A small percentage of the population controls over 90% of the wealth. Most people will never become rich no matter how high their IQ or how hard they work, or how much money they earn. Most people will spend their lives having the problem of not enough money and they will fail to ever live the life that they dreamed. By understanding why most people never get rich you can learn how to become rich.

Before I start telling you why most people never get rich I first want to debunk a few wealth myths that may be holding you back from becoming rich. Firstly the myth that you need to earn a lot of money to become rich is false, many people who earn millions become poor. You also don’t need to be smart to be rich. Some of the richest people in the world dropped out of high school and college. You don’t need money to make money, money can be made from nothing, or you can leverage other people’s money to become rich. So now let me explain why most people never get rich.

Most People Save Money

Most people subscribe to the idea that you need to live frugally and save money in order to become rich. But there are a few problems with saving money that explain why this method keeps millions of people from becoming rich.

Firstly, money goes down in value over time. When my mum was a kid she could buy a bag of lollies for a penny, now I can’t even get a bag of lollies for $1. Money loses its value as more money is printed and cost of living goes up, so by saving money you are actually losing money.

Also interest earned on money is heavily taxed, so although you are earning 4% on your money it is likely you are paying 30-50% in tax. That is an effective 2% return on investment. Seeing as inflation is around 3-5% you are going backwards.

Also just saving money is bad because you are not using any leverage. You are only getting money from working (and you can only work so hard) and you are only using your own money to invest. Your return is therefore very limited.

Most People Live Below Their Means

Most people live their entire lives trying to live below their means. They live frugally and try to spend less than they earn. But rich people don’t try to live below their means they try to increase their means. Rich people are constantly seeking new investments that will earn them money without them having to do anything. By constantly seeking to increase their means rich people become richer and richer, and by constantly trying to live below their means poor people remain poor.

Most People Invest Not To Lose

This is probably the number one reason most people fail to become rich. It is not how much money you earn from your job that determines whether or not you can become rich. Generally it is your investing that will make you rich or keep you rich. Most people invest not to lose, but they don’t invest to win. Thus they never get a good return on investment because they are too busy trying to play it safe.

Most People Buy Liabilities Not Assets

Even though most people are afraid of losing money they ultimately lose a lot of money because they buy liabilities instead of assets. Most people will buy nice cars, a big house and other expensive liabilities that take money out of their pocket every week. Rich people use their money to buy assets that put money in their pocket on a regular basis. So their income is constantly going up instead of their debt constantly going up.

Most People Are Financially Illiterate

Most people are so afraid of losing money because they are not financially educated. They don’t know much about money and thus they cannot make solid investment decisions. They are constantly looking for the latest ‘hot tip’ about he stock market or property market and they are constantly buying into ‘get rich quick’ schemes. Or they spend their money on the lotto and blame their finances on the government. Most people never become rich because they go to school and college to learn but they never learn how to become rich.