The 9 Reasons Why The Rich Keep Getting Richer

Why do the rich get richer?

The first million is the hardest as the old cliché goes. It’s a cliché because there is truth to it.

Based on my own experience, I found this to be true.

For me, the first million was the hardest.

It was easier to make the second million than the first. The third million was easier to obtain than the second.

And each subsequent million became easier than the previous million.

The game is really stacked in favor of those who are already rich.

I remember reading an article about Ringo Starr, the famed drummer of The Beatles.

He said something in the article which really resonated with me.

When Ringo was a young lad and just started out in music, all he wanted was to own a nice drum set.

He didn’t have money and needed to claw and scrape to save enough to buy a nice drum set he was eyeing.

No one offered to help him out with the purchase. He was on his own financially to make it happen.

Now, after having achieved fame and fortune, he gets offered free drums all the time from companies.

In fact, I’m sure not only can he get free drums; he can get companies to pay him to use their drums.

Ringo found it ironic that when he was young, broke, and needed financial help the most, no one offered any help to him.

But now that he is rich, famous, and can easily afford any drum set in the world, he can get free drums all day long.

It appears that the less one needs, the more one gets.

Now, is this fair?

Hard to say – it really depends on your perspective.

But that is how the world works.

The World Gives More to Those Who Have More

The above scenario doesn’t only apply to Ringo Starr; it also applies to many well-to-do people.

That is why there is the old cliché “the rich keep getting richer.”

I personally experienced that myself on a smaller scale.

When I first started out in my professional career as a corporate peon, I made very little money.

As I moved up the corporate ladder over the next two decades, my income and net worth both increased.

As my corporate responsibilities increased, more and more service vendors offered me free meals at nice restaurants and tickets to sporting events in the name of relationship development.

When I first started out in my corporate job with very little money to spend, no service vendor offered to take me to a nice meal at a Michelin-starred restaurant or box seat tickets to catch a basketball game in Madison Square Garden.

Now that I have more expendable cash, I get offered nice meals and tickets for free.

The Reasons The Rich Get Richer

There are good reasons why the rich are getting richer.

Hopefully, this article does not draw up hate or jealousy of the rich.

The purpose of this article is to make you see that there are reasons why it is easier for the rich to gain more coins than the average person.

And those reasons have nothing to do with being evil, being a bad person, or performing illegal acts as the general population is led to believe.

Instead of hoping for the rich to fail, let’s try to join them so that we can take advantage of all the benefits of being rich.

Reason #1: The Rich Place A Higher Value On Their Time

If you go to work, you expect to get paid for your time and effort.

I hope that seems reasonable to all of us, except for a few politicians out there who believe you should be taxed heavily on your effort and collect very little for your labor.

If the economy is good, you would take a job only if it pays you at least what you think is a good price for your time.

If the job doesn’t pay you what you believe you should make, you would walk away and look for a new job.

The rich feel the same way except they place a higher value on their time given their sizable asset pool.

We all work for money according to what we believe is a fair exchange for our time.

The rich end up getting more money for hours worked because they believe a higher payment amount is necessary for their time since they are already rich.

They tend to compare compensation to their asset pool.

$100,000 a year might sound good to someone with $25,000 in assets.

But if you have $10 million in assets, $100,000 a year in compensation for working a job doesn’t sound as great. In fact, earning $100,000 a year doesn’t move the needle of the overall net worth.

Therefore, the rich will elect to work on something that can produce a higher compensation.

Hopefully, this seems logical to you and is one of the reasons why the rich continue to get richer.

They place more value on their time because they can afford to.

Reason #2: The Rich Have Assets And Can Put The Assets To Work

In this world, labor isn’t the only exchange for money.

People also pay to use certain assets. Those are called income producing assets and rich people have a lot of those.

Real estate is an example of an income-producing asset.

In fact, I am a big fan of real estate and believe it should be a cornerstone of your investment portfolio.

People will pay to live or work in your real estate property.

Cash is another example of an income producing asset.

Banks will borrow your cash and pay you an interest rate.

The rich have more income producing assets that will help generate cash flow and continue to add to their net worth.

Reason #3: The Rich Have Money And Can Buy Unique or Rare Items Which Can Appreciate Faster

I remember reading that Kevin O’Leary of Shark Tank fame purchased a Patek Phillipe 5711 watch. It is the steel Nautilus with a blue dial.

This version of the watch is no longer in production. 2021 was the last production year.

At that time, the watch retailed for around $30,000 in the US.

The watch was in such high demand that it produced a multi-year waitlist for it.

Kevin O’Leary said he was on the waitlist for 8 years before getting his hands on that watch.

Because of this high demand, the price of the watch in the secondary market ballooned to over $60,000 at the time of Kevin’s purchase.

People who did not want to wait years to buy that watch from an authorized dealer drove up the price of that watch in the secondary market.

Upon buying the watch at $30,000, Kevin was able to make a quick 100% return on his purchase.

The Patek Phillipe 5711 continues to go up in value in the secondary market given the strong demand for high end steel sports watches.

It trades for around $100,000 today but, at one point, the Patek Phillipe 5711 listed for closer to $200,000.

The rich have money to buy rare, unique, and expensive items.

Those items are coveted by other rich people.

With heavy demand and short supply, the prices will surely go up.

If you have money, you can also buy such items.

That is another reason why the rich get richer.

They can afford to buy expensive items wanted by other rich people and those items can appreciate quickly given the amount of money the people who want the items can afford.

Reason #4: Better Investment Opportunities

The rich have better investment opportunities.

There is nothing corrupt or illegal about this.

In fact, there are government regulations that only make certain investments available to the rich.

Take a private equity fund (PE Fund) investment for example. PE Funds by law are only offered to accredited investors.

To be an accredited investor, a person must have either (1) an annual income exceeding $200,000, or $300,000 for joint income, for the last two years with expectations of earning the same or higher income in the current year or (2) a net worth exceeding $1 million excluding the value of the home.

The law is put in place to protect the average person from getting exposure to what the government perceives as hard to understand and riskier products.

This means in order to take advantage of a PE Fund investment, you need to be rich.

Reason #5: If You Are Rich, You Have Better Financing Options

The rich have easier access to capital.

That shouldn’t be a surprise.

They have two things working in their favor over the average person: (i) assets and (ii) strong income.

Lenders are in the business of providing money to people.

In return, the lenders need to recover their principal back and collect interest.

One way for lenders to mitigate the risk of not recovering their money back is by asking for collateral on the loan.

Why can banks lend at a better rate on a mortgage than on a personal loan? The reason why is that your house serves as collateral on a mortgage.

The rich have assets, especially income producing assets.

Those assets can serve as collateral on a loan. There are more financing options available to the rich because of this.

Additionally, a lender wants to see strong income in order to cover the interest payments.

The rich have higher cash flow than the average person. That makes the lenders feel more at ease.

Banks might also provide better financing terms if you have more assets with them.

Some banks offer a quarter point or more in interest rate discount on mortgages if you hit certain asset levels with them.

This also allows the rich to borrow at a lower rate.

Reason #6: The Rich Have Greater Influence

Some of the rich have gotten to their position because they lead companies or have a strong following.

They are very influential on either their employees or customers.

This kind of influence is also very valuable and can produce great wealth.

Take Kylie Jenner for example. She is part of the Kardashian/Jenner family.

In 2019, Forbes magazine estimated Kylie’s net worth to be $1 billion and which made her the world’s youngest self-made billionaire at the time.

Her billionaire status has since been reassessed by Forbes, she is nevertheless very rich even if she is not yet a billionaire.

She launched her successful cosmetic line which generated the bulk of her net worth.

Kylie used her immense number of Twitter followers to help promote her cosmetic line. Last check, her Twitter followers totaled 40 million.

With that many followers, she should be able to sell a lot of whatever product she wants to push to her followers.

The level of influence she has on her followers allows her the ability to generate great wealth.

Reason #7: The Rich Have Better Connection

This one could be a self-created circle.

People in general think the rich have better connections.

Better connections can lead to greater opportunities.

People like greater opportunities and, hence, they want to connect with someone rich.

Now, this results in the rich having more connections.

Start-up companies with tremendous potential in Silicon Valley can easily attract capital.

But at times, those start-ups don’t just want capital; they want guidance and also relationships that a new equity partner can bring.

If you can only offer capital to the start-up, you will lose out to another prospective investor who can bring both capital and relationships to the table.

The rich have better connections and those connections offer better investment opportunities for them to keep getting richer.

Reason #8: The Rich Can Leverage People To Produce More Output

The rich have the money to hire more people to help provide leverage on time.

The average person performs chores around the house in order to keep the home in order.

Raking the leaves, cleaning the house, doing the laundry, cooking, and running errands are some of the chores performed.

Those chores are necessary in order to maintain an organized life. However, they don’t directly produce income.

The rich can hire people to perform such chores.

Instead, the rich can use the time that would have gone into performing chores to work on projects or perform tasks that can produce money or income.

The rich can also hire many people to help with income producing businesses or projects.

Instead of exchanging only one person’s time for money, the rich can exchange many employees’ time for money.

Think about the owner of a law firm, a dental practice, or an accounting firm to see leveraging other people’s time in action.

Reason #9: The Rich Have More Information

The rich have more information or access to information than the average person.

Information can produce greater wealth and income.

There are reasons why the rich have more information.

It can be that the rich have more time to do research.

They might have gotten rich because they excel in a particular field.

The rich might also have better connections and relationships which can result in better education and information from other experts in a particular field.

The information that the rich have can be valuable and can result in greater wealth building opportunities.

It is Easier to Make Money When You Are Rich

It is easier all around to make money when you are rich.

Hopefully, now you understand why this is the case with the reasons listed above.

Don’t hate the rich for their ability to generate income and wealth.

Wouldn’t you also take advantage of the benefits if they are offered to you?

The Reasons Above Helped Me In My Own Wealth Building

I see it in my own personal financial situation.

There are differences in opportunities available to me now after having accumulated some wealth than compared to two decades ago as a young professional in debt.

Below are some of the reasons why I believe I will continue to get richer.

Reason #2: The Rich Have Assets and Can Put The Assets To Work – I have assets I put to work.

My cash sits in an interest-bearing account paying me over 3%.

I have investments in the stock market.

My rental properties are generating good rental income for me with the added benefit of zero income taxes.

My assets are hard at work in making me richer.

Reason #4: Better Investment Opportunities – Because of my income and net worth level, I qualify to participate in certain investment opportunities offered to only accredited investors and not the average person.

I have investments in private placements and private equity funds. Those investments have produced 10%+ IRR for me so far and have helped in increasing my net wealth.

Reason #5: If You Are Rich, You Have Better Financing Options – I have seen better interest rates on my mortgages given I can obtain relationship pricing with a bank.

Relationship pricing is given to the bank’s clients with assets deposited at the bank over certain thresholds set by the bank.

For example, Bank of America recently offered me 0.50% off the normal interest rate on a mortgage if I deposit $1 million of assets with them.

Strive To Be Rich

This hopefully gives you added motivation to become rich.

Once you become rich, a lot more channels for income and wealth open up to keep making you richer.

To The Audience: Can you think of any more reasons why the rich keep getting richer? If you are rich, which of the reasons do you think helped you create more income and wealth? Which reasons above do you find the most beneficial to your wealth building?

8 thoughts on “The 9 Reasons Why The Rich Keep Getting Richer”

Michael @ Financially Alert
April 16, 2019 at 11:48 pm
I think you captured all of the ones I could think of too! The only add on is that the rich have figured out the rules to the “game” when most people don’t even realize there’s a game being played. (It’s hard to win a game if you don’t know the rules!)
Like you, we’ve diversified our assets and they’ve respectively have grown over the years. You’re right, it’s much easier to make money when you’ve got money to leverage. Although, for the young ones out there, it can still be done. Just takes some persistence and focus.
- Mr. Hobo Millionaire
  April 18, 2019 at 10:50 am
  >>The only add on is that the rich have figured out the rules to the “game” when most people don’t even realize there’s a game being played.
  Michael, this is the “saddest” part of all of this. Investing/stocks and real estate are open to most anyone. Like you said, it’s a game that many don’t even know exists. I made my money growing a small software company over 20 years. I did not fully learn/understand stocks and real estate until my 40’s (because I was then looking for ways to diversify the money my company was finally putting out). It’s a real shame basic investing (like a Vanguard index fund) is not taught to everyone while in school. $100/month invested from age 20 to 65 will grow to ~1M (and we all know you can add more than $100/month as you get older). There is simply no reason why more people don’t have large amounts of savings — they just don’t know the “game” (ie. math).
  - Rich
    April 25, 2019 at 9:56 pm
    It is a shame that financial literacy is not taught to high school kids (or even younger). The earlier the start, the greater the compounding effect, especially in the back years.
    It is up to parents to educate their kids on personal finance matters (or for the kids to figure out themselves which might result in very late starts or no start at all). But, unfortunately, a lot of folks are just not savvy with personal finance.
  - Triple Fi Guy
    May 3, 2019 at 1:50 am
    Great post! Really a lot to ponder on.
    MHM, yes financial education is sorely lacking among the majority of Americans. It’s why I’m passionate to help correct this and the reason I’ve started my business.
    - Rich
      May 3, 2019 at 8:33 am
      As I’ve continued on my personal finance blogging journey and have continued to broaden my exposure online, I’ve come across a number of personal finance blogs with well intended owners with the purpose of providing financial information to the masses. Hopefully, with more of us telling our stories, people can see there are many paths to gaining wealth.
- Rich
  April 25, 2019 at 9:51 pm
  Right – the earlier you start the game and the longer you play, the easier it gets (and the more material the dollar amount). 10% return on $10,000 is only $1,000. But if you have $10 million, a 10% return produces $1 million. Now that’s real money!
Little Seeds of Wealth
April 17, 2019 at 2:39 am
I thought about something related while doing my taxes this year. It felt a bit strange not being able to claim certain deductions or make Roth contributions as when I used to make a lot less. At the same time, the added freedom from a higher paycheck has enabled me to take on more risks I’d otherwise not want to consider with a lower income. I’m not an accredited investor yet but looking forward to having access to the opportunities you mentioned when I finally get there!
- Rich
  April 25, 2019 at 10:04 pm
  I see, you have Reason #10 – The Rich Can Take On More Risk.
  I’ve made a few $10k to $20k investments which are just fliers for me because I can take on that risk. Most of them can go to zero, but I just need one home run to make it all back and then some. Even if I lose 100% of my investments in those fliers, I can still take the hit and it wouldn’t impact my finances much.