Understanding Why the Rich Get Richer and the Poor Get Poorer

Welcome to the new age of wealth and success. We currently live in an era of fast paced financial achievement with an increasing number of millionaires reaching staggering new heights. In 2021, the US alone reached a new record of 18.6 million millionaires.

We have all heard the catchphrase “the rich get richer and the poor get poorer”. This centuries-old phrase is mostly used by the lower class as a resentful reference to economic inequality. However, this catchphrase represents a reality that is commonly referred to as “income gap”. 

This income gap is widening at such a rapid pace that many success icons, including Grant Cardone have stated that the millionaire is now the new middle class.

Here are some factors that make the rich get richer and the poor get poorer.

The Power Of Mindset

Whether we like it or not, our mindset directly correlates to our level of success or failure in all aspects of our lives including wealth.

Mindset is a collection of dominating thoughts and beliefs that control our intentions, decision making and actions. It can either enhance our ability to see potential and transform it into wealth, or it can generate self-destructive behaviors which prevent us from achieving more than we currently have.

Wealthy people generally possess a positive and or abundance mindset. Many understand and implement the law of attraction which is heavily positive oriented. They believe that anything is achievable including wealth and they continue to set higher goals and take the necessary actions to achieve them. As a result, the wealthy generally invest most of their time, energy and focus into personal growth and anything that contributes to the achievement of wealth.

Additonally, highly successful people rarely pay attention to or engage in negativity. When confronted with a negative circumstance, they usually see it as a temporary situation and quickly find a positive solution. They have a clear understanding that negativity is more destructive than it is productive.

Conversely, most of the low-income group generally possess a negative and or scarcity mindset. Many are easily attracted to negativity and often feed into the “lack-of “ mentality. They usually focus on or get easily distracted by negative circumstances, even situations that have nothing to do with them personally.

Unfortunately, many get consumed by negativity and drama to the point where it consumes much of their daily thoughts which often fuels a victim mentality. As a result, this leads to a reactive and often negative behavior.

Consequently, they rarely see higher levels of potential and are often highly skeptical of achieving any level of success including wealth. For many,  their decision-making is usually fear based. For this reason, they financially and socially retract by mentally limiting their needs and desires, thus living a much lower quality of life.

To acquire a greater understanding of a wealth mindset, check out my book “Forge A Wealth Mindset”

Social Circles And Who We Pay Attention To

Our mindset, habits and actions are greatly influenced by those we associate with and pay attention to the most. This association greatly influences our success or failure in almost every area of our lives, including wealth.

For the wealthy, they usually associate with and pay close attention to other wealthy people. Essentially, they study, network, and collaborate with other high performers and like-minded people. This association provides them the correct mindset, knowledge and decision-making skills needed to find and grow new wealth-building opportunities.

Conversely, those of lower income usually associate with and pay attention to others in a similar income group. Unfortunately, this creates a limiting belief and  financial trap scenario that continuously recycles incorrect knowledge and beliefs about achieving wealth and success.

As a result, many in this low-income group never learn financial literacy, they never get the chance to discover how to create wealth or financial freedom on any level.

 Spending vs. Investing

Spending vs Investing - Affluent Vitality

How many times have you heard happy stories of the less fortunate winning the lottery only to sadly learn that they became broke again shortly after.

Whether through income, charity or winnings, the poor in most cases will spend everything. For many, their spending is a result of careless squandering to achieve immediate gratification. For others, it’s through a slower process of thriftiness, which prolongs the spending period. Either way they usually spend it all with no consideration of saving or reinvesting.

For most, their usual pattern is to first pay off debt followed by careless spending to achieve immediate gratification. This behavior results in the rapid outgoing of money without an increase in new incoming money.

For others, their spending habits result in a slower process due to thriftiness. While this approach prolongs the spending period, it eventually results back to poor status because money is being spent with no new money being created.

Generally, the poor including most of the middle class, spend all their earnings on items that are considered liabilities. Liabilities cost money but do not create money.

Most common liabilities include a home, cars and other stuff that not only cost money to buy but they continue to cost additional money to keep or maintain. As a result, for the poor, this style of spending sends all money out without the potential of any new money coming back. This creates a constant “back to zero” situation.

Conversely, when the wealthy acquire money, they quickly find new opportunities to multiply this money. They usually reinvest with the intentions of boosting existing revenue streams or creating new forms of revenue streams.

When the poor acquire money, they immediately think of the things and short-term experiences that they can buy. Conversely, when the wealthy acquire money, they see it as a tool to create more money. Click To Tweet

Essentially, the rich usually reinvest a percentage of their earnings into revenue generating assets such as real estate, angel investing, intellectual property and so on. As a result, these assets generate additional and ongoing revenue.

Due to the constant increase in new assets which result in the increase of new money, the rich can easily acquire liabilities without financial strain. This is because their assets are generating money at a much faster rate than it is needed to spend on liabilities.

Active income vs Passive Income

The poor including most of the middle-class usually work for money, generally, at a job where they trade their time for money. This is known as active income and is generally highly restrictive because there is only so much workable time in a day. Therefore, the potential to scale and create more money is limited, depending on the profession or field of work.

Conversely, most of the rich do not work for money, they have their money work for them, known as passive income. Essentially, wealth creators work to create or acquire revenue generating assets, and it is these assets that create money for them.

Passive income types provide time leverage and scalability. Once an asset is established and becomes self sufficient, the owner of this asset is now free to expand this asset for greater revenue potential or, create another revenue generating asset.

This scalability provides freedom to continuously expand existing revenue streams or to create multiple revenue streams. As a result, the flow of incoming money is constantly growing and often coming from multiple revenue streams.

Learn more about Active Income vs passive Income.

Habits – Rich vs. Poor

We all have habits, the question is how were these habits formed, what influenced them? This is vitally important because our habits either create or limit success, sometimes they even lead us to failure.

The wealthy have productive or growth habits that result in high levels of financial success. These habits include but are not limited to, setting clear goals, consuming the right knowledge every day that supports these goals, paying close attention to wealth and maintaining a growth mindset.

Some social habits that the rich live by include forming connections and relationships with other like-minded people who support their quest for success and avoiding negative people.

Conversely, the poor have habits that add little or no value toward the achievement of wealth. They rarely set goals, or they set goals that do not add value to the creation of wealth. The content they consume is mainly for entertainment purposes and often include mindless drama.

Their social habits are usually only for surface level entertainment with no depth or strong information value. These social interactions rarely include success or wealth-based knowledge or insights. Unfortunately, these types of habits trap the poor in an endless cycle of financial struggle with no clear path to financial freedom.

Join The Rich

Like any aspect in life, you must pay close attention to whatever it is that you are trying to achieve. If you want to become wealthy or wealthier, than you must pay close attention to those who have achieved wealth.

It’s imperative that you study and adopt the right mindset, knowledge, habits and associated actions of the wealthy, especially their social and financial behaviors.