The other day I was checking the mail and I caught an advertisement from one of those rent to own stores. I vaguely remembered someone telling me at a young age to stay away from those places at all cost. I had not gave it too much thought until recently when I looked closer at the add which featured a Sony Playstation 4 that included a bonus game for $69.99 per month for 12 months or $589.99 cash. From a quick glance the $69.99 per month may seem like a good deal if you don't have the $589.99 cash, but buyer beware! This purchase is horrible and can give some small insight on why the rich get richer and the poor get poorer.

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If you believe that buying the PS4 for $69.99 is a better buy because you can pay the payments unfortunately you have a poor mentality. A poor mentality is not to be confused with a poor or broke person, it's much more sinister and can breakdown family generations financially. Being broke can have a time limit having a poor mentality will keep you poor no matter how much money you come across. When we say to ourselves "I can afford the payments", to be frank, is typically a poor mindset because monthly payments on items that can, in most cases should, be bought for cash will begin to take away from building wealth for the future. Here is why; let's say I want to purchase the PS4 and decide to use the payment model the store is so "generously" offering at $69.99 for 12 months versus the $589.99 cash up front. Let's do some quick math:

$69.99 per month for 12 months would be $69.99 X 12 = $839.88

In order to have the PS4 through payments I would be paying an extra $249.89 ($839.88 - $589.99) for an item with an upfront cost of $589.99. Is that a wise purchase? Basically, the store is charging me interest and calling it "rent to own". So what does this have to do with the rich getting richer? After I paid $839.88 for the PS4 how much is it worth? If I put the questions a different way, how much is its resale value? Definitely not $839.88 for a used PS4, it's not even worth $589.99 now (ask yourself, would someone pay the same amount as a new PS4 for a used PS4? I doubt it!). The folly in this situation is that you are overpaying for an item that is ALWAYS dropping in value just to have it now. Don't get me wrong most of the things we buy decrease in value but overpaying for it so you can have it right now as well as it taking away from your monthly cash flow due to payments is a way the poor get poorer.

A person with a rich mentality would probably handle the situation in a different manner. They know the PS4 is not worth monthly payments, especially since it's a luxury item! It's not even a need. If faced with this same dilemma they would probably consider these options:

• Pay the upfront cost of $589.99 or not buy the PS4
• Save $69.99 for only 8.5 months, $69.99 X 8.5 = $594.92 and then purchase the PS4
• Price check the PS4 at different places to get the best price (I Googled a PS4 and found prices starting at $299.99) and repeat bullet point one or two.

I may have used the PS4 as an example but the same poor mentality applies to more expensive items like vehicles which are probably our most expensive purchases that drop in value. I know you want the new $23,000 2018 but if you have the cash for the $5,000 2010 it's a wiser purchase until you can save enough cash to buy a newer model. I fell victim of the poor mentality too; see Money Mistakes Vol. 1 so I understand but remember cars drop in value just like the PS4 that means unless you have $23,000 of extra money to have fun with it may be best to save and buy a new used car for cash until you have enough wealth to purchase a new car with cash.

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A big differentiator in this example of the rich and poor mentality is patients. What other differences do you see in the example (comment below)? We have to transition from "I want it now" to "I can wait and get it later" ESPECIALLY for luxurious items. I know it's hard but if you consider the rich or poor mentality which is most-likely going to be passed down to the next generation? Probably the one our children see us living. Thus, the manner we make purchases contributes to the rich getting richer and the poor getting poorer, so please... purchase wisely!