There are many reasons why poor people stay poor. The poor keep getting poorer while the rich keep getting richer. Factors like talent, ability, opportunity, and motivation play a key role to whether one becomes rich or poor. While the poor feel entitled to free stuff, rich people work for them.
Poor people work for money. On the contrary, the rich know how to make money work for them. The rich continue getting richer because they have mastered how money works. In this article, we are going to look at some reasons why the poor stay poor and the rich stay rich.
1. Failure to Save
One distinction between the rich and the poor is the ability to save. Rich people save a percentage of their income. The rich pay themselves first. When they get their salaries, they first deduct savings and then spend the remaining amount.
In the contrast, the poor spend money and then save what is left. Most of the time, nothing is left at all, meaning they don’t save. The poor do not save on a percentage, but on what is left after deducting expenses.
2. Failure to Budget
The other reason why the poor stay poor and the rich stay rich is due to failure to budget. The rich are able to manage their finances by budgeting for it. This helps them avoid unnecessary spending and set aside money to save. The rich plan for their money before they are paid.
In the contrast, the poor do not budget. When they get their salaries, they spend it on unnecessary expenses. By the time they are realizing it, they have already spent a significant portion of their salary, yet they have not set aside savings.
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3. Investing in Assets that Depreciate
Investing in assets that depreciate is another reason why the poor stay poor. The poor get short-term joy from assets that depreciate like expensive cars and fancy tech gadgets. Unfortunately, they don’t get any financial gains from these assets.
The rich invest in assets that appreciate and ones that give them financial gains. Most rich people invest in real estate and stocks that earn them returns over time. As such, the rich continues getting richer, while the poor stay poor.
4. Failure to Sacrifice
The other reason why the poor remain poor is because they are not willing to sacrifice. Good things have a price attached to them. When the poor earn their salaries, they are never willing to sacrifice by living a simple life for a better life in the future. They want to enjoy life when it lasts.
On the other hand, most of the richest people paid a painful price for their success. Most of them have had to sacrifice a fancy lifestyle to become financially independent. Instead of buying expensive cars and mobile phones, they invest their money in projects that earn them good returns.
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5. Failure to Set Financial Goals
The other reason why poor people stay poor is because they don’t have financial goals. Since they don’t have any future goals, they are most likely to spend money on unnecessary expenses. Goals helps one separate wants from needs.
The rich set financial goals and keep on evaluating them from time to time to find out if they are still on track. The rich set short-term and long-term realistic goals that help them become financially independent. A financial plan can help you get out of debt and build wealth.
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6. Fear to Take Risks
The ability to take risks is one of the greatest distinctions between the rich and the poor. Poor people are afraid of taking risks and losing their money. They are afraid to start a business, or to invest in risky business ideas. Consequently, they never find ways to grow their money.
High net worth people are the greatest risk-takers. They have a high tolerance for risks. They are able to channel their money into risky ventures that have great potential to generate high returns. For instance, rich people are not afraid to start businesses and stash their money into risky investments.
7. Spending More Money than They Make
The other distinction between the rich and the poor is money management. Poor people tend to live beyond their means because they want to look rich. They spend most of their income on expenses that have no financial gains. This is another reason why poor people stay poor.
Rich people live way below their means. This allows them to set aside money for savings and investments. Over time, they are able to channel money to gainful ventures that generate them returns. This sets them apart from poor people.
Summary of Why Do Poor Stay Poor?
The poor stay poor because they have not mastered how money works. This is the clear distinction between the rich and the poor. The rich know how to make money work for them. They are willing to take risks and live way beyond their means to achieve financial independence. While the poor want to look rich, the rich work to gain the actual wealth.