3 Reasons Why The Wealth Gap Has Never Been Bigger

The gap between the rich and the poor has never been bigger.

This is evident when you look at the contrast between the top 1%, and the bottom 1%, of any region you visit.

With the opportunities presented to us today, why is this still happening?

I’ve narrowed it down to three core reasons, why this wealth gap continues to grow at an alarming rate in the western world.

The Image Pandemic

I’ve spoken about The Image Pandemic before, and it’s a crisis amongst the lower classes of the western world.

There’s a core difference between the rich and the poor, and it’s backed up by what I’ve called the image pandemic.

Poor people buy liabilities to LOOK wealthy. Rich people buy assets to BE wealthy.

Do you ever see a paparazzi picture of a super rich person wearing the blandest, cheapest clothes?

Mark Zuckerberg comes to mind when I think of this. Why does he do it?

Well, why should he care about what he wears?

• He’s the Founder of a trillion dollar company.

• He has nobody to impress.

• He’s not trying to convince anyone he’s absurdly rich.

I mean sure, this is an extreme example, and in our cases, you should dress to impress.

But that doesn’t mean spend all your money on designer clothes to make the shareholders of fashion brands even richer.

I think social media is largely to blame.

There’s a serious problem with a lot of young people as they spend huge amounts of money on things they don’t want, to impress people they don’t even like.

It’s funny.

We live in a world where you’re judged by what people can see.

So, everyone seems to either wear their wealth, or drive it etc.

And before you know it, these liabilities have bled you dry.

Please, for the sake of your future, don’t be this person.

Focus on assets, not liabilities.

Fiat Currency

Fiat currency is the money we use on a daily basis to buy and sell goods.

Most people call it cash, and despite now being mostly electronic, cash has been around for hundreds of years.

But, in it’s modern form, it has problems.

Big problems.

Centralised

It’s controlled by one singular entity, like a government or central bank, which has the power to:

• Control supply

• Issue new notes or coins

• Alter denominations

• Devalue your savings

Unlimited Supply

We saw first hand during the COVID pandemic why fiat currency is so flawed.

Bankers can print money at will, knowing that their wealth is safe because it’s in assets, not cash.

Misunderstood

The term currency comes from the term current. Like an electrical current.

Cash isn’t meant to be used to build wealth.

It’s meant to be exchanged for goods and services, and nothing else.

Want to build wealth? Like I said earlier, you need assets.

The value of $1 in 1800 is equal to the value of around $25 dollars today, which shows how much value fiat currency has lost over time.

This is an alarming figure if you have long term cash savings, earning an interest rate that fails to keep up with inflation over several years.

This emphasises the importance of buying assets, and for the most part, this is only done by the rich.

There are still so many money myths amongst the poor that stop people from investing their money:

• “It’s too risky”

• “You need to be rich to invest”

• “I don’t have time to invest”

Where have these even come from?

They’ve come from the rich, to dissuade the common people from building wealth.

When you think long term, and you factor in:

• Economic growth

• Inflation

• Compound interest

The bigger risk is NOT investing.

Compound Interest

Compound interest is a phenomenon which describes earning interest on top of your initial investments, plus on top of interest already accrued.

Say you invest $1,000, and make 10% in the first year, you have $1,100.

Say you make another 10% in year 2, you earn an extra $10 from the year 1 interest, ultimately making your return even bigger.

It doesn’t sound significant when you use small numbers, but the truth is that compound interest is super powerful for those who have been invested for a few decades, and have large sums of wealth making money for them.

Compound interest is all about two things.

Momentum, and patience.

And poor people, in general, don’t have these two traits.

As well as compound interest being so powerful when it works in your favour, it can be catastrophic for your finances if it works against you.

The most common way this occurs is through high interest debt.

Things like:

• Credit cards

• Personal loans

• Your mortgage (of course these are essential though)

You find yourself paying off way more than you need to as the interest compounds over time.

There are even some loans where the interest compounds daily, meaning the longer you wait to pay things off, the more you pay back.

Building wealth is all about those two words I just used.

Momentum and patience.

One of the reasons why it’s so hard to build wealth is because you start with no momentum.

You’ve got to create it yourself by contributing regularly, and being patient.

It might take years, or even decades to see real growth.

The key difference?

The rich are willing to wait years or decades for the reward.

The poor, aren’t.

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