Reasons The Rich Become Richer
1. A Good Job
Most people don’t become millionaires without a decent job that provides a good income. That might be a job as a business owner, an engineer, a doctor, a lawyer, or something else.
However, it is not a job managing a McDonald’s restaurant, mowing lawns, or checking people out at the library or Wal-mart. People with those jobs don’t typically become millionaires.
At any rate, most people working on the second million still have the job that got them to the first million, and that’s one reason the rich get richer–they earn more money!
2. Learning the Rules
However, another important reason the rich get richer is that they know the rules of the game. I had an interesting chat with a relatively poor man in an unfortunate situation recently.
He felt the game of life was rigged against him and that the solution was to take all the wealth that “those rich guys” have, and split it up evenly among everyone else.
Read Also: How can i make money through blogging ?
I do not doubt that within 5 or 10 years of that event, that we would all be more or less back where we started in the process.
The rich are rich because they know how to get rich and stay rich. They understand how money works. They can do basic math. They know that it is better to get interested than paying it.
They know that leverage works but works both ways. They know the difference between assets and liabilities. They know how the tax code works and how the business world works. They know that discipline in spending matters.
How can you win the game without knowing the rules? You can’t, not without extraordinarily good luck combined with extraordinarily good advice.
While accumulating that first million, most people generally acquire some stuff that will appreciate in value, like a home, rental property, or even businesses.
These items don’t generally become worthless over time, and that appreciation continues to increase their wealth. Meanwhile, the poor don’t own anything that appreciates.
The only increase in anything they see is due to inflation, and the only way inflation helps the poor is by decreasing the effective interest rate on their debt. Guess what? It does that for the rich too!
Perhaps the best way to boost people out of the lower class is through education. Well, most of the self-made rich have already got it.
It might be self-acquired through years in the business world, but it more likely involves years of study in college, professional, and/or business school.
This may be the most important reason why the rich get richer. Not only are they earning money with their time/work, but they are also earning money with their money.
If you have an $800K portfolio, it’s like you have 800,000 little employees each busting their butt 24/7/365. Sure, each of them might only make a nickel or a dime every year, but there’s 800,000 of them!
Those dimes add up, and a much bigger chunk of that second million will come from investment earnings than the first million.
Read Also: A fool and his money are soon parted
6. Entrepreneurial Mindset
Many of the more well-to-do are business owners. Owning a business causes you to think differently; you develop an entrepreneurial mindset. All of a sudden you start seeing businesses everywhere, both real and potential.
It is a rare week that goes by that I don’t think of two or three businesses I could start or ways to increase profits in the businesses I own.
Sure, most of them are loser ideas or would require more time and effort than I’m willing to put in, but when you’re thinking about dozens or even hundreds of them a year, eventually you stumble onto a few that are both sufficiently interesting and profitable.
There you have it. My thoughts on The Second Million. Money might not bring happiness, but it sure can relieve a lot of misery. Want to be skinny? Do what skinny people do. Want to be rich? Do what rich people do.
What do you think? Has your wealth started to snowball? What were the big factors that led to it? How long did your second hundred thousand or second million take compared to the first?
Let’s try to be the boss of ourselves!! Thanks