This post was guest blogged by 14-year-old blogger, Tushar Dhoot.
One of the growing concerns of middle class families everywhere is why they are stuck in the same income zone, while the rich, or the upper class, continue to move up. Over time, this has been labeled a “problem” by politicians, and while it very honestly isn’t, many of them are using this to promote contempt towards the rich. They want people to believe that most of these people don’t deserve to be richer, which is exactly the opposite of what I believe. I think there are reasons for this increase in wealth, and that’s why I created this blog post on 3 Reasons Why The Rich Continue to Get Richer.
Besides from those who won the lottery or just got lucky, most rich people will remain being rich, if not richer, for the rest of their lives. Some will actually remain rich for more than their life, because they’ll pass on some of their wealth to their next-of-kin. That’s not to say that some in the middle class can’t join them, though. That will require smart thinking and hard work, not just complaining about how those with fatter wallets continue to make more.
The first reason that the upper class elites will continue to become richer is because they have wide access to capital that little in the middle class have. If they see a great deal on a stock or a firm, they can buy it right now without having to jump through hoops. A common man would have to call his bank, ask for credit, put down-payments, and basically negotiate with his banker while the rich guy next door was sealing the deal.
This is especially true in today’s market, in which access to credit (another form of investment funding) is being restricted to only those who can really afford it. While banks are rejecting new loans and reducing limits on existing credit lines for the average Joe, they are offering unprecedented amounts of free-flowing credit to those who have the wealth to sustain it. One great example of how this access to credit will make the wealthy even wealthier is the stock market. While the rich will pour billions into the cheap stocks right now and profit 5 years down the line, the common man is having a hard enough time keeping the existing credit lines open.
The second reason that the rich will continue to prosper is because they are more diversified than your average middle class person. While a middle class person may have around 40-90% of their entire wealth invested in their home, the same house would be a laughable percentage of Warren Buffet’s wealth. So if houses were to ever tank completely, and if they were to lose 20-40% all of a sudden, it wouldn’t impact the rich as much as it would devastate the middle class. Does the situation sound familiar to you?
Secondly, since most wealthy people are businessmen, they understand the need to diversify their income sources better than the middle class. They know that they should not only rely on one product in their business, and that they should develop multiple products at once. This way, even if one part of the economy is tanking, they will fare better because they are spread this.
Often, just because rich people are losing less on a percentage basis than the middle class, people get the false impression that they are getting richer. In reality, they are merely increasing the gap between themselves and the middle class.
Make Their Own Decisions
The final reason that the rich are going to stay rich and become richer is because they don’t rely on others to make their decisions for them, and instead they make their decisions themselves. They don’t end up listening to mainstream media, which is telling them that the economic stimulus plan may or may not work, that we may one the verge of depression, and that home prices have tanked 20% since the start of this year.
The rich will rely on their own intuition, and instead of getting scared or shocked at this kind of news from the media, will continue to run their business and do what they feel is right anyways. So while the common man is still sweating over the thought of facing a second depression, and is reconsidering his decision to get a house this year, the upper class citizens will go ahead with that purchase, and save nearly 20% on it as well.
So as far as this class warfare goes, I would like people to know that there are reasons that the rich are getting richer. It’s not because they don’t deserve it, but it’s the way it works. Kind of like the old saying “Don’t hate the player, hate the game”.