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Why The Poor Are Getting Poorer, the Middle Class Are Stagnant, and the Rich are Getting Richer

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Have you noticed how the poor seem to be getting poorer, the middle class have loads of debt, and the wealthy are even more powerful and rich than they were before? Many people consider this a mystery, but it’s actually quite simple. Attaining wealth is all about discipline and what you purchase. It is because of this that the poor and the middle-class have practically nothing in their bank accounts, regardless of the time of year (or decade) that you would choose to view them.

The Poor Have Little and Buy Short Term Thrills

Those that have little do not have an easy life in this world. They barely make enough to survive and they never experience the big thrills of traveling abroad or owning a large home on the lake. It is more likely that they live in a small apartment, they do not travel, and have a very slim selection of what they eat from day to day.

However, even though it is true that the poor do not have much for income, they are not helping their situation with the common things they typically purchase: cigarettes, lottery tickets, fast food purchases, and impulse buys from the mall. These purchases cost quite a lot when considering their total yearly income, and they have very little sellable value (even immediately after the purchase).

The poor stay poor because they do not use their small amounts of excess cash on long term investments. They merely buy short term pleasures.

The Middle Class is Stagnant and Their Debt is Growing

The middle class has plenty of income (often more than $50,000 per year), but their wealth is stagnant and they are racking up more debts than ever. Student loans, car loans, and home mortgages are piling up and the middle class find themselves with very little wealth. So if they have the appropriate income for attaining wealth, why is it that their bank accounts remain empty and their debts are growing? It’s all about what they are purchasing.

liabilities

The middle class are thankful that they are not poor, but they truly just want to live like the rich, so they end up buying things that they truly cannot afford, like boats, expensive cars, and houses that are bigger than their bank account can handle. In reality, the middle class act like the rich, but in doing so, they are just racking up depreciating assets, which just continue to make them hard up for cash and leaves them with nothing to invest for the future.

The Rich Are Getting Richer

Instead of people acting as though they are rich, they should really be studying how the rich are actually becoming wealthy so that they can do it themselves. So how do the rich do it? How is it that they can continually improve their financial status again and again? Again, it’s all about what they are buying.

assets

Unlike the poor, the rich are not throwing their money away with senseless purchases, and unlike the middle class, the rich are not going out and spending all of their excess cash on cars and boats. Instead, they are putting their money toward investments that will then net them even more money. Then, they take that money and reinvest it for more, and do it again and again, while occasionally using a small portion of their earnings to buy a vehicle or a boat along the way.

Many people assume that the wealthy invest more than others because they have the means to, but I look at this phenomenon much differently. I say that the rich invest more because they understand what it can do for them. They have wealth because they are long term thinkers and realize that by denying themselves the small pleasures today, they can experience much greater pleasures later in life.

Do you think like the poor, the middle class, or the rich?

Money

AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

16 Comments

  1. I use to think like the middle class, being obsessed about buying a bigger house, driving a fancy car and going on exotic holidays. Nowadays, I am doing my best to think like the rich but it is hard as I do think its in human nature to want bigger and better stuff especially when you have been told that from an early age by other people and evil advertisers.

    • The middle class conversation is really starting to annoy me lately actually. People talking at work about their new boat, RV, or auto…. all of which they cannot really afford so they are taking out huge loans to attain them. Can’t anyone talk about their retirement investments instead…?

  2. I think the poor lack the knowledge to get ahead. Most don’t know about retirement accounts, tax advantages, dividend investing, index funds. The list goes on and on. How are they suppose to grow their wealth without this information?

    • It is unlikely that their parents would instill the appropriate wealth knowledge into them since they were most likely poor themselves. However, through the library and the Internet, the poor have all of the same information about finances that I do. While I understand it is difficult, I think that the poor can most certainly claw their way out of their current circumstances and become wealthy.

      • The information is available but, that doesn’t mean they understand that the information is out there.
        I know I didn’t. I was watching QVC many years ago and, heard Suzie Orman talk about her book. I read it.
        That was the beginning for me. I still had very limited knowledge. Then one day I happened across
        Dave Ramsey’s book. I improved more!

        After this things started rolling, I read YMOYL, Mr. Money Mustsache,JL Collins, and ERE! I am currently reading
        The Intelligent Investor. Too, I am reading your blog and, a few others. I keep my mind thinking about saving
        and, investing daily. 🙂

        Funny, I was watching QVC for shopping entertainment. 🙂 I didn’t know I needed to understand finances.
        I thank God for bringing this knowledge into my life. I thought rich people were rich because they had/made
        a ton of money. I didn’t understand that anyone willing to work hard and, save could become wealthy.
        I had never seen that modeled or, mentioned in my social environment.

        • That’s crazy how you were introduced to proper financial wisdom through QVC! Ha, I would have never guessed it! Thanks so much for the personal comment Joy. It tells me that it is possible to move from poor thinking to rich thinking. It just takes some information and some time.

    • Hi Daisy. Thank you so much for the comment. For the last 2 years I have volunteered much of my time to helping those that are in poverty in my local area. While some of them are truly in unbeatable circumstances, many of them could (in my opinion) most definitely battle their way out of their unfortunate financial state. Yes, I simplified the poor within my article, but I still stand by what was stated.

      • Stand your ground, Derek. I agree. Of course life/poverty is complicated (trust me, I know – lived below the poverty level for several years and never took a dime of welfare ’cause I didn’t like what it represented i.e. the opposite of freedom). And for all those still in poverty – YES YOU CAN (get out of it and thrive). Easy? Hell no! Worth it? ABSOLUTELY!!!!!

        • Thanks for the comment Jim! With the proper information, anyone can become rich. Like you said, it won’t be easy, but it IS possible!

  3. I feel like I think like the rich, but for now am classified as middle class. I have all these ideas in my head but at such a young age and recently buying my first house I can’t put my ideas to reality without the appropriate funds. I too would like to get started in real estate, primarily buying rental properties. I have a goal in my head that in 10 years I should have my house paid for and will use that as my first rental and buying more as the funds become available. I think this will provide me with a heafty retirement along with my companies ESOP program!

    • Those are some great goals Ryan. Just never stop learning and I am certain that you will become rich!

  4. I always say that the rich are rich because they look at the long term while the poor look at the here and now. It’s best explained this way: a rich person buys a car and pays attention to the overall price they pay (the car plus interest when financed). The poor just look at what the monthly payment is and whether or not they can afford it.

    The rich are better off because they focus on their future, where they want to be whereas the poor are more interested in instant gratification.

    • Thanks for the comment Jim. You have me wondering though, do you think the rich would actually finance a car? Wouldn’t they rather find a deal on a 2 year old car and pay cash for it (according to The Millionaire Next Door)?

  5. Like you, I have worked with people in poverty for many years through low income eye clinics and for helping with their pets through the humane society. I don’t pretend to understand how it must be to have to live in that situation, but I do think lots of it comes down to only thinking about today, not the future. I can’t tell you how many people I’ve worked with that started to get ahead and went out and bought a new car or some other big purchase only to fall behind when things when downhill. I used to think that way too, but it’s much easier to turn it around on a larger salary. If you don’t make much, financial decisions are much more important.

    • Great succinct comment Kim. I totally agree. I have seen the poor make some very short term, poor financial decisions, which of course keeps them poor. If they had a larger salary it would perhaps be easier for them to become rich, but with the short term mentality they will almost certainly stay poor. Becoming wealthy is more about your mind than your income.


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