There are things the rich do that working class and middle class folks don't. Some of them--living off the return on capital rather than wages or salary--are only available to the rich. Others--seeking a first-rate education for your kids, working for yourself rather than others--are things that ordinary folks do to the extent that they can, but their ability is limited. Even so, it's worth learning the tactics of the rich and applying them where possible.

Some of the tactics of the wealthy are unsavory. One key tactic is to share as little as possible of the profits of the enterprise. This is why working for yourself is such an important tactic--the owners and managers are in a position to grab the lion's share. Put your suppliers in the position of competing with one another for the lowest price, put your workers in the position of competing with the unemployed for the lowest wage, and pocket the savings (via dividends if you're an owner, via bonuses if you're a manager).

Others, though--tactics like frugality, living within your means, avoiding debt (except to invest in a money-earning enterprise), and working hard--are positive virtues, or at least neutral. (And they're generally the ones that lead to wealth creation. The others are largely about wealth preservation.)

These tactics are not kept secret, exactly, but various factors keep them largely out of view from ordinary folks. The biggest is simply that consumption is interesting while frugality is dull. So, buying a yacht makes the news, whereas driving a 10-year-old car one more year doesn't get noticed. The result is that popular culture shows the excesses of super-wealthy but not the ordinary lifestyles of the ordinary wealthy. But there are way more of the latter than there are of the former.

Not a level playing field

There are a lot of ways in which the deck is stacked in favor of the rich. The advantage I mentioned at the beginning--owners and managers being able to skim off an outsized share of the profits--is a huge one, but there are others:

  • The legal system heavily favors the rich.
  • The financial system offers high quality services to the wealthy (often for free), while the poor make do with expensive check-cashing services and payday lenders.
  • The rich are in a much better position to wait for a good deal--which gets them lower interest rates on loans, lower rents, lower insurance rates, and better prices on just about everything.
  • And then there are simple social realities--affluent neighborhoods are safer, stores that cater to the affluent have more and better choices (and often cheaper ones as well), schools in affluent neighborhoods are better and safer.

Knowledge can help level it

If you know enough, though, most of these advantages of the wealthy are available to the poor as well:

  • Anybody can start a small business. The internet has vastly increased the range of options that require almost no capital (and has made a wide range of formerly expensive services available cheap or free). This mean that anybody can work for themselves rather than others.
  • Anybody can be frugal and live within their means, as long as they don't assume that they're entitled to some particular standard of living.
  • Anybody can avoid debt. More important, anybody can understand the difference between productive debt (invested to earn the money to pay itself off) and unproductive debt (spent on consumption).
  • Anybody can do the research to find the good public schools. The affluent have a lot more choices, but you only need to find one affordable place to live in a safe neighborhood with good schools.
  • Anyone (even people with garnishments) can open a bank account and quit using the check-chasing places.
  • Anyone can be patient and refuse to take a bad deal--which will, over time, get you the same good prices that the rich get.

It takes time and effort to learn the tricks and pitfalls, and this is where the children of the affluent get their biggest leg up: They learn these things from their parents and their friends' parents, from their classmates and teachers and neighbors. They also generally reach adulthood with at least a little capital (instead of student loan debts). But you can learn these things too. It's one reason for reading Wise Bread.