“Spend everything you’ve earned” sounds strange and alien, but this is the basis of Amazon’s ingenious strategy, which has been successfully working for many years.
The new economy calls for spending money, not saving. It is very important to correctly understand what will be discussed now and correctly perceive the information. To do this, consider some points related to finances and spending. In the middle of the summer, RichDad published an article whose title literally translates as “Spend everything you’ve earned”. Its main semantic load is that saving in the form of saving money is evil, and it is much better to spend all the money you earn.
At first glance, this may seem illogical nonsense, especially to rationally minded people who have a classical education in economics. After all, for many years in a row they have been instilled with “correct thoughts” about how to study, earn and save money. That is why the thought of building capital at the expense of spending all the funds seems unacceptable to many. But is it really so?
How do the middle class manage their funds?
Representatives of the middle class, with very conservative views, find it impossible to build capital by spending money. The main problem lies in the misunderstanding of the essence of “spending money”. As a rule, most people associate with him exclusively the purchase of liabilities: apartments, cars, equipment, clothing, etc.
Most of the income goes to pay for services, food, consumer goods, etc. Unfortunately, the overwhelming majority of the middle class are forced to live from salary to salary, and at the same time, the more they earn, the higher their expenses (they buy a more spacious house, the latest car brand, go to expensive cafes and restaurants). It is not surprising that, in the end, the only way they see it to preserve their capital is to save as much of it as possible.
How wealthy people spend their money
There is a phrase: “do not let your money go bad in your wallet.” It contains the whole point of the main problem: money withdrawn from circulation not only does not bring you income, but also tends to depreciate from inflation and devaluation.
Most of the middle class simply deposit their money on a long-term basis in a bank account. Receiving a meager percentage, upon the expiration of the term of the deposit, the profit is withdrawn and spent. This is the main difference between the thinking of the middle class and the wealthy people.
Wealthy people never let their money stagnate. They hold most of the funds not in liabilities or cash, but buy assets with them, which show good growth potential. Money must bring money. Only with this kind of thinking is it possible to achieve new heights. Ultimately, it is possible that the need to work for someone else will disappear altogether, because your money will work for you.
An employee, even with a high income, still continues to work for someone and depends on other people’s decisions. The investor, on the other hand, earns from passive income, and additional work for him (if any) is just a high-paying hobby. Moreover, if desired, he can at any time abandon it and do something new.
Now, let’s consider a very important question – what to do with the profit? Here wealthy people often use one simple rule – to reinvest in order to increase the percentage of income. This is another important difference from the investment approach of the middle class.
So what exactly is an Amazon investment strategy
So we come to the main question – Amazon’s investment strategy.
The company was founded in 1994 by Jeff Bezos. Initially, it was a small online bookstore. After that, the company has come a long way, and now, it is the largest company, whose capitalization has increased from $ 438 million to $ 460 billion. However, where does the profit go?
Let’s tell you about one fact about the company. Since 1998, Amazon has bought out 76 companies. One of the largest purchases was a chain of 400 supermarkets specializing in the sale of organic Whole Foods. According to experts, this transaction cost the company $ 13.7 billion.
Very often, you could hear from unknowing people that Amazon does not have a lot of income, but this is far from the case. Jeff Bezos primarily thinks about the movement of his funds, and not about net income.
Jeff Bezos is well aware that the secret of the company’s success is that it invests in everything that keeps it ahead of the competition.
How to spend money correctly
In order to save money, you must have strong willpower, and in order to spend it, you must have an objective understanding of the essence of spending.
We advise you to spend money on profitable assets, and then reinvest the profits to increase the rate of capital growth. Amazon’s example shows us that this strategy is not only acceptable, but necessary. Competent investment of funds made the company one of the largest, and its owner the second in the Forbes list.
By adhering to fairly simple money management rules, you can take your income to the next level. Moreover, everyone can do it – and you are no exception. The most important thing that will be required is to understand that spending money is not bad, but rather profitable.