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Here are some findings you may want to know about before you dive more into the rich versus the poor.
According to CNBC, about 62% of Americans are living paycheck to paycheck.
About 14% of Americans have $100,000 saved for retirement based on a survey done by GoBankingRates, which isn’t a lot considering that this $100,000 amount is mainly based on age groups starting from 55 to 65+.
On the flip side, only 8.8% of Americans are millionaires. Of those, only about 1.13% have a net worth of over $10 million and are considered to be truly “rich” and “wealthy” in financial terms by definition.
Rich People VS. Poor People
Now that you have an idea about the stats in America, do you ever wonder how rich people become so wealthy?
What are their secrets to success and becoming rich?
How do they generate passive income and make so much money?
What are the rich vs poor habits and the rich vs poor mindsets?
What do the wealthy people have that poor (or average) people generally don’t?
Today, I’m going to go through a list that describes the rich vs poor differences and talk about the habits of each group.
We’re also going to discuss the 10 things the rich do that the poor don’t.
But before we do that, let’s define what “rich” means since many people often ask this question.
What is a rich person?
A recent American poll I found from CNBC said you need to have a net worth of at least $2.3 million or earn an annual salary of $300,000 to earn the title “rich”.
But for the purposes of this article, and its context, we are going to assume a rich person is someone who possesses a hefty amount of wealth like these top multi-billionaires:
- Jeff Bezos (Amazon)
- Elon Musk (SpaceX and Tesla)
- Bill Gates (Microsoft)
- Warren Buffett (Berkshire Hathaway)
- Mark Zuckerberg (Facebook)
- Larry Page (Google)
I was curious to learn how rich people acquired their wealth, so this led me to do some research.
Although everyone will always have a struggle or problem no matter their financial situation, I had the impression that rich people are generally happy because they have the freedom to pursue their passions. They also don’t have to stress about not having enough money and live the life they want.
As I searched and read a lot about topics on personal finance, money, and rich people, I came across a book by Steve Siebold called How Rich People Think.
I was obsessed with this book because it resonated with me so well. It allowed me to shift away from a very poor mindset and rewire my brain to think and see things from a rich person’s perspective. I was very interested in what he had to say and couldn’t agree more with most of the points he mentioned in the book.
He also wrote it in a way where it felt like he was speaking directly to me. I’m sure it will speak to you too if you allow your mind to open up!
Siebold mentions that this book isn’t about money. Instead, it’s about thinking, mentality, and mindset.
He says in his book:
“Each short chapter represents one of the lessons I’ve learned over the past 26 years interviewing some of the richest people in the world. Every chapter compares the “middle class” and “world class.” These terms reference the average person versus the world-class thinker. The idea is to compare the way most people think about money in contrast to the rich. The differences are as extreme as they are numerous.
When I started this journey in 1984, I was a college student, completely broke and searching for answers about success I wasn’t finding in the classroom. My discoveries along the way changed my life, and I wrote this book to give you the same opportunity. If you follow the beliefs, philosophies, and strategies of the rich and take action, you have a legitimate shot at becoming a millionaire. The secret is not in the mechanics of money, but in the level of thinking that generates it. Once you learn to embrace this, your earning potential is limitless.”
Excited to dive deep into a rich person’s mind? Learn more about this book HERE if you want to learn how rich people think and increase your chances of becoming rich!
Rich vs poor habits: What is the difference between rich and poor?
I still consider myself very average or even poor but having a rich mindset can increase your chances of becoming rich. If not, having even less than 1% of their wealth can still allow you to achieve financial independence sooner. 🙂
Generally speaking, I would say I’m pretty diligent and good with my money. I’m able to sock away a good amount of savings each month and I’m on track with my financial goals.
I’ve always listened to financial experts’ advice about saving money, but no matter how well I was with managing my money, I still felt very “average”. Despite saving over six figures in my 20s, a rich person would still reference me as “the masses” or even “poor” to their standards.
Having said that, in this article, we are going to assume that poor, average, or anyone who has a net worth of less than $3 million is considered the same definition by rich people standards. It’s not to say you are poor but instead, the whole point is to get you to really think and understand the mindset of a truly rich person.
Let’s now take a look at the differences between the rich and poor along with the habits they develop. We’ll also dive into the rich mindset to explore how rich people subconsciously think.
Lifestyle comparison between rich and poor
Let’s do a lifestyle comparison between rich and poor people. You can also play this video to find out some very interesting facts (that you may not know) about these two different groups:
1. The rich focus on earnings. The poor focus on saving.
While living frugally and saving money is one key factor in creating wealth, the ones with a rich mindset put more emphasis on earnings.
Rich people are still good at saving money but they know that there’s a limit to how much you can save but technically no limit to how much you can earn.
In other words, rich people believe that money is abundant and not scarce. Again, it’s not to say saving money isn’t important. Don’t read it that way because saving money IS important, but there are many ways to optimize your savings without cutting back on things you truly enjoy.
With that said, you are one step closer to achieving a rich mindset by focusing your energy on learning how to make more money, creating a new business idea, and investing your money to benefit from compounding interest.
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According to Siebold:
One group is operating from fear, the other, from abundance. The self-made rich aren’t afraid to take calculated risks, because they know if they lose they can make it all back.
While the middle class is always looking for the home run investment that will make them wealthy, the world class invests wisely, knowing the bulk of their fortune will come from the service they provide.
Most people are more concerned with the modest gains they accumulate from their savings and investments than they are with using their billion dollar minds to create a fortune.
They are masters at focusing their mental energy where it belongs: on the big money. How about you? Are you more focused on saving pennies or building an empire?
2. The rich think about investing. The poor think about spending.
It isn’t surprising that people who are always broke with no money are spending above their means.
Some families earn a high level of income but still have nothing saved at the end of each month. But for the average income earners, they need to spend in order to live a decent lifestyle.
According to Siebold, the middle class is famous for living beyond their means. They’re not spendthrifts, but they earn so little they have to spend it all in order to live a decent existence.
What’s his solution?
His advice is to “double or triple your income” so that you can invest and enjoy life at the same time.
In other words, why can’t you have both? Why does it have to be one and not the other? They’re not mutually exclusive — you can have it all!
That’s another reason the rich get richer: they’ve learned how to make money work for them twenty four hours a day. And it’s not because they’re investing every penny. The rich like to spend and enjoy their money like everyone else. It’s that they have so much of it, there’s always plenty to invest. So instead of focusing on spending and saving, focus on how to earn more, invest a percentage, and spend the remainder any way you wish. You only live once and you can’t take it with you. Why not enjoy it?
3. The rich lives below their means. The poor live beyond their means.
When Siebold says rich people live below their means, he’s not saying they’re frugal.
In addition to that, when he says “rich people” he’s not referencing high-income earners who spend all or most their money with no savings to show for. He certainly isn’t speaking of financially savvy people who are good at saving money and finding deals either.
Rich people live below their means because they earn so much money they can afford to live like king while saving painlessly without effort.
This is what Siebold said:
It’s easy to live below your means when you earn more in a day than most people earn in a year. Not to mention that the rich earn money primarily through leverage, and not hard labor. It’s hard labor that creates the physical and psychological stress that kills so many poverty, working, and middle-class workers.”
So, how can you live below your means without penny-pinching?
Siebold says the secret is to tap into the mindset of the wealthy and truly understand how rich people think – get so rich that you can afford to live below your means!
4. The rich embrace any form of education that makes them wealthier. The poor embrace advanced degrees.
One of the many famous quotes about money and success really stuck out to me while I was still at a job I didn’t like:
“Formal education will make you a living; self-education will make you a fortune.” Jim Rohn
You’ll always hear and see that the poor and masses are caught up with academics and fancy degrees. While the poor are busy and working hard to earn all 24 alphabets behind their names, the rich are spending most of their time to improve on real-life skills.
In graduate school, you learn all this complicated stuff, but what’s really essential is being able to get others to follow your ideas.
It’s not to say that going to school and earning a degree adds no value, but rich people are opened to learning things that aren’t taught in school. These new skills learned outside of an academic setting could improve your self-development and make you become wealthy when you leverage it.
According to multi-billionaire Warren Buffett, a simple $100 college course gave him the most important degree he has and it’s why he’s successful today.
Based on a CNBC article, Buffett credits much of his success to the class, and his office shows more than enough proof.
“I don’t have my diploma from the University of Nebraska hanging on my office wall, and I don’t have my diploma from Columbia up there either — but I do have my Dale Carnegie graduation certificate proudly displayed,” he says. “That $100 course gave me the most important degree I have. It’s certainly had the biggest impact in terms of my subsequent success,” he says.
5. The rich get rich doing what they love. The poor earn money doing things they don’t like to do.
Do you agree with this quote by Oprah Winfrey?
“If you can get paid for doing what you love, every paycheck is a bonus.” Oprah Winfrey
Are you in the situation where you hate your job and feel like you’re dreading almost every day?
While money is important and pays for the bills, it’s hard to get by life with a job you don’t enjoy.
If you really wanted to, you have the choice to switch jobs or discover new career opportunities you never thought about.
The first step to making that happen is putting in the effort to try something novel. By experimenting with new ideas, you can find out what you really enjoy through experience and learning something new each day.
According to two extremely successful billionaires, Warren Buffett and Charlie Munger:
“I have never succeeded very much in anything in which I was not very interested,” Munger said. “If you can’t somehow find yourself very interested in something, I don’t think you’ll succeed very much, even if you’re fairly smart.”
Buffett says passion pays off. “You want to be excited when you get out of bed in the morning. I tap dance to work every day.”
6. The rich think about money in non-linear terms. The poor think about money in linear terms.
Do you naturally think that putting in more time to your work equals more money?
People with a poor mindset think this way and that’s why they’re always exchanging their time for money.
Many people have a nine-to-five job so it’s not uncommon for you to trade your time for a paycheck. That’s how you can stay financially afloat and you support your family.
However, it is argued that the ones with a rich mindset are generally risk-takers. They are motivated and true heartedly believe they have what it takes to become rich whether it’s through investing, building multiple passive income streams, or creating a product that will solve the masses’ problems.
Rich people don’t like wasting their time on activities that don’t have the potential to generate a good return on investment.
According to Siebold:
“The masses trade time for money. This creates the belief that making money is a linear process directly connected to time. The average person believes the only way to earn more money is to work more hours, with the exception of raises and bonuses. The wealthy know big money requires thinking about it in non-linear terms. The great ones are masters at generating money through ideas that solve problems. They realize since there is no limit to ideas, there is no limit to how much money they can earn.”
7. The poor focus on pleasurable activities. Rich focuses on money-making activities.
While rich people are focusing their efforts on making money, the poor (and average middle-class earners) are spending most of their time on pleasurable activities like shopping and watching TV.
According to a NY Times source, American adults are watching five hours and four minutes on television every day!
That’s close to the number of hours you work at your full-time job!
Unless you were born in a royal family, there is no such thing as getting rich without effort.
Rich people know and understand it takes a considerable amount of time to build an empire and make money work for them.
They spend a lot of their time on activities that make money and have the potential to turn into a business that solves a problem.
They are also creative creatures where they would experiment with many ways to make money. Believe it or not, most of them don’t hit the jackpot overnight. They go through several hardships and failures before striking it big.
Here’s what Siebold wrote in his book:
The masses spend a substantial amount of time entertaining themselves in a variety of activities. They live in a state of consciousness where effort is minimal and pleasure is king.
Billion dollar industries are created overnight when smart marketers give the masses what they want most: comfort and entertainment.
Rich people focus the majority of their attention on money-making activities they enjoy. They parlay a love for real estate into property speculation; a passion for beautiful paintings into investment art; or a flair for numbers into buying and selling stocks.
So while they’re working, they’re making money, and while they’re enjoying their hobbies, they’re still making money. Wealthy people know leverage is one of the great secrets of success, and they go to great lengths to employ it
8. The rich build their own ship. The poor wait for their ship to come in.
You know the time when Poor Paula turned to a family member and asked them to lend her some money so she could buy the lottery?
According to an interesting article from Bloomberg, the poorest Americans risk the most by trying to strike rich with lottery tickets. That includes Poor Paula, and even after winning the jackpot, she’ll still forget to return the money back to her family member!
Whether it’s an inheritance, Bank of Mom and Dad, or the lottery, it’s common for the poor to subconsciously wait for help and come up with excuses as to why they aren’t rich. With such a poor mindset it’s no wonder why they’re always waiting for a magical solution or relying on someone to rescue them (even when it comes to asking for some spare change to buy the lottery ticket).
If you think the lottery is here to save you, think again.
According to Siebold’s book, he makes a very good point here:
“The average person subconsciously believes he’s going to be discovered, saved, or made rich by an outside force in the future. It’s like the fat person slowing killing herself through obesity, who patiently waits for the next pill or potion to make her thin and healthy. They are convinced their hero on the white horse is right around the corner ready to save them from themselves.”
The rich are self-sufficient, responsible, and rely on themselves ONLY. They know that there is NO white knight to the rescue. They don’t blame the government or other external factors and are definitely not counting on them to bail them or take care of them when they get old.
Siebold adds: “Champions don’t wait for things to happen, they make things happen.”
9. The poor believes rich people are crooks. World class believes rich people are ambitious.
Generally speaking, the masses believe that the rich are greedy, cheats, and slimy.
Before making those judgments, people need to think about their own character first. Are average people as honest as they claim to be?
For example, do they misrepresent their qualifications and skills on their resume? According to a source, studies found that 85% of job applicants lie on resumes.
Do most average workers take long lunch hours? Are they on social media all day, watching YouTube videos at their desks, or shopping online during company work hours?
Based on a NY Post article, employees are slacking off at work and the numbers add up to $15.5 billion in lost productivity every week.
It’s interesting that these average people have been brainwashed to believe they are honest and right while wealthy people became rich because they are dishonest crooks.
This isn’t true because Siebold makes another great point in his book that money just magnifies who you are.
Siebold justifies the point that rich people are just ambitious and not all of them are crooks:
This is one of the excuses the masses use to justify a lack of financial success. World-class thinkers know the majority of fortunes were built through ambition, drive and vision.
Every socio-economic sub-group has people who earn money illegally, but the percentage of crooks in the upper class is no different than the lower class. Because of the average person’s unwillingness to accept full responsibility for his or her results, they are eager to criticize society’s most successful in an effort to minimize their achievements and justify their own mediocrity. Unfortunately, they often pass these misrepresentations onto their children, and the belief carries on growing stronger with each generation.
Meanwhile, the world class takes full responsibility for their own results and direct their mental energy towards getting rich. Instead of wasting their brainpower on excuses, they use it to harness their creativity and solve bigger problems.
10. The rich believe the rich are selfish and self-absorbed. The poor believe the rich are selfish and self-absorbed.
You probably think there was a mistake here but nope, you read that right.
Both rich people and poor people believe the rich are selfish and self-absorbed. The only difference is that the poor think it’s wrong while the rich think it’s right.
You may think that being selfish is slimy and wrong but think about this concept for a minute. How on earth could you help anyone else without being able to help yourself first?
For example, when you’re in financial trouble and living paycheck to paycheck with no savings, how are you in the position to donate your time or money to anyone? You may not realize but you end up doing more harm than help when you’re trying to give what you don’t have.
I couldn’t agree more when Siebold said:
The masses are programmed to believe at an early age they should put the needs of others in front of their own. While this sounds like a spirit driven, high-level philosophy, it’s the worst advice you can get.
When you fly on a commercial airline, the first thing the flight attendant tells the passengers is, ‘in case of an emergency, your oxygen mask will drop down in front of you. Please secure your mask first and get the oxygen flowing before you attempt to help anyone else.’
That selfish strategy has saved many lives, and the premise is simple: If you’re not taking care of you, you’re not in a position to help anyone else.
You can’t give what you don’t have, and if you’re struggling to pay your bills while volunteering four nights a week, you’re probably hurting more people than you’re helping. The world-class philosophy is to get rich, get what you want, and help others in any way you wish.
Wrap up on the rich vs poor people
I hope found this article about the rich vs poor interesting.
Remember that forming a rich mindset and actually becoming rich doesn’t happen overnight. You must truly believe in these philosophies in order to change your behavior and actions.
It doesn’t matter what stage you are in life. You have a legitimate shot at becoming at least a millionaire if you’re able and willing to take the first step of changing your mindset from poor to rich!
Changing your mindset and how you think is the hardest part, but once you’ve changed your beliefs, taking action becomes much easier.
What are you waiting for?
Do you have what it takes to think like a rich person and become wealthy?