Friday, February 10, 2012

The richer you get the richer you get

I was trying to explain this concept to my son who graduated with his B.S. in Nursing this past year because I have only begun to grasp the concept myself during the last 5 to 10 years at most.

So, I began by explaining how this works in most people's lives. I said, "If someone is poor they can't afford to buy much of anything so they wind up paying about 10 times as much as they should because they can't buy enough of it to get bulk prices. For example, if you go out and buy 1 roll of toilet paper you might pay(since I don't shop I'm not sure of the actual prices today) 1 dollar or more a roll. But if you go out and buy 20 or more rolls you might get your individual price per roll down to 25cents a roll or less. This basic concept carries through in almost anything anyone purchases. So, if you have the money it is always better (unless it is perishable) to buy a whole lot of whatever you need and use it up over the next months or years and then keep doing that. So, this also contributes to why, "The richer you get the richer you get" (at least this is true in the U.S). I can't vouch for other places.

Here is another thought. Because Amazon Prime which is similar to Netflix costs 80 dollars a year, that is enough to make ANYTHING you buy from (food, electronics, books and electronic books, Dvd's electronic one night DVD's over the internet etc) become free shipping thereafter because of just joining Amazon prime. My son just built a computer custom designed and made by him by buying ALL the parts from  . Then because he was an Amazon prime member everything was shipped to him free. Then because Amazon doesn't charge sales tax he saved about 7% to 10% sales tax on everything he bought. So, the price of all the parts of the custom computer that would be better than you could buy already assembled anywhere on earth was only 700 dollars instead of 1000 dollars which it would have been or more to buy that anywhere else with shipping and taxes included.

Here is another point of view. Many children who live on fast foods in the U.S. are expected to die between ages 15 and 35 because that food really doesn't support longevity in humans or support brain development or physical development long term. This is really unfortunate for our country that this has happened over the past 20 years or so for so many.

However, if someone is fed on organically grown whatever and the person feeding them also has some knowledge about nutrition and exercise that same child might be capable of Never dying because of the potential capacity of medical science and nutrition today here on earth. So, being wealthy in knowledge and experience is equally important to the survival and well being of everyone. It is not just being financially wealthy that is important. It is equally important to be rich in knowledge and wisdom of all kinds. Wealth can be viewed in many ways and actually being monetarily wealthy might be the least important when weighing all the types of wealth including good health, diet and exercise is included. So, as you can see in all ways, "The Richer you get the Richer you Get". (At least in the U.S.)

Later: I thought of some other useful analogies regarding richer people:

First of all, if you are wealthy enough likely you would rather pay cash for your car. So, how much does that save in interest doing this? Also, no one will ever repossess your car because you own it outright.

Second, if someone is rich enough often they pay cash for their home or homes. By doing this no one will ever foreclose on their house unless they don't pay the property taxes for a very long time(usually years). So, basically as long as they stay on top of property taxes this house or land might be owned for generations potentially without any ongoing problems(50 to 70 years or until the owner passes away). Also, since a 30 year or more mortgage often makes a house cost double or more in dollars paid out from the list price of the house. (even though the actual value of the dollars normally reduces during those years.) So, these are some of the other instances.

Also, in regard to American Express cards or Visa Cards, wealthier people tend to pay off those cards monthly so as not to owe any interest at all. So, if you add all the money interest saved buying cars, homes for cash, and paying off charging instruments completely monthly,  regarding all these things likely you would find about a 50% reduction in actual costs if you average all these things out. (However, it actually could be more than this) because that 50% not spent on interest could be invested in savings accounts, stocks, bonds or even muni non-taxable bonds on a bond ladder which might earn an average of 10% per year non-taxable on this 50%. So, this realistically would have to be added to the actual savings of having been wealthy  enough in the first place to pay cash for everything.

So, I guess what I'm trying to get at here is that it is not only someone's wealth that helps them, it is also how much money they save by buying in bulk in advance and by not paying interest on anything unless it is business related which can then be written off by the businesses they own.

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