In 1897, the Italian economist Pareto (not "Balett" as mentioned in the original text) serendipitously observed the patterns of wealth and income among 19th-century Britons. Through his sampling surveys, he discovered that "the majority of wealth flows into the hands of a few." He also noticed that this subtle relationship existed in other countries and manifested as a stable mathematical relationship.

From a vast array of specific facts, Pareto distilled a pattern: 20% of the population possesses 80% of the societal wealth, indicating an imbalance in the distribution of wealth among the populace.

This is known as the famous Pareto Principle, also referred to as the 80/20 rule.

So, the question arises: why does the wealth, earned by the hard work of 80% of the laboring masses, end up concentrated in the hands of the top 20% of society?

Let's now uncover how wealth flows from the majority of the poor into the pockets of the rich.

A picture is worth a thousand words!

See? The rich get richer by leveraging the money saved by the poor.

After viewing this image, do you still believe that those with large, long-term, idle deposits in banks are the truly wealthy?

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If this image is not enough to challenge your perception of "saving vs. borrowing" and "poor vs. rich," then let me take a sip of water, moisten my throat, and continue to discuss further.In fact, those who only know how to save money are nothing more than nouveau riche; no matter how wealthy they are, they remain unsophisticated.

I believe that many people reading this article harbor an inner fear of debt, which is why they often refer to themselves as "mortgage slaves" after buying a house, right? However, it's understandable, as Chinese people are accustomed to the idea of being debt-free and unburdened! How else could there be the "fine tale" from a few years ago about the Chinese and American grandmothers buying houses?

01. Why do the poor love to save money?

Undoubtedly, China is one of the countries that loves to save money the most. The national savings rate has always been among the highest in the world.

Although Chinese people, after the reform and opening up, have realized in recent years that the money in their hands is no longer valuable, and they are well aware that the interest rates on bank savings cannot keep up with the CPI, they still save money with the same enthusiasm and persistence.

They save money with great effort, simply hoping to accumulate wealth and improve their lives through saving. On the surface, what they deposit is money, but in reality, it is a heavy sense of security that they are storing.

Regrettably, their money gradually depreciates over time, and the so-called "sense of security" is nothing more than a hidden danger.

Unbeknownst to them, it is the traditional and conservative concept of "saving money" that has led them into the predicament of "becoming poorer the more they save."

The world is increasing its punishment for those who save money! It is precisely because they deposit their money in banks that they end up subsidizing the rich!Banks lend the money of the poor to the rich, allowing them to create more wealth, thereby becoming increasingly wealthy.

While the poor are indignantly clamoring for "robbing the rich to aid the poor," they are allowing the rich to "rob" themselves. In the end, the poor end up helping the rich make their wedding clothes.

So the trajectory of the poor's wealth is as follows: work hard—get promoted and receive a raise—consume—save. The poor work hard to earn money, but they always put the money they earn in the bank, letting it lie there quietly.

02. Why do the rich prefer high-quality "debt"?

While most of the poor are tight on money, afraid to spend recklessly, and put the money they save from their teeth into the bank, most of the rich not only invest their money but also borrow heavily from banks to invest, because they not only know the power of inflation but also understand the importance of making money from debt.

The rich not only know how to manage their finances but also how to manage their debts. "High-quality debt" is a precious resource, and the rich are good at using debt instruments to "make money from debt."

Apart from mortgages that can benefit some of the poor, there are almost no opportunities for the poor to get loans smoothly.

Many of the poor do not even have the awareness of borrowing, and even consider it shameful.

Even if you want to borrow, banks will not lend to you casually. They will ask you to print out transaction records, provide proof of assets or collateral, and after submitting a thick stack of documents to prove "you are rich," you still have to wait for the bank's approval...

The rich borrowing is a completely different scenario. You have to know, these days, it's really "the debtor is the boss."I have personally witnessed several bank presidents, who are usually full of themselves, fawning over their major loan clients. They would offer gifts, rush to pay the bills, and complain bitterly, all in the hope that the clients would open their accounts at the bank where they work and receive a high loan limit that is simply staggering.

Why? Because these few major loan clients are the "cash cows" for banks. If the source of "lending" is cut off, what would the banks use to pay interest to millions of depositors every day?

Why don't banks casually lend to ordinary people? The reason is simple: to control their own risks. Therefore, banks will selectively choose their lending targets. The more capable a person is, the more willing the bank is to lend to them, because banks know that capability represents strength and a guarantee of repayment.

The wealth trajectory of the rich is as follows: work hard, earn passive income, try hard to borrow money from banks, use debt as a way to make money, and become wealthy with ease.

Reiterate once again: the rich indeed become wealthy through debt, but you must understand that their debt is technically sophisticated and of high quality!

03. Debt is Neither Angel Nor Demon

Debt itself is not something to be feared; what is truly frightening is being in debt without understanding it and without a corresponding financial plan, leading to an ever-growing and increasingly serious debt situation.

Reasonable consumption and reasonable debt are sometimes more important than making money. Properly leveraging debt can allow you to enjoy a better quality of life.

For ordinary people, there are roughly three types of debt: mortgages, auto loans, and credit card debt.

Let's start with mortgages. After several interest rate cuts, the benchmark interest rate for commercial mortgages is only 4.9%, and the rate for housing provident fund mortgages is even lower, at 3.25%. This can be considered the cheapest and longest-term loan an individual can obtain.As for whether to join the ranks of "house slaves" and take on a mortgage, one must first consider their debt amount and repayment capacity. For instance, if a person earns a little over 4000 per month and is required to pay more than 3000 for a mortgage each month, their annual income might not even cover the interest. If they also encounter investment losses, it could lead to a severe financial crisis. This is known as "bad debt."

Now, let's discuss auto loans. Auto loans are undoubtedly a form of "bad debt." Since cars are consumables that do not retain value, they depreciate rapidly. Additionally, they incur extra expenses such as insurance, fuel, parking fees, fines, and maintenance costs during use. Not only do they cost money without return, but they also do not bring us additional income unless your job genuinely requires this mode of transportation to improve efficiency and generate business.

Therefore, if you can afford to buy a car in full, try to avoid auto loans, as they will continuously erode your cash.

Mortgage debt, however, is different. Besides providing living value, real estate also has the potential for appreciation. In a sense, the debt itself generates returns.

The third type of "bad debt" is credit card overdraft consumption. Credit card spending is essentially borrowing from the bank to purchase goods. To be frank, credit card loans are not much different from usury. If you fail to repay the bank on time, you will face hefty penalty interest.

The practice of charging full penalty interest on credit cards has long been criticized by cardholders. A case in point is when a CCTV host, Li Xiaodong, used a certain bank's credit card to spend over 18,000 yuan, only to later discover that 69 yuan remained unpaid. What surprised him even more was that this 69 yuan debt generated over 300 yuan in interest after just 10 days. Upon inquiry with the bank staff, he learned that the bank calculates overdue interest based on the total amount of the monthly statement, not on the unpaid portion.

Generally, there are two types of interest calculation methods for credit cards in our country: one is full penalty interest. If the cardholder does not repay the full amount by the due date, the bank will calculate interest based on the total consumption amount. The other is to calculate interest on the unpaid portion. Neither of these interest calculation methods is desirable for consumers.In summary, when incurring debt, adhere to three principles:

1. Only take on debt for necessary matters;

2. The amount of debt should be within your repayment capacity;

3. Recognize that debts must eventually be repaid.

Only by managing these three common types of debt in daily life can you, like the wealthy, use other people's money to become rich!