Think bums are poor? They’re actually richer than you!

homeless bum street

Donald Trump and his daughter, Ivanka, were driving one-day and on the corner of a street they spotted a bum. Donald pointed out to Ivanka, that the bum had more money than he did. She was startled, and she naturally asked him how that was possible. He then went on to explain how the bum had no debt, while he had a lot of it.

The average American household is $14,500 in debt. If you include things like a home loan, the debt amount per household drastically increases. But this shouldn’t stop you from becoming rich, just like it didn’t stop Donald Trump. Instead, it should make you adjust how you control your finances.

If you want to become rich the first thing you need to do is adjust the way you spend your money:

  1. Pay off your debt – list out every penny you owe and the interest rate next to it. Chances are that you are paying more interest on things like your credit card than what you are earning from the bank. So instead of making the minimum payment on your credit cards each month, pay them off.
  2. Spend your money wisely – just because you have money, doesn’t mean you should waste it. Be cautious with your spending and if you really want something, buy it when it is on sale.

After you start managing your finances wisely, you need to change your viewpoint about money. Every penny counts! When you see change on the floor, pick it up!!!!!!!! There is nothing wrong with this; even millionaires pick up change off of the ground. You’ll be amazed how fast all of those pennies add up.

Now that you have the right mindset, you need to start making make more money, with your money. Incase you didn’t know, more millionaires are born during recessions due to the opportunities the economy presents. If you want to be one, here is what you need to do:

  1. Embrace the unknown – there are going to be tons of opportunities for you to get rich especially in this economy. Things like the stock market are very attractive, but before you jump in, make sure you learn about it. Be willing to put time into learning new things because if you don’t you will either miss the opportunities or you will lose all your money by investing in something you have no knowledge about.
  2. Ride the coattails of the rich – people are desperate right now, so the rich are seeing some of the best investment deals ever. Although you may not know much about investing, the rich usually do, so try and ride their coattails. Now granted, this only works if you know a lot of rich people, so if you don’t know any millionaires, you better hurry up and get to know them.
  3. Make a lot of bets – like everything else in life, if you keep on trying to become rich, sooner or later it will happen. By being more cautious with your spending you should have more money to play around with. Don’t be gun shy, invest when you see the right opportunity. And if you find a really good opportunity never go all in, it may actually be too good to be true.

Update: John Chow just wrote a blog post correcting many of my errors. He talks about things like good debt VS. bad debt. He makes some very valid points, you should check it out.

P.S. If you need help growing your business click here.

Comments

  1. Very nice post NP…My goal is to befriend a millionaire every month. Lay down with dogs, you’ll come up with fleas so surround yourself with successful people and you’ll begin to see incremental changes in your income ;). Sounds far fetched…but give it a shot.

  2. 2 words: Dave Ramsey

    • Dave Ramsey is popular but he advocates never getting into debt… business is fueled by debt (we can argue whether that’s right or wrong for weeks, but it is what it is) and leverage is crucial in business.

      • Yea, in many cases you have to get into debt to make money. Look at Sam Walton, as Walmart grew his debt continued to grow.

        • Matt | Small Biz Bee :

          Right on Neil! As long as it’s the right kind of debt, increasing it is a sign of doing things right growing your wealth. I’d love to be $1 billion in debt someday, it would mean I was in the financial position to accept it.

          Matt

          • And in most cases you won’t be in that much debt, it will be your company that is in debt. None-the-less if you are a billion dollars in debt, it is a good thing. Even if you fail, at least you have the connections to get that kind of money.

            • Matt | Small Biz Bee :

              Right on both counts. Typically it’s only a fraction of that amount, and once you get that kind of money you can do it again if something were to go wrong.

              • Exactly! Plus if your company has that kind of debt it is probably large enough where you are getting a good salary.

    • I just Googled him, it seems that he is very well known and popular.

      • Debt = Risk + Stress + Anguish!

        My Favorite Financial Quotes:
        – Borrower is Slave to the lender – Proverbs 22:7
        – You will make within 5-10% of your ten closest friends average income – Dan Miller

        Dave Ramsey is a multi-millionaire who built his business with absolutely no Debt. (After experiencing bankruptcy). Build your business organically – just like you would your website 🙂
        He has a great podcast and Entreleadership program for small business owners – see daveramsey.com.

        @nuzunet

        • It is a good philosophy to build a company with no debt, but that isn’t possible for everyone. For example I had a lot of debt with one of my first companies… there was no way I could use 500k of my own money to start it up. None-the-less it worth it for me.

          • Underarm Sweating :

            Yes but like John Chow says its difference between good and bad debt.. I would suggest you reading a book from R. Kiyosaki, rich dad poor dad. Mind blowing book if you didn’t already read it..

        • Heard Warren Buffet weigh recently about debt, and he also was opposed to it. Not to the extent of a Dave Ramsey, but still he said that it was possible to make money from debt. But it only takes one thing to go wrong to bring one down, who has built on debt.

          • Yea, you just have to be careful when you barrow money. People like Warren Buffet have a lot of experience under their belt.

  3. 2 rock solid tips that get overlooked all the time.

  4. Justin Hernandez :

    Wow really made me think. Haha. I think I’ll study bumology in college.

    • A lot of people take bums for granted, but many of them choose to live that way. A few of the ones I have met even have college degrees.

  5. Mike | PlanetChiro :

    I pass guys like this everyday on the way to the office. The work each major corner in my area and I figure they take in 20+ bucks an hour (easy) with much more during holidays. There has to be someone among the group that’s tucking that cash away and not spending it on drugs and such.

    Wonder if there are “Homeless Rockstars” like there are rockstar SEOs.

  6. I think “bets” should be cleared up for some kids that might actually think that pumping your savings onto the roulette table is going to pay off…

    Spreading your bets should be more so on expanding your business ideas. We all have ideas on better business plans and should capitalize on them no matter how stupid others might think they are. I have my hand invested in literally 5 different businesses and I’m sure that if anyone hits it big, the pay off will be insane. In my circle I’m a venture capitalist kind of guy..I hear of a half decent business idea/plan, i want in form the ground up. Some have no clue how to raise equity or have no idea what to sell a stake of their idea for and its like a wolf eating a baby rabbit lol…easy money…well better odds than putting all my money in a slot machine anyways..

    Going to the bums, its funny…I was in Beverly Hills a couple of years back and there was a homeless guy that was getting a $20 once of twice an hour hanging outside a popular celeb hangout. He would hang out near the parking garage/valet area and it was crazy overhearing some of the local bouncers talk about how some nights this “homeless” person was bringing more in than a working stiff…also, although I’m probably going to get flamed, how many of these ‘homeless’ people are actually homeless? with the money they bring in, they can easily afford a condo and play the role during the day just like any actor in LA.

    www.bullsbattlebears.com

    • Yea, the purpose of making “bets” by no means is to go to Vegas and gamble away your money. Instead the purpose is to get people to take more risks and diversify where they put their money.

  7. I’m a product of trying different bets and one of them finally paid off, personal finance blogging. I was decent at poker (hold em), I sold some crap on eBay, etc. etc. and finally hit pay dirt with professional blogging. You just have to keep learning and keep trying until something catches.

  8. Great article. Now to come think of it, you are probably. It is so easy to get a credit and little by little those purchases on the card add up.

    The best way to do is by debit unless you can control your urges and use a credit card.

    Keep them coming man.

    • I hate using my debit card because the money gets removed from my bank account instantly. By using a credit card, I can make interest on my money for an extra 30 days.

      • Absolutely. You can do way more with credit than debit. But you do have to have the self-control. If you need the physical reminder to keep yourself under control, try going cash-only. If that doesn’t work, convert it all to ones or quarters 😉

        • Yea with a credit card you may tend to spend more because of the high limits credit card companies give you.

          If quarters don’t work, you can always try pennies.

  9. Just because someone is a “bum” or “homeless” doesn’t mean they don’t have debt. The likelihood of the debt getting paid back is slim, however they still have it. One day they just don’t run out of money and say oh crap I better live on the streets…

    • A lot have debt and a lot don’t. Not all bums live on the street because they got kicked out of their home, some actually choose to be a bum.

  10. It’s easier to save money than make money. A lot of the millionaires that I know have the attitude of living a conservative lifestyle even though they have boat loads of money. You make a good example of a rich person picking up coins on the ground, I think that is the attitude those people to the lifestyles they live today. Every penny does count, you’d be surprised how fast they add up. good post to help us realize the important aspects of becoming and staying successful once you reach your financial goals.

  11. Kenney and Kim :

    lol. Great post. This is so funny because I just saw a guy the other day at the corner that said: Need Money For Beer, at least I am honest. lol. We laughed, then gave him some change. Then I saw 2 of the next 4 cars do the same. (So, I guess his honest marketing was working ; )

    • I think humor is the best way to get money out of people. If a bum tells me a good joke, I always give them some money.

      • Kenney Works From Home :

        True. Humor works wonders. I think it gets down our defenses and makes us “like” them. Ahhh the power of liking and entertainment. lol. Bums always have some good jokes or good stories.

  12. Good tips Neil. It pays to live humbly even if you’re rich.

    • Exactly. To many rich people are arrogant when they shouldn’t be. Arrogance will just slow you down from making more money.

  13. It was Ivanka, not Ivana.

    I believe the story as Trump told it was that in 1990, when his net worth was like MINUS a billion dollars, and he was on the verge of bankruptcy, he was with his daughter Ivanka when he spotted said bum, and explained to her that the bum actually had a higher net worth than he did. Anyhow, Trump went back to being worth several billions, and his daughter grew up and became very hot.

    I know, tiny insignificant detail!

  14. The easiest way to go broke; is to be rich and not know how to manage the wealth!

    There are many people who have had fame and fortune, who have mismanaged their money and have ended up with nothing. The misconception of “I’m rich, I don’t care” can really set people on the wrong track.

    • This happens with a lot of celebrities such as movie stars or musicians. In many cases they waste money on fancy cars and houses when they can’t afford them.

      • True, but then there are those who really know how to manage their cash and actually make more outside of their career, like 50 cent. I wrote a post about his business tactics and style, if you want to read it it’s linked in my name.

        • I’ll check it out. I think 50 cent made money outside of his career because of his agent.

          • 50 cent made bank with Vitamin Water.

            Smartest move he’s ever made!

            I also heard, not sure if it’s true but Kanye did sell more albums in the US, but he ended up selling more world wide.

      • I’m quite shocked when I see celebrity moguls filing for bankruptcy, like Mike Tyson or MC Hammer. Idiots

        “can’t touch this…” oh they touched it alright

        • LOL! MC Hammer’s dot com company isn’t doing so well either. My guess is that the company may claim bankruptcy sooner or later.

    • I think Will Smith took that route.
      Then once he went broke he decided he didn’t want to be that way again.

      • Actually there is a pretty interesting story behind Will Smith..

        As we all know he was in Fresh Prince of Bel Air, so he was making tons from that when he was 18, but didn’t realize that he had to pay taxes on his income, so uncle Sam took it all away and he ended up with a couple bucks.

        Obviously he learned to pay taxes, but I thought that was interesting.

      • The cool thing about Will is that he is molding his kids to become successful. For example his son has been in tons of movies such as The Day the Earth Stood Still.

    • I think Will Smith took that route.
      Then once he went broke he decided he didn’t want to be that way again.

      • Sometimes you need to lose everything to realize and appreciate what you had. Instead of looking at Will’s past as a mistake, it is better to look at it as an experience.

  15. Lol. No, I don’t agree with your opinion.

  16. Maynas Eric Chua :

    Hi there Neil,
    Been a few months since here 🙂 Hope you are doing great.

    Between, John (Chow) recently made a blog reply to this page at his blog. Thought you’ll be interested.

    http://www.johnchow.com/no-bums-are-not-richer-than-you/

  17. I’ll take donald trump’s debt.

    It’s good debt.

    It’s OPM that grows his net worth.

    If i could use opm to get good debt I would!

    I just Need Investors! I’m ready!

    great post neail…

    like the blog just found you from a friend of mine!

    Cheers!

    David

  18. CCNA Training Videos :

    Always good stuff.. I would suspect a lot of bums out there didn’t start off that way, and along the way racked up some debt as well.

    A lot of the country is probably 4-6 months away from bankruptcy (meaning if they lost their jobs for 4-6 months, they’d eat up savings, etc) and possibly lose their homes… so it could happen to anyone, give then right (or wrong) set of circumstances..

    • That makes sense. Although some chose to live that life not all want to live that life. Hopefully more people aren’t going to become homeless due to the economy.

  19. Mortage is french for “until death”.
    The wise move is to focus on good debt and business opportunities. Get rid of bad debts. But even if you have to take a short term personal loan at 15% interest, it could be worth the money if the deal is good enough.

    • I didn’t know that it meant “until death”. I wonder if they knew mortgage meant that before they called it that in the US.

  20. Vakfıkebir :

    Just because someone is a “bum” or “homeless” doesn’t mean they don’t have debt. The likelihood of the debt getting paid back is slim, however they still have it. One day they just don’t run out of money and say oh crap I better live on the streets…

    • The chances that they are in debt are high, but it doesn’t mean all bums are in debt. The thing to learn from this post is that in many cases it pays to live a frugal life.

  21. This is actually true in my city in New York, these homeles actually loaded since there is a high amount of traffic in my town. I did talk to some of them and they all really have a tough history. Kinna weird though.

    • Yea, some bums supposedly make 30k a year. Probably a very small amount of bums, but it seems that they have the potential to do well.

  22. Seo los angeles :

    wow, john chow retard burned you in his post, omg, did you read it?

  23. Neil, after reading John’s post, I realized that you didn’t mention the moral of this story. It wasn’t about good debt vs. bad debt or saving money vs. spending money, the moral was about how even after Donald had such massive debt, he was able to move forward by asking his investors for even more money to play with. When life gave him lemons, billions and billions of lemons (debt), he made billions of glasses of lemonade and sold it for mega profit. A pretty simple analogy, I hope you get the idea. Would you be okay if I rewrote this story and post it on my blog with the message I’m referring to?

  24. Very interesting post. This has triggered few more thoughts in my tiny brain, which I would pen down on my blog. Neil, can I use the image of the bum from your post? This would be perfect for my post.

  25. Neil,

    I posted the Donald Trump story with the concept I was explaining to you behind it. Check it out:

    http://www.persuasive.net

    Let me know what you think!

  26. John Chow got nothing on Neil Patel! I am not sure if you heard Ramit Sethi’s new phrase: WWAID (what would an indian do) The phrase is funny but as Russell Peters said we are the cheapest people on this planet and we are proud of it.

    • Damn right! I am proud of going on a US Airways flight and asking for a cup of ice because I didn’t want to pay $2 for water.

  27. The pic is funny but that’s the truth. We started our life with negative account balance with all the loans. At one point, I still believe that the richest man on the planet is those who don’t have any debts and have enough money for him to pay the bills and feed the family.

  28. Custom Silicone Bracelets :

    Ha ain’t that the truth… unless you get to college for free, but then there is car payments, house payments, credit card payments, and stupid other payments.

    • If you commute and have the option to live at home, you could save a lot of money. You just have to smart with your finances.

  29. I agree with you that the bum was richer than Donald at the time because Donald had a negative net worth. But I do think John is right about the fact that this does not mean that the bum is richer than the average American. I wrote a more detailed explanation here: http://www.contrariangoldfish.com/are-street-bums-richer-than-you/

  30. Steam Engine Kits :

    Thanks for sharing. I`ve had some good experiences with using a prepaid credit card with a chosen monthly average of cash. For example 400 € or 400 $. That would be 100 bucks of weekly allowance for coffee, CD`s, junk-food and so on. I think more than enough play money and a good way to control your outputs. If there is money left from the previous month, you can choose to keep it on the card + some new 400 bucks or you could just backfill the card to the amount of 400 bucks. This is a good way to not tap into the debt trap and even save money.

    Cheers. P.Bengs

  31. Webmaster Radio :

    you’re right for most people Neil, regardless of what Jon says. Household debt is the ticking timebomb that is going to be the eighth horseman of the financial apocalypse. Three short weeks from when this comment is being written, Xmas credit card bills will start filtering into mailboxes across America. When a critical mass of consumers can no longer make minimum payments…. arg.

  32. Webmaster Radio :

    Hi Neil,

    I’m living between Canada and the US for the time being, literally splitting my time between the west coast, Toronto, Fort Lauderdale and whichever American city whatever conference is in. It’s going to be like this for a few more months. (arg)

    The economy in Canada is hurting but not as badly as in America. Canadian banks are far more structured and regulated than US banks were so all remain solvent and monies are still being lent to those with good credit or loan histories within a reasonable time frame. We are NOT experiencing a housing-credit crisis and continue to have very low mortgage default rate.

    At the same time, Canada’s economy is a branch-plant / petrol economy tied to the US auto industry, resources and oil. The exhaustion of the auto industry has caused terrible job losses in Ontario, which is traditionally the economic engine of Canada. Out west, we are reeling from the roller-coaster ride of declining oil prices with the province of Alberta suffering the most job losses. Nevertheless, our jobless rate (which is traditionally higher than that of the US) is around 5.8%, three points lower than America’s.

    My Registered Retirement Savings Plan (similar to a 401K) is in tatters. Six years of gains are totally gone, as is my formerly brilliant “Freedom-45” plan.I’m now likely to be working long into my 50’s, a fate I had hoped to avoid until early last autumn. cést le me…

    As these conditions persist, many of my own personal plans are being called into question. I am not sure how long the conference circuit can sustain guys like me. I might have to go back to applying my knowledge directly as a service rather than a consultancy, writer or broadcaster. 🙁 Whatever happens, I believe (for the most part) the strong willed and agile will come through this relatively OK. At this point, I have no idea how long the downturn will last but believe it to be far more severe than economists or governments can predict.

    best wishes to you and everyone reading this blog.
    jim

  33. I disagree with John totally. There is never bad or good debt. Debt is debt and is always a millstone around one’s neck. It is the biggest cause for business failures and breakdowns of relationships. It has been so throughout history. Lender nor borrower be is a very difficult dictum in modern times, but one should strive to be debt free at as young an age as possible. Had lenders and borrowers been saner, the world would not be in the present sad state.

    • You can have debt in a house, but if that house is making you money then it is good debt.

      • Fair enough. In the US it is unfortunately true that you need to buy your home and very often purchase a vehicle too to commute. Apart from these two which may be considered as essentials, the rest should be bought on cash or at best with credit cards payments for which must be cleared fully every month. This is a sane way to live.

  34. Articles Spinning :

    Ha ha ha funny about Donald Trump saying the bum had more money than him. Yes, he’s right and you are also right to say one should pay off his/her debt. But there’s good debt and bad debt. People like Donald Trump, Robert Kiyosaki and other such investors made their wealth with good debt. But yes, if you mean debt from credit cards, yes, you are right. But for those that know how to use good debt to get rich, it’s not such a good idea to pay off all their debt. Such people just keep adding more to their portfolio with borrowed money, but of course they KNOW exactly what they are doing and hardly ever get into serious trouble that they can’t get out of.

  35. Motorcycles for sale :

    Dats very true.. Humor works wonders.N i hve seen too many rich people are arrogant when they shouldn’t be. Remember one thng “Arrogance” will just let you down from making more money.

  36. u gotta respect an honest man 🙂

    i bet he makes more money than the bum across the street.

  37. I love the picture in this post. It made me laugh. I’ve heard stories of people pretending to be homeless and making more money panhandling than they did working their regular jobs. It’s people like this that make very reluctant to give out money when asked.

  38. Living of debt is a terrible thing. Imagine this scenario – you’ll limit your spendings for the next couple months but afterwards you’ll have no debt, you’ll be able to spend every penny you make instead of giving half of it to banks and credit card companies.

  39. Accident Injury Claim :

    people go into debt through deficit spending. A deficit occurs when spending exceeds income at any given time. An accumulated deficit become a debt, and a debt is a financial obligation or liability to pay. To avoid deficit spending, spend below your means.

    • Sometimes unexpected things happen, such as losing your job. Even if you were spending below your means, you can have problems when you lose your job.

  40. The Work At Home Blog :

    It’s exciting to hear millionaire stories from rags to riches. I never befriended a millionaire before. I can imagine learning the things they did to get where they are is priceless. Nice post! The truth is even a bum can make millions if desired to do it. Oh yeah, is the story true about a bum that collected over a million dollars worth of coins, but the government took it all? I hear this story from people have you heard of this? If that really happened that is so screwed up.

    • I haven’t heard of that bum story. I’ll have to research it…

      • Online Colleges :

        In my hometown there was a bum who was asked how much money he made a week by the paper. His reply was 2,000$ then they took a picture of him with a sign that read, “why get a job when I can sling a sign for 2,000 a week.” Go figure!

  41. Thats a funny picture…I wonder he gets anything with that…

    Its all about cash flow…debt is leverage.

  42. One of the best things I ever did was cut up all but one of my credit cards and now have one credit and one debit card. The credit card is left at home (securely of course). This means that I only ever spend what I have but that in the event of an emergency I do have a credit card to help me out.

    • @Buy PSP Go, It’s great that you’ve cut up the credit cards, and done away with the credit cards. Hopefully you really do keep that other credit card as a true emergency only CC. Anyways, I’ve always never been a big fan of credit cards, and I always advise people to stay away from them, hehe.

      Till then,

      Jean

  43. I am currently a finance major at a University, which will remain nameless for privacy reasons, anyways, personally I’ve always felt that basic finance should be thought in High School. I bet there would be alot more richer people if everyone had been thought how to manage their money properly in high school. I think alot of people make mistakes with credit, that they would of otherwise likely not made if they had learned about how it all works in High School.

    Till then,

    Jean

  44. Good tips Neil. It pays to live humbly even if you’re rich. 🙂

  45. Sagar Pandya :

    I also have read in places that you shouldn’t pay debts off first; you should pay yourself first and see make sure you personal “balance sheet” is bigger then your “liabilities” sheet.

  46. interesting, you can apply the same way of seeing debt to countries economies , its what you do with your debts and in investments you make for example with your loans, that will determine your future

    • Yes…. most of us all face similar problems and challenges… but it’s the skills we posses that separate us apart.

  47. sell textbooks :

    Great post. How true it all is. Most people are so in debt and don’t even realize it is a problem. It reminds me of the commercial where the guy is talking about how great all his stuff is very sarcastically, and how he is up to his eyeballs in debt

    • What’s interesting is that a lot of people are in that same boat.. they seem to be rich, but the reality is… like you said, they’re into their eyeballs in debt.

  48. Yes i know bums are not poor even we ignore they are really rich then us.

  49. Good or bad debt. It thinks it just good to not have any debt at all. I here Donald Trump say all the time college loans are good debt. I once heard Warren Buffet say he will never purchase a credit card so I am guessing this is bad debt. I just rather have no debt and live on my interest from investments !!!! one day i’ll get there 🙂

  50. Yeah Donald being a “Bum” is so much more worthwhile than having a home, a job, a car, a nice life, good friends and no addictions. Yeah, I want to be a ‘bum’ too.

    I understand the point about good debt and bad debt, but what a horrible introduction into explaining it. Using the homeless and most unfortunate of our society, what is wrong with you people?

  51. debt consolidation :

    Very nice post. I just stumbled upon your weblog and wished to mention that I’ve truly loved surfing around your blog posts. In any case I’ll be subscribing to your rss feed and I hope you write once more soon!

  52. jjjjjjjjjjjjjj :

    well, I only owe $1000, so i’m $13,500 ahead of average. With a little work, I could BE a bum! Woo-hoo!

  53. We all have ideas on better business plans and should capitalize on them no matter how stupid others might think they are.

  54. Its true even in Hong Kong.

    Some of the street bums outside the MTR are pulling down 60,00HK$ a month !!!! all tax free…
    That is what a study found.

  55. Actually no matter if someone doesn’t be aware of afterward its up to other viewers that they will assist, so here it happens.

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