It seems that some people think “becoming rich” is a bad thing.
Take for instance a recent Dave Ramsey Show rant titled, “Should Billionaires Be Allowed To Exist?”
Someone email him an article written in the New York Times about “abolishing billionaires”.
Here’s a few lines from the article:
“Some ideas about how to make the world better require careful, nuanced thinking about how best to balance competing interests. Others don’t: Billionaires are bad. We should presumptively get rid of billionaires. All of them. A billion dollars is wildly more than anyone needs, even accounting for life’s most excessive lavishes. It’s far more than anyone might reasonably claim to deserve, however much he believes he has contributed to society. At some level of extreme wealth, money inevitably corrupts. On the left and the right, it buys political power, it silences dissent, it serves primarily to perpetuate ever-greater wealth, often unrelated to any reciprocal social good.”
Dave goes on to say that there’s a large part of the population that think having money is bad. If you are wealthy, then you are evil. If you get money then you are a bad person and you SHOULD have it taken away from you and given to someone else. He claims this is straight up Marxism.
But if we give it to someone else, what does that make them? Bad too? 🙂
I made the mistake of commenting on the video with, “We are where we are because of our actions. I guarantee you that if you spent 24 hours with a billionaire, you’d quickly realize how they got there.”
It didn’t take long before I started getting the “haters” replies such as:
- “The more I’m around rich people, the more I realized how shady it is…”
- “If you were around the rich, you’d see why they’re the richest people.” “I did and it’s because they’re shady.” “Um, um, then it’s because you were around the wrong ones.” If moving the goalpost was your job, you’d be on the new billionaires.”
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Who Are The Rich?
There is a difference between someone that is “rich” and someone that is “wealthy.” But for our purposes today, we’ll treat them both as equal.
Related article: Rich vs Wealthy – What’s the MAIN Difference?
In America today, being rich means you have or are associated with money. Typically these people invest in assets such as stocks, bonds, real estate, crypto and/or they have a high income.
If you’ve read The Millionaire Next Door then you know that rich people don’t necessarily appear rich.
A CNBC poll gave the following criteria to be rich:
- net worth of at least $2.3 million or
- earn $300K/year
My definition of a rich/wealthy person is someone that has enough money to live off of assets that pay passive income whether they’re working or not.
They focus on accumulating assets that provide extra money for freedom whereas most people focus on buying crap to make them look good.
In The Millionaire Next Door, the authors used net worth as a measure of wealth.
This is calculated by subtracting your assets (what you own) from your liabilities (what you owe).
Assets – Liabilities = Net Worth
Who Are The Poor?
When you think of someone that is poor, who comes to mind?
- A homeless person?
- People of other countries?
- Poor countries?
This isn’t who we’re talking about today.
My definition of a poor person can be the average person that’s unemployed to the doctor making $400,000 annually.
I know you’re probably asking yourself, “Jeff, how can this be?” For our purposes today, a poor person are those individuals who live beyond their means.
They live paycheck to paycheck with little to no assets. They exhibit poor thinking thus leading to a poor mindset.
Many times their net worth is negative due to high amount of consumer debt.
7 Key Differences – Rich People vs Poor People
#1 Rich people make their money work for them
One of the biggest differences between the rich and poor has to do with HOW they make money.
In the book, Rich Dad Poor Dad, author Robert Kiyosaki preaches that the rich don’t work for money, they make money work for them.
Robert Kiyosaki, “If you work for money, you give the power to your employer. If money works for you, you keep the power and control it.”
The rich understand that wealth can’t be built if you’re in a position where you have to trade time for money. It’s impossible.
Even though everyone has the same allotted hours a day, the rich know how to maximize those hours. Most have an average of 7 streams of income where the poor only have one.
Rich people are voracious readers that are constantly on the lookout for ways to invest their money. They know one of the key assets for alternate income streams is real estate so their money will continue working for them.
On the other hand, poor people trade time for money, earning only a living wage, paycheck to paycheck. They spend their entire career depending on a job and working for an hourly wage.
If they miss a day of work, no income comes in that day. This is a very risky way to live that leaves them vulnerable to the needs of corporations which means they don’t have a backup plan if they’re laid off.
#2 The rich focus on earnings. The poor focus on saving.
Even though one way to become wealthy involves saving money and living frugally, most rich people put more emphasis on earnings.
Even though the rich are good at saving money, they understand there’s a limit to how much you can save but no limit to how much you can earn.
This has to do with having an abundant or wealthy mindset. They believe that money is infinite where poor people feel that it’s scarce.
Related article: Scarcity vs Abundance Mindset – Which Do You Have?
Rich people constantly focus on learning ways to create enormous wealth such as creating new businesses and utilizing compound interest.
Again, their operating from abundance where the poorest people operate from fear. The rich aren’t afraid to take calculated risks, because they know if they lose they can make it back.
“Money has to circulate in order to move and grow and it can’t do that sitting still.” – Grant Cardone
Poor people are more concerned with the modest gains from a 401k investment than they are with using their minds to create true wealth.
#3 Rich people focus on opportunities and poor people avoid risk.
There’s a BIG difference in how the wealthiest people make financial decisions compared to poor people.
The key difference is this: Rich people use logic and weigh the pros and cons of a situation before making a decision.
They gain confidence with their decision by taking calculated action as they’ve performed the necessary background work. These steps give them a better chance of having a higher payoff potential.
On the other hand, poor people tend to make financial decisions impulsively without thinking through their choices.
For example, they have a poor habit of buying a new car without learning about how much interest will be charged. Their main focus is on how much it will cost them each month.
These impulsive financial choices are based on feelings rather than sound financial practices. The financial outcomes in these scenarios are often negative with huge losses.
#4 Rich people constantly learn. Poor people quit learning after school.
I can’t tell you how many of my dental school classmates told me, “Hey Jeff, I can’t wait until I graduate. I’m NEVER going to pick up another book again!”
Poor people (even dentists) stop learning once they’re finished with school. I don’t care how educated you are, if you think like this then good luck getting wealthy.
Just like a business, if you’re not growing, then you’re dying. Without continued education, there’s nothing to compound.
Billionaires such as Bill Gates, Elon Musk and Warren Buffett understand this concept which is why they’re avid readers:
- Buffet reads 5 hours each day.
- Musk read 2 books a day growing up.
- Gates reads 50 books a year.
Research shows that the wealthiest Americans aim to set aside at least one hour a day for education.
“88% of the wealthy read 30 minutes or more each day for self-improvement vs. 2% of the poor.” – Chris Hogan
Because I’ve always been interested in personal finance, reading everyday allowed me to eventually stumble upon how to create passive income and eventually real estate.
If I’d stopped learning, I’d work until I’m 70 (like most dentists).
#5 Rich people set goals and have a vision whereas the poor don’t.
Jonathan Swift, “Vision is the art of seeing what is invisible to others.”
Research shows that 80+% of rich people focus on accomplishing a single goal at a time. They write it down and then place it in a highly visible location.
Only 12% of the poor people have written goals.
#6 Rich people avoid complaining and search for solutions. Poor people find excuses and give up.
There’s a reason why only 1% of the population is rich vs 99% that aren’t. The rich understand that become a “1%’er” isn’t easy and they’ll be many failure and roadblocks along the way.
“I can accept failure. Everyone fails at something. But I can’t accept not trying.” ― Michael Jordan
“Your network is your net worth.”
Proverbs 27:17 – “As iron sharpens iron, so one person sharpens another”.
Successful people understand that life is about connections and make it a point to “connect” with others to broaden their circle.
Remember that they have goals and a vision and seek out those they admire most to learn from them.
When the pandemic caused people to stay indoors, it didn’t take me long to realize that I missed connecting with others.
Life is all about relationships.
The rich spend time with other rich people. And the more you hang around with them, quicker you’ll realize their work ethic and success habits.
Seek out those that you admire and inspire you. Then make it a point to learn from them.Join the Passive Investors Circle