Why the rich get richer…
Take 90% of the wealth of the top 1% and redistribute it to the bottom 10%, and I guarantee that within two years, the wealth will end back up in the hands of those it was taken from, and the bottom 10% will return to the bottom 10%. That may be a harsh assessment, but it’s reality.
Wealth isn’t about money; it’s about what you do with it. It’s about mindset, motivations, and habits.
There’s a long-running political talking point that the rich are rich because they exploit the poor and the middle class. As long as the poor and middle class believe this, they will always be poor and middle class. The rich are rich not because they exploit the poor but because they exploit opportunities.
The poor and the middle class cling to the status quo – content to go through every day like the last. They have a defensive mindset when it comes to money. They invest not to lose – by diversifying any meaningful gains away from their portfolios. And when it comes to retirement, the poor are counting on social security while the middle class is content to supplement their social security with just enough from their 401(k)’s, IRAs, or annuities to get by in retirement.
The rich don’t play defense, and they’re never content with the status quo. No matter what they were taught growing up about money, they are always open to new ideas and change. The poor and the middle class are averse to change. The rich don’t go with the crowd because they see the rest of the crowd live. They want to be the outliers – the ones who dictate their schedules and not by someone else. They’re willing to educate themselves to assess their investment options and to seek alternatives.
The rich are willing to go out of their comfort zones and break from the crowds. The poor and middle class stick to what’s convenient – getting their investment advice from the internet and social media and investing in auto-pilot retirement plans like company-provided 401(k)s. The rich are willing to educate themselves to weigh all their options.
The rich don’t want to just get by in retirement. They want to live their best lives now. Their overriding motivation is to buy back their time, and there’s no way they can do that by punching a clock. They want to call their own shots, and they want to cut the cord from a time clock. It’s this motivation that attracts them to the types of investments that they allocate to. They seek passive income opportunities that will eventually supplant income from their jobs.
The poor and middle class have one of two motivations: 1) to play it safe or 2) go for broke. They’ll either diversify any real gains away, or they’ll play the market like a casino. Neither approach is desirable for the rich who strive for above-market gains but are not at the risk of losing everything.
That’s why they seek private market alternative assets like ownership in private companies and commercial real estate that are uncorrelated to the stock market. Shielded from stock market volatility, these assets are able to deliver above-market returns through a combination of cash flow, appreciation, and tax savings.
Habits are what truly sets the poor and middle class apart from the rich. Habits are why money taken from the rich to give to the poor will end up back in the hands of the rich. The poor and middle class spend their money on things, not assets – splashy things that draw attention from the neighbors and social media but that only deplete their bank accounts instead of building them up. They’ll spend their paychecks on and go into debt for fast cars, nice clothes, expensive shoes, big houses, and toys that will deplete their assets. Where does the money go? To the owners of business and real estate that cater to the poor and middle class. That’s why the rich will always be rich.
The rich get richer because they put their money in assets that will garner more assets. They invest in assets that will compound their wealth – not take away from it. It’s not to say they don’t splurge once in a while – but they only do it within their means and as long as their wealth-building machine remains well-oiled. Passive income investments that generate income that can be reinvested – when combined with appreciation and tax savings – compounds wealth. A 10% return on $100 can be reinvested to return 10% on $110 and so on.
The Law of Attraction
The true law of attraction is what the rich do to attract money continually. Their mindset, motivations, and assets lead them to the right types of asset that will attract money and build wealth and not take away from it. Whereas the poor and middle class spend their money on material goods that only deplete wealth, the rich invest in assets that generate income 24-7 – making it possible for them not to have to work if they choose.
Take money from the rich to give to the poor, and the money will end back up in the hands of the rich because wealth is not about having money; it’s about what you do with it.