How the Rich Are Always Getting Richer

It is a common phrase that is heard around the financial world. People in the middle and lower classes of society complain about how the top 1% of the wealthy are hoarding 99% of the overall wealth. This disproportionate distributions on money is one of the main reasons why the democratic party has such a large following. However, it is easy to complain that they have all the money, but what if we stop and think.. how are the rich getting richer? Would that open the door to allow us to open path to wealth ourselves?

Robert Kiyosaki, a best-selling author and successful entrepreneur, talked about this in one of the most impactful books that I have read in my young life. Years ago, he wrote Rich Dad, Poor Dad which paved the way for thousands upon thousands of entrepreneurs to break their way out of the so-called “rat race”, and begin accumulating real wealth.

Rich Dad, Poor Dad

Rich Dad, Poor Dad is a life changing novel that goes over how Robert Kiyosaki was able to change his mindset at a very young age through the teaching of his “rich dad” that came in the form of his friend’s father. His “rich dad” taught him many lessons, but one of the first things that you read when you open the book is “the rich don’t work for money”.

If you decide to takeaway only one thing from Rich Dad, Poor Dad, then I recommend that this be the concept that sticks in your head. Read it again slowly, the rich do not work for money.

That concept, as I will explain in more detail below, is the basis of why poor people stay poor, the middle class never has any money, and why the rich are getting richer. 

Let’s take a look at each class of wealth to see if any of these examples hit home for you.

The Poor

People who are living in or below the poverty line in the United States are seen are seen as not being the most financially literate in most instances, and even if they are, they more than likely don’t care much about saving or investing their money. Kiyosaki classifies someone as being a part of “the poor” if they are stuck in the rat race and are living below the poverty line.

They are trying to get to the next paycheck without going hungry. This leads to them making irrational financial decisions and being stuck in the “rat-race” that Kiyosaki referred to.

A rat race is an endless, self-defeating, or pointless pursuit.

“Get Paid, Spend all of your money on things, Go Broke, then Wait to Get Paid Again”

This irrational behavior regarding the handling of money is why poor people are known for poor buying stuff.

“Poor people”, as classified by Kiyosaki, don’t buy fancy cars, or nice houses, or anything that would cost a substantial sum of money unless, of course, they take out a high-interest rate loan. So from month-to-month poor people accumulate things.

These things do not have much intrinsic value and tend to clutter up the homes of the poverty-stricken. They are usually one-time payments and can be something as simple as buying furniture, TVs, car detailing, and other lower-cost things that won’t appreciate in value over time. It is simply stuff.

They are characterized as not being well financial planners and living paycheck to paycheck, possibly working every day to earn an income, and if they don’t work they don’t get paid. When it is time for them to retire, they depend on the government to supply their finances. Which puts further strain on the already struggling Social Security and Unemployment Systems.

The thing about this lifestyle is that you can be right in the middle of it and not even know it. This is because when we think about “poor” people, our minds go straight to the homeless who are living under a bridge. Those are extreme cases of being poor, and being poor has a broader range than you make think.

With an understanding of how “the poor” view money and finances, let’s move on what the Middle Class does with their money.

The Middle Class

People who are living in the middle class of the American economy can look a variety of different ways, however, the majority seem to have the same mindset of what they want to do with their money. Like the poor, the people who are in the middle-class may very well assume that they are wealthy.

One of the main reasons for this is because they look the part. They have the big house and the nice car. They have the high paying job with the big bonuses at the end of the year. They are living the good life, but why aren’t they wealthy?

Well, it actually is pretty simple to explain. The main difference between the middle class and the wealthy is that:

Middle-Class people accumulate liabilities. 

For those who have an accounting background, Robert Kiyosaki has a different take on the traditional definition of what an asset and a liability is.

Kiyoaski defines an asset as anything that you own of value that provides cash flow. These could be things like stocks that you own, rental properties, a business, etc. Kiyosaki defines a liability as a recurring expense. This can come in the form of a car payment, mortgage, or jewelry payment plan. Liabilities take money out of your pocket every month, resulting in a lower bank account balance.

What is difficult to determine about these middle-class people is that they look WEALTHY. From the outside looking in, you would think that these people had all that they needed in life. While, in reality, they are making more money each month, but they are also spending the same percentage of their income.

Essentially meaning that the Middle Class is living paycheck to paycheck as well.

Their mindset is that of great skills and tools that can make great sums of money, but they fail to use the money that they have effectively to build long term wealth. They are a reclassified version of the poor, with a nicer way of living.

Basically, the middle class have the ability to make more money, they can get raises because they have the skills that are needs to be valuable to a corporation, but their mindset says that if they get a raise, then they can go get that new car that they always wanted. This essentially puts their bank account at the same amount month after month, with no growth.

They may have more experience with planning financially, however, they are content with owning a home and providing a comfortable life for their loved ones. They have a 401(k) and maybe other retirement funds set up, but they will never truly be wealthy if they don’t change their mindset to think like the wealthy think.

I will go over the mindset that the wealthy have here shortly.

The middle-class people are also using high levels of active income to fund their living expenses. Meaning that if they don’t work, they won’t get paid. Robert Kiyosaki preaches about the wonders of passive income and how you can use it to leave a life free of the restraints of money.

Now for the part, we’ve been waiting on. How the wealthy view and use their money.

The Wealthy

What makes the wealthy actually wealthy isn’t the amount of money that they have in their bank account, however, it is how they go about attaining their money. Kiyosaki loves to quote of saying, “it is not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” This is essentially saying the in order to be wealthy, in order to not work for money, you have to start making your money work for you.

The Wealthy are famous for their keen sense to accumulate assetsAs I mentioned earlier, Robert Kiyosaki defines assets as something that you own that provides cash flow.

Otherwise known as passive income.

The wealthy use their money from their income today to invest in a better future for tomorrow. They are not concerned with how they look to their peers, the wealthy are focused on accumulating more money over time, and having their money accumulate money for them. This means that they are laser focused on accumulating assets. Not things, and especially not liabilities. To the wealthy, a liability, is the exact opposite of what you should be doing in order to be taking steps towards financial freedom.

(This is different if you are taking out a loan in order to leverage an investment. This is one of the joys of using other people’s money that I will talk about in later posts.)

But the rich are all about finding ways to increase the amount of passive income that they are bringing in each month.

For those who may need a refresher on what passive income is, passive Income is defined as an income where active work in not constantly required. This can come in the form of stock dividends, real estate investment, a business that you have started, or other interest-bearing accounts that allow for growth without constant monitoring.

Passive income is like the gift that keeps on giving.

Let’s take a look at what makes this mindset so unique.

Just as a poor person would go out and buy a pair of the newest Air Jordan shoes for $220, or the brand new iPhone for $999, a wealthy person would instead take that same $220 or $999 and invest in assets that allow money to be paid back to them in future periods.

Over time, these assets will begin to increase in value with the help of compounding interest and provide an income stream equal to or greater than what most people make in their 9-5 jobs.

Let’s look at a quick rudimentary example.

Starting out with a $1,000 upfront investment, and leaving it in an investment account with an expected growth of 10% for 20 years would yield the following results.

$1,000 would turn into over $7000 without you having to lift a finger. By year 20,  you will end up earning more interest on your interest, than you do on the principle itself.

While this is a long time to make $6,000. Imagine if you were able to put in $1,000 every one or two months, and then that money was able to begin compounding. Before long the interest on the money that you are making will outpace your contributions ten-fold. Leaving you with more money that you could have thought imaginable.

Now, how attractive does that brand new iPhone look?

In Summary:

The reason that the rich continue to get richer is because they have the knowledge to continuously put their money into assets that will generate more money for them. It is not a secret society or a government program that is facilitating this building of wealth, it simply a basic financial education that takes advantage of the wonders of compounding.

If you want to join this group of the elite, then you simply must get on the road to accumulating assets.

For a quick reminder:

The Poor accumulate things.

They live paycheck to paycheck mostly because they have no choice. Most of the people in this group will have to work to get a higher income before accumulating assets. However, this could also be achieved by lowering the amount of expenses that you have so that your expenses are less than your income. Then you can use the surplus that you have each month to begin accumulating assets.


The Middle-Class accumulate liabilities.

They accumulate mortgages, auto loans, and everything to make them look wealthy. They may not be doing it for anyone in particular except for the reason that they just want to use most, if not all, of their money as they earn it. I can not say that there is anything wrong with this way of thinking about your own money other than that it is not a recipe for building long term wealth and passive income.

and, lastly.

The Wealthy accumulate assets.

The rich finds ways to make their money work for them. As the first page of Rich Dad, Poor dad states: the rich don’t work for money.

Check out Rich Dad, Poor Dad by Robert Kiyosaki for yourself, it is an awesome read!

Thanks for reading!

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