My friend Sal posted this on one of his blogs yesterday. Very sound info and advice: The Biggest Difference Between the Rich and Poor October 15th, 2014 Why do you think the rich keep getting richer and the poor keep getting poorer? Let’s take a look at some of the reasons we’ve turned up. At the end of Q2 this year, the Fed announced that U.S. household net worth increased by $1.4 trillion to a record $81.5 trillion. But don’t get too excited until you understand the fine print. The gain in net worth was isolated to a miniscule percentage of US society known as the 1%. The rich keep getting richer . . . About the same time, Bloomberg reported that average debt burden for U.S. families declined from 125% of pretax income in 2010 to about 105% of pretax income in 2013, the lowest level since the 2001. Once again, a closer analysis reveals that those whose financial situation improved through a declining debt burden represented the top 1%. Middle class Americans, in turns out, have never been deeper in debt. The poor keep getting poorer . . . The biggest difference between America’s rich and the middle class? Investing and asset building. As Fed Chair Janet Yellen pointed out at the Corporation for Enterprise Development’s 2014 Assets Learning Conference, Washington, D.C, “A larger lesson from the financial crisis, of course, is how important it is to promote asset-building, including saving for a rainy day, as protection from the ups and downs of the economy. “ She went on to say that the government and advisors need to “. . . encourage families to take the small steps that over time can lead to the accumulation of considerable assets.” Before you dismiss this discrepancy in accumulated wealth by saying that it’s easy for the wealthy to invest and hard for the average middle class member, consider some fundamental difference between the have’s and have-not’s compiled by financial planner and author of Rich Habits Tom Corely after more than 5 years observing basic differences between the rich and poor. Here’s a summary of some of the key characteristics that differentiate attitudes and behaviors that promote wealth-building from those that results in debt. Control Rich people believe they are in control of their lives and they act accordingly. Even during trying situations, the naysayers and doubting Thomases do not sway them. They take the bull by the horns and enact a solution. Poor people, on the other hand, tend to view life as something that happens to them and often blame their misfortunes on external events like the economy or on others, like a boss. Risk Rich people are not afraid to take risks; in fact, they often view risks as challenges worth overcoming. But they also tend to take calculated risks by examining the proposition’s risk-reward equation. Poor people are afraid of risk and afraid to lose to such an extent that the status quo becomes more comfortable. Turning to Fed Chair Janet Yellen again, one can see that this risk aversion to investments and assets accumulation is backfiring, “Families with assets to draw on are able to deal with these developments as bumps in the road. Families without these assets can end up, very suddenly, off the road. Knowledge Rich people believe in and engage in activities for life-long education and self improvement. They are avid readers. Because they are constantly acquiring knowledge, rich people are informed and decisive about investment decisions. Poor people feel that they’ve learned enough, seldom strive for learning more and would rather watch television. Focus Wealthy folks have a different focus when it comes to money. They focus on their net worth; poor people focus on their income. Rich people establish financial goals and focus on building wealth while poor people are more concerned about a raise in their paycheck. According to Jack Ma, who started with only an idea and just became the wealthiest man in China when the recent Alibaba IPO was launched, “People lose out in life because of these 4 reasons: Being myopic to opportunity Looking down on opportunities Lacking understanding Failing to act quickly enough “You are poor,” Ma says, “Because you have no ambition,” and “The depth of one’s ambition determines the potential of one’ future.” Maybe it’s time for you to become more ambitious and start focusing on your net worth, gaining the knowledge you need to make sound investments and taking some calculated risks that will lead to a financially secure and successful future. How do you plan on building assets?
Posted on: Thu, 16 Oct 2014 14:07:16 +0000
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