Saturday, March 15, 2008

Why the Rich Keep Getting Richer?

Copyright © Lawren Smith

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Once I am a successful business woman, and I have a lot of money, I want to invest. I am just not sure where to begin with my investing. Because of my lack of knowledge in investing, I started to engage in some research on the subject of investing. A coworker of mine gave me a book he had read written by Robert Kiyosaki called “Guide to Investing”. In Robert’s book, he talks about what the rich invest in that the poor and middle class do not.

What is interesting is that the rich have available to them investments to invest in that the poor and middle class are not allowed. In fact, the SEC prohibits the poor and middle class from investing in these investments. The reason is that the SEC wants to protect the public from the bad investments, but in doing so, they are also keeping the poor and middle class from the best investments.

The kinds of investments that the poor and middle class are allowed to invest in are referred to as the sanitized investments.

Robert does go on to discuss much more in depth the subject of investing, but I don’t want to get too much involved in discussing the more complicated aspects of the subject of investments because it would make this article too long and too involved. I want to focus on the topic of investing for the rich versus investing for the poor and middle class. I want to show, to some degree, why there is an ever growing gap between the classes.

One reason for this gap between the wealthy and other classes is, as mentioned above, the kinds of investments that the rich can participate in, that the poor and middle class cannot.

Another reason is the way the tax system works. The poor and the middle class focus on earned income which is the wages and paychecks. The rich focus on passive and portfolio income.

Earned income is taxed at a higher rate because they provide various forms of “social insurance”. Social insurance stands for payments the government makes to various people. Examples of social insurance include the following, social security, Medicare, and unemployment insurance.

Income taxes are taxed on top of social insurance taxes.

Passive and portfolio income are not subject to social insurance. The rich don’t work hard for their money. They have their money work for them.

One may be thinking, at this point, that this is unfair. You know, you are right. It is unfair. But there is a good reason why our tax system is so unfair. It is because the tax system was created by the rich, for the rich. This is a known fact, at least by the powers that be. Most of the poor and the middle class are not aware of this and maybe it is best that they don’t.

Along with this is what is known as the 90/10 Rule. The 90/10 Rule means that 10% of the people always make 90% of the money. Who are these folks? Again, these folks are the wealthy.

In other words, although there are more people investing these days, the rich continue to get richer.

Reading this book has opened my eyes even more about the discrepancy that exists in the American society. It pays to not be average. Jobs keep people in debt and most people don’t even know this. Most people continue to work at their jobs, pay their bills, living unfulfilled lives until they retire.


Lawren Smith is a member of $9.97MakeMoneyNow and writes on a variety of subjects. To learn more about this topic, Lawren recommends you visit:

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