The Rich Get Richer

A lot of times I hear people say, “The rich just keep getting richer.” They say it in a way that means, “I can’t get any (financial) breaks, because I’m not rich.” It’s like they feel that the world is set up so as to always benefit an incorrectly perceived, privileged rich and suppress the unfortunate poor.

But, there is a fallacy in that thinking. It’s not that the “rich” keep getting richer—it’s the smart rich people who get richer. We hear stories all the time about people who have won the lottery and then are completely broke in just a few years time. They were rich. Some with millions of dollars. If it is true that the rich just keep getting richer, how come they didn’t get richer? Because they were not smart! Most “rich” people get rich in the first place because they worked hard, took advantage of their intelligence and wisdom, and saved their money. Once they got rich, instead of spending their money, they found ways to make their money work for them and they got richer.

And why should it matter to people if someone else is rich? It obviously does. You can’t listen to the news for a week without hearing several stories about how unfair it is for someone to have so much plenty and someone else to have so little. We also hear stories to the effect that this person or that person has “more money than they need.” That’s an interesting statement! Again, so what! How can anyone know how much money someone else needs? Maybe they need that money to build a soup kitchen for the homeless.

Another saying you hear from people is, “You need to have money to make money.” This seems to imply that if you don’t already have money, you might as well give up because you won’t be able to make it. That’s not true either. I’m not rich, but I aspire to it. I plan for it, think about it, work towards it; and I defer spending a lot of my hard-earned money now so I can find ways to put it to work to help me reach my goals later. That is how most people get rich.

Many people assume that most rich people inherit money to become rich. That is not the case. But, if it was—who cares?! One of my goals is to have enough money to be able to provide for and leave enough money to my children and grandchildren, so that they are not left wanting in life. When I get rich (I fully intend to get there) is it wrong for me to leave my money to them? Why should anyone else care? I made the money, so shouldn’t I get to pick who I give it to, instead of the Government? Besides, I have reduced the number of people you have to help support in life through your taxes and/or charity. Does it hurt you if I have money and leave it to my family? No. And, it’s not their fault that I left it to them, so don’t get all up in their face about it.

I’m going to get rich by working hard. I’ve worked hard to increase my skills so that I get paid enough to satisfy the needs of myself and my family, take care of some of our “wants,” and then still have enough left over to save and begin building my wealth. I do this honestly, without taking anything from anybody. I don’t force the company I work for to pay me this premium—they do so gladly because, in their estimation, I provide that much value to them.

I’m not where I want to be yet, but I didn’t get where I am by taking advantage of anyone but myself to get here. If I had asked other people to give up the things and sacrifice what I did, I’m afraid I would have been locked up. But I did it (and continue doing it) to (and for) myself to get where I want to be.

Years ago I gave up my free time by going to school while working—getting my Bachelors degree and then my Masters degree. While others were out partying and having fun, I was driving from work to attend night classes, studying on the weekends, and taking summer classes. When times were tough, I cut off my cable TV and sold off vehicles so I could keep saving into my IRA. I made mistakes in life all along the way, but I didn’t let that discourage me. I fixed my mistakes and kept working at it. Now, about 30 years later, I’m starting to benefit from all that work by earning a good salary and building wealth.

That extra money is not just going into a shoebox under the bed either. I’m putting it to work for me, so that it helps me earn money more quickly. Some of it I’m investing in different companies—not all of which have done well for me. That’s part of the risk I take. But, enough of them have improved so that my money is earning more money for me.

At first, when I was relatively poor, the few thousand dollars that I had saved only made a few dollars a year for me. When I earned 7% on my $5,000 nest egg, I only got $350. At the same time more wealthy people got 7% on their $5 million, they received $350,000! Whew! I really could have said, “Poor me. I just can’t get ahead. The rich just keep getting richer and I get (relatively) nothing.” But I didn’t. I kept my head down, worked, and saved my money so that eventually I could be rich.

I didn’t pay taxes when Reagan was President because I didn’t make enough. When there was a tax break, it didn’t occur to me to get upset, because I didn’t pay taxes in the first place! I didn’t feel I deserved to get a tax break. Now that I am paying a lot of taxes (I think), I’m frustrated that so many ”tax breaks” end up going to people who don’t even pay them. I’m not jealous that others are getting a break that I didn’t—it’s a fairness issue. Isn’t it sort of like going to Sears and saying that you want the 20% savings given to you for that big-screen TV that’s on sale, even though you can’t afford to buy one? “Mister salesman, just cut me a check for the $500 that I would have saved if I could afford to buy this expensive TV.” (I probably just gave a bunch of people an idea. I expect to see a rash of law suits over the next few months by people saying that only the rich can afford to buy big-screen TVs. Their argument might go something like, “Why should the rich get all the breaks? The poor need the break more than the rich. People who can afford it should pay extra for the TV and the savings should be awarded to the poor people who need the break.” It scares me just to think about it.)

There are some people who would say that I have “enough” money now. But, I don’t think so. I could probably pay my bills and put food on the table for myself and my family for the rest of my life, but there is more that I want to do. I plan on working (and, to some extent, sacrificing) for another 7 years to get where I want to be. I’ll give my employer a good day’s work for the money they pay me. I’ll put my hard-earned savings at risk in hopes that it will earn me more money. Then, when I think I have enough, I’ll quit working at my job and I’ll let the money that I have saved begin working for me.

I’ll have to work managing my money. In some instances I’ll put it at risk in return for a potential reward. Sometimes the risk will come to pass and I’ll lose some of my money, but, hopefully, in most cases I’ll be smart enough to overcome the risks and I’ll use what I have to earn more money. Again, this is money that I saved years ago when others were spending theirs on beer, cigarettes and a new car. No one has the right to be bitter that I have money and they don’t. Most people had the same chances that I had years ago and they elected not to defer their gratification. When they are working in their 60s and 70s (80s?) at a job to make ends meet, I’ll be working managing the money that I earned and saved. That is the result of the choices that we both made.

One of the ways that I may manage my money is by buying and then renting homes to people. At this time in our history, in early 2008, we are finding that many people who recently tried to buy homes are discovering that they are unable, for a variety of reasons, to be home owners. Perhaps they overextended themselves. Maybe they overestimated their value in the job market. They may have taken a risk that just turned out badly for them. Maybe they just decided they weren’t willing to make the sacrifices, like giving up cable, driving older cars, and not eating out, to make enough of a difference. That’s fine, but these people still need to live someplace. Shelter costs money.

I’ll be glad to risk my money to provide shelter to those people who can’t (or elect not to) provide it for themselves. If you don’t think this is a risk, try this. Save up your money for several years until you have enough to make a down payment on a second house. Spend some more money to fix up the damage the previous family imparted on the property before leaving. Then, allow people to live in the house that you bought, knowing that most of the people feel that since it is not their house they don’t need to take care of it. In fact, in some markets you may have a hard time finding someone to live in the house. Months may go by with you paying an extra mortgage payment without receiving anything in return. These are just some of the risks I’ll take. Why would I elect to take these risks if there wasn’t the potential for some reward? I wouldn’t. And few others would either. The hopeful result is that I get rewarded with a return on my investment, and, in the process, some family gets a nice place to live. Win / win.

I will not force anyone to live in my property and pay me a rent that they feel is unfair. They are free to find a different place if they think I charge too much, or they don’t like the property. They can move once their lease (contract) is complete. (That’s an additional risk for me.) When I rent to them I am honest in that I tell them what they get and what it will cost. When they agree, we enter into a contract that needs to be honored by both sides. When it is, we both get what we want and we both win. Who cares how I got the money to make a down payment for this property? I worked hard for it, but I may have been given it by a rich uncle. In this transaction I am being paid by the renter for knowing how to do something they don’t know, or elect not to do. That is how to keep a house maintained, pay the bills, and to save enough to afford it. By the way, it may take several years before I start earning enough on this house to pay for the effort that I put into making and maintaining this investment, but I do it because I perceive there to be a financial reward in the future. Now were I to do this over and over again, I may become richer. What harm is that? Other families benefit from the hard work that I’ve put in to finding, buying, repairing and renting them a nice place to live.

The point of this whole rant is to show that money doesn’t just come easily to most people. People like me (I hope) start working early in life. We work hard and most of the time we don’t get paid for that hard work until years later. But finally, if we persevere and overcome obstacles, we break out ahead of others who were not as diligent. Why is it, then, that at that point, when I begin to get a sniff of success, some people feel justified in challenging how much money I have? No one, including the Government, has the right to say that I have more money than I need and then use that as a pretense to simply take it away from me to give to someone who has not been as diligent and careful throughout their life.