In America or in almost all of the countries, there is a wide gap between the rich and the poor people. The common observation from many economists is that the “the rich getting richer and the poor get poorer. In my previous article I discussed in detail the reasons why the rich getting richer. And now in this article I will elaborate the causes why the poor getting poorer or why poor people stay poor.
Majority of poor people are educated and have a decent job. They are trying to climb the corporate ladder and competing among other employees for a certain position and salary. Poor people favorite words in this world is security and comfortable. They feel secure of having a job but still keep worrying about money. Poor get poorer mainly because they don’t tend to risk looking for and taking other sources of income.
Poor people tend to acquire lots of liabilities and bad debt. While the poor people stay poor, they still feel better when they buy more wants; like branded clothes, latest and expensive electronic gadgets, etc. Wages from their job is their main source of income. They love to have a consistent and fixed income coming to their account monthly. They don’t bother to trade their precious time to their employer for dollar or money.
Over the period of time, the scenario is still the same, that the poor getting poorer and in most cases in our society, the poor keep struggling to save for retirement or for emergency fund. They are happy to have just enough money or to have just enough to pay the bill. To clearly understand why the rich getting richer and the poor get poorer, you read the below.
5 reasons why the poor get poorer:
1. Working hard and earning less
Poor people concentrate to work hard and to look for a second job in order to cope up with their household expenses. You may notice that if you are an ordinary employee, your income is always less. The price of grocery items, foods and other necessities are significantly going up while the salary of middle class and ordinary poor wager is still fixed. Poor get poorer because they don’t have time to think or to conceptualize how to escape from rat race. They don’t have time to look for any other opportunities of money making vehicles or to ask any advice from registered financial advisor or financial mentor. They love to work hard, work and work yet their income is not enough to pay their bill or loan.
However, if you could observe, rich people work less but they earn much money throughout their life. Rich getting richer due to leveraging, they love to delegate all the works to their people while they are busy looking for other ventures or business opportunities.
2. Spending Habits
Poor get poorer due to their spending habits. They spend majority of their income on luxurious things before setting aside for savings. After buying and paying bills, nothing left for saving and investing. Most of the poor people stay poor because they spend most of the time above their income by using their credit card to purchase expensive stuffs. These expensive stuffs will make them satisfied and happy for a few minutes or days and after that they’ll sacrifice to pay off over a long period of time.
On the other hand rich get richer for the reason that they have a self control to save and invest their money. After accumulating money and building wealth they can now afford to spend luxury items or nice car for themselves, to go for vacation holidays, etc.
3. Lack of Financial Education
Poor get poorer because of lack of financial education. Poor people are always busy working for money and they don’t have time to learn how to invest to financial education. They don’t spend their spare time to educate themselves on how to read financial and income statements. If they have spare time and money, financial education is not their priority. Additionally, poor people stay poor, because they are focusing on being an employee only and they don’t want to learn about money saving, wise investing, financial and frugal tips, real estate investing, business venture and etc.
While millionaires are focused on mastering money markets, stock trading, real estate investment and business trends. They are open minded people, willing to learn and adapt new technology for the advancement of their mind and their business.
4. Investing Money in one asset
Poor people biggest investment in life is their home. Poor get poorer for the reason that they tend to acquire home mortgage for a big and nice house because they believe that their house is an asset. In recent global crisis the most affected business sector is real estate and the most affected in the society are those poor that are mainly tied up of their savings or retirement on their home mortgage. Moreover the poor people stay poor, due to the collapse of real estate; it means that they owed more than the real present value of their houses.
Whereas those wealthy people, they diversified their investments into different money making vehicles and markets. They invest their money wisely and keep learning the ups and downs of the markets and that’s why the rich getting richer.
5. Hanging out with like minded friends
Friend of the same feather flocks together. Most of the poor people hang out with friends with lavish lifestyles who buy big houses, new and expensive cars, latest appliances, electronics gadgets and eat out at fancy restaurants. Hanging out with these kind of people will lead you to a lot of unnecessary desires and impulse buying due to peer pressure. Thus, this will contribute to the fact that poor get poorer due to peer pressure.
However rich and successful people avoid dealing with toxic and broke individual. Rich get richer because they like to hang out with like minded people where they can gain great business ideas and advices about market trends. They get assistance and advice among fellow wealthy individual.
“Rich people think and focus on opportunities while poor people focus on obstacles”.
In recent economy and in our society, the real story here is that there is little hope for an already struggling poor people. It takes a lot of financial education, self control and discipline to gain towards financial advancement. Furthermore, if you will invest most of your time and money for the gain of your financial literacy, you can escape the rat race and can avoid the poor get poorer scenario.
My personal advice to those financially struggling out there, go and learn how to read financial statement, how to invest and learn the cash flow pattern. Read a lot of reading materials related to personal finance and money investing. By these, you can render your action based on the knowledge you gained from your self learning process about money and financial being.
P.S. If you have any additional ideas or suggestions, please feel free to leave your comments below.
P.S.S. If you feel this article is useful to other, please share and tweet this. Thank you.