Thursday, November 12, 2009

Concept: Why the rich get richer and the poor get poorer

Being poor is not a social malady that some of us had been led to believe. It is a mindset. Being poor is doing things at all the wrong times. Doing things at all the wrong times would encompass things like buying unnecessarily and/or selling unnecessarily. In contrast, doing all the right things mean buying NECESSARILY and selling SMARTLY.

I've gotten comments from some of my readers that my entries are sometimes boring, so I've decided to spice it up a little by including some real life examples- things that we always see everyday. In explaining this, I would like you guys to meet two of my lady friends: 'Always want to glamour auntie' (referred to AWTGA hereon) and the 'chilled and relaxed auntie' (referred to CARA hereon).

AWTGA is your typical bimbo, fashion victim and credit spender. She goes for the latest fashion, has 5487 pairs of shoes and 215 different bags. Their sole purpose in this world is to look glamourous and to put their bank accounts on a diminishing decline. AWTGA buys without thinking and believes in making minimum payments to their ever growing credit card debt.

CARA, on the other hand, is just as fashionable but does not have 5487 pairs of shoes and 215 different bags. She only has 2-3 pairs of shoes and 1-2 bags for every occasion. Their purpose in this world is to be aware of the future, to be enriching their wealth and buying NECESSARILY.

Now that we've understood the two ladies fairly well, which one of them do you think hold themselves together better? A good way to find out is to put them in a scenario that we see occasionally - SALES! Now, because AWTGA spends all her money every month buying everything she can get her hands on and turns out dry, she will never be able to fully take advantage of the savings she may get from a sale. This was because money was not put aside, thus, when a sale comes, she was not able to get as many things as CARA who had been putting aside money. AWTGA, being the poor wretch she already is (having a mountanious credit card debt), is becoming even poorer by spending more than CARA.

In a larger view, the same goes for businesses. Companies that are cash-rich always get the advantage of going into the fray first and emerging as winners. Companies that are not cash-rich will always be a wee bit later than others because upon identifying an opportunity, they scurry around for money and by the time they were ready (or at least thought they were), the opportunity has already come and gone.
Lets go back to the title of the post, shall we? Why the rich get richer? Because they have the competitive advantage of grabbing opportunities first and thus, making the most out of everything before the market gets saturated. Why the poor get poorer? Because they do NOT have the competitive advantage of going in first and will always be going in after market saturation, yielding minimum benefits (in AWTGA's case, NOT AT ALL!).

Ever seen something that you really like go on sale and you just don't have the juice to buy it? You get the idea. Start spending wisely! Think like the rich, Act like the rich and Live like the rich.
Shaun Ng signing off. =)

No comments: