November 24, 2007

Why The Rich Get Richer And The Poor Get Poorer

The rich get richer and the poor get poorer is a saying that you hear all the time, but to be fair it is completely true, and if you look at society as a whole you will see exactly why this is the case.

The primary reason why this is true is because the wealthier members of society have the ability to invest their money into assets and investments that will make their money grow significantly, whereas poorer people don't really have this option.

The rich can invest their money into property, which can earn them vast sums of money through rental yields and increases in value, whereas the poorer members of society struggle to get a mortgage for their main property let alone think about further investment properties.

Similarly the rich can invest in the stock market and earn income from dividends and any capital gains they make through rising prices, or to go even further they can actually buy or start up businesses themselves which can bring great financial rewards.

All of which is generally beyond the average low income worker. That's not to say that they can't invest in these areas but if they do manage to save up and invest some money, the returns they will make will be very small in comparison.

The trouble is that you need money to make money, particularly when it comes to property and shares, and for most poorer people this is simply not an option as they have little or no disposable income with which to invest and make any decent returns from.

Most poorer people struggle just to maintain a reasonable standard of living, let alone get richer. Whilst the rich are increasing their wealth through rising share prices and rising property prices over a long period of time, the poorer people who are renting property, for example, will not benefit at all from any gains and although their income hasn't gone down, they are essentially getting poorer due to rising inflation and a more expensive cost of living.

The main path to wealth for the poorer members of our society is to either work their way up the career ladder or raise enough money to start their own business and make a success of it.

The rich, however, can just sit back and passively invest their money into stocks and property, for instance, and watch their money work for them, increasing their wealth all the time.

It's not a fair society but at least everyone has an equal opportunity to better themselves and make a success of their lives. Indeed many of today's rich started out with nothing, but unfortunately for the most part it's essentially true that the rich get richer and the poor get poorer.

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