Why Is It So Hard for the Poor to Get Rich?

Six Fundamental Problems That Keep People in Poverty

I. Introduction: The Challenge of Building Wealth

Poor people rarely get rich overnight, while middle‐class individuals might fall into poverty suddenly. Sometimes, people spend their whole lives without becoming wealthy, yet second-generation rich individuals can quickly revert to ordinary—or even poorer—statuses in just a few years. I mention this not to discourage rapid wealth accumulation but to emphasize that no matter how much wealth you acquire, the most important thing is to hold onto it. Improving financial literacy is crucial because the most terrifying situation is not having a low starting point but being locked at the bottom. Often, those who remain at the bottom are the ones who lock themselves in.

Many years ago, I debated with some young colleagues at Google on this issue. They attributed widespread poverty to society, but I argued that blaming everything on society is a lazy approach that never solves the problem. I reminded them that even the poorest among us had milk and bread to eat as children, a bathroom in their house, various electrical appliances, and even a car. Their so-called poverty was not about having nothing; it was simply about not being able to afford better food, a separate room for each child, or to upgrade a decade-old car. Twenty years ago in the United States, the poverty line for a family of four was an annual income of less than $20,000—which at that time could buy 2,000 pounds of eggs per month. When I was a child, my family’s annual income could only buy 100 pounds of eggs, and we had to send money to support my grandparents. My American colleagues were surprised by this, and I added that in just over 20 years, my income had surpassed the poverty line many times over—while many American families have remained below it for generations. Today, I want to share with you the six fundamental problems that lead to poverty.

II. Six Fundamental Problems That Lead to Poverty

1. Overextending Generosity

Many people, even before they become wealthy, begin to give away large amounts of money to subsidize their family and friends. Some might argue that generosity is a virtue. However, consider the airline safety instruction: in the event of an oxygen mask emergency, you are told to put on your own mask before helping others. The same principle applies to wealth building. Solve your own financial problems first and avoid becoming a burden on society; only then should you help others. Today, many emphasize filial piety, friendship, and saving face—even before securing their own career and financial independence—by giving large sums to family and friends. Every penny is hard earned, especially for those from poor backgrounds. Diverting your limited wealth reduces the funds available for exponential growth, turning potential exponential gains into mere linear growth—or even stagnation. This pitfall affects not only money but also career development.

2. Rushing into Uninformed Investments

People with limited funds often rush to invest—especially in industries they don’t understand. This issue is common among American college graduates and some middle-class individuals in China. When a person’s savings amount to only four to five times their annual income, the difference between choosing a good or bad investment option may not significantly impact their life. Yet, some become overly obsessed with investments—not just stocks and finance, but also buying second properties. This not only consumes their limited funds but also their time and energy, causing them to lose focus on developing their careers. In short, someone who chases too many investment opportunities may not have time to concentrate on career advancement.

3. Premature Consumption and Consumerism

The mindset of consumerism, particularly premature consumption, is a major enemy of wealth building. For instance, many young people in the US—whether earning under $50,000, around $100,000, or even $200,000—often live paycheck to paycheck. Those earning $200,000 rarely accumulate wealth. About ten years ago, I observed a similar phenomenon among young people in China. Several small business owners with an annual income of over 1,000,000 yuan would spend lavishly on luxury study trips and stays in five-star hotels, even though they could have used that money to study in Paris for an entire year. Such consumption patterns quickly cap their wealth accumulation.

4. Over-Engagement in Ineffective Socializing

Some business owners spend excessive money on luxury hotels and extravagant social events simply because everyone in their business school circle does the same. I told them that people who unthinkingly spend on luxury items to fit into a particular circle are not truly advancing. Over-engagement in ineffective socializing often means neglecting the time and energy needed to hone money-making skills. Inefficient networking and social activities can detract from focusing on career development.

5. Investing Too Much Time in Low-Value Learning

Some individuals invest excessive time in earning irrelevant certifications or degrees that have little value beyond professional qualifications. Many such certifications lack credibility and fail to persuade employers. While some believe that a higher degree will secure a better job, the key is whether you actually learn something useful that can be applied in your work. Additionally, spending too much time on hobbies—like coffee brewing, baking, or flower arranging—without any plan to turn them into a business can divert your focus from your primary goal of wealth creation. While hobbies are valuable, excessive focus on them can be detrimental to building wealth.

6. Casual Entrepreneurship in Unfamiliar Fields

Starting a business in an unfamiliar industry can be much harder than expected. Many restaurants close or change owners quickly because people assume opening a restaurant is easy. One restaurant owner told me that their seasoning inventory alone includes hundreds of varieties and requires frequent restocking. If you do not understand the field, jumping in is likely to lead to losses, wasting both time and money. With current trends in artificial intelligence, many people who have never written a line of AI code are rushing to start AI businesses—much like someone who has sampled a few Cantonese dishes trying to open a Cantonese restaurant. Although there are other issues, such as choosing the wrong romantic partner, these six problems are the most critical.

III. Conclusion: Focus on Fewer Mistakes

In summary, as Warren Buffett says, it is more important to make fewer mistakes than to seize every opportunity. To build wealth, you must:

• Secure and retain your wealth by managing your money wisely.
• Focus on career development and avoid distractions that divert your limited resources.
• Overcome a mindset that prioritizes immediate gratification over long-term wealth building.

Only by addressing these six fundamental problems can individuals break free from the cycle of poverty and achieve lasting financial freedom.