Here’s a common question…Why is it that the rich get richer, and the poor get poorer?Well, it all comes down to about three things; Money management, tax advantages and mindset. All of these relate to a certain term known as cash flow.
Cash flow is simply the amount of money you receive, it’s a term typically used whilst referring to investments. Here’s why this is exceptionally important; cash flow from investments makes people rich, cash flow from jobs make people average. But why is this the case? Why does cash flow from investments have such a greater impact on wealth than job income?
Well, here’s where the formerly mentioned three aspects (money management, tax advantages and mindset) come into play. Let’s start with the former; money management. The knowledge and ability of the rich to masterfully manage their income streams and money is quite different than that of regular people; the rich rarely save, and often invest. As for the poor and middle class, it’s typically the other way around; save and rarely invest. This is the first reason the rich get richer and the poor get poorer.
Secondly, tax advantages. Now I’m no tax accountant or specialist, but I do know this: Income from jobs is taxed at a ridiculous rate, income from investments (notably real estate investments) can often be completely tax free. There appears to be a certain injustice here, however what the masses do not realize is that the injustice is only present due to a lack of knowledge, luck is a non-factor. The tax laws are the same for everyone, without exception. The reason the rich benefit the most from them is because they know them. They understand how to list exemptions, and make their income from sources with many probably deductions.
Lastly, mindset (this is the Novel Mindset after all…). The rich have a focus on long-term goals, whereas the poor and middle class often focus only on their short-term goals. The reality of the situation is that almost nobody actually gets rich overnight, the majority of the time wealth is created through long, arduous efforts. The only reason we don’t get that impression from wealthy people is because we’ve only known them after success. I guarantee it, ask any successful entrepreneur how much they worked and it will blow your mind.
So, dear reader, I urge you to take action towards your success, and adopt a new, novel mindset. If you’re interested in learning more about becoming rich, you NEED to read this article about the power of compound interest: Compound Interest: The Strongest Tool To Achieving Financial Freedom.