5 Reasons The Rich Get Richer

You know the old saying, “The rich get richer and the poor get poorer.” And like all sayings there is probably some truth to it. But why? And more importantly, what can we learn from the rich to get richer ourselves? What habits or practices can we adopt to harness wealth building potential? A quick note: I realize the American middle class has been slammed for the last several decades. Mainly due to globalization, automation, and the high costs of healthcare and higher education. These are some of the reasons the FIRE (Financial Independence Retire Early) movement is so critical. Even if we do not excel at FIRE, the habits and practices can make us stronger, perhaps even happier. In my view, it is important that we try and understand the dynamics of building wealth in order to create a stronger country, society and future. After 20 years of studying investing and wealth building, here are the reasons I believe the sayingabove is somewhat true. I will also provide a couple counter arguments as to why it may not be true.

Defining “Rich”

I truly believe that past a certain amount of income and assets, being “wealthy” or “rich” is more about developing gratitude and a state of mind. Studies on happiness have proven this. Once basic needs are met and we have a little extra, being content and happy has more to do with what we do to help others. Therefore, defining “rich” is ultimately a personal choice, but we will use a couple of guiding principles. Wealthy folks typically own assets like real estate, stocks, bonds, etc. The wealthy are also able to service any debt and have disposable income and assets that they can make choices with. They can ultimately decide to invest more or consume more, depending on their preferences.

1. Habits

I believe simply put the upper middle class and wealthy have developed strong habits that compound over time. Or they have engineered systems to ensure that they are forced into stronger habits. What does this mean? It means that the wealthy think about time, work, money and investing in a different way than most people. The rich get richer by having systems and discipline in place that forces them to continue to build wealth over time. A simple way of looking at this is assets vs. liabilities. You see, poor people load up on liabilities that create the illusion of success. Fancy cars, vacations and clothes purchased on high interest credit! They are trying to fool themselves and society into thinking they are successful humans. They buy new luxury vehicles, McMansions, eat at expensive places, buy new clothes, etc. Over thousands of years as a river flows over rock it wears the rock down and smooths it out. The river flows continually for many years. Our habits over time flow from our lives and smooth things into a certain shape or pattern. The problem is that we are myopic little animals focused mainly on our immediate gratification. It is very hard for our animal brains to imagine a future 20, 30 or 40 years from now. But that time comes, therefore attempt to build habits that grow your wealth and health over time.


Develop and engineer true wealth habits: automatic savings and investing, avoiding credit cards and debt, focus on accumulation of assets over taking on more liabiltiies…

2. Math

The rich have mastered financial math! Most people tell themselves lies like “I am not good at math”. They never gave themselves a chance to master financial math. At some point during our usually lame financial education path (if one even exists in the US) we start to believe that we are not good at math. I hear this from people all the time as they say “I am not good at math…” (insert sad face). I believe in many cases they did not receive very good math education and experience.

Embrace math and re-write the script in your head

I think people should challenge this belief about themselves. And develop a working knowledge of basic financial math concepts in order to have the tools to build wealth. We do not need to be a character from the show The Big Bang in order to be proficient at financial math. We ought to challenge many limiting beliefs about ourselves and push the boundaries of what we believe we are capable of. Many people think math is scary and it is understandable why! People say self defeating things like “I was never good at math”, “I am not good at math”, etc. Many of these sayings become self fulfilling prophecies and in my opinion are not true. I think people can think more with a math mind then they give themselves credit for. This is a major failure of our education system and society. We can do better and make math fun and engaging for children and adults. Like anything, math skills can be learned and enhanced over time. Math is one of those things that enabled our species to thrive and build the marvel of the modern economy. We are all part of this legacy.


Reaching financial independence and managing our resources effectively is truly about math. Many F.I.R.E. concepts are based on very straightforward mathematical rules of thumb. For example, save about 20-25 times your annual salary and withdraw 4% a year to live on it for decades. If you can live comfortably on $48,000 per year, save and invest $1.2 million. It sounds like a big number, but at least it is a known number and can become a goal. The bottomline is that we need to do the math, and again, the math is pretty straightforward. The good news is that it is pretty basic math. People in general tend to fear math or when presented with math it scrambles our brains. But I truly believe to be firmly on the path to FI, one has to understand and utilize some basic math concepts. When these concepts are truly understood and applied, a person’s life can be transformed from a financial standpoint.

Face the fear of math and nail down the most important concepts. Here are what I believe are some of the most important math concepts to utilize to enhance wealth building capacity:

a. Compound interest

Einstein called it the 8th wonder of the world and said those that understand it, earn it, those who don’t, pay it. Compound interest is probably the most important wealth building tool one can use. The basic concept is simple, the interest you earn on your money also earns interest and so on forever as long as you do not withdraw it. Warren Buffett has talked a lot about compounding over the years and much of his investment success is due to this mathematical wonder. The good news is that it is not hard for us non Einstien types to harness. Basically it involves letting your investments continue to grow and snowball on themselves over time. If you have $100 invested and make $5, you now have $105. Instead of removing the $5, if one keeps it invested it also earns interest, which makes the next interest earning greater. This can have a profound effect on your investments over decades.

Interest paid on debt

The opposite of compound interest in your favor is interest paid on debt. This is probably the number one wealth killer and destroyer. As a Money Viking you must fight back against these wealth destroyers and enslavers.

 b. A simple budget (Addition and Subtraction)

I am not a detailed excel spreadsheet guy when it comes to my budget or investments. I do like spreadsheets, I like excel and I like budgets, but I opt for a simple straightforward list with no bells and whistles. It takes a few minutes to prepare and manage. It is a list of income on top followed by a listing of all expenses starting with the largest one (the mortgage) down to the smallest (Starbucks). I also include all automatic withdrawals into assets and investment accounts. $50 to Vanguard, $500 to 401k, etc. The final step is that I highlight the items that are going into assets and then keep unhighlighted the expenses that are going into liabilities. Budgets at the end of the day are simple addition and subtraction, but most people fail to even make a simple budget. It can be an eye opening exercise and will tell you where your money is going. My goal is to maximize outflow into assets such as investments and real estate and minimize outflow going into liabilities such as cars, gas, utilities, food, etc.

c. Your time vs. the cost of things

A simple math trick I like to use that helps me resist overspending temptation is asking myself one simple question before the purchase: How long will it take me to earn the money to pay for this _______________? It can be anything, a bottle of wine, a meal, a shirt, a toy, groceries, a trip, etc. If you think this way you will tie the time you spend at work to your spending, and will probably not make certain purchases. You may calculate that it is simply not worth it.

d. Risk vs. return

In general, folks will want to understand that when an investment is paying a high percentage it is generally more risky. Are you willing to take the risk? Maybe, maybe not, it depends. Bitcoin, Ethereum, Ripple are examples of high risk investments. Some people made a bunch of money and others lost a lot, high risk, potential for high return. Then there is cash on the other extreme. Low risk and low reward. In fact the reward is so low, that your cash pile will lose value over time because of inflation. Inflation will eat away at the buying power of your cash. Let’s say someone sold there house for $40k 30 years ago and then placed the $40k in a nice safe savings account. 30 years later perhaps they wanted to buy a house, well houses now sell for $400k. The $40k is still there nice and safe, but it does not buy as much of anything. Somewhere in the middle of this spectrum are blue chip dividend paying stocks, low cost Vanguard index funds or Bonds. These investments will go up and down, but over time they will probably go up 5-10% a year over many years on average. That beats inflation currently.

e. The cost of things over time

A little math trick I like to do is to average out the cost of ownership of certain things over long periods of time. For example, my used Honda Accord I purchased for $16k. I have owned the car for 10 years now, therefore I have spent $1,600 a year for my car. Not bad, I hope to do better, but not bad in the grand scheme of things. If I had spent some crazy amount like $40,000 on a “luxury” car and then paid interest on top of that, I would have paid close to $5,000 a year for the car. That is a huge difference from $1,600 and the ability to invest the difference has great potential over time.

f. Probabilities

A basic understanding of probabilities is important to managing our finances…


Believe in yourself and educate yourself on the fundamentals of sound financial math and money management.

3. Be Like Millionaires, Financial Education (Think For Your Self)

At our heart, The Money Vikings blog is about knowledge and education. Knowledge and education are power and enable us to master and manage our lives more effectively. There is so much confusing financial noise out there. I believe the rich are able to cut through the noise and master fundamentals. The fundamentals build to success in wealth creation. The rich tend to take in all kinds of information, process it, and then think for themselves and make their own decisions. They do not outsource their brains and thoughts to governments, institutions, companies or other organizations that depend on group think. The bottom line is that it is critical to continue to develop a financial education just as the wealthy do. We learned so much from The Millionaire Next Door Books about how millionaires truly behave in our world: Millionaires:
  1. Live well below their means. I grew up hearing that it is not how much you make that matters, it is how much you save. There are many high income earners that have low net worth. I do believe that one needs to make a solid salary to save and invest up to significant wealth levels. Recent surveys says earning around $75,000 a year for most people affords a stable comfortable life and allows one to save a bit.
  2. Allocate time, energy, and money efficiently, in ways conducive to wealth building. This is a very powerful concept that makes me examine how I use time, energy and resources. How can these be maximized to encourage investment and living a life of work and True Wealth?
  3. FI is more important than status displays of wealth. See, most people want to show off, we are herd animals. We want to live in a certain place, drive a certain car and look a certain way to display status and wealth. Many millionaires are able to shun and tame this ego driven aspect of human existence. They are more focused on wealth accumulation than on displaying “trophies” or baubles of wealth.
  4. They target market opportunities. This reminds me a lot of Warren Buffett who is famous for saying when everyone is fearful, you should be greedy. What he means is that there are times when investments lose mass favor, and at that time they are on sale and cheap. A person can acquire more assets at this time because they are on sale. Know anyone that bought a house after 2010, they have now made a lot of money in appreciation because in 2010 the real estate market had tanked. We wrote about this in our article Your 3 Big Financial Opportunities  This article was featured on Camp FIRE Finance because it outlined how most people will have a few big opportunities in their life to invest, the important thing is to be prepared.


Learn from millionaires and adopt some of their actions.

4. Luck/Connections

Any review of how the rich get richer must address luck and connections in our lives. In many ways lives are shaped and evolve from what appear to be random encounters. For starters, as far as we know, we have no choice of the family we are born into. Some people are born into wealthy and connected families. As much as we strive for an egaliartarian merit based system, there seems to always be a kind of primal bias for our own kin and connections. I am not sure what the answer is here. In many ways the world is probably more fair on aggregate than it used to be. And luck or unfortune seem to strike at random. The main goal is to continue to strive and be prepared for opportunities. As the Roman Seneca once said: “Luck is what happens when preparation meets opportunity” Are you doing everything in your power to prepare for opportunity? That is what the wealthy ask themselves every day.


One thing I have found to work in my own life is to try and be prepared, professional and put in effort. These things in a way can create our own kind of luck. By being good to others, professional and applying myself, many doors of opportunity have opened that I would not had if I behaved in another manner. So in other words, open the possibility of good luck through strong and good behavior, which is at least somewhat in our control.

5. Misc. (Smarter work, timing, self worth…)

17 months Did you know that the average inheritance lasts 17 months? Therefore most wealth creation is built by the first generation. We must deploy multiple strategies to be like the wealthy. We need to consider working smarter, consider our timing and have a high self esteem. In other words, think positively that we can do things. We all fail at times, that is human, but the wealthy are able to learn from failing and get back up to try again!


Find your own unique path. We all have something to offer the world in exchange for increased value.

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