Why do the rich get richer while the poor get poorer?

I have some questions for you to think about.....

1. Why do you think the gap between the rich and the poor continues to grow wider and wider each year?

2. How do the wealthy manage to grow their wealth both in good times and bad times?

3. What is your definition of wealthy?

4. It is said that "the wealthy do not work for money", and I agree, but what does that statement actually mean?

5. With the cost of living increasing due to inflaton, low income Australians have just been promised a pay increase by the new government, which they have recommended be no less than the current official inflation rate of 5.1% in order to minimise the impact of inflation. What are you thoughts on this... a helpful good idea or an unhelpful damaging idea, and why?

The gap between the rich and poor has been increasing as far back as I can remember, however, I feel that this gap has been growing faster of late, and there are obvious reasons for this as far as I'm concerned. There are numerous reasons for this.

• I think that 95% of people have a definite lack of financial education. They have no idea about how to handle money and invest.

• People do not save enough in order to invest. No matter what you earn, you MUST put an amount aside to save for future investments. It doesn't matter if you're saving $20 per week or $2500 per week, you MUST save something - it's about building good habits.

• Many people live beyond their means, spending more than they earn.

• Budgeting and planning is beyond most. Budgeting in order to save money without creating a plan to do something with that money is pointless. One needs to do BOTH

• In today's social media world, people will spend money they don't have, in order to impress people that do not care about them.

• People are generally more into immediate gratification rather than saving and building future wealth. They waste their most important resource - TIME !!!

The wealthy manage to grow their wealth in good and bad times because they have become financially wise and adapt to the ever-changing economy, understand taxes and structures, follow where the smart money is going.

People think that a high income makes them wealthy. No, it does not. If their job disappears, so does their income. That is NOT wealth. For me, a wealthy person is able to generate a good income and enjoy the lifestyle they desire without having to work a single day AND still be able to grow their new worth over time. If you can do that, then you are wealthy - in my eyes at least.

I have not worked for money in over 30 years. The wealthy do not work for money.

The wealthy, work to generate investment income, in order to create and build a portfolio of assets that generate even more investment iincome. They just keep doing this knowing one day they will have in their possession, a perpetual "income generation machine".

The average person works 40hrs per week, gets paid, spends their pay, saves nothing, and generally does not worry about the future. These people will work until they die.

A wealthy person works 50, 60 or more hours per week to generate the income so they can invest in income producing assets so they no longer have to work.

They will put in the hard work early, and be able to retire early also.

The newest Australian Government has promised to increase the incomes of the low income earners in order to close the cost of living gap. These wages are going up, not because of productvity increases, but rather because the government has decided it.

This has been done by previous governments befor in order to win votes, but the actual result is always the opposite of the intention of the increase here's why.....

The government is saying that the pay increase should be at least the same as the inflation rate - currently 5.1%. Now, lets say this happens and low income earners (several million people) get a 5.1% pay increase.....

• The 5.1% increase has to come from somewhere - if it is for a government worker, then the government has to fund this pay increase by either taxing everyone more, or cut money from other budgets such as defence, education, health etc. Either way, the average worker loses.

• If the worker is in private industry, then the company they work for must increase their prices to cover the cost of the wage increase. Let's say the employer is a food manufacturer, beverage manufacturer or even a power generation company. In order for them to fund the wage increase, the price of their products must increase, meaning the cost of food, drinks and power goes up. Again the average worker loses out because they have "zero net gain" - i.e: as the price of everything goes up, their wage increase gets used up to cover the price increases. The whole exercise becomes rather pointless and futile.

Again, the wage increase will have zero gain for the average to low income earner, but the end result will be higher prices of goods, higher taxes and as a result, higher inflation.

Lessons:

• You MUST learn the habits of the wealthy, otherwise you will end up a slave to your job and a pay cheque.

• You MUST become financially intelligent in order to be able to handle your money effectively.

• Understand this: if you cannot manage to budget, to save and properly handle a $60,000 income effectively, THEN you will NEVER get the opportunity to handle susbtantial investments or $250,000 (or more) income.

• If you cannot save $20 per week to invest, how will you ever get to the point of saving and investing $1,000 (or more) per week?

All of the above are doable - if you want it bad enough, if you plan for it and you focus on it.