Rich and Poor Divide: Managing Debt
RICH AND POOR DIVIDE: MANAGING DEBT – For the millions of people who live on the breadline and pay taxes into a system that is clearly broken they often have but one hope of ever living the good life; that of course involves winning the National Lottery or indeed the Euromillions Lottery.
Yes the odds might be stacked against those who participate at 14,000,000 to 1 but someone has to win eventually and the ethos will always remain in that… ‘it could be you’
Oh those four little words are so powerful and each week millions dream that finally they’ll be dragged out of poverty and thrown at the speed of light into the world of the super rich.
Unfortunately there’s a catch in which there is growing evidence that winning the lottery doesn’t in fact make you happy; look at the amount of news recently of lottery winners who have separated or divorced due to the pressures the vast wealth has settled upon their shoulders.
I know, boo hoo; no doubt you have very little sympathy for these people but spare a thought for a moment and sit down and consider how you would cope if you actually won the lottery.
For starters you’ll need to decide whether or not to go public and tell the world of your new found fortune. Many people elect to be thrown in the limelight and within days are swamped by begging letters from thousands of people declaring they need help.
Even if you don’t opt for the publicity there’s not much of a chance you can keep your new found wealth a secret. It is after all human nature to gloat about what you have and it won’t be long before your friends and family discover you’re now a multi-mega millionaire and soon after that the word spreads to their family and friends.
There is no stopping the gossip machine once it starts and this inevitably leads to feuds with family and friends as jealousy sets in.
You could of course jump on a plane and get the hell out of dodge but how long can you remain in self-exile? Surely a week or two lying on a tropical beach is a great thing but you’ll soon begin to miss home and indeed your family and friends.
For the rich this is not really a problem and that’s because their wealth was either earned or inherited and their circle of family and friends are generally within their own wealth bracket.
For the rich the life style is not simply thrust upon them but rather is a gradual accumulation of wealth or in the case of an inheritance the wealth was already well established and therefore they were accustomed to having lots of money.
I’ve actually bought a totally of 10 lottery tickets in my entire life and most of these were bought at functions or where I was cajoled into it. I certainly believe in luck, but the odds of winning the lottery are just too great and so I would rather spend my time actively working in order to increase my wealth.
When you work and find ways to make a few bucks it’s like a drug; the more you make the more you want and it no longer pertains to just accumulating wealth but rather the thrill of taking a calculated risk which pays off – well not always but that’s life in the fast lane.
Working for your wealth often dispels expectancy from others; that is family and friends don’t automatically expect you to dish out the cash as they would if you simply won the money. No, earning wealth takes on a different persona in that you deserve the wealth due to your hard work.
What is the difference between the rich and the poor? Apart from the obvious wealth gap, a lot of it simply comes down to circumstance and an unwillingness to change.
The poor are often ill equipped to either generate wealth or indeed manage it properly when fortunate enough to win it.
It has long been argued, but never implemented, that each child should be educated to a level of standard accountancy; that is schools should teach all children at least the basics of accounting so that they can appreciate how to manage money and importantly how money flows.
We are all aware that we are now in a financial recession which was forced upon us by inept bankers. In fact that statement, or rather widely accepted belief, is complete and utter nonsense.
The poor were equally culpable for the financial crash of 2008 where banks had to be bailed out at the expense of the poor taxpayer.
Cast your minds back and you’ll remember that it was the housing market that primarily brought the banks down after they issued ‘Ninja’ loans – that is No Income No Jobs or Assets; yes the banks started to loan money to people who had little or no chance of ever meeting the repayments.
Such loans become widely known as ‘Sub Prime Mortgages’ and it was a recipe for disaster but the banks honestly believed that whilst the housing market remained buoyant with rising property values there was little chance that that assets in which they held would lose value.
This might have held true if a small number of homeowners with sub prime loans had defaulted but when the numbers rose by the thousands per week these so-called assets became toxic due to the falling values; in some cases by as much as 70 per cent.
The downfall, or bankruptcy, of Lehman Brothers had far wider consequences than was originally conceived by the U.S or other Governments. However, as with a house of cards once you remove one element the entire structure comes tumbling down.
Within two weeks of Lehman Brothers declaring bankruptcy the world’s entire financial and banking infrastructure was on the brink of collapse; indeed Ireland was the first to recognise that it had very little choice but to bail out its banks in order to safeguard the country’s finances.
Such a move was already being considered by other Governments, including the U.S and UK, however many felt they had more time to seek alternatives; time wasn’t a luxury that was afforded and therefore respective Governments around the world took the decision to partially nationalize the banks in order to stave off financial catastrophe using taxpayers money.
The general public, both in the UK and the U.S were opposed to the Government using taxpayer’s money; many thought that the banks should be allowed to go bust if that’s what the free market system determined.
Like most financial matters it wasn’t as simple as just letting a bank go bust, for if one went bust they all would and in turn employers wouldn’t have access to short term loans in order to pay for supplies and even employees wouldn’t be able to be paid.
There were other consequences such as people wouldn’t be able to access funds in their accounts and even credit cards would be rendered useless.
During and after the initial financial crash the poor certainly became a lot poorer. Many people lost their homes and were saddled with debts that they were almost certain never going to be able to repay.
But what about the rich? The truth is that many of them became even richer; they were able to buy up assets for almost nothing and then convert them for a very healthy profit.
It has been widely accepted that many new billionaires were born from the financial crisis and this is because they understood how the wheels of finance turned and therefore took full advantage of the poor people’s misery.
It might be argued that certain individuals had no moral fortitude; after all they preyed on the poor and accumulated vast wealth on the back of their misery.
With the right education and basic understanding, the opportunities were afforded to anyone who could effectively see through the smoke as the banks and financial institutions burned.
It could be concluded that the poor were not only culpable for the financial crash, because they took on home loans that they simply couldn’t afford, but also responsible for their own losses because they did not understand basic finance principles.
Currently 97 per cent of the entire world’s money is debt and this debt is created by the poor who continue to spend well beyond their means with little or no control over their finances.
If you are one of those living on the poverty line then stop and think carefully about what you spend. We are but a few days from Christmas and it’s likely that many have already maxed out their credit cards in order to put presents under the tree.
Yet again, without truly considering the consequences, the poor have just dug themselves deeper into debt and ultimately if they don’t pay their debts it falls upon the taxpayer to pick up the tab therefore increasing national debt and making the poor even poorer.
Debt is a vicious cycle of despair and the sooner the poor get savvy about controlling their finances the sooner we can come out of a recession and start repaying the debt.
There are lots of free resources online to help you find out more about basic accountancy and how finance works.
Why not petition your local politician and demand that the educational curriculum includes financial management and basic accountancy?
When we all have the ability to understand how the flow of money works, even at a basic level, we can move forward and plan how to control what we spend and acknowledge the consequences and responsibility of our debt.