Why the Rich Get Richer
To those who have everything more will be given, and from those who have nothing, everything will be taken. — The Matthew principle
Get in the game.
Buy assets, not liabilities.
The rich tend to get richer while the poor often stay poor. This is even true in a fair game like Monopoly where everyone starts with the same amount of money. Of course, this is even more pronounced in the real world where people begin at different starting points.
As I’ve said, the game starts fair. However, after a couple of turns, someone invariably gets lucky and people keep landing on their property. That person then uses the money obtained from those properties to buy even more properties further increasing the chance that someone lands on another one of their newer properties. This plays out for a couple of hours ( or days if you’re unlucky) until one person has all the money while everyone else has zero.
Notice how the person with a small sum of money in the middle of the game almost never makes a comeback. Why is that? Because they simply can’t. There just isn’t much they can do. Because they only have a little money they need to keep that money to survive and stay in the game, just like poor people need to survive and pay their bills. This leaves neither the metaphorical monopoly player nor the actual poor person to take the financial risks involved in creating wealth.
How do you win the game of Monopoly?
By buying assets.
How do you create wealth in real life?
By buying assets.
Unfortunately, after bills and general expenses are paid, poor people do not have enough money left over to buy assets. Worse even, many of them collect liabilities like debt which are the exact opposite of an asset.
An asset is something that brings money in your pocket like a business, real estate or stocks.
A liability is something take takes money out of your pocket.
Rich people, on the other hand, have plenty of money leftover to continually be buying assets. Rich people have the vast majority of their net worth in real estate and in the stock market, things that are continually growing their money for them.
Let’s say I have 10 million dollars in the stock market growing at 8% a year, my money will grow to 10.8 million dollars in just one year, and this involved no work on my part. I made $800,000 free dollars for just having my money sit in the market. That is more than many make in their entire life, and I made that in one year by doing absolutely nothing. It is no wonder then how the rich get richer. It’s not because they are corrupt ( though they certainly can be) it’s because they own assets.
From survival mode to saving mode.
“The first $100,000 is a bitch, but you gotta do it.” — Charlie Munger.
It is certainly an uphill battle to go from poor to rich but it is entirely possible.
It’s hardest at the very beginning, but gets much easier once you get past your first 100k. It’s once you get past this milestone that the Matthew principle begins to work in your favor and you wealth begins to snowball.
How to get to the first $100,000?
First, you need to live below your means and save whatever you can.
Most people stay poor because they spend everything they make, sometimes that’s by necessity but sometimes it’s simply because you refuse to give up your comfy lifestyle. Know which one of those you are. If you’re the latter, toughen up buttercup, learn to live with a little less so that you can live with much more later on. Try cutting down expenses by at least 300$ a month, or try earning an extra 300$ a month. Don’t tell me that’s not possible, it’s only an extra 10$ a day. If you’re resourceful, you’ll figure it out.
Second, with that money begin buying assets.
Either begin saving for a down payment on a home, or save for a business you want to open up, or if you’re lazy like I am put it in index funds which should earn you about 8% a year. If you start by investing 300$ a month in your 20’s and slowly start increasing that by 100$ more dollars every 5 years there’s no reason why you shouldn’t be a millionaire in your late 50’s.
This is how you make the Matthew principle work for you instead of complaining about it as many do.
If you want to get wealthy, play monopoly in real life. — Robert Kiyosaki
I want to begin buying assets. Where do I start?
