I just posted an article “Decreasing Spending versus Increasing Income“, which talks about why increasing your passive income is better than decreasing your spending.
Many so-called “personal finance experts” are too focused on decreasing expenses. In general, decreasing “bad spending” is good. I just think that you should focus more on increasing your income by acquiring positive cash flow assets.
A positive cash flow asset is something that puts money into your pocket after all expenses and debt service. A liability is something that takes money from your pocket, and generally depreciates in value. A car is a liability, because it depreciates over time and consumes your money for fuel, maintenance, insurance, and taxes.
Poor and financially illiterate people trade their time and effort for a paycheck from an employer. Retirement funds are first taken from the paycheck, then taxes, then the employee receives whatever is left. Everyone else gets paid first before the employee gets paid.
Wealthy and financially educated people do not work for a paycheck. Instead, they work to build or buy positive cash flow assets that continue to pay them after the work is completed. We all know that wealthy people buy things that depreciate in value, and many folks try incorrectly to emulate the wealthy by buying expensive things, like houses, cars, and boats. They use consumer debt to buy those liabilities and use their paychecks to repay the debt with interest while the liability is decreasing in value faster than the debt is repaid.
Wealthy and financially educated folks will instead…
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