How are the Rich Getting Richer?

The wealth gap between the rich and poor keeps on widening and the trend will continue this way over the coming years. Rich people tend to have more resources to risk by investing in different investment instruments that eventually create for them multiple streams of income.

As rich people’s investments grow, their wealth also grows. It is easier to make more money while you already have money unlike starting from scratch. For this reason, the rich will keep getting richer while the poor will remain poor.

Here, we are going to look at how the rich stay rich and the poor poor.

Why Do the Rich Keep Getting Richer?

The following are some strategies the rich use to stay rich and grow their wealth.

1. Investments

Rich people keep getting richer by investing. In turn, their investments generate for them multiple streams of income. Wealthy people have resources that the average person does not have allowing them to invest in different investment instruments. Some of rich people's investment instruments include stocks, real estate, hedge funds, money markets, and mutual funds. 

All these investments create a stream of income for wealthy people. Some of these streams of income include dividend income, rental income, profit income, interest income, and capital gains income. As their investments grow, they keep on growing.

2. Inheritance

Rich people also keep getting richer through inheritances. Wealthy people often pass their wealth to their children or heirs even when they are rich themselves. The end result is that the rich keep on getting richer while the poor keep on getting poorer.

Wealthy people pass assets from one generation to the other through inheritance thereby maintaining wealth within the family.

3. Tax Laws

In most countries, tax laws favor the rich thereby making the rich get richer and the poor poorer. Wealthy people get many tax breaks and other incentives that allow them to accumulate more money which they then reinvest.

Besides, many wealthy people can employ experts like accountants who can advise them on ways to avoid taxes. For instance, Elon Musk receives remuneration as Tesla CEO in form of stocks or stock options which are not taxable immediately.

4. Take Calculated Risks

Another thing that helps the rich get richer is the ability to take calculated risks. While wealthy people don’t gamble with their money, some venture into risky investments. For instance, Elon Musk invested all his proceeds from the sale of PayPal into Tesla and SpaceX while they were on the verge of collapsing. Fortunately, both succeeded.

Today, most of Elon Musk’s wealth is wrapped in Tesla stock while all of his other investments continue to generate more wealth.

5. Investing in Themselves

Rich people also get richer by investing in themselves. They acquire skills and knowledge that help them get richer. For instance, many wealthy people have a habit of reading books that help them gain more knowledge. Self-improvement through reading books improves one’s ability to perceive things.

Rich people are always looking for ways to push themselves and become better people. While the average person reads entertainment books, wealthy people read self-improvement books.

Also read: How to meet millionaires for business.

6. Live Frugally

While the average person spends money on unnecessary expenses such as luxuries, rich people get richer by living frugally. For instance, rich people don't wear branded clothes nor do they buy fancy cars or homes. For instance, Warren Buffett lives in a house he bought in 1958 for $31,500.

By living frugally, wealthy people are able to save and reinvest their wealth. These investments generate multiple streams of income that help them keep getting richer.

7. Stock Boom

Billionaires do not keep their billions in bank accounts. Instead, rich people keep their money in investments, businesses, and cash and cash equivalents such as money markets.

Rich people’s wealth is held in stocks in different companies. When there is a stock boom, rich people get richer. This is the reason why the wealth of the rich keeps growing as a result of stock boom. 

8. Technology

Growth and technology have created innovative ways to make money online. For instance, the internet has created ecommerce businesses that have made billionaires like Jeff Bezos, and Jack Ma rich. Through the internet, people can buy and sell products and services online.

Technology has also led to the creation of better products through research and innovation. Wealthy people have the resources to invest in technology and come up with improved products that fetch higher prices in the market. Eventually, they are able to compete in the market helping them get richer.

Why the Rich are Getting Richer Summary 

The rich stay rich by investing and creating more streams of income. Rich people have the resources to take risks by investing in different investment instruments. Other ways the rich stay rich is by living frugally, inheriting property, tax laws, and investing in themselves through skills and knowledge.

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This article was updated on August 30, 2023

Vincent Nyoike

Vincent Nyoike is an experienced business consultant and financial analyst. He is a CPA and is currently pursuing a Master of Science in Finance and Accounting at JKUAT. He holds a B.Sc. in Applied Statistics from the University of Eldoret