Why the Rich Get Richer and the Poor Get Poorer (2024)

Attitude matters: unravelling the rich-poor divide

Why does there seem to be a growing wealth disparity between the rich and the poor?

Here at Become Wealth, we strive to help people create and sustain personal wealth, so every day our team sees firsthand what it takes to become ‘rich’. Guess what? It has more to do with mindset and habits than any external circ*mstance. So, let’s explore the power of attitude and mindset in shaping financial outcomes. From spending habits to investment strategies, below we’ll explore how different attitudes can influence financial success.

For context, let’s quickly run through a series of facts, some of which may challenge common thinking:

  • Fidelity Investments, the world’s third largest money manager, researched the source of millionaires wealth and found 88% of millionaires built their wealth themselves. A raft of similar studies draw the same conclusions and so fly in the face of the common myth that most millionaires are born into wealth. For instance, a 2019 study from Wealth X found of the global population with more than USD$30 million, “…over two thirds of UHNW [Ultra High Net Worth] fortunes were predominantly self-made”.
  • Despite what we may see or hear in media reports, the most common economic measure of inequality, called the Gini Coefficient, has fallen in the most recent New Zealand data available. This means New Zealand is becoming more financially equal, not less – in other words, by this measure the rich are not getting richer relative to the poor at all! This data makes New Zealand one of the most equal nations worldwide.
  • If you’re a New Zealander reading this, then you’ve already hit the jackpot. According to the Nobel Prize-winning economist Herbert Simon, the benefits of living in a well-functioning economy probably accounts for 90 percent of individual income.
  • If you have total net worth of more than USD$138,346 you’re already in the top 10 percent of wealth accumulators worldwide – as determined by the most recent research from global financial powerhouse Credit Suisse.
  • Globally, the economic growth that the world has experienced over the last century isn’t just enjoyed by the rich. While the rich worldwide are increasing significantly, the poor are not doing poorly. More than a billion people have lifted themselves out of extreme poverty since 1990.

All of this seems to lead to two conclusions: no matter how much we clamor that the rich get richer, data also shows that the poor get richer, too. More importantly, the data shows that true wealth creation is available to anyone.

Circling back to our main topic, let's dive in and examine the fascinating world of wealth accumulation through the lens of attitude.

Our attitude shapes how we respond to challenges and setbacks. For whatever reason, there seems to be no shortage of ‘professional victims’ nowadays. We all know them or have met them: the sort of person who is continually blaming someone else or wider society for their struggles, forgetting the role they play in directing their own life! This sort of person might be perpetually offended by something or someone, and lacks the attitude required to be successful, and therefore lacks the attitude to be wealthy.

Poor people often attribute their financial situation to external circ*mstances, such as perceived or real societal barriers, or wider economic conditions. On the other hand, the rich embrace a proactive mindset, taking ownership of their financial destiny. They identify opportunities, overcome obstacles, and persistently strive for success. By maintaining a positive and solution-oriented attitude, the rich are more likely to create favorable circ*mstances and seize opportunities.

To illustrate this, consider the back story of the world’s wealthiest man, Elon Musk. He’s had a wide range of challenges and setbacks in life, not limited to:

  • Born and raised on the poorest continent
  • An unhappy and abusive childhood in apartheid South Africa
  • Being hospitalised for two weeks after a teenage street fight, where he was injured so badly his own family did not recognise him
  • Immigrating to a different country
  • Financially supporting his near-bankrupt father
  • Being rejected from a range of tech jobs
  • Ousted as CEO of his first company, Zip2
  • Almost died from malaria
  • Paypal, one of his first businesses, was voted ‘the Worst Business Concept of the Year
  • Divorce, depression
  • Near bankruptcy during the early days of Tesla
  • Repeated rocket failures at rocket company, SpaceX

Instead of dwelling on his disadvantages or issues, Musk has channeled his energy into finding solutions and creating his own circ*mstances. His determination and resilience have propelled him to the top of several industries, showcasing the power of a proactive mindset.

Think Musk is unique in this regard? Think again:

  1. Oprah Winfrey was born to a teenage solo mum, grew up without running water or electricity, and suffered childhood sexual abuse
  2. Arnold Schwarzenegger was raised in Austria, which was devastated by WW2. He had an alcoholic father and lived in a home without running water or electricity
  3. J.K. Rowling was a single mum who struggled to make ends meet
  4. Steve Jobs was the child of two immigrants
  5. Ed Sheeran dropped out of school and slept in subway stations
  6. Putting politics aside, before he made the rich list John Key was raised in a state house by a widow mother who had fled the holocaust
  7. New Zealand’s wealthiest person, Graeme Hart, dropped out of school at 16 and worked as a truck driver and panel beater

While the poor may be more focused on instant gratification, the rich tend to have a long-term perspective. They consider the impact of their decisions on future generations and work toward building a legacy. This forward-thinking approach enables them to make strategic investments, build successful businesses, and secure inter-generational wealth.

By thinking beyond their own lifetimes, the rich lay the groundwork for leaving a legacy and ongoing prosperity, while the poor struggle to break free from the cycle of short-term thinking.

Often, the rich aren’t even that focused on wealth at all, wealth just comes as a byproduct of their efforts. Let’s consider Elon Musk’s latest pursuits:
  1. Mass manufacture of electric cars to help reduce our dependance on fossil fuels. Musk doesn’t even patent the technology, it’s available for any competitor to use!
  2. Travel to Mars to ensure the human race isn’t dependent on one planet for our survival
  3. Purchasing Twitter to facilitate and safeguard free speech
Yes, there is a financial return for these efforts, though it’s clear Musk’s aim isn’t just to make an extra buck!

The disparity in wealth accumulation can also be attributed to divergent spending habits. Poor people tend to spend their money on liabilities — items that depreciate over time — such as luxury goods, excessive entertainment, or expensive cars. In contrast, the rich focus on acquiring assets — investments that generate passive income or appreciate. They invest in stocks (shares), property, businesses, and other ventures that have the potential to grow their wealth significantly over time.

Let's consider two hypothetical individuals, Mike and Lisa. Mike, who is struggling financially, purchases a brand-new sports car that immediately starts depreciating in value (i.e., dropping in price if he were to sell it). On the other hand, Lisa invests in a rental property. While Mike's car loses value, Lisa's property generates a steady stream of rental income and has the potential to appreciate over time through capital gain. Lisa can then allocate this passive income as she sees fit, perhaps to help her retire early, buy a nice car for herself, or maybe to support a worthy cause. In this way, by prioritising assets over liabilities, the rich increase their wealth and create a solid foundation for financial stability.

Attitude influences the way we make purchasing decisions. While the poor often prioritise finding the cheapest option, the rich consider the overall value proposition. They understand that quality products and services may come at a higher initial cost but can be a smarter choice over the long run. By valuing quality over price, the rich maximise the value of any purchase, ensuring long-term financial stability and growth.

Let's consider the scenario of purchasing a kitchen appliance. Imagine you have two options: a cheap appliance with a tempting price tag, or a well-crafted, high-quality appliance that comes at a higher cost. Initially, the cheap item may seem like a bargain, but as time goes by, it starts to show signs of wear and tear. It breaks down frequently, requiring costly repairs or total replacement. On the other hand, the well-made item, while more expensive initially, proves a wise choice. It withstands the test of time, performing flawlessly year after year. Its durable construction and superior craftsmanship ensure it remains functional and efficient, eliminating the need for repairs or replacements. By choosing the well-made item, you save money in the long run and enjoy the convenience and reliability it provides, ultimately lasting a lifetime.

The rich also know this applies to a whole range of services too:

  • The rich understand the importance of surrounding themselves with a network of professionals who can provide expert guidance and support. They seek out financial advisers (including us here at Become Wealth!), lawyers, accountants, and other professionals to help them navigate financial matters and make informed decisions. By leveraging the expertise of these professionals, the rich optimise their wealth, minimise risk, and capitalise on investment opportunities.
  • The rich understand the value of acquiring knowledge and expertise in their pursuit of success. The wealthy prioritise personal growth and continuous learning, recognising that education is a powerful tool for expanding their horizons and unlocking new opportunities. They are willing to invest in quality education, whether it's through universities, specialised training programs, micro-courses, or to hire personal coaches and mentors.

Poor people often view financial constraints as insurmountable barriers, thinking, "I can't afford that." In contrast, the rich adopt a growth mindset and ask themselves, "How can I afford that?" The rich explore creative solutions, seek out opportunities to increase their income, and leverage their resources to achieve their goals. This proactive mindset allows them to overcome limitations and pursue lucrative opportunities.

The mindset of the rich and the poor can often be distinguished by their approach to problems. While the poor tend to focus on the problems themselves, the rich have a natural inclination to seek solutions.

When faced with the rising cost of living and feeling like their income is insufficient, a poor person might express frustration and blame circ*mstances. On the other hand, a rich person's mindset is geared towards finding ways to overcome the challenge. They ask themselves proactive questions such as: "How can I earn more?" which will lead them to explore various avenues, such as seeking a bonus or promotion at their current job, starting a side hustle, acquiring new skills to increase their value in the job market, or even considering relocation to another country with better opportunities. The rich understand that dwelling on the problem won't bring them closer to a solution, so they focus their energy on action and exploring possibilities to improve their financial situation. This forward-thinking attitude empowers them to find innovative solutions, adapt to changing circ*mstances, and ultimately increase their wealth.

Attitude matters.

Attitude is the underlying force that separates the rich from the poor when it comes to wealth accumulation. From thinking long-term instead of seeking short-term gratification, the rich demonstrate a mindset that positions them for financial success. They take ownership of their circ*mstances, prioritise assets over liabilities, seek value over price, and proactively seek solutions to life’s inevitable issues.

While it's important to acknowledge that external factors do play a role in wealth disparities, the power of attitude should not be underestimated. By adopting a proactive mindset, we can begin to shift the needle and build a wealthier, happier life. Remember, it all starts with the right attitude!

It’d be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above, so get in touch today.
Why the Rich Get Richer and the Poor Get Poorer (2024)

FAQs

Why do rich get richer and poor get poorer? ›

Not Having The Funds To Invest

By making consistent investments when you are young, it enables you to become wealthy by benefiting from compound interest. This means that the earnings on your investments create future earnings, without having to work for it. This snowball effect amplifies your wealth significantly.

What is meant by the phrase the rich get richer and the poor get poorer? ›

The well-worn assertion that the rich get richer while the poor get poorer echoes Karl Marx's theory of immiseration which said that capitalists could only become richer by lowering wages, thereby reducing the living standards of workers until they had no choice but to revolt.

Do you believe that the rich are growing richer and the poor are growing poor? ›

It is probably true the rich are getting richer. But the poor are not getting poorer. Now, how do you increase the consumption standards of the middle class and the poor? The answer lies in creating more jobs.

Why does the rich stay rich? ›

The richest people don't only invest for growth, but they also invest to generate more income. They diversify their investments and find new streams of income. They know how to turn their assets into income-generating machines, therefore achieving wealth, even if the economy takes a dip.

Why do the rich pay less? ›

While giant companies enjoyed record profits in recent years, many still pay lower tax rates than most working families. That's in part because many take advantage of generous tax breaks and stash profits in tax havens around the world.

What causes rich people to go broke? ›

Poor budget choices and failure to follow basic financial principles can send even the richest people with a high net worth into debt. Millionaires have more money than most of us can imagine.

Why do the poor stay poor? ›

The low wage and unreliable nature of those jobs prevents them from saving enough to fund the purchase of indivisible assets needed to run these businesses. As a result, the poor remain poor not because they are only suited to irregular, unproductive work but because they cannot access the better jobs.

Why do rich people want more? ›

The wealthy are willing to spend more on each purchase in order to get a better price per unit and save time spent on repeating useless activities. This can apply to a business — the rich may contract to buy bulk supplies or equipment — or to you personal life.

Why do the rich not give to the poor? ›

Many wealthy people work hard for their money and would rather buy luxuries than give money to the poor, some of whom choose not to work. Being obliged to give to the poor can be demotivating e.g. Ronald Reagan had to pay 90% of his filmstar earnings in tax, a reason he gave for turning down some roles.

Who is healthier the rich or the poor? ›

Researchers have long known that the rich live longer than the poor. Evidence now suggests that the life expectancy gap is increasing, at least here the United States, which raises troubling questions about the fairness of current efforts to protect Social Security.

Who is happier between the rich and poor? ›

“In the simplest terms, this suggests that for most people larger incomes are associated with greater happiness,” says Killingsworth, a senior fellow at Penn's Wharton School and lead paper author. “The exception is people who are financially well-off but unhappy.

Do the rich save more than the poor? ›

Abstract. Empirical evidence suggests that the rich have higher propensity to save than do the poor. While this observation may appear to contradict the hom*otheticity of preferences, we theoretically show that that is not the case.

What is the biggest secret of the rich? ›

7 Money Secrets All Wealthy People Know — And How You Can Use Them, Too
  1. They Look at the Big Picture. Some wealthy people get rich quick. ...
  2. They Avoid Debt. ...
  3. They Search For Ways to Save. ...
  4. They Always Want More. ...
  5. They Know Time is Money. ...
  6. They Have Patience. ...
  7. They Believe Knowledge is Power.
Dec 12, 2023

Why are the rich so quiet? ›

The rich are often quieter than the poor because they have less to worry about. Money can buy you food, shelter, and security. It can also buy you freedom from want and fear. When you have enough money, you don't have to worry about where your next meal is coming from or whether you'll be able to pay your rent.

How do most rich people get rich? ›

The key for most millionaires is to save money before spending it. No matter how much their annual salary may be, most millionaires put their money where it can grow, usually in stocks, bonds and other types of stable investments.

Why there is an increase between the rich and the poor? ›

A major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job.

Why the rich get richer even in a financial crisis? ›

They benefited from [Federal Reserve] policy, from low interest rates, from big government spending.” And when companies did extremely well, so did the very rich. “And that's because the bulk of stock in this country, of shares, are owned by the wealthiest households.

Why do rich families lose their wealth? ›

One reason why this cycle occurs is due to a lack of financial education. Without proper guidance, subsequent generations may not have the knowledge or skills to manage the family's wealth effectively. Additionally, entitlement and family conflict can also contribute to the downfall of wealthy families.

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