You don’t have to get poorer!

‘The rich get richer and the poor get poorer’ – this is a catchphrase that people often use to criticize uneven economic development. It may be a fact though. I am not going to write a scholarly discussion on the economic theory here, but just to discuss from a common man perspective how does it happen!

How do rich get richer? If you have one million and deposit it in a bank fixed deposit at a rate of 5% per annum, it becomes 1.28 million in five years. When you have one million you will be able to invest in shares which will give you better return. When you have one million you will be able to invest in real estate or rental property which will give you regular rental income besides capital appreciation. You will be able to start a business or invest in a business which may again multiply your wealth. This is how rich becomes richer! It is only natural and there is no meaning in complaining about it.

So it is obvious that the rich get richer. Does it mean that you have to get poorer? How does it happen? You spend on what you can’t afford. When you try to imitate others, you fail to recognize that others do it because they can afford it after saving enough to build their wealth. You take loan to spend and pledge your future income for present luxuries, while others save from their present income to meet their future expenses. You pay interest while others earn interest. You misunderstood that living the life means spending on luxuries! You go behind ‘get rich quick’ schemes and lose everything. Yes, it is you who make you poorer.

So how to avoid becoming poorer? First thing that you need to do is live an affordable life. Keep yourself away from debt. Never pledge your future income by taking loan to meet present expenses. Keep a portion of income as savings – treat it as a necessary and unavoidable expense. Understand that there is no quick way or short cut to make money – It needs years of hard work. Realise your hidden potential, polish the skills that you already have and find some way to generate additional income.

Warren Buffet, the self-made billionaire

Rich made their first million by sweating, by doing their hard work, going that extra mile, deferring their gratification. Read about any rich people, there is a hard work behind them – at least by their parents or grandparents. Warrant Buffet, one of the top five world billionaires, has gone door to door selling chewing gum, soft drinks or magazines. He has worked in grocery shop. Every rich has a beginning from the low.

I know there are people who get rich by unscrupulous methods. I know there are poor people who are in trouble too deep to come out of it themselves. Forget about the former, they can’t enjoy their life too long peacefully. Help the later, it will help you to live peacefully rest of your life.

Published earlier at www.dropsdavings.com