Contents
According to the law of attraction, you become what you think in life. If you think you will be rich then there are high chances that you will be. On the other hand, if you think you cannot become rich then for sure you never will. What we think powerfully affects our subconscious mind which then translates it to reality. Rich people are not any more talented than the others. In fact, in most cases it has been found that the IQ of some of the richest people in the world are just above average. Many of them are college dropouts and don’t even have high qualifications.
What then can explain the massive difference in the financial condition of these people versus the poor? The answer lies in the way these people think. Mindset plays a huge part in determining the course of our lives. Rich people always think positive and expect the best in spite of problems and obstacles. Poor people on the other hand are usually pessimistic and keep complaining about everything.
Famous multi-millionaire T.Harv Eker in his book “Secrets of the millionaire mind” mentions that when he first started out, he was broke. He used to sleep in his car at night. He did not have money for the basic necessities in life. He had to borrow from his friends to just get by. But when he learnt about the ways that the rich think, he started following them. He started copying the rich in terms of how they think and look at things. And that totally changed his life. Today his net worth is in millions of dollars. So, if he can turn over his life from being broke to becoming a multi-millionaire, what is stopping us from living our dream life? If we know the different ways in which the rich think and consciously try to follow them, we can also be on the path to financial freedom and glory.
Purchase this book now from below:
Below are 26 differences in the mindsets of the rich and the poor on different areas. Read them carefully and follow them aggressively so that you too can achieve your dream life and fulfill all your desires.
Rich keep accumulating assets, the poor keep accumulating liabilities
Are you tempted to buy that iPhone or the Mac laptop? Have you taken a loan to buy a car, a home, for a vacation or even for personal expenses? Do you eagerly wait for the big billion days festival to begin to start purchasing all your long-desired clothes/accessories/gadgets from Flipkart or Amazon? If you answered yes to any of the above questions then you may need to reassess your spending habits.
Rich people don’t like to spend their hard-earned money on things that don’t help to improve their cash flow. By definition, an asset is something that puts money into your pocket. On the other hand, liabilities are those that take money out of your pocket. Rich people don’t waste their money on buying unnecessary stuff that will actually depreciate in value with time. Instead they invest their wealth to buy assets that can generate income, e.g. stocks, mutual funds, real estate, etc.
Recommended reads: Why do we need to be financially literate?
Rich live below their means, others live above their means
William Danko in his famous book “The Millionaire Next Door” published an extensive report of the lifestyle and spending habits of 500+ millionaires in America. For over 20 years, he interviewed millionaires from all over the country and sought to understand the reasons behind their tremendous financial success. The one thing that each of the self-made millionaires confessed is that they all lived below their means. They may be earning in millions but they don’t spend that wealth on irrelevant and unnecessary things like flashy cars, bikes, watches, suits, big houses, etc. They don’t like to show off their wealth to the world. They like to live a modest and a frugal life. From their appearance, it is very difficult to make out that they are millionaires.
On the other hand, the poor and the middle class are the ones who buy all the stuff that they don’t need. They buy all the expensive watches, the overpriced coats, the high-tech iPhones/MacBooks and take loans every now and then to purchase cars, homes or other trivial things that they cannot afford. In an attempt to emulate the rich, they dig their own financial graves.
Recommended reads: How to stop impulsive buying/spending?
Rich pay themselves first, the poor pay themselves last
By mindset, most of us are spenders. We are not wired to save. When the salary first hits the bank account, a large chunk of it goes into paying the rent, the electricity bill, the water bill, the credit card bill or the loan EMI. Next, we use the money to fulfill our wants by buying expensive clothes, dining out at lavish restaurants, going out for movies, binge shopping at malls, etc. Then after that whatever is left behind we use it for saving in our bank account. For most, that amount is negligible. Some people even spend more than what they warn. The net savings for them is in negative.
On the other hand, the rich always pay themselves first. Whenever they receive an earning in the form of job or business income, they keep aside a certain portion of it for savings/investment. And then whatever is left behind after that, they use it to spend on their necessary expenses. For rich people, the financial equation is as follows:
Income-Savings = Expenses
While for the poor and the middle class it is the other way around, i.e.
Income-Expenses = Savings.
Rich embrace being uncomfortable, the poor like to stay in their comfort zone
The rich are always pushing their boundaries and trying out new things all the time. They try their hand on new businesses, they implement new ideas in their workplace, they get up early each morning and exercise, they force themselves to adopt healthy eating habits, etc. They seek out things that they are not comfortable with and push themselves to do prioritize those things. They are not afraid to fail. They see defeat as a teacher and not as a stumbling block.
The poor on the other hand like to stay inside their comfort zone. They are afraid to try new things lest they fail. They work on only those things that they know are going to work.
Rich own the corporate ladder which the poor aim to climb
The middle class tend to work for someone else. They have a job, a career. Upper middle class tend to be self-employed. They own a job. The rich tend to own the business. They own that corporate ladder which the middle class are busy working up. The rich understand that they need more people working for them to earn more money. The rich understand the power of passive income.
Purchase one of the best personal finance books ever written from below:
Rich choose their friends wisely while the poor mingle with everyone
You may have heard that overused cliché that “You are the average of the 5 people that you most associate with”. This is as true as it can get. Rich people are rich for a reason. They follow certain habits, possess certain values and have certain thoughts that help them to attract the best things in life. The same is true for poor people as well. Their pessimistic and negative attitude always attracts negative outcomes towards them. If you want to fly like an eagle then you will have to learn the ways of an eagle. And for that, you need to closely associate with eagles to learn the tricks of the trade.
Rich work to learn while the poor work to earn
There is a common trend in the IT industry especially in India to switch jobs frequently sometimes as often as once every year. People who do this usually make the transition to increase their salaries. They are happy even if they get 5-6% hike on their existing salary. While this may seem to be a strategy that works in the short term, this will actually hamper not only your growth but also your earning potential big time in the long run. Rich people, on the other hand, put learning above everything else. Even if they know that they are getting paid less, they still stick to a job if they see an opportunity to learn. They think long term and know that the knowledge that they are gaining now will give them handsome returns in the future.
Rich people have money, the poor have things
As mentioned before rich people don’t like to spend their money buying unnecessary stuff that depreciates in value with time. They have fewer material possessions. As one self-made millionaire famously said when asked about his secret to financial success,
“Same house, same spouse, same car.”
There is great wisdom in those words. The rich like to accumulate assets that generate income for them. They don’t buy new things unless absolutely necessary. Poor people in contrast keep buying all sorts of items that they don’t need just to fulfill their wants. They often do it out of a desire to boost their image and appear wealthy in front of their family and friends.
Rich target to increase their earning while the poor focus on saving
A small percentage of the poor and the middle-class people who do manage to save their money like to keep it safe in their bank accounts. They are comfortable to keep it idle in the bank although they know that such accounts provide a meager 4% rate of interest. That is not even sufficient to beat inflation that is growing at 6% every year.
On the other hand, the rich invest their savings into different asset classes such as equity, real estate, P2P loans, businesses, etc. to diversify and increase their earnings. This helps them to generate inflation beating returns. They realize that to grow and stay rich they have to create multiple sources of income.
Rich handle their finances logically while the poor are emotional with money
Oh man, this is a big factor. Most of us become emotional when it comes to our finances. In India as soon as a boy/girl gets married, parents/relatives and others start pressurizing to buy a house. Parents feel proud if their son/daughter has their own homes. It’s like a status symbol in the society which they can boast about. If you don’t own a house you are almost treated like a loser. On top of that, if you have a car then you absolutely rock. People become so emotionally attached to their house/car and treat them as assets. Whereas in reality, they are actually liabilities. Every month you will have to pay the maintenance charges, the water bill, the driver salary (if you keep a driver), house/car loan EMIs, repairing charges if the car gets damaged while driving, etc.
Rich people, in contrast, are logical when managing their finances. Before purchasing any item for personal use/luxury, they first build a passive income source that can cover the monthly expenses for it.
Recommended reads: Should you buy or rent a house, which is a better choice?
Rich aim for the stars while the poor are afraid to dream big
Aim for the stars so that even if you miss you will reach the moon-The rich believe in this mindset. They always set high targets for themselves and work/plan hard to achieve them. They always push themselves and keep improving moving from one goal to another.
On the other hand, poor people have self-doubts and don’t believe they can achieve their goals. They are contented with where they are and feel afraid to aim higher. The fear of failure stops them even before they start.
Rich believe in leverage while the poor believe in hard work
Hard work is a necessity. For all of us. If you want to reach the top (whatever that may be for you), you’ve got to put in the work. The problem is that hard work alone will rarely make you rich. You can’t become rich by doing it all yourself. You have to use leverage to truly become rich and stay that way. Leverage works in many ways, from outsourcing to investing. The more leverage you can incorporate, the more time you will free up to work on the things that really matter in your business and your life.
Rich people are the owner of their lives while the poor believe in destiny
Rich take ownership of their lives. They believe that whatever happens in their lives be it something good or bad is ultimately the result of their past actions. They carefully choose their present thoughts and actions because they know that their future results depend on them. The rich are the masters of their own fate.
On the other hand, poor people play victim to their circumstances. Ask any poor person what is the reason behind his poverty and he will come up with a hundred excuses for the same. His parents were poor, the Government is not doing anything to provide jobs, God is unfair to him, he is born with poor luck, he is not paid well at his current job, etc. They will blame everyone for their current state except themselves. They are the masters of the blame game.
Rich people play the money game to win, poor play not to lose
If you put your money in the stock market, you might lose it. If you put it in real estate, you might lose it. If you invest it in starting a business, you might lose it.
All of that is true.
However, the stock market, real estate, and starting a business are the best ways to supercharge your accumulation of wealth. They are what let your money start working hard for you instead of you needing to work hard for your money.
If you’re playing not to lose, you’ll avoid all three. You’ll avoid the losses that you were scared of, but unfortunately, you will suffer a worse loss, the loss of opportunity. Your reward won’t be safety, but regret.
And regret is brutal.
Rich people commit to being rich, poor just want to be rich
Simply dreaming of becoming rich will not make a person wealthy. If you truly want to become rich then you must commit to it. That means writing down your financial goals clearly on a piece of paper and setting deadlines for each. Then you should formulate a well-defined plan on how to achieve those goals. On the way to financial freedom, rich people make many sacrifices. They wake up an hour earlier in the morning to work on their business, go to bed an hour late, read books/magazines/articles to educate themselves and stay ahead of others. They take baby steps every day to reach their ultimate goal.
Rich people focus on opportunities while the poor focus on obstacles
Have you ever heard someone claim that they had the idea for Uber before Uber? Then why didn’t they do anything about it? If I had to pick one explanation, this might be it: they were stuck in a mindset that recognized obstacles, not opportunities.
There are plenty of obstacles with Uber:
- Why would someone just trust an unlicensed stranger to pick them up? (I even know people who won’t use Uber due to safety concerns)
- How do you expect to compete with the well-established taxi business?
- What about the fact that so many consumers are older and struggle with apps and technology?
Plus there are all the obstacles inherent in running a business: where are you going to get funding, what is your business model going to look like, etc.
If all you can see are obstacles, you’ll never seize on an opportunity even if it is staring you right in the face.
You need to be able to look for opportunities and have the courage to tackle them despite their obstacles.
Rich people admire other rich and successful people
Do you feel happy when you hear about the success of one of your friends/relatives or a known person? Do you feel that they deserved it? Or do you catch yourself grumbling and maybe feeling even a little jealous about it?
Rich people always admire other successful people. They feel glad when they hear about the success of others and encourage them to achieve even higher things in life. The reason is because when you appreciate other people’s successes you send a message to the Universe that you enjoy and celebrate victories in life be it yourself or anyone else. The Universe also then responds back sending more successes on your way. Whatever you ask to the Universe, you get it.
Similarly, if you resent other’s successes, you tell the Universe that you don’t like success and are uncomfortable with it. Accordingly, the Universe will ensure that you are comfortable. So, it will prevent you from becoming rich and successful.
Rich people don’t hesitate to promote themselves & their virtues. Poor people think negatively about selling and promotion
If you want anyone to ever hear about you, you need to promote yourself and what you have to offer. It will be awkward and uncomfortable, but it’s the best (only) way to move forward.
There’s really nowhere that you can escape the need to promote yourself. Even if you don’t try to start your own business and go instead for climbing the corporate ladder, you’ll need to promote yourself to get hired, you’ll need to promote yourself to get a promotion, etc.
I’m definitely not saying that you should become arrogant or cocky, but if you have something good to offer, for your own sake let people know about it.
A fear of selling and promotion can do nothing but hold you back.
Rich people are bigger than their problems, the poor are smaller than them
Have you ever heard someone who isn’t successful trying to justify why they aren’t successful? They will have a string of excuses as long as their arm, and all of them shift the blame to someone or something else. It’s the government’s fault. It was their old boss’s fault. The industry is in decline. The market is bad. Their co-workers don’t do their job, etc. etc. etc.
The way they talk about their problems make you think that they will never succeed, their problems are bigger than they are.
Successful people realize that their problems are obstacles that are going to need to be overcome for them to continue succeeding. In their mind, they are bigger than their problems.
You can choose which one of these mindsets you will adopt.
Rich people are excellent receivers. Poor people are poor receivers
Everyone needs help at some point in their lives on their journey to their goals. Since we live in a society, we need to build networks and relationships with other people. Asking for help does not mean that you become low in front of that person. Rather you should look at it as a great opportunity to build a new relationship.
Rich choose to get paid based on results, the poor choose to get paid based on their time
Every person has 16 or more working hours in a day that they can spend on their jobs to make money. But this is not scalable as it limits the earning potential based on the time available. Also, you would want to spend those hours rather with the people who matter the most in your lives.
The alternative to this is to get paid based on the results. For example, a salesman is paid and earns commissions based on the number of sales that he has made. He may toil all day but, in the end, his earnings will depend on the total sales that he has made. This may sound scary to most people. That means you might fail. You might not be able to make the amount of money that you thought of making. Of course, all these downsides will be there. On the other hand, if you do perform well the results will be outstanding. It will be far better than if you had stayed stuck trading time for money.
Rich people think “both”. Poor people think “either/or”
Do you honestly think we can both win or do I have to lose so that you can win? Can we both get what we want or is it going to be one or the other? Can we collaborate to build each other up or are we destined to fight to tear each other down?
This can apply not just to areas of competition or cooperation, but to the way you manage your time and resources as well.
Should you focus on the present or the future? Both.
Should you focus on quantity or quality? Both.
It may seem like an either/or and it may be hard to find a way to do both, but there are people who are doing it.
Sometimes you might really have to choose either/or, but your first thought should always be to ask how you can choose both.
I would add the caveat that doesn’t mean that you will never have to make a trade-off. You definitely will. This means that if you start looking for opportunities for “both” you’ll start finding them.
Rich people focus on their net worth. Poor people focus on their working income.
Net worth is defined as the difference of the total assets and the total liabilities that you have. An asset is something that puts money into your pocket, e.g. stocks, mutual funds, real estate, business etc. Liabilities are those that take money out of your pocket, e.g. home loan, car loan, credit card dues etc. Truly rich people focus on increasing their assets and decreasing their liabilities such that their net worth goes up.
Poor people focus on their active income from jobs. If they have a high income they think that they are rich. Nothing can be far from the truth. A person can earn high but at the same time he can also spend all of it or even more. As a result, net savings at the end of the month is zero or worse negative. This habit of living paycheck to paycheck will never let a person save and in turn become rich.
Rich people manage their money well. Poor people mismanage their money well.
Consumer debt is at an all-time high in India. People are borrowing money for everything from cars, homes, vacations, marriages to even their personal expenses. Credit card debts are the worst among these. If anyone delays the payment of credit card bills on time then he/she will have to pay a hefty interest for that. It’s like you are going to your job to earn money that you have already spent. It’s the worst way that someone can manage their money.
Rich people invest their money on educating themselves. They buy books/courses, attend seminars to acquire the skills that they need to increase their earnings. They invest their money into starting a business.
Rich people have their money work hard for them. Poor people work hard for their money
Rich people put their money into money-making vehicles. Stocks, real estate, their own business. Their money earns more money. Poor people get into debt and have to work longer hours to pay for money they already spent.
A lot of this comes down to the fact that the things that make the most money in the long run often earn little return in the short run.
We all know that if you invest early you can make a lot of money, but when you actually put away what little you have to spare, you see that you earn hardly anything in the stock market. That’s because that’s how it works. You see almost no results in the beginning… but then it starts to snowball. It’s the same thing with investing in real estate or starting a business. Lots of unpaid hours and uncertainty as to whether it will all be worth it. Then things start to snowball. Those who have faith in the system will be confident enough to let their money work hard for them.
Trust the process.
Recommended reads: How to plan for your financial goals? A quick guide!
Rich people constantly learn and grow. Poor people think they already know.
Below are examples of some successful people who read voraciously,
Someone once asked Buffet about keys to success, and he said “Read 500 pages every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”
Buffet read 600 to 1,000 pages daily when beginning his career as an investor.
Mark Cuban reads about 3 hours a day because it gives him a level of comfort and confidence in his business. Bill Gates reads 50 books a year. Elon Musk taught himself to build rockets by reading. Tony Robbins read 700 books in seven years–all on psychology, physiology, anything that could make a difference in life.
Final thoughts
Mindset is the main differentiating factor between rich and poor people. In fact it’s the difference between any successful person and a person who is not. Talent is important but if talent is not complemented with the right attitude then success will not come. On the other hand, even if someone is less talented but has the right attitude he/she will become much more successful. Changing mindset is not easy. It requires effort, dedication and discipline to make changes in how you think. You need to be patient throughout the process as the change will happen gradually. But once it happens, it will be there for life and will bring tremendous success and joy.