Why the Rich Get Richer and the Poor Get Poorer

An investment in knowledge pays the best interest. – Benjamin Franklin

The secret is a simple one: Education. I’m not talking about going to Harvard or some elite university. I’m not even talking about a Masters or a PhD degree. I’m talking about fiscal education. The rich are rich because they know how to manage money. They know how to put it to work and make it grow. By contrast, the poor know only debt. How to get into debt and how to get deeper into debt. Money management is taught in the school of life, not the universities.

The rich and poor just think differently about money. The rich think in terms of assets and liabilities. It’s one of the few enligh

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11 Responses to Why the Rich Get Richer and the Poor Get Poorer

  1. MollyJ says:

    I don’t think it’s that simple any more. Education doesn’t explain why corporate profits are as high as they have ever been, but the wages of the average worker have actually declined. For the first time in history, the wealth isn’t being shared. If you REALLY want to know why the rich are getting richer, you have to read “Supercapitalism.”

  2. Uri says:

    The wealthy also have greater ability to take risk and greater access to investing. They can lose money without worrying about retirement. Transaction fees are insignificant and they can meet minimum investment requirements easily.

  3. George says:

    ” Education doesn

  4. Sharman says:

    I thought your article was really good and truthful. Another thing about the wealthy, they are frugal. It’s the “affluent poor” that spend all their time and money trying to look rich, but don’t have a pot to piss in or a window to throw it out of.

  5. Provi Hernandez says:

    I don’t know much about being rich, and I can’t say I’m poot, but what I can tell you is that I don’t expect to earn my own house, and nor do I expect to retire.

    Nonetheless, I continue to educate myself.

  6. Dody says:

    As a “poor” woman I thought I would weigh in. I am “poor” because my income is very low and my assets are meager. However, I don’t have rent or a mortgage payment. I don’t pay much for gas because I have a 50cc scooter. I don’t have to pay much for “business clothes” because I work at home. I don’t pay for day care because I work at home. I own every thing and only owe because I decided to get a degree, a degree which so far can’t even pay for itself. I thought it was a good investment. Apparently people need a B.A. to be an administrative assistant.

    My point is, many “poor” like me are in rural areas trying to figure out passive incomes. I have the whole small business, self employed thing down pat. I know it inside out and can support my family of 7 frugally on it. I admit to wishing I could a afford a higher life style, but I never expect to. For right now my goal is to finish nursing school while working at home full time and home schooling 5 kids. I have done all of this with only medical help for the kids from the state. I also homestead.

    The “poor” folks like me are few around here because of “dignity”. Apparently it is undignified to drive a scooter. It is also undignified to work for ones self. I don’t know what kind of dignity a person can have with 2 100k mortgages, a 20k loan for a car, 40k in school loans, and 10k in credit card debt. I only have 30k in school loans and I feel like I am drowning. So don’t assume all poor people buy plastic consumable crap. The only “crap” I bought in the past 24 months was a Zen, so I have music to work out to. It was 80 bucks and has proven invaluable in lowering my blood pressure, cholesterol, and weight. I would say cheaper than the 50 bucks a pop to see the doc every week. *I won’t work out with out good tunes.* The money I “waste” is spent on political campaigns, services I donate to in order to keep them up such as certain websites, and religious affiliation items. This could be seen as a waste on a budget as tight as mine, but I feel everyone should chip in a buck or two to help keep what they love going.

  7. LVTfan says:

    I don’t think it was ever that simple!

    Might I send you to a 130 year old book called Progress & Poverty, which details the peculiar fact that, despite awesome technological progress in the first 100 years of America’s history, America in 1880 had huge poverty in its cities. The author, Philadelphia-born Henry George, sought the root of the problem.

    The book was the #2 best seller of the 1880s, second only to the Bible. It was widely serialized, widely discussed, translated into 30 or so languages.

    A modern abridgement is available online at progressandpoverty.org or from Amazon (search on Henry George Bob Drake progress poverty)

    No amount of education that doesn’t include an understanding of HG’s ideas is going to reduce poverty by even a tiny fraction.

    We tolerate, even are proud of, a machine that shovels our wealth into the pockets of a lucky few who own our natural resources and our most valuable urban land. And we treat them as if they are doing something for us, rather than the rest of us working for their benefit!

    HG proposes a simple alternative.

    You might explore wealthandwant.com for more about these ideas. (Search the front page of the last one for “wealth distribution” if you can bear to see the details: 1% of us have 33% of our wealth; the next 4% have 24%, leaving 43% for the other 95% of us. Their wealth — much of it in the form of ownership of natural resources and super-valuable urban land — is a rent-seeking machine. Those of us who dutifully play by the rules simply enrich them. Poor rules!

  8. Uncommonadvice says:

    I think it is this simple! “Only borrow money for things that go up in value” is one of the best pieces of advice I’ve ever came across.

  9. Terry says:

    Being in the field of helping others having problems with their personal finances for nearly 35 years I believe Joe has hit the nail on the head.

    When I read terms like Capitalism or in this case Super Capitalism I have a real problem with it because the alternative is Socialism, a concept I will never embrace.

    We make our decisions starting at an early age. Most of us make mistakes along the way. In many cases we have to live with those decisions, good or bad.

    Corporate profits are high because somebody is doing something right. They are selling and we are buying what they sell. Who profits? The shareholders of that company. People like you and me that have investments, no matter how small, through programs like our 401k.

    One other area that bothers me is this push to tax, regulate or penalize companies just because we think they are too rich. This is like cutting off your nose to spite your face.

    When we add expenses of any kind of a company, guess who pays. You and me. They simply hike the price of the item to cover the extra cost. Just good business.

    Being in this business as long as I have I also know that circumstances plays a part in your financial situation. But, that is the exception rather than the rule.

    It’s proven day after day that when we change the way we think about our money good things happen. Don’t stop educating yourself!

  10. Jack Sprat says:

    “The rich are rich because they know how to manage money. They know how to put it to work and make it grow.”

    The rich are rich because MOST of them came from RICH families.

    I’d like to see the CEO’s of AIG, Lehman’s, Fannie and Freddie dragged out into the street and publically flogged for putting our country into this mess.

    Put Treasury secretary Paulson there while your at it. He was the head of Goldman sacks. He knows how to part stupid investors from their money. Invest in products NO ONE UNDERSTANDS!

    He should have KNOWN BETTER, but he is just another fox watching the henhouse.

    When a small business fails, no one cares. Why are these SOB’s getting a BAILOUT for their CRIMINAL BEHAVIOR???

  11. Mike says:

    Jack,

    “The rich are rich because MOST of them came from RICH families”

    That’s simply not true anymore:

    http://blogs.wsj.com/wealth/2008/01/14/the-decline-of-inherited-money/

    It’s an antiquiated view of wealth, and one that only serves to keep you poor.

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