Difference The Between Rich And Poor

There are several factors in why the rich are getting richer, thought the biggest reason is their view of money. Most of the lower and middle class look as money as a way to live. The wealthy see it as a way to advance. Money is to be used as a tool, not a chain.

The viewpoint on money is deeply molded by those around you, especially family. Those not in the upper class were raised to work hard and save their money. Those from wealthy families are raised to work hard and invest their money. Most people stick with the lessons learned from their parents and use those principles for the rest of their life, thinking that that’s just how you are supposed to do things. If you were taught to invest by your parents that may be a good thing, though those from lower or middle class families might never climb to the next economic class due to this advice.

Many think that saving money is their best bet because you are guaranteed not to ever lose the money you put in, and see investing as a roulette wheel. Little do they know that they are wrong on both counts.

When keeping money in savings, you have 1 force working against you: inflation. On average, the national inflation rate is 2-3%. This means a $100 today will only be worth around $97-$98 next year. This inflation loss is offset by the interest rate you earn on your savings account. Nowadays, savings accounts are earning as little as.01%, as you can see at Money-Rates.com when looking at their “Popular National Banks”. With an interest rate that low, the inflation rate is higher than the interest so you would be losing money.

Interest rates weren’t always that low. Back in 2004, there were some savings products that had a 3% rate as shown on the census.gov website, though around 2007-2008 the rates began to drop. Those who were invested in the S&P 500 index, for example, suffered a drastic hit in 2008 as well, though this index fully recovered and even exceeded it’s pre-recession value in 2012 according to the S&P 500 Returns Calculator at MoneyChimp.com. From 2004 to 2013, investors in the S&P 500 index enjoyed an annual return of 4.88%, while savings accounts earned an average of 1.5%. Using the numbers shown on Usinflationcalculator.com, the average inflation rate during the same time period was 2.38%, meaning that those who kept money in savings lost an average of.88% of their money.

Those who believe investing is a gamble simply do not know the basics of investing. Investigative steps should always be taken when making any type of investments so that you can make an educated decision on whether that investment will grow. This is opposite in gambling, where there is no amount of research you can do to improve your odds at roulette and walking out of the casino a winner. If you do not research or understand your investment, then it can be more like gambling. That, however, is easily avoid by doing your research before investing.

This fundamental change in view is the biggest difference between the wealthy and the not so wealthy. If the middle class invested more of their money rather than saving it, they would have a much bigger nest egg down the line which would put them in the upper class, though the risk of losing everything keeps many out of the market. Many are never taught to invest, so when they discover it later on the concept is intimidating so they avoid it. Those who are wealthy were taught to invest and use it as a tool to gain more wealth, so they continue to get richer. Investing is the tool wealthy individuals utilize that others are too afraid to use.