Prices for luxury items such as Rolex watches, extravagant cars, and works of art gained exorbitantly during the pandemic. However, it was only a matter of time before they experienced a price crash. And crashed, they did.
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According to entrepreneur and money expert Jaspreet Singh, beginning in March 2022, the “free money” era ended when the Federal Reserve began raising interest rates for the first time in three years. The easy-to-access money previously printed or provided via loans, grants, and stimulus checks stopped as the government and the Fed began their fight against inflation.
Wealth and financial stability can fluctuate for individuals and businesses based on a variety of factors like economic downturns, changes in business ventures or market dynamics.
According to Singh, an individual’s financial standing is most impacted by personal decisions. The reason most Americans are broke is “not because they’re not making money (although some people are not making enough money), it’s because most people have no idea of what to do with the money that they get,” he said on his Minority Mindset YouTube channel earlier this week.
“Wealthy people want to use their money to grow their wealth, while most Americans want to use their money to drive a fast car,” Singh said.
The lure of luxury brands is a powerful one indeed. Still, during a severe economic contraction, everyone, even the rich and uber-wealthy, must leave themselves a cushion in case things go wrong. When tough economic times prevail, depreciating luxury items won’t bring you the value or happiness they did when you impulsively bought them.
“The biggest shift that most people need to make in America to build wealth is you have to understand what to do with the money you earn,” said Singh. “That way, you can not only protect your money but also grow your money.”
“If you spend every dollar you earn, you’re never going to have a chance to build wealth,” he added. Or, as Singh had previously noted, “Make yourself rich before you make everyone else around you rich.”
Having a margin of safety with your financial life means always having sources of liquidity you can draw on. Just because you have a lot of money, or received “free money” doesn’t mean you don’t have to manage it accordingly.
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This article originally appeared on GOBankingRates.com: Jaspreet Singh Says ‘Rich’ People Are Starting To Go Broke — Here’s Why
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