great scene depicts trader Dr. Michael Burry, the founder of hedge fund Scion Capital, leaving a meeting with Goldman Sachs where he convinced them to sell $100 million in swaps against Goldman’s CDO holdings in the housing market. The Goldman team members are laughing hysterically, thinking they just took money from a baby. In the end, Dr. Burry had the last laugh. As did the others betting against the hot-air balloon that was the housing market in the mid-2000’s.

Those who spent their money betting against the housing market made billions of dollars. Those who saved money or believed that the value of their house would always go up, lost…and lost big.

Essentially the people who were willing to spend (on the right investment) won, and those who held on to what they had lost.

Why Investors Are Today’s Winners

Money is not backed by anything. It is a currency, which like a current of electricity, is always moving. Today, money flows from one sector to another. If it stops moving, like a current it dies. If your money isn’t moving, it is dying, slowly, losing value day by day.

The rich know they must keep track of where money in the markets is moving, and they must move their money accordingly. This is why the traders who made the big short profited so spectacularly. They were paying attention and saw where money was moving. But more than that, they saw the assets it was moving into and understood the value of those assets was garbage. They knew that they could get ahead of the curve and move their money to where others eventually would. And in the world of money, the first always feast and the last always starve.

This is hard for the average person to wrap their minds around. For generations, we’ve been taught to save our money wisely. Today, that advice is no longer good or wise advice. Today, if you want to get ahead financially, you must know how to spend your money wisely.

Spending money wisely, of course, takes financial intelligence. And that takes financial education. In order to see and understand the markets, you must teach yourself the language of money and the concepts that make the markets run. You must study, and hard.

The good news is that information is plentiful. All you have to do is look. Today, start thinking less about saving your money and more about investing it. This subtle mind shift will make a huge difference in your financial future.

How to Get to The Point of Investing Versus Saving

A lot of people have a hard time saving. So, it’s no surprise that the idea of saving money so you can spend it seems even harder. The reason for this is that we are hardwired to focus on what happens today and discount the future. It’s built into our DNA because we evolved in a time where not eating today could mean you would die tomorrow. So, if we have money today, we want to spend it. And if we’ve saved money up, we grow attached to it and don’t want to spend it at all on the off chance that we’ll need it.

As NPR’s Chris Arnold points out, the best way to short-circuit this evolutionary habit is to make your savings automatic.

Arnold talks about making things like saving in your 401(k) automatic. Of course, that’s not what we recommend. Instead, you want to make saving your money to invest in assets as automatic as possible.

When Kim and I were young, we did this by hiring our bookkeeper Betty. Each month we instructed Betty to pay us first by putting our money for investing to the side… even if we couldn’t pay our bills. She didn’t like doing it, but she did. And we didn’t need to think about it. It was automatic. Instead of computers, we had Betty.

Today, you can use all sorts of apps and services to do the same thing. No need to pay Betty… or to listen to her howl about how irresponsible you were being.

The good news is that before you know it, you’ll have enough money saved up to then… spend! Spend on assets that will give you cash flow for years to come and enable you to buy even more assets. It’s the sure path to financial independence and freedom.

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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