Grant Cardone: Why Budgets Keep the Middle Class From Getting Rich
Written by
Gabrielle Olya
Edited by
Ashleigh Ray
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There’s a key difference between how the middle class and the super-rich manage their money, and it starts with mindset. While most Americans rely on a budget to manage money, money expert and real estate investor Grant Cardone believes it’s that very mindset that’s keeping people from becoming wealthy.
Instead of relying on a budget to cut expenses and track spending, the rich use a wealth plan to grow their income and assets. According to Cardone, this distinction is the key to financial success. Keep reading to find out why your budget could be keeping you from getting rich.
Why Wealth Plans Beat Budgets for Building Riches
According to Cardone, 83% of millionaires have a wealth plan and 100% of billionaires have a wealth plan. “They have to,” he told GOBankingRates. “And most of America simply doesn’t have a wealth plan.”
Instead, most Americans live by a budget — a strategy Cardone said is inherently limiting. “The budget is the problem,” he said. “America has achieved its budget and nothing more.”
From Budgeting to Building: Cardone’s Personal Shift
Cardone said that he grew up on a budget, but it wasn’t until he shifted his mindset about how to approach his finances that he truly became wealthy.
“‘Budget’ was one of my mom’s favorite words,” he said. “‘We have to live on budget.’ But if you look at these wealthy companies, the billionaires, they don’t have budgets.”
How the Wealthy Prioritize Income Over Spending
The key difference between a budget and a wealth plan is that a budget focuses on limiting spending, while a wealth plan focuses on expanding income.
“[The wealthiest people] have tremendous amounts of income and they have assets,” Cardone said. “Even when their income [declines], they have assets. They don’t focus on a budget, which is defense.”
To build wealth, Cardone recommended flipping the traditional model.
“Spend 95% of your time on the income-producing part — the proactive, offensive side of your financial statement — and less time on the budget,” he said.
A New Financial Mindset for the Middle Class
Instead of asking yourself, “What income do I need to pay my bills?” Cardone suggested asking, “What income do I need so that I can invest?
“The wealthiest people I know… They’re not worried about what they’re spending because they earn so much,” said Cardone. “And anybody can do this. If the middle class were to study the wealthy, they would know what they’re doing wrong.”
Caitlyn Moorhead contributed to the reporting for this article.
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