Monday, April 18, 2011

The gap between Rich and Poor:A different look

You have heard it all before. The cliches` about the "widening gap" between the rich and poor and how a small percentage of individuals control most of the wealth and so on. Today I will share with you a perspective seldom mentioned, if at all. Many people simply do not invest their money, or simply squander what they do have. Here is a simple example; Google stock(GOOG) made its debut on August 16, 2004 at $100 a share. If you invested $1000 in the purchase of 10 shares; by 2007 those shares would have been worth over $700 each. In other words your small investment would have multiplied seven times. Many individuals fail to understand that geting rich is a process for the most part. It is about making good decisions over and over again. For example; does it make sense to buy a brand new car and make car payments for five years at a ridiculous amount of interest? Instead paying cash for a reliable used car and having money to invest seems to be the sensible choice.There is a wise proverb that I like very much; "A fool and his money wil soon part ways." What we are getting at here is that lack of information leads to ignorance, and eventually leads to lack of resources. Example: A crafty car salesman tells you about a great "deal" on a vehicle. You are uninformed, and easily tricked into a five year payment plan on a new vehicle. Now you have signed the papers and are bound by contract to pay the principle and interest monthly. This situation leads to a lack of resources, because you are now "trapped" in debt. Debt creates a barrier between you and investing. How can you invest if you have no funds? I believe that the less resources you have, the better manager you need to be. Unfortunately the opposite is usually the case; it is the wealthy that manage their assets properly. For the last two years we have been in what is known as a "bull" market, alot of money was made and still is being made. If you do not know what a bull market is; let that be your signal to learn all you can about money management and investing. The poorer you are; or the less resources you have, the more important it is for you to know how to manage your money. With consistent, good money management you will gradually find yourself with more and more. The principle is simple: "He that is faithful in least is faithful in much."Do good with what you have, and you will end up with more.

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