Thursday, March 29, 2007

The Rich Get Richer

That the rich get richer is one of those cliches which is true. (Kind of like the kid's response to Shakespeare - "Man, his plays are so full of cliches.") Economists expound on it with many different theoretical explanations. Obviously it's a very old and thorny problem, at least for the people who are left behind. I notice lots of little ways, anecdotally, where having the money for things costs less.
One doesn't need huge amounts to get these benefits, just a positive cash flow. It also helps the bottom line to be well-organized.
One obvious area is paying credit card bills as they arrive and avoiding interest charges. The majority of bankruptcies are not people running up clothing and electronics bills. They are people bankrupted by ill health, charging medical bills on their credit cards. Another area is buying in bulk. If an affluent person see a good deal on something, he or she can buy a bunch. Not so for the person living precariously. Where we live, property owners get a break on real estate tax for early payment. Likewise, businesses get a token discount for paying state sales tax on time. Pay in cash instead of credit card and you can sometimes get an additional discount. (Of course you're losing the interest you would have earned on the float, so you need to do the math to see if it's an actual savings.)
Today I needed a new toner cartridge, so I comparison shopped on line and got the best price. Without access to the internet and a credit card, such a transaction would not be possible. (And of course I was lucky - I took the cartridge out, shook it, and it was good for a few more copies, enough to tide me over til the new one's arrival.) We were able to get a more energy efficient front loading washing machine that will over time pay for itself, because we could afford it. The new Forever Stamp is another example. Anyone who can afford it can stock up on these $.41 stamps. They will be good for first class postage FOREVER. As soon as the 41 cents rate goes up, these will become an excellent investment and those with disposable cash (and organizational skills!) will be the beneficiaries. EZPass lanes also benefit the privileged. If you have a credit card and can afford for them to maintain a EZPass balance, you zoom through while the others are backed up at the tollbooths. Of course some of the EZPass account holders pay more, because of interest charged on their credit card balances.
Obviously self-discipline comes into play. Some folks are able to manage their finances well and eventually achieve security, and some people are irresponsible. Most hardworking people, no matter how responsibly they manage their finances, can never make up gaps like these.
It's really NOT fair. Let's all vote for politicians who will enact universal health care and stop cutting taxes for the wealthy. Amen.

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