Savings and debt

17 Mindset Differences Between Poor And Wealthy Families

Building financial security is as much to do with mentality as it is to do with business intelligence. Sure, some people have a significant advantage due to a “small loan of a million dollars”; however, there are others who came from nothing and managed to reach financial comfort.

One of the comments I get when I discuss entrepreneurship with strangers is “They just got lucky.” Luck can play a part, but more often than not, it all boils down to habits.

People with good financial security – and on their way to wealth – have different habits.

Find out how to live like the rich for much less in my post How to Cut Bills by 40%, Save Money & Wipe Debts – 2020

1) Spend what they don’t have

Poor people are more likely to spend what they don’t have. I am not knocking those who do it due to a low income. I am specifically talking about those who have enough money for the basics but choose to go into debt to get luxury items.

Just because you can pay it in instalments doesn’t mean you should get it.

People who choose to overspend on luxury items end up paying more. This is because they pay back with interest. If they can’t make the monthly payment due to a job loss or reduced income, the debts pile up. As a result, they end up using their money to get back to the starting point.

On the other hand, people with good financial security tend to make cautious spending decisions. They regard debt as the enemy. As a result, they are less likely to end up in a situation whereby much of their monthly income goes to paying off debts.

2) Don’t think about the future

With humans living longer, saving is more important than ever. People who make bad monetary choices tend to only think about the present without a care in the world as to whether money is set aside for the future. “You can’t take it with you” is the motto of such people.

As you know, life isn’t always perfect. There are a lot of pitfalls. Money doesn’t bring happiness, but it is the solution to many problems.

People who save money and invest aren’t greedy. They simply realise that it is crucial to have money set aside should things go left. If you don’t have the money to ride through the storms of life, you have no money than to borrow. This is how some people find themselves in a ‘hamster wheel’ of working hard just to keep debt collectors away from their front door.

Financially responsible people know that cash is what will get them out of tight situations.

3) Living above one’s means

Humans want what they can’t have. We want to be respected and accepted.

Companies use these traits to their advantage, They pay successful celebrities to use products in the hope that we will want the same things. Unfortunately, it works very well.

A friend was going through some financial troubles. He made good money; however, the spending habits of his family meant that his bank account was always in the negative at the end of the month. I sat with him and looked through his monthly outgoings, and helped him to cancel some unnecessary monthly costs.

Then we got to his car loan repayments…

He had taken out loans on two sports cars – one for his wife and the other for himself. The monthly repayments were insanely at an exceptionally high-interest rate. Downsizing to a durable and more affordable car would have saved him a lot of money.

I suggested downsizing, and he looked at me as if I had just dropkicked his mother in the throat. “But we NEED them.”

He works very hard, but he basically works for the cars. Vehicles aren’t a good investment because they lose their value as soon as you drive out of the dealership.

People who live above their means trade in short term luxury for long term discomfort.

I have close friends who I wouldn’t describe as rich, but they are incredibly good at making their money stretch. They set aside money each month and invest it. They might not drive the fanciest cars or live in big houses, but money isn’t a problem to them. They have a growing pot which enables them to take care of life’s emergencies.

4) Poor people are happy with what they have

I know that I am going to get some slack for this, but it is true. Most long term poor people don’t have goals, and are basically happy living paycheck-to-paycheck.

We live in a country filled with opportunities. There are a lot of educational opportunities. Plus, the internet enables us to gain a lot of knowledge from the comfort of our homes. We can reach millions and build online businesses with little investment.

However, poor people would rather trade their time watching television, playing video games and partying.

They feel as if they can’t change their situation; therefore, they don’t even try.

On the other hand, people with good financial habits do everything they can in order to improve themselves and their families. Instead of watching television all day, they use that time to help their children with homework. They are incredibly strategic with investments and knowledge and stay curious and ears open for new opportunities.

Such people understand that by uplifting those around them, they can build a strong network in the future. Furthermore, they understand that time is currency and would rather spend it on activities which bring returns.

Before you send me angry emails: we all have the same 24 hours in the day. How come some people get more done in that time?

5) Complain

Complaining rarely works. The ones who pulled ahead take action.

Life isn’t designed to be fair. Some people will use loopholes and any means necessary in order to pull ahead at the expense of someone else. Complaining and blaming your life on others doesn’t help.

That time and energy is better spent creating a plan and executing.

6) Like the idea of wealth but hate the hard work involved

Gambling is a popular hobby because people love to imagine what they would do with all the money they could “win”.

Most people love the idea of being financially secure but dislike the idea of putting in a lot of hard work and time into something that might not work.

The dangerous part is when some people try to buy things wealthy people have even though it would stretch their budget. They hate the idea of living within their means.

They want to appear rich, even though their net worth tells a completely different story.

Some of the wealthiest people I know dress poor and drive cars you wouldn’t give a second glance. This is because they don’t care about whether others think they are rich. In fact, they would rather “blend in” because once people know that you have money, they come with stories in an attempt to lend or take advantage.

Most people with good financial responsibility are focused on growing their emergency fund and finding opportunities in order to increase income.

7) Understand the importance of teamwork and keeping wealth within the family

Some wealthy people can come across as being very snobbish or greedy. However, it is because they understand the importance of teamwork.

If the people around you have the same wealth-building mindset, you are more likely to become wealthy. Keeping the money within the family ensures that you can make strategic moves together.

This also allows you to make good investments together.

I brought up this subject with a friend and she asked why I was so stingy and she feels uncomfortable keeping a lot of money. She would rather share it. She was also going through some financial difficulties due to borrowing money in order to share with friends.

Quite simply, the more money you have saved, the bigger the investments you can make.

8) Take big risks

You need to be slightly crazy in order to become an entrepreneur. Stress levels are high and after putting in a lot of hard work, there is a high risk of failure. In fact, most businesses fail, and it is rare for a business to survive for more than 10 years in the U.K.

Entrepreneurs work fro crazy hours, and put in a lot of money. Some lose their partners or put a lot of strain on their family. They could do just get a “normal job” but the drive for more keeps them going.

They place everything on the line in the hopes of a big payoff.

Your boss won’t make you wealthy.

Without an entrepreneurial spirit, you are simply working for a paycheck. And with the rapidly changing world of work, “job security” is rapidly becoming a myth.

The internet empowers us to have the standard 9-to-5 while also building a side hustle on the side. It isn’t easy, but possible with consistency and hard work. Anyone who tells you likewise is just trying to take your money for a course, eBook etc.

9) Careful with money

Money is a tool which can be used to build wealth. Therefore, after taking care of the essentials, people with a wealth mindset tend to look towards investments and savings.

On the other hand, people with a poverty mindset prefer to “live it up” and would rather use any excess money on entertainment and other items which don’t provide any returns.

People who are careful money are sometimes called “greedy” or “selfish”. However, this is far from the case. They are merely looking towards the future and ensuring that their money works hard at bringing them even more money.

10) Leverage

I was talking to a property developer a few years ago. He started off with £30,000 cash and was able to turn it into a multi million pound property. Naturally, I was keen to hear what he had to say,

He said something which I will never forget “You need a way of leveraging other people’s time and resources in order to enrich yourself. Anyone who seeks wealth, but can’t do this is simply exchanging their time for money. They will become an employee in their own business.”

This was the turning point for me.

Therefore, the key to wealth building is to be able to get assets (people, software etc) which when combined with time, gives you a good return on investment. As your business grows you need to be able to step back and build systems which enable it to run smoothly with minimal input from yourself.

Remember that money is important, but so is satisfaction. The ideal situation is to have both these parts work hand-in-hand.

On the other hand, people with a broke mindset believe that each hour of their life has a specific value dictated by their boss. Therefore, they get angry when they see entrepreneurs and sportspeople making millions. Understandably, it doesn’t seem fair.

Notably, most top-earning sportspeople, entrepreneurs and celebrities have determination and grit which few possess. They are able to handle failures and rejections which would break most people. Moreover, they have found a way to leverage their time, and build a support system to continually grow their fame and wealth.

11) Push through fear

Fear can be crippling. Have you ever had a great idea, and given yourself so many reasons why it won’t work.

We think about what society thinks of us, the embarrassment of failure, how much time it will take etc. As a result of these fears, most people retreat to the safety of doing nothing.

We are designed to always choose the ‘safe’ option. This dates all the way back to the ‘hunter-gatherer’ days of mankind. Moving away from your community, or taking big risks could get a person eaten by a wild animal. Therefore, it was wiser to be safe.

We have moved on from needing to wrestle animals or hunt for food. However, the need to take the safest option still remains.

Whenever you feel afraid to take a massive step, just remember that it is built-in.

Wealth minded people are able to push past the fear and push on.

12) Wealthy people see opportunities and respond accordingly

People with a wealth mindset see opportunities where others can’t. More importantly, they respond quickly in order to capitalise on it.

Anyone can come up with a great idea but few have the bravery to execute.

Rewards come through actions and not just through thinking.

13) Always learning

This follows on from the point above. Knowledge makes it easier to spot opportunities.

The world is constantly changing, and those who fail to keep up will be left behind. For instance, during the ‘dot-com boom’ people who understood the internet found themselves with many opportunities and became wealthy.

We are moving towards a world where the internet and automation will become increasingly important. Those who capitalise on it stand to make a lot of money, and those who refuse to learn will find themselves with limited opportunities.

This is one example; however, no matter the industry you are in, it is important that you keep track of how it is changing in order to spot the opportunities and take advantage. This is how some families have been able to grow their wealth over many generations. One example is the Walton’s- owners of the Walmart Group which includes ASDA.

14) Face problems head-on

The easiest thing is to blame others for your problems or mistakes.

You see this behaviour in people who blame their lack of opportunities on immigrants or being raised in poverty.

If there are no opportunities, how come some immigrants are all to capitalise on them?

The bank and electric company don’t care that you were raised in poverty.

The evidence is clear: many people were born into abject poverty but were still able to become wealthy.

Blaming others is just a way to push the blame onto others.

Wealth minded people believe that they are in control of their destiny. They take full blame when things go wrong. They spot the mistake, correct it and push on.

15) Materialism

We live in a world which encourages us to spend and accumulate stuff. We are told by brands that this is what we are supposed to do. And if we don’t do it, we aren’t part of society.

Marketers tap into our need to belong.

Some people are so deep in this vicious cycle that they spend everything they have on impressing others. They would rather look rich and be broke, than look poor but have money saved in the bank.

Designer clothes, expensive car loan repayments and other unnecessary items sharply decrease in value. On the other hand, investments build wealth.

People with a wealth mindset are able to pull away from the grip of materialism. They are more interested in investing and gaining more knowledge than impressing others. As a result, they can come across as “cheap” “stingy” or greedy.

Don’t go broke trying to look rich.

16) Earning ability

There are many ways of saving money and unlocking funds. However, you can accelerate wealth building by increasing earnings.

Most millionaires have 7 streams of income. They are constantly on the lookout for a new income stream, work hard to get it profitable and then outsource certain tasks. Fortunately, technology makes this process a bit easier.

Don’t just focus on saving money and investing, try to find ways of increasing your net worth.

17) Work Hard And Work Smart

All the tips in this article will mean nothing without hard work.

Some people will share this piece, and find it thought-provoking but then do nothing. Motivational speakers are popular because we love to feel motivated. They sound good and make us feel as if we are working towards our goals even though we are actually doing nothing.

I have a friend who loves to read motivational books. However, he rarely takes action.

The hardest thing is to take action when no one else believes in your ambition.

It is hard to believe and execute when it feels like there is no one in your corner.

To push forward, you will need to learn how to put your head down and simply work without any excuses. Even if that means changing paths in order to grow in another industry.

Do you have it in you?

Final thoughts

I know that some of the things mentioned will annoy some people. Sometimes the truth hurts.

My aim isn’t to whisper sweet words into your ear.

I would love to know your thoughts. Feel free to drop it into the comments section below or get in touch. I read and reply to every message.

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