There’s a little secret about the difference between those who are richer than us: they spend their money differently. At a glance, it might appear that their expenditures are quite similar. They have trouble saving sometimes and can still live paycheck-to-paycheck. To break it down, it’s important to understand the difference between assets and liabilities. Assets put money into your wallet, like dividend-paying stocks, income-generating real estate, or interest-paying bonds. Liabilities do the opposite and take money out of your wallet, like mortgages, credit cards with outstanding balances, and consumer loans.

Everyone has expenses. That’s not the difference between how the wealthy and middle class spend their money. No, that difference comes in what they spend their money on. The wealthier, though they may live from paycheck-to-paycheck, spend their money on assets that will help grow their wealth and reduce their number of liabilities. By buying assets, the wealthy have money flowing into their accounts rather than just leaving their accounts. The wealthy generate passive income to help boost their total income without much effort, but their smart buying choices or investments help to aid their living expenses without taking it out of their salaries. Ideally, this loop of earning money off assets without adding liabilities will cause someone to become truly financially independent.

But how do we all spend like the wealthy? Take a look at how you spend your money. Rather than buying stuff that may bring some instant joy but adds no real value, reassess and try to up your assets. Some examples include rental homes, office rental units, etc. This way you can earn money from rent that will cover the mortgage, utilities, taxes, etc. of the second property but that will also garner enough extra cash that you can add it to your personal accounts — and perhaps save for an additional income-producing asset.

For more information on how to Master Your Cash Flow®, visit tswealth.com.