No. of Recommendations: 32
The biggest reason that the rich get richer, and the poor stay poor is a result of basic arithmetic. The rich need to pay only a small fraction of their income and net worth on living expenses, while the poor need to pay essentially all of their income and net worth just to stay live. Consider a person with $100 million in net worth and no job. He or she probably makes about 7% of net worth per year from investments and spends maybe 1% of net worth on expenses, for an increase of 6%/year or so in net worth. By contrast, a person with basically no savings and earning $30,000 from a job (twice the federal minimum wage) spends all of his or her earnings on living expenses, for an increase of 0% in net worth.
