Saving vs Investment
Billionaires Barbara Corcoran and Grant Cardone say saving money does not make you rich. Pexels

While having a lot of money is often associated with being rich, self-made millionaires Barbara Corcoran and Grant Cardone believe there's more to it than just saving money.

"I'm just not a believer in saving money," Corcoran, a real estate entrepreneur and star of ABC's "Shark Tank," recently told CNBC "Make It." "I've never saved a dime my whole life."

The real estate mogul, who faced criticism in 2021 for a comment on "The View," offers a surprising tip for making money: Spend it strategically. According to Corcoran, her spend-happy philosophy comes from her mother.

"I had a mom who raised ten kids on a shoestring budget, and she always said money is meant to be spent. And she didn't have much to spend," she recalled.

Cardone, the 66-year-old real estate investor known for running successful businesses like 10X Studios, Cardone Ventures, and 10X Health System, agrees with Corcoran. In the latest tweet, Cardone wrote: "Saving, saving, saving won't bring you wealth."

Corcoran and Cardone believe striking a perfect balance between strategic spending and investing is the key to building wealth. Let's delve into their methods.

'Cash Flow is King': Cardone

Forget "parking" your money. Corcoran and Cardone advocate for a dynamic approach. They believe cash flow, achieved through strategic spending and investing, is critical to building wealth.

"True wealth is through investing," Cardone told his followers in a video posted to Twitter. "Invest in things that [create] cash flow."

The potential for losses can make investing intimidating. However, Cardone warns that fear can be a wealth killer. He argues that instead of letting your cash sit idle, paralysed by fear, you should invest it in assets that generate income, actively growing your net worth.

Cardone's mantra is clear: Cash flow is king, not cash itself. "In fact, cash is garbage — inflation eats it. $1,000 in 1960 had the purchasing power of over $8,000 today," he wrote in a CNBC commentary 2018.

According to Cardone, investing in yourself or your business to increase earning potential is a significant first step. He also recommends assets like income-generating real estate to build a strong cash flow engine.

Corcoran echoed Cardone's emphasis on cash flow. She highlights the importance of "spending smart" by investing in assets that generate returns. Corcoran's success story reflects this philosophy – her investments in startups and her real estate firm not only grew her wealth but also brought her satisfaction.

"Believing that money makes money, if you're willing to share it and spend it, really works, or at least it has certainly worked for me," Corcoran said. "I really believe if you spend money it comes back to you."

Being Fearless

Fear isn't a factor for Corcoran and Cardone. Neither achieved their success by fearing the worst. Corcoran reveals she almost went bankrupt for the fifth time just before a million-dollar idea struck. Their stories are a testament to the power of perseverance in the face of setbacks.

Corcoran's financial confidence stems from her mother's advice: Don't waste time worrying about money. On the other hand, Cardone's parents were risk-averse and discouraged investing due to fear of loss.

"They didn't take money and leverage it into investments because they were terrified of losing their money," he said.

While bad investments are a concern, remember there are ways to manage risk. The stock market's historical resilience is a positive sign, especially for long-term investors. Diversifying your portfolio across different asset classes can further mitigate risk and improve your chances of long-term growth.

To minimise risk, you can follow the advice of successful investors. For example, billionaire investor Bill Gross recently recommended avoiding tech stocks after the Bureau of Economics announced a disappointing U.S. GDP growth of only 1.6 per cent in Q1 2024. Beginners can make their foray into the investment arena through low-cost index funds.

These funds track a market index, like the S&P 500, offering instant diversification and mirroring the market's performance. This reduces risk compared to picking individual stocks and comes with lower fees compared to actively managed funds. This highlights the importance of considering economic factors when making investment decisions.