We’ve all been hearing a lot about the gap lately, and not that place where you buy jeans and hoodies. The great divide between the rich and poor keeps widening, but what’s interesting in this story written by Bankrate.com’s Judy Martel for FOX Business is how the difference between income and wealth is explained.
“The income gap and the wealth gap are two different measures of the divide between the rich and poor, and both have an impact on the growing chasm. Wealth is often the result of stock market and home equity gains, in addition to income. Wealthier investors who were able to sock more into the stock market have grown much richer since the recession, according to Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. Gains in housing values also boost wealth and affect a larger share of the population than stock market gains, he adds, yet the housing market is recovering at a slower pace.”
Let’s dissect that paragraph a bit. Wealthier investors who were able to dump money into the stock market have grown much richer. Yes, of course. But less wealthy investors who funneled a percentage of their income to the market would also be richer, right? A rising tide — and a rising stock market — does raise all ships, even the littlest rowboats, if they’ve got a clever captain. Read about two really clever captains in the case study further down.
Although the article discusses the importance of college and selecting the right major to ratchet up your income at the dawn of your career, that’s not the only education that’s going to fill the pot with gold, according to two of the article’s sources, Jason Flurry, president of Legacy Partners Financial Group, and Lauren Prince, certified financial planner at Prince Financial Advisory in New York City.
The key to financial success, according to Flurry, “is an understanding of how money flows, through interest rates, stocks and bonds and debt, for example,” the article says. “Once you understand that, you can figure out how to make your income work for you and avoid going backward by sinking into debt.”
Prince offers a case study on why using your money wisely matters: “I have clients in their mid-70s, a couple who came from Italy to this country. They had two children. The father was a union carpenter and the mother delayed working while the children were young, then worked packing boxes for a pharmaceutical company. They have a couple of million dollars saved up and own a home where they are getting rent from the upstairs while they live downstairs. They put their children through college, they have no debt and the house is paid for.”
Although we suspect that couple scrimped to a degree that’d be unacceptable to the average person, you can still make money on the stock market even if you’re into extreme financial self-sacrifice. You don’t even have to become a financial adviser’s favorite case study.
If you want to learn more about investing,BetterInvesting offers a series of free or low-cost webinars. A new five-part series, “Researching to Bolster Judgment,” will kick off on Jan. 9, with a cost of $40 for members, $60 for nonmembers.
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BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.