5 Reasons The Rich Get Richer
and there is nothing anyone can do about it except JOIN THEM!!!
By Brad Reed of www.RealLifeTrading.com
1)Rich people spend LESS than they make
2)Rich people spend less than their investments grows after inflation
3)Rich people effectively pay less for items by paying with cash rather than credit card or loan
4)Rich people have better investment choices
5)Rich people pay less for insurance
A lot of political and religious leaders speak out about the evils of rich people. Any changes to taxes, wall street or whatever will be completely ineffective with taking down the rich and will only make it harder for everyday people to accumulate wealth. Here are 5 reasons the rich get richer, and there is nothing anyone can do about it except join them.
1) Rich people spend less than they make, even before they became rich. The key to becoming rich is not about big income; the key to getting rich is controlling expenses. According to 'The Millionaire Next Doorâ€ 80% of millionaires in America are 1st generation rich; this means at one point, 80% of today's millionaires were not rich. A person wishing to become rich keeps their expenses lower than their income, and if their income increases, they put more money into savings and investments instead of increasing their current lifestyle.
Expenses < Income
This is how many people have become millionaires with minimum wage jobs because they have always, and always will, spend less than they make.
2) Rich people spend less than their investments grow after inflation. 90% of lottery winners and 60% of professional athletes file bankruptcy because they spend their money faster than it can grow. Savings are invested to grow the account; the key is allowing the money to grow more than what is withdrawn for spending. Inflation causes the cost of living to increase each year by about 4% on average. Therefore, the equation for indefinite financial independence is…
Expenses < Savings * (Rate of Return â€“ 4%)
For lifelong sustainability (aka retirement), the growth of savings minus 4% must be more than what is withdrawn. Understanding this concept is why rich people can retire at early ages and still continue to get richer.
3) Rich people effectively pay less for the same things that other people buy because rich people pay for things in cash while others pay for things with credit cards and loans. If a $20,000 car is purchased with a loan, the total cost of all the payments could be $22,000; however, if the equivalent of the monthly payments are put into an account growing at 10% (the stock market average), the total payments come to about $17,000 â€“ over 20% less!!! By saving and investing, rich people effectively pay a lower price for things than those using loans, credit card and other forms of debt.
4) Rich people have better investment choices and always will. The more money one has, the easier it is to invest successfully. A $2500 account is most likely limited to short term trading where fees and commissions will consume significant portions of the gains. If you have $10,000 an investor can take advantage or more strategies in their portfolio (go to www.RealLifeTrading.com for free videos on how to grow a small account quickly). US laws require someone to have $25,000 to day trade or $1,000,0000 to invest in high performance hedge funds. Most financial advisors have a $250,000 minimum (email Brad@RealLifeTrading.com for excellent advisors that have a much lower minimum). The wealthier someone is the more they are able to invest successfully in real estate, bonds, stocks and options and more.
5) Rich people pay less for insurance because their wealth allows them to self-insure. Insurance is best used to protect against financially catastrophic events. A wealthy person can afford many events that a less wealthy person would need insurance protection such as hail damage to a roof, accidental damage to expensive home electronics and more. A normal person wanting $500,000 in life insurance to care for their surviving family in case of their demise will have to pay; if a person already has $500,000 in liquid savings or investments to leave to their surviving family, no insurance is needed. By having larger financial assets, rich people avoid many insurance costs whereas the less wealthy must carry the expense.
Real Life Trading has a mission to EnRich lives by offering free education from getting out of debt to finding a competent financial advisor to investing in the market.
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If you can't beat 'em, join 'em! If you want to improve your financial future, we want to help you for free. Why for free? Because we are successful stock traders ourselves. Plus, if you become rich, then you can provide financial security to your loved ones, create jobs for the unemployed, supply housing to those not able to buy, donate to charities you deem most worthy and more â€“ and THAT will make our world a better place!!!
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