3 Reasons Why the Rich Continue to Get Richer

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.

Capital

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.

Diversify

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”.


55 thoughts on “3 Reasons Why the Rich Continue to Get Richer”

  1. Wow, great blog — 14 year old Tushar Dhoot? He might be my 2nd favorite online-money-making-guru — imagine the “wealth” of knowledge he’ll have by the time he is actually able to buy stocks!

    Great article, Tushar.

    1. By the way, the “make their own decisions” part is quite true — and is something I have said many times! I am tired of hearing how the economy is ‘this..or that’, and how it is impossible to gain anything right now.

      “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.”

      Agreed!

      1. Tushar says:

        Thanks for the comment Mellissa!

        I’m glad you share my view.

        1. Nice post there dude. As far as making own decision go, even if they make a wrong decision it really does not matter much now does it?

  2. I agree with everything you say. I would just add that if the middle class (or any class for that matter) want to be rich, they should focus on working for themselves, instead of thinking how long they will have a job or where they’re going to find the next job.

    1. Tushar says:

      Well said Enrique. Working for themselves, and working on themselves, rather than eyeing the wealth of others or taking the advice of others.

      1. Charlie says:

        I agree with the post overall. But this is a much simplified version of the real world. I don’t mind an entrepreneur who risks his own money getting rich.
        However, there is a category of rich people who are not businessmen but rather these CEO’s, corporate management etc,whose risk reward is completely asymmetrical. They move around in corporate jets which are paid by shareholers in good times and taxpayers in bad times. Risk reward for them is like– if the company wins, I take a multimillion dollar bonus. If the company loses, the maximum punishment is that I lose my job with a million dollar a year pension deal — These are the Dick Fulds, and Sir Fred Goodwins. WIth 100s of millions in wealth accumulated just from a job, they are many times richer than most entrepreneurs. Who needs to take risk when you can earn more than businessmen just by doing your job. And you have no risk on your plate.
        I know I am digressing but there is something wrong with the corporate system of America. There is no control over management anymore. The market is pointing it out but the politiciancns are busy bailing out the incompetent with scant disregard to moral hazard etc. I know I am digressing here.
        Basically I agree with Tushar that the rich are rich because of all the reasons he said. But reality is much more complex than just 3 reasons.
        And if the current misalignent of risk reward for corporate jobs continues, who will want to be entrepreneur anymore? Who will want to work fro themselves?

  3. The rich have started successful businesses.
    They do it by starting their own business. They have taken the leap and reaped the benefits of taking that entrepreneurial risk. It becomes a vital cycle: start a business, make money, start another business, make even more money. I think the rich deserves to be rich or as you said richer.

    Peter Lee

    1. Tushar says:

      Thanks Peter.

      You’re absolutely correct when you say that it’s a cycle of sorts, and although it can be broken easily, it can also be kept going with the same ease.

  4. Go Local SEO says:

    You’re pretty smart for a 14 year old and you are also right with your assessment of the rich. Unfortunately, in this current political cycle, the rich are being sold as evil. Those who cannot or do not think for themselves will buy into this propaganda.

  5. Great post! This flows nicely with what was taught in Rich Dad Poor Dad. My father is well off but still listens to the media, and in doing so has pulled out of the market completely, losing tens of thousands of dollars. Me on the other hand, I’ve been saving for quite some time and have steadily been investing in certain points when the market drops. Granted, I have many more years before retirement, so I’m not so worried about the situation as of now, but know that as history proves, when it goes back up, it goes up hard. Buying today with prices at 1995 levels is too good of a deal to pass up. Keep up the positngs! You’re well versed as a 14 year old – reminds me of myself back then =).

  6. BusinessX says:

    About diversification Warren Buffett is opposed, he says- “”Diversification is a protection against ignorance. It makes little sense for those who know what they are doing.”

    All great fortunes were built on a singular industry. Eggs growing in one basket.

    1. Tushar says:

      Who is to say you can’t diversify within your own Industry?

      Take Warren Buffet himself for example. Financials. Stocks. Bonds. Insurance.

      Many sides of the same coin (erm, well, 5-sided coin).

  7. kiki says:

    Yes, I’am agree with you. the rich men will Continue to Get Richer cause they will invest their money to get more money. it’s mean you have doubled your money with money not work 🙂

  8. Xof says:

    Dead on, it’s called basic rules of business and that’s why having access to $$$ is key in any kind of economy but esp. in this kind.

  9. Great post. Nice contrast when compared to the attitude of so many who are so busy complaining that they need a handout rather than copying the hard working habits of many of the rich so that they can create wealth themselves.

  10. An excellent analysis. It’s amazing that someone as young as you would have such a thorough understanding of the differences in habits between the middle and upper class.

    I definitely look forward to reading more of your writing, Tushar!

    1. Tushar says:

      Thanks Lee.

      I hope you’ll check out my blog for more of my work!

  11. Tushar, excellent point! Great job on guest posting on john chow! Hope all is well man!

  12. Tushar says:

    Wow, seems I got on at just the right time.

    Thanks for putting this up, John!

  13. Faisal Anwar says:

    Great article Tushar. You’re only 14? Thats really impressive!

    Anyway I kinda disagree with the last reason because even rich people have to “go along with the flow” sometimes. And its true that capital is a strong factor that makes the rich richer, they can expand themselve like virus whenever they want to.

    1. Tushar says:

      Thanks Faisal!

      While most rich will go with the flow sometimes, it’s their attitude most of the time that made them rich and will keep them rich, if not richer.

  14. Hrvoje says:

    Yeah this is very true. But also write how the middle class or lower can become rich ;-). and don’t work hard. work smart.

    Hrvoje

  15. Avinash says:

    Well said Tushar, there are people from middle class who have become rich,I feel the reason there are not many from the middle class is because of the attitude and not ready to change and take the same old path many others have taken and feel thats the way to go.

    1. Tushar says:

      Thanks Avinash.

      Your last point is exactly what I wanted to convey in my third point. You have to be able to make your own financial decisions and not rely on others all the time.

      1. Exactly!

        There are the people who come up with great ideas, but then while being influenced by others to a certain extend, to “protect” themselves from potential harm or failure, do not take the necessary steps and risks involved (which are ALWAYS involved in starting a business, bad economy or not!)

        — Then there are the people who actually do take action — and benefit from the rewards that come from hard work, sacrifice, and again: RISK!

        Basically to elaborate on my first point — the economy is just a cop out, or an excuse, for people who are not ready. Like people wanting to lose weight, “Well, it wont work anyway — I don’t have time to go to the gym.” — wrong, because you do

        Same goes for this — “Well, I wont get rich right now. The economy is bad.” — WRONG.. people are getting rich as you sit there!

        🙂

  16. Tim Andren says:

    Information is power. Social capital is even more powerful. These two areas are ways for anybody, regardless of class, make positive strides for themselves.

  17. Very true indeed – good guest post!

  18. Are people with those T-shirts still “Flipping Rich”?

  19. Akmal Wardak says:

    its hard to believe that these are words of a 14 years old.

  20. Great post.

    although the rich do get richer, they do not always go on their on intuition. I have a wealthy client in California that I’m working with and his “team” of consultants advise him on what projects to take on. Unless after going through a proposal with a fine comb do they see no projected pitfalls, the plan is pushed forward.

    Wealthier people have the ability to hire the best and retain the best which in the end helps their own bottom line. They also have the ability with greater wealth, to cushion any financial downfalls one of their many diversified projects might show.

    I can also tell you from personal experience that the rich are having just a hard time in getting loans from banks as the regular working person. Yes, it might not be comparing apples to oranges in comparison, but a definite hurdle has come up for this once hassle free group.

    Another thing, what happened to people living within their means? Is it the fault of a rich person that he can afford his mortgage payments while a middle-class person went into a house with little down and constantly stressed over payments? Last time I checked, this is what society has produced…over consumption and a lifestyle built around borrowed money/credit.

    Towards the end it seems like you imply that there will always be a division of wealth classes where you are either in it now, or never be in it because of the way the game is setup. I disagree, I came from nothing and no many others that have worked their asses off to rise the ranks. Its all about what you put into it and how far you want to go at the end of it.

    Some people will complain that others are richer than they are, while others will look at these as goals to strive for (ie. financial wealth/independence).

    1. Tushar says:

      Thanks for the comment Aman.

      The first reason you mention is a great example of one of the many other reasons that rich people will remain rich, and that is because they have the best talent working for them and can simply hire someone in the fields where they are not skilled.

      Secondly, it may be just my connection, but one of my relatives who is fairly rich (several million dollars) has told me that banks are willing to give loans at lower rates because they are now focusing on their lower risk individuals and accounts versus perhaps making an extra 1% and taking a risk.

      As for the last point, this was not my intention at all. What I wanted to do was imply that the rich are where they are for a reason, and contrary to what most people believe, they do deserve it.

      Once again, thanks for commenting, visiting John’s blog, and reading my guest post.

        1. Tushar says:

          Don’t thank me, let me thank you.

          I’m happy to have people reading my guest post and having liked it enough to leave a comment, and I’m sure John is happy to have people on his blog!

  21. I think the reason can be summed up even simpler than this article: the rich know how to manage money. They live below their means, have savings and make smarter investments than “regular” people.

    1. It is extremely difficult to live below your means when huge percentages of the population barely make enough to keep a roof over their head and food on the table.

  22. firedupblog says:

    Amazing all this from a 14 year old? I was chasing girls when I was 14 but Tushar way to go…..I am inspired Thank you:)

  23. Bibokz says:

    Work hard and get rich… then, play hard.

  24. You show great wisdom for such a young person; however, as someone who has lived much longer I’d like to share a different viewpoint.

    Most Americans would love it if they were still “Middle Class” and their buying power was still the same. It hasn’t been for a very long time.

    Like every other country – and maybe even more than most – the United States is a plutocracy. Obstacles are intentionally and continually created to protect existing wealth and prevent competition.

    Propaganda from every direction insists everyone needs a college education which puts most students deeply in debt. The longer they can keep people in college the more productive years will be unavailable to build businesses.

    Propaganda also preaches that everyone must have a J.O.B. (Just Over Broke) and a CAREER. Neither is true. As someone else commented, we should be reading Rich Dad, Poor Dad instead. Anyone who reads it and still thinks they need a J.O.B. or a career didn’t “get it”. They should read it again.

    Oppressive laws and fees and paperwork and red tape tie up our time and suck up our resources and discourage people from starting businesses. This artificial overhead ensures that many new endeavors will fail.

    If anyone really wanted to improve our economy they would start repealing these laws and keep repealing them until the only laws left are for serious criminal offenses. And that includes mandated spending on ANYTHING by anyone.

    That should start with mandatory liability insurance. Those who can afford insurance still have to carry uninsured motorist insurance so mandatory insurance burdens the working poor and allows insurance companies to get paid twice for the same coverage. Being able to get to work should not be considered a luxury and in many locations there is no public transportation.

    We would vote with our dollars and support our LOCAL businesses and small online retailers and services. We would quit buying from huge corporations that offer us products at below their true value at the expense of the people forced to sell them too cheaply.

    The majority of people can already barely keep a roof over their head and food on the table and it will get far worse before it gets better. Some may figure out how to work their way out of poverty but many don’t have a chance no matter what they do.

    Between a dumbed down education, so many taxes that necessities of life like a loaf of bread cost hundreds of times more than they should, and mandating that people buy things they can NOT afford is the cause.

    Let’s stop blaming the “victims” of this ridiculous system and change it. If we don’t the U.S. is going to see many forced to live off the books. Going to a cashless society will only create a huge black market or internment of thousands of Americans.

    The time is here for SERIOUS decisions. The sooner you make them the better off you’ll be in the long run. I’ve linked a blog post I did on the imaginary middle class we supposedly still have but don’t. You may find it interesting reading.

    1. great comment internet strategist

    1. Tushar says:

      Obviously not everyone will start out with millions of dollars, but it does get easier to grow once you do you have that amount of money.

  25. game-girl says:

    The post is nice.Money attracts money.This is called the universal law of attraction.And everybody knows that the money must be kept in different baskets.The question is if it is so good to start business at !4.My idea is ’tis a kind of extremety,Nature is wise and it will balance everything in the course of time.Many stories about millionaires telling about them being childish at 50.A lady collects and plays dolls like a 10year-old girl,she started to sell ice-cream at 10 helping her mother,a great -haired genleman chasing girls in the office,I think that is the balance-to be happy they got what they had missed at its time.

  26. Agent 001 says:

    The first point is absolute. The reason I have not been able to rise is lack of capital. The credit one. I have money but cannot invest it, I have no access to credit cards yet.

    Tushar very nice post.

  27. This post is awesome! Especially coming from a 14year old. Carry on and you’ll be there among those who get richer and richer!

  28. Clement says:

    Great piece, young man. Better than most of John Chow’s articles.Lol.

  29. Ben Pei says:

    Wow Tushar, you have some good writing skills there. I bet you’re doing well in school huh?

  30. Rob says:

    My goodness. You talk about “the rich” as if they are some invincible beings from another planet.

    Perhaps I missed the measuring point, but how do you define rich? Net worth? Annual income? What’s the number?

    Rich people are losing less than the middle class? Are you kidding? Look at the stock market meltdown. Or how about the multiple Ponzi schemes that have been uncovered in the last few months. I know some “rich” people, hard working folks that lost more than 50% of their hard earned 401K contributions and other investments. Others in the news have lost everything. Sorry, but that DOES have an impact no matter how much money you have.

  31. it is very true man.A Well thought out post.
    Cheers

  32. If you have watched the secrets, then you know that the rich continue being rich because their predominant thought is wealth.
    If you think about making money most of the time, you will eventually find the right money making channel.
    On the other hand, if you keep fearing the loss of your accumulated wealth, you increase the chances of losing it.
    It’s that simple:
    Likes attract likes and that is the law of the universe.
    Thanks

    Kevin Njoroge

  33. Insightful article Tumar. A lot of what you say is true. But when someone buys a blue chip stock like Citigroup at $50 last year and today it’s a little over a dollar, it’s not a rich mentality that going to save you.It”s money that gone for a very long time. Well Tumar, how can the middle class get back some of their wealth? Errol.

  34. Dating says:

    Tushar, I am very impressed with the way you think and how well you are able to put your ideas into context that gets attention.

    I think you have a lot of great thoughts here. I will be keeping an eye out for you!

  35. Bobby Birman says:

    Great post – Tushar if you ever get bored with contemplating the sources of wealth please consider syndicating your articles – you have a Golden Talent for communication 🙂

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