For Richer or For Poorer

The demise of the middle class and what it means for you

When I was growing up, my poor dad wasn’t poor by economic standards. He was the head of the schools for Hawaii and had a steady income, a good amount of savings, a home, and a pension. In other words, he was your typical member of the middle class.

Like most people, my dad bought into the American Dream of a house, a job, a car in the driveway, and a family. Most people in his generation worked hard to attain the status of comfortable, middle-to-upper-middle class. And, at the time, if you were frugal and saved your money, you could achieve that status.

The disappearing middle class

If he were alive today, my poor dad, however, would have struggled financially. He most likely would not have been comfortable. Today, the middle class is quickly disappearing. All the ways my poor dad achieved a level of financial comfort no longer work in today’s economy.

Today, savers are losers, houses are worth less and less, there are no pensions, and essential goods for life are more and more expensive. Today, inequality is higher than it’s ever been.

The two classes of people

For a while now, I’ve been predicting that the middle class would disappear and that we would have only two classes of people in the U.S., the poor and the ultra-rich. Recently, the Congressional Research Service, a nonpartisan research service, released a report on the distribution of wealth in America that confirms what I’ve been saying.

According to Dan Froomkin, reporting for the Huffington Post, “The share of the nation’s wealth held by the less affluent half of American households dropped precipitously after the financial crisis,” falling from 3.6 percent in 1995 to 1.1. percent in 2012. And, “The study found that the share of wealth held by the top 10 percent of households grew from 1989 to 2010. In every other segment of the remaining 90 percent of households — i.e. the middle and lower class — that share went down.”

Translation: The rich are getting richer, the poor are getting poorer, and the middle class is disappearing.

You have two choices

As I’ve said before, this financial crisis, which isn’t going anywhere soon, is one of the greatest transfers of wealth in history. Today, you have only two choices, become richer or become poorer.

For my poor dad, it wasn’t his financial status that made him poor. It was his mindset. He didn’t understand how money worked, he thought investing was risky, and he valued security over everything else. So, he chose to save his money, work as an employee, and rely on his pension for retirement. Today, that formula would make him poor both in his mindset and in his bank account. Today, my poor dad would have made choices that made him poorer.

What kind of decisions are you making? Do you want to be richer or do you want to be poorer?

If you want to be poorer, it’s easy enough—keep blindly doing what you’ve always been told to do: save money, get a good job, buy a house, and invest in a diverse portfolio of stocks, bonds and mutual funds.

If you want to be richer, it’s going to take a new mindset and a lot of work. This work begins with increasing your financial education to understand how money works and how to make money work for you.

There is much opportunity to become rich for those who think like the rich. The middle class is disappearing. Today, it is essential that you are finically intelligent so that while others become poorer, you can become richer.

So, what’s it going to be? Richer or poorer?

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