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Why do rich people have more money?

Wednesday, August 17, 2016

I hardly keep in touch with friends from my school days. Actually, I hardly keep in touch with anyone apart from family and a handful of closer friends. 

I grow more reclusive as I age and, honestly, I rather like it this way.

So, when I received a call from a friend whom I have not heard from for more than 10 years, it was more than a surprise. I was momentarily stunned.

What do you say to someone whom you have not kept in touch with for so long other than the usual "How are you?"

The last time we met, we chatted over a meal and he was doing pretty well. I remember joking that he would be able to retire very soon. To that, he said: 

"I can't retire soon. Rich people need to make more money because they have more things to spend on."

I was somewhat taken aback and asked him why he said that? What did he spend his money on?

He started counting the items using his fingers and I cannot remember all the items but I remember "a big house and two cars" being on the list. 

Then, I also noticed then that he was wearing a luxury watch. His clothing and shoes were also probably from some luxury brands but I wouldn't know, would I?

I also remember that I felt somewhat self conscious then with my outfit (not Boss but Bossini). 

Poor AK was psychologically scarred. 

I wasn't financially as comfortable back then and was trying hard to build my wealth like I was doing most of my life.

What this friend said back then reminded me of what another friend said to me before:

"It is not enough to be rich. You must appear rich."

Now, at the ripe old age of 45 and with what I have achieved, I can confidently tell these friends that they are wrong. They are so wrong.

Oh, you want to know why did my friend call me? 

Oops. I am growing forgetful in my old age?

Well, after some small talk, 

"Er... Could you loan me $50K?"

I was so stunned like vegetable. I kept quiet and he went on to explain.

Apparently, his business is not doing well and he exhausted what savings he had. There is no way for me to know if he was telling the truth or not and this is someone whom I have not been in contact with for more than 10 years.

So, what was my answer?

I offered him $2K, saying that I was not comfortable to lend him any amount larger than that. 

He hung up.

Rich people don't have to make more money because they have more things to spend on. 

Rich people have more money because they spend on less things and spend less on things.

I shan't say anything else but you might want to read the related posts below for my thoughts on "being rich" and "lending money".

Related posts:
1. If we are not rich, don't act rich.

2. Lending money? Ask questions.


E H said...

You da man!

redponza said...

Hi AK, given your current financial situation and depending how close you are with that friend, I think you should probably donate 10k instead, 2k is just peanuts....

I think that is why he hung up...

Forgive me if you don't like this post :)

AK71 said...

Hi E H,

I am glad you approve. ;)

AK71 said...

Hi redponza,

I am sorry you don't approve. :(

Kevin said...

Hi AK,

The chinese saying "无事不登三宝殿" is always true. I wouldn't even lend a so called friend $2K whereby both parties did not keep in contact for more than a decade.

I probably just give him some tips on how to deleverage. :P

ScOpIoN said...

Bossini == Boss-sini(here)!

My lame attempt at a melayu joke. Hehe..

STE said...

Quite sad to see that people end up with such situations because of money management and lifestyle inflation. ..
Ak, I think you don't expect to have the $2k returned after the offer. .don't u?
In such case. Better to be conservative in your offer. .right

Siew Mun said...

You are a generous man who write off the $2k loan.

meesiam said...

this video fits the topic very well 黄子华栋笃笑 - 什么是朋友 said...

I don't agree with redponza, why should AK donate his own money (accumulated due to his frugal ways and smart investment decisions) to this friend who is used to splurging his money on luxury items (consumption) - even if AK is to donate 10k, then it should go to the less fortunate in the society who cant afford the basic necessities in life. My reply to extended family/acquaintances who ask for loan is same as AK - I will offer to give them 1k or 2k as well. I don't expect them to return the money. It's better for my peace of mind while giving them some face :P

BrokerADD said...

I wish I have to luxury to lend your friend the 50K

Unknown said...

Hi AK,

I think being polite when asking for help/loans is a very basic essential behaviour of a minimally decent person.

Imo, I think you are too kind to offer 2k. I hope to make friends with you :)

Sillyinvestor said...

Hi Ak,

My thoughts:

It's not easy asking for money. I wonder that day I come when I need to ask for money. I think I wil feel super horrible ... That he ask u, a long "lost" friend, he might be pretty bad in debts with the loved ones and "close friends" Liao.

But, if u offer me 2K, I will take it. I might feel like you are treating me like a beggar, but in that situation, I will take. I might felt insulted and damn lousy, but I will bite tongue and take, and hopefully I can find 5 more AK.

AK71 said...

Hi Kevin,

I didn't feel good about rejecting him but I would have felt worse lending him $50K, I am sure. I had to do what would not make me lose as much sleep.

AK71 said...

Hi Scopion,

Very droll. Thanks for lightening the mood. :)

AK71 said...


Consistent with my philosophy on lending money, it must be a sum of money that I am prepared to write off. For an old friend who has not been in contact for more than 10 years? For old times sake, $2K is still acceptable. Not $50K.

I blogged about this before:
The difference between lending and donating.

AK71 said...

Hi Siew Mun,

He is an old friend although we have not been in touch for many years...

I have donated much more to charitable causes. I don't think I am generous but I try to be charitable. :)

AK71 said...

Hi meesiam,

LOL. Yes, this friend falls into the "$2K Limit" category. ;)

AK71 said...

Hi Elsie,

Exactly my sentiments.

Even though I offered $2K and not more, it was goodwill on my part.

My money did not fall from the heavens and it could be used elsewhere too.

AK71 said...


Even if we could afford to do something, I think we should ask if we should do it. :)

AK71 said...

Hi Unknown,

I have grown to become quite anti-social over time. You won't want to be friends with me. ;p

AK71 said...

Hi Mike,

He could have taken the $2K first. In fact, he probably should have done it if the situation is dire. I know I would have taken the money if I were in his shoes.

TangoXray said...

You are a kind man, AK.

Honestly, I will save the 2k outright.

AK71 said...

Hi Tango,

I would not have offered $2K to just anyone who asks me for $50K. So, I am not sure if I am a kind man but I think I am a kind enough friend. :)

tong said...

$2K can buy a lot of bread and butter to feed people. So he ought to take it if he needs to eat. Not use new debt to pay old debt...

Disclaimer said...

May be he heard about your success from other friends. It's not too long ago you told them you have retired and sleeping on a bed of money and condos of gold. If desperate, would have taken the 2k, and go look for other opportunities.

AK71 said...

Hi tong,

I agree. $2K might not be a lot of money and relatively speaking it is little compared to $50K but we can still do a lot of good with $2K. :)

AK71 said...

Hi Disclaimer,

I don't keep in touch with many friends. However, I have not changed my phone number in more than 20 years. So, it could be that he was just trying his luck. That would show how bad his situation might be.

Some might call me heartless but it might not be a bad thing for him to declare bankruptcy and to start over. It will be tough but it might change the way he looks at money and what defines "being rich".

Clive ong said...

Hey AK,

Okay what $2k sounds like a good charitable amount that he should consider taking.... I meant since he have exhausted all his options and he still wants to choose... hais.

There's a saying "beggars can't be choosers"

Anyway, this is life isn't it.


AK71 said...

Hi Clive,

I suppose his pride was still intact.

If he should call me again to take up my offer, I will still give the money to him.

Steven Yap said...

Hi AK,

The amount to loan must be the amount you are comfortable to lose. Its highly likely he will not return you the money. Its not about being polite or rude. This money big or small is hard earned money. You dont give away hard earned money without thinking properly. :)

Best Regards,

AK71 said...

Hi Steven,

Oh, absolutely. This is something I blogged about before too:
Difference between lending and donating money.

If the money does get returned, it is a bonus. :)

ZMay said...

Hi AK ,
Just want to ask you for your view . My brother runs a hdb shop and can never make ends meet . I have been helping him pay rental and expenses up to the tune of $2800 per month for 10 years . Recently decided that I cannot afford to do this any longer . He is of poor health due to diabetes and drinks and get drunk frequently .He is 53 years old , does not get on with the rest of family and is not employable because of poor health , only secondary 4 education . He wants to be boss that is why he has been trying to run his own shop . What would you do in my shoes ? Continue to give him money for living expenses whilst knowing that he wastes it drinking ? He denies drinking but I have been told otherwise by my siblings. I feel that I have been helping him all this while for the sake of my mum who would be heartbroken even though she has passes on 10 years ago

AK71 said...

Hi ZMay,

I am always very pragmatic when it comes to money. ;)

This blog post is about properties but you will get my drift:
Unless we are rich, be pragmatic and not romantic.

Just by closing the shop alone, you would be saving a chunk of change on its rental. Then, you only have to worry about his living expenses (if you want to) and I don't think that is anywhere close to $2800 a month.

SMK said...

that one not rich, blog title misleading. lol

truly rich people have cash flowing generating assets.

not enough to have value in assets, must generate positive cashflow.

but all these, you and your readers already know. lol

Unknown said...

I kinda like that you admitted that you rarely keep in touch with anyone except for that few close friends and family and is a recluse. Many people tend to think that successful people should be sociable and have lots of friends. At my ripe old age of 32, I have also become a recluse and I really like it this way. Why? I come to realize that most friends or school mates are not genuine in wanting to be your friend, they just enjoy attending gatherings where they can "show off". "Show off" what car they drive, what kinda property they bought and then if you happen to "lose" to them, you make them happy. It kinda sucks attending such gatherings as I cannot stand them from the bottom of my heart, and I don't enjoy the gathering at all and I get home feeling sad and jealous some times. I have come to realize that not attending such superficial events is the solution and it makes me very happy that I spend my time wisely. Even wasting it watching k drama is more enjoyable than watching them "show off". I'm still not that big hearted to feel happy for every single one of them showing off and I find that by being a recluse, ignorance is bliss and I'm much happier =)

AK71 said...

Hi Unknown,

Inspired a blog post. ;)

How much material wealth is enough?

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