The Rich Get Richer
I wouldn’t have it any other way. It gives me something to look forward to. I am by no means a rich man today. But I plan on it. Here are just a few of my favorite reasons.
The Rich Have Money
Dave Ramsey, David Bach, to Suze Orman and countless others tell us over and over to start investing NOW. The reason is simple. Compound Interest. It does amazing things. The part that is overlooked is that there are two parts to the equation. Time and Principle. The average American does not start investing with a large principle. We all rely on time to do the heavy lifting for us.
On the other hand, if you do happen to have a significant amount of money to invest, then you don’t need time on your side to reap large dollar gains.
Very simply, 5% of $1,000 is $50 while 5% of $1,000,000 is $50,000. Even though each is an equivalent rise in value, I am willing to bet that the majority of readers would rather have the $50,000 gain.
The Rich Pay Less Taxes
The rich more often than not use a significant amount of their wealth to invest. Investments are taxed using a different set of rules than earned income. First and foremost, there are no Payroll Taxes on capital gains. If you sell a stock for a profit, you will pay federal and state income taxes and that is it. You do not pay social security taxes (6.2%) or Medicare taxes (1.45%). That is more money in your pocket instead of the government.
If you happen to of held your stock a full year or longer, or you receive a dividend, your tax liability decreases further still. Long term capital gains as well as dividends are taxed at lower rates, currently both are 15%.
If that wasn’t enough, social security tax has a cap on it. For 2008, income up to $102,000 is taxable for social security. Every penny after that is free and clear further reducing the over all taxes paid by high earning individuals.
The Rich Don’t Worry About Inflation
Gas and food prices have seen rapid increases in the last year or so. This has threatened many families financial well being. While inflation concerns are another great reason to NOT live paycheck to paycheck when you are rich, you don’t have to worry as much.
While the rich may use more gas and food than others, they do not use nearly as much as the rest of the world when you look at it as a percentage of their income. If gas and food costs increase by 12% in a year, the family whose gas and food bills make up 25% of their expenses are going to be far more affected than the family who spends only 5%. Having more money does not mean that you automatically use more gas and food. You have to look at it as percentages to get the full story.
If You Can’t Beat Them…
The people with money have an easier time making more of it. Once you have it it is likewise easier to keep it. It’s a fact of life. So rather than fuss and complain over it, resolve to join their ranks. I plan on being rich. One way or another.
What more motivation does one need?