I'm fascinated by the differences between rich people and poor people. Are the differences mostly a matter of class and economic mobility? Are people born to wealth and poverty and destined to remain there? Or are there observable differences in attitude and action that tend to lead people to specific levels of affluence?
From my experience, it's some of both.
I believe that there are absolutely systemic issues that contribute to wealth and poverty. But I also believe that there are attitudes and habits that foster wealth and success. These attitudes and habits can be learned. They can be applied to our own lives, allowing us to build better futures.
I grew up in a family that had always been poor, a family that had lived for nearly 100 years in rural Oregon, barely getting by. The things we had and said and did were “lower class”, even if I didn't know it at the time.
I was raised in this trailer house:
My father was a serial entrepreneur and the primary breadwinner for the family. Occasionally his businesses did well. Mostly, they didn't. But even when our family did have a decent income, Dad spent that money on boats and airplanes and computers. He didn't save. Then when hard times came — and hard times always came — he had to sell those toys to put food on the table.
The boom times were rare though. During the 1970s and 1980s, Mom and Dad spent most of the time living paycheck to paycheck. They fought about money. When Dad's businesses weren't doing well (which, again, was the norm), he worked as a salesman for various industrial companies. Or he was out of work. He spent long stints unemployed. We had to have help from extended family and from our church. (I can't recall that we were ever on government assistance, but it's certainly possible.)
Just before he died in 1995, Dad pulled me aside to apologize for how poor we were when I was a kid. “I remember that one Christmas when we didn't have enough money for presents,” he said, “You and your brothers wrapped your existing toys and gave them to each other. I felt so ashamed. I'm sorry I couldn't give you guys a better life.”
So, I've experienced poverty. Maybe not poverty as extreme as some others, but poverty.
I've also experienced wealth.
Today, my life is very different than it was when I was growing up. I'm fortunate (and grateful) to have a solid financial foundation. I achieved that financial success through a combination of hard work and luck. (And make no mistake: There was definitely good fortune required to get me where I am today.)
My brothers too have managed to work their way to a comfortable middle-class lifestyle. We have it better than our parents did. At the same time, it's clear that the three of us retain some of our old habits and attitudes. (So too, I think, do other members of our extended family who also grew up poor.)
From my experience, I believe that poor people have certain habits, attitudes, and expectations. I think that these habits, attitudes, and expectations differ from those of wealthy people. Sometimes these qualities are a result of being poor (or wealthy); sometimes these qualities lead to being poor (or wealthy). In other words, it's neither the “chicken” or the “egg” — it's both.
What do I mean? Let's take some time today to explore the types of habits that foster wealth and success.
Important note: Before we go any further, I'd like to acknowledge that this is a complex subject, one weighted with political, economic, and social issues. I don't expect for one blog post to be a definitive exploration of the topic. I do, however, hope that this article can highlight some insights from myself and others — including you. This piece is not meant as a takedown of the rich or a takedown of the poor. It's meant to highlight habits and attitudes that can improve the odds of success.
The Secret Language and Behaviors of Wealth
First up, here's Chelsea Fagan from The Financial Diet sharing eight things wealthy people do differently. Fagan breaks down what she calls “the secret language and behaviors of wealth”.
At first I thought this video would be cheesy. It's not. It's excellent — which is why I've placed it at the top of this article. Fagan's observations are astute, and she offers lots of practical advice for her intended audience: young women.
“Wealth isn't just about how much money you accumulate,” Fagan says. “Particularly in America, there's a whole different approach to life — not just the financial parts of it — when you're wealthy.”
She continues: “There are many specific behaviors that wealthy people tend to practice which are adapted to perpetuating their wealth. The good news is there are many of these habits ane techniques that you can adopt even if you're on a serious budget.”
According to Fagan, these are the eight things wealthy people do differently from the rest of us:
- They don't wait for permission. From a young age, we're conditioned to get permission to do the things we want. As a result, most of us enter adulthood with the idea that we still need permission to pursue our desires. Wealthy people have shifted their mindset from permission to control. Echoing my friend Chris Guillebeau, Fagan tells her viewers, “It's easier to ask forgiveness than permission.” (This is one of CG's mottos. He lives by it.)
- They know the landscape around them. In the U.S., for instance, we're taught that it's bad manners to talk about money. Most people don't. The wealthy, however, do talk about money — at least amongst themselves. (From my experience, this is very very true.) Talking about money helps wealthy people better understand the financial world around them so that they're able to make better decisions. Plus, wealthy people actively seek advice and information about money.
- They ask for help with what they don't know. This one is huge. From my experience, when poor people don't know something, they tend to shrug their shoulders and go on with life, never seeking an answer. Wealthy people aren't satisfied to remain in ignorance. They have what I call a personal board of directors, a small group of trusted advisors to which they can turn for information and advice. I just emailed my accountant the other day, for instance, asking for help with a financial issue. This morning, I'm driving an hour to meet with my friend Michael, who has acted as both a friend and advisor for a decade now. Even if you can't afford to have an accountant, attorney, and/or financial advisor, much of the info you need is available for free online. You just have to take the time to search for it.
- They put a specific (and growing) value on their time. “Wealthy people decide that every hour of their life has a value,” Fagan says, “and they stick to that value while constantly trying to raise it.” Wealthy people are aware time is money — and money is time. As a result, they try not to waste time. This is an area where I struggle. That's why I did a time inventory last year (and discovered I spent twice as much time playing videogames as I did writing about money). Fagan urges viewers to treat every hour of their lives as if it has value — because it does.
- They speak the language of money. Wealthy people are more financially literate than the poor. They're better educated about personal finance. Because they know what they're talking about, they're better able to advocate for themselves. They're able to make better decisions.
- They understand that money is a long game. Or, put another way, wealthy people recognize that there's no reliable way to get rich quickly but that almost anyone can get rich slowly. They keys are persistence and patience. Do the right things for a long time and you will achieve your financial goals. “The choice is not between this $5 Starbucks that will make me happy or this $5 sitting in a sad bank account making me feel bad,” Fagan says. “The choice is between this $5 Starbucks today or the hundreds of dollars it has the potential to be when it comes time for retirement.”
- They outsource, outsource, outsource. Wealthy people are aware of where their skills and talents lie, and they play to those strengths. They know when it's better to delegate a task to somebody who's better at it. Or they know when to outsource because their time is better spent elsewhere. (This is another area where I suck. I've never really figured out how to outsource, so I often find myself doing things that I'm not good at or that I'd rather pay somebody else to do.)
- They know the importance of recharging. While you might not have the ability to jet off to a beach house in Florida, we're all able to make time in our lives to “sharpen the saw” as Stephen Covey put it in The Seven Habits of Highly Effective People. Don't allow yourself to become overwhelmed. Deliberately dedicate time to self-renewal in your physical life (exercise, proper nutrition), social life (spending time with friends), mental life (reading, education), and spiritual life (meditation, church).
This video is truly excellent. If I had a college-aged daughter (or a college-aged son), I'd urge her to watch it. But I think it contains good info for anyone at any stage of life.
The Daily Success Habits of Wealthy Individuals
Tom Corley is the author of a book called Rich Habits: The Daily Success Habits of Wealthy Individuals, which summarizes his research into the habits of the rich and poor. (He defines “rich” as those having an income over $160,000 per year and net liquid assets of more than $3.2 million. To him, poor means a gross income of $35,000 or less and no more than $50,000 in liquid assets.)
Corley's approach is unique because he took time to interview people from both ends of the financial spectrum. While I haven't yet read the book, I did manage to track down a piece he wrote for Success magazine that gives some insight into the results of his study. According to Corley:
- Rich people live within their means. “Wealthy people avoid overspending by paying their future selves first. They save 20 percent of their net income and live on the remaining 80 percent.”
- Rich people don't gamble. “Every week, 77 percent of those who struggle financially play the lottery.”
- Rich people read every day. “Among wealthy people, 88 percent read 30 minutes or more every day.”
- Rich people spend less time in front of screens. “Two-thirds of wealthy people watch less than an hour of TV a day and almost that many…spend less than an hour a day on the Internet.” On the other hand, “77 percent of those struggling financially spend an hour or more a day watching TV, and 74 percent spend an hour or more a day using the Internet recreationally.”
- Rich people control their emotions. “Loose lips are a habit for 69 percent of those who struggle financially. Conversely, 94 percent of wealthy people filter their emotions.”
- Rich people network and volunteer regularly. “Almost three-quarters of wealthy people network and volunteer a minimum of five hours a month. Among those struggling financially, only one in 10 does this.”
- Rich people work harder. “Unsuccessful people have ‘it's not in my job description' syndrome…Successful people work hard to achieve the mutual goals of their employers or their businesses.”
- Rich people set goals; poor people make wishes. “Every year, 70 percent of the wealthy pursue at least one major goal. Only 3 percent of those struggling to make ends meet do this.”
- Rich people avoid procrastination. “Successful people understand that procrastination impairs quality; creates dissatisfied employers, customers or clients; and damages other nonbusiness relationships.”
- Rich people talk less and listen more. “Wealthy people are good communicators because they are good listeners. They understand that you can learn and educate yourself only by listening to what other people have to say.”
- Rich people avoid toxic relationships. “Of wealthy, successful people, 86 percent associate with other successful people. But 96 percent of those struggling financially stick with others struggling financially.”
- Rich people don't give up. Wealth individuals “simply do not quit chasing their big goals. Those who struggle financially stop short.”
- Rich people set aside limiting beliefs. “Almost four out of five wealthy people attribute their success in life to their beliefs.” They pursue personal development.
- Rich people have mentors. “Finding such a teacher is one of the best and least painful ways to become rich.”
- Rich people make their own luck. “Successful people create their own unique type of good luck. Their positive habits lead to opportunities such as promotions, bonuses, new business and good health.”
- Rich people know their main purpose. “It’s the last Rich Habit, but it might be the most important. Those people who pursue a dream or a main purpose in life are by far the wealthiest and happiest among us.”
I'd love to see the raw data that led Corley to make these conclusions but I don't think his book includes that info. From what I can tell, it's written as a story, sort of like The Wealthy Barber. His website does give some background on his methodology, however.
I found other articles about Corley at Business Insider (some stats included) and Entrepreneur. Corley also appeared on an episode of the Afford Anything podcast. Finally, here's Corley's appearance on the Art of Charm podcast:
The Secrets of the Millionaire Mind
When I first decided to dig out of debt in 2004, I devoured every book about personal finance that I could find. One volume that had a profound influence on my future financial philosophy was The Secrets of the Millionaire Mind by T. Harv Eker.
Eker believes that we each possess a “financial blueprint”, an internal script that dictates how we relate to money. Our blueprints are created through lifelong exposure to money messages from people around us, especially our family and friends, and from our country's culture and mass media. (I agree with Eker. See my recent article about money blueprints.)
Eker says the unfortunate truth is that most of us have faulty blueprints that prevent us from building wealth.
“Money is a result, wealth is a result, health is a result, illness is a result, your weight is a result. We live in a world of cause and effect,” writes Eker. “A lack of money is never, ever, ever a problem. A lack of money is merely a symptom of what is going on underneath.” (This echoes my advice that debt reduction is a side effect of doing the right things and ought not be a goal in and of itself.)
At the core of Millionaire Mind are Eker's “wealth files”, a list of seventeen ways in which the financial blueprints of the wealthy differ from those of the poor and the middle-class. According to Eker:
- Rich people believe: “I create my life.” Poor people believe: “Life happens to me.”
- Rich people play the money game to win. Poor people play the money game to not lose.
- Rich people are committed to being rich. Poor people want to be rich.
- Rich people think big. Poor people think small.
- Rich people focus on opportunities. Poor people focus on obstacles.
- Rich people admire other rich and successful people. Poor people resent rich and successful people.
- Rich people associate with positive, successful people. Poor people associate with negative or unsuccessful people.
- Rich people are willing to promote themselves and their value. Poor people think negatively about selling and promotion.
- Rich people are bigger than their problems. Poor people are smaller than their problems.
- Rich people are excellent receivers. Poor people are poor receivers.
- Rich people choose to get paid based on results. Poor people choose to get paid based on time.
- Rich people think “both”. Poor people think “either/or”.
- Rich people focus on their net worth. Poor people focus on their working income.
- Rich people manage their money well. Poor people mismanage their money well.
- Rich people have their money work hard for them. Poor people work hard for their money.
- Rich people act in spite of fear. Poor people let fear stop them.
- Rich people constantly learn and grow. Poor people think they already know.
Eker says that most people are motivated to make money out of fear. People don't call it fear, though. They say they're motivated by security. Eker notes — correctly — that fear and security are essentially two sides of the same coin. The tough truth is that money doesn't dissolve fear.
Fear is not just a problem, it's a habit. Therefore, making more money will only change the kind of fear we have. When we were broke, we were most likely afraid we'd never make it or never have enough. Once we make it, however, our fear usually changes to “What if I lose what I've made?”
“When the subconscious mind must choose between deeply rooted emotions and logic, emotions will almost always win,” writes Eker. Even if you know what you ought to do intellectually, it can be tough to do it because your money blueprint controls your thoughts and behavior. To change your habits, you have to work consciously and constantly to create a new plan. This takes time and practice.
Want to read more about how fear affects our decisions? Check out my article on how to build confidence and destroy fear.
Millionaires vs. the Middle Class
In The Top 10 Distinctions Between Millionaires and the Middle Class, Keith Cameron Smith also makes an attempt to delineate the difference between the rich and the rest of us.
His ten “distinctions” — in order of importance — are:
- Millionaires think long-term. The middle class thinks short-term.
- Millionaires talk about ideas. The middle class talks about things and people.
- Millionaires embrace change. The middle class is threatened by change.
- Millionaires take calculated risks. The middle class is afraid to take risks.
- Millionaires continually learn and grow. The middle class thinks learning ended with school.
- Millionaires work for profits. The middle class works for wages.
- Millionaires believe they must be generous. The middle class believes it can't afford to give.
- Millionaires have multiple sources of income. The middle class has only one or two.
- Millionaires focus on increasing their wealth. The middle class focuses on increasing its paychecks.
- Millionaires ask themselves empowering questions. Middle-class people ask themselves disempowering questions.
Some of the items on Smith's list seem to be derived from Eker's philosophy. But although there are similarities, Eker's list gives me warm fuzzies and Smith's list doesn't. I'm not sure why.
Maybe the difference is this: From my experience (and your experience may be different), Eker's many distinctions hold true (at least in the U.S.). I've seen the differences he describes in my own life. But I'm not convinced that the differences Smith lists do hold up.
For instance, I know lots of poor people who talk about ideas rather than things and people, and many of the same folks embrace change. A lot of my friends love learning but they're not millionaires. And haven't we seen statistics that show, based on a percentage of income, poor people give more than the rich do?
There are differences between the mindsets of the rich and the poor, of this I'm sure. But I think they're closer to Eker's list than to Smith's.
A Brief Rant
Without taking anything away from personal responsibility (which you all know I think is vital to success), I'd like to suggest that both Eker and Smith are too quick to dismiss systemic causes of poverty. Perhaps neither of them knows what it's like to be poor? Some of their observations make sense, but some seem to come from people who've lived lives of privilege.
“Rich people act in spite of fear,” Eker writes. “Poor people let fear stop them.” Why is that? Could it be that the rich can act in spite of fear because they have a safety net? Could it be that when you grow up poor, a scarcity mindset becomes so deeply ingrained that it's almost impossible to shake? (That's been my personal experience, by the way.)
There's no question that wealth brings opportunities, both in the U.S. and in other countries. Those with money have more choices. The rich can take risks, and they're often rewarded for taking them. (Thus, “the rich get richer”.) I have so many more options now than I ever did when I was a boy, when my family was poor. I think this element of “luck” is something ignored by both Eker and Smith (and many other people).
Ten Habits of Successful People
Instead of defining the differences between rich people and poor people, I think it's more constructive to look at what separates successful people from unsuccessful people. Maybe I'm picking nits, but in this case I think focusing on a financial scorecard misses the point. It's possible to be successful and poor, and it's possible to be rich and a fool.
I'll admit there seems to be a strong correlation between wealth and success, but the two qualities don't overlap precisely.
From looking at my own friends, and from thinking about the stories readers have sent me during the past decade — especially stories about how people have moved from debt to wealth — I've seen the following patterns.
- Successful people surround themselves with positive people. They limit their exposure to negativity and naysayers, preferring to spend time with folks who have can-do attitudes. They don't have time to listen to the reasons something can't be done; they'd rather find ways to make it happen.
- Successful people aren't flummoxed by failure. They know that mistakes are inevitable and should be treated as stepping stones to success rather than signs of weakness or reasons to stop trying. (This is why it's important not to praise achievement, but to praise effort. The former breeds fear of failure.)
- Successful people manage their time effectively. They recognize that minutes and seconds are a precious non-renewable resource. So, they set priorities and pursue them with passion. My successful friends seem to watch less television (and play fewer videogames) than my unsuccessful friends, for instance. There's nothing inherently wrong with Game of Thrones or Hearthstone, but they suck up time that could be spent exercising or reading or taking a class.
- Successful people ignore the opinions of others. They march to the beat of a different drum. They don't feel compelled to “keep up with the Joneses”. They limit their exposure to mass media not only because it allows them to be more productive, but also because it reduces the influence of advertising and the pressure of cultural norms. When investing, they don't follow the herd. The wealthy people I know all drive older cars (many of them bought used!), dress modestly, and avoid conspicuous consumption.
- Successful people have direction. They act with purpose. They know why they're working hard and saving money. They have a mission, even if it's as simple as putting their kids through college, and their daily actions are aligned with their long-term goals. None of the folks I know who struggle with money have a clear idea of what they want to do with their lives.
- Successful people focus on big wins. Sure, they develop smart habits and pay attention to the small stuff. But they also understand that if they're diligent with their dollars, then the pennies will take care of themselves. The average person economizes on the small things but isn't willing to make sacrifices when it comes to housing, transportation, or career. And the folks who are broke all of the time? Well, they fritter away their pennies and their dollars.
- Successful people do what's difficult. They don't procrastinate. My friends with money work longer, harder, and smarter than my friends who have less. (This is an unpopular observation with some folks, but it's true.) They practice deferred gratification, sacrificing small comforts today in order to obtain greater rewards tomorrow.
- Successful people make their own luck. They practice awareness so that they can recognize opportunities when they come along. Moreover, they act boldly, seizing these opportunities where others might hesitate to act.
- Successful people believe they're responsible for their future. They're proactive. They have an internal locus of control. That is, they understand that although it might not be their fault they're in a given situation, it is their responsibility to change it.
- Successful people grow and change over time. They adapt. They evolve. They're not afraid to entertain different points of view. Most importantly, they're not afraid to change their minds. They seek knowledge and experience, and they allow the things they learn to mold them.
None of these differences is absolute, of course. Most people (including me) follow a few of these rules but not others. Or we adhere to certain rules only part of the time. The most successful people I know do all of the things on this list; the least successful people do none of them.
The Bottom Line
That's a lot of words — almost 5000! — about how the mindsets of the wealthy and the poor differ. And while I do agree with these generalizations, I think it's important to note that they are generalizations. These principles aren't applicable to all people.
There are plenty of poor people who have the right mindset but struggle because of external factors. There are plenty of rich people who do not have these attitudes but have managed to obtain wealth anyhow.
For me, the real takeaway from discussions like this is that regardless your circumstances, you can increase the odds that you'll achieve your goals if you model your actions on those of the people you want to emulate. If you want to be rich, look for common themes in the lives of the wealthy. Do what you can to incorporate them into your own life. If you want to be successful, learn from the lives of successful people.
“If you don't change direction,” my father used to tell me, “you'll arrive where you're going.” I didn't really undersand what he meant when I was in high school. Now I do.
In life, there are often default options. If you don’t consciously and deliberately choose something different, you get the default. Most people live their lives in default mode. They accept the default without question.
My aim for myself — and for you, the readers of Get Rich Slowly — is to both be aware of the defaults and to question them. Sometimes they’re fine. A lot of times, however, there are better ways to live. By examining the habits of the wealthy and successful, I think we can all find ways to change direction so we reach a better future.
What do you think? From your experience, what are the differences between the rich and the poor? What qualities separate successful money managers from those who remain broke? Given roughly similar backgrounds, why do some folks build wealth and others struggle to make ends meet? How do the rich think differently? What behaviors to the poor and the middle-class have that the rich do not? Or is it even possible to create distinctions like this? Does it all just come down to luck? (Please keep conversation civil and respectful. No poor shaming — but no rich shaming either.)
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.