In the world we live in today, the richest 1% of the population controls 48% of the total wealth. Moreover, the top 80 richest individuals are worth as much as half the world’s population. When considering these figures, there is no doubting the fact that there is a separation between the rich and the poor.
While many people assume these wealthy people are rich by birth or winning a lottery. That is so not the case. In fact, only 11 out of 80 richest people were passed down their fortunes with the other 69 having made their wealth through hard work and determination. And one of these individuals is none other than the investor mogul himself, Warren Buffett.
Like the majority of these rich individuals, Warren grew up in a middle-class family. However, he soon found a way to amass the knowledge and skills that contributed to accumulating a wealth of over $70 billion.
We have often seen people living with excess and others living with nothing. But have you ever taken a second to think about what truly separates a rich from poor? The answer is obvious. Rich has more money unlike the poor. But there are more reasons for it beyond the cents and dollars.
When you think about it, a rich and a poor person can live in the same city, have access to the same jobs and both have only 24 hours in the day. Yet one can be living paycheck to paycheck while others can have more money one can imagine.
So what truly makes a difference between someone who will amass billions of dollars in their lifetime and someone who will struggle financially forever?
John and Tim- An Illustration
It would be easier to outline the differences by taking an example of John as a rich man and Tim as poor. The difference will make the process easy and you can adopt these rich person habits and realize financial prosperity in your own life.
Before doing that, you must keep in mind that both John and Tim have similar IQs, come from middle-class families, and lives in the same city. In short, neither man has any advantage over the other. However, their bank accounts are at totally opposite ends of the money spectrum.
1. Rich Never Stops Learning
It’s Monday afternoon and both John and Tim commute home from work. When Tim gets home, he goes over to his couch, turns on Netflix, and binge-watches hours of TV to numb himself from the long workday he had. While Tim’s boss recommended that he should read more books to increase his chances of promotion.
Tim can’t be bothered to read especially when a new season of his favorite show is out.
When John arrives home, he immediately logs into his computer to start studying. Hours pass as John reviews his notes for upcoming exams. While John already has a Masters’s degree and multiple designations. He continues to put in few hours every night to work towards another accreditation which will help him scale the corporate ladder faster.
In fact, John recently learned that one of his idols, Dan Lok, invests over $500,000 a year in learning. John figures that if millionaires are investing that much time and money into learning new things then he should do the same. Therefore, difference number one is that the rich never stops learning.
2. Rich Sells Value and Poor Sells Time
At work the next day, Tim’s boss begins handing out bonuses to all of the employees. As Tim opens his envelope, he sees that he’s gotten a $100 bonus, much less than others. He goes to his boss and complains about the amount.
Tim has been serving the company for 10 years and it is an embarrassing moment for him. His boss goes on to say that Tim never stays late to help his team and his productivity has dropped every year since he started.
Across town, John is plowing through his current project at work when his boss approaches him. His boss hands him an envelope. As he opens it he sees a check of $10,000 in his name. John is stunned and very appreciative of the bonus. His boss goes on explaining that he has been putting efforts into working late at night.
He also appreciated his last project making a $1 million profit. Therefore, the second difference is that the rich sell value and poor sell time.
3. The Rich Pay Themselves First while the Poor Pay Themselves Last
The following week, Tim is counting down the days until Thursday which is when he gets paid. As soon as his boss gives him a cheque, he rushes to the bank and begins sending it to his creditors. He sends money to his landlord, hydro company, and of course monthly installments for income tax. At the end of the month, he was left with no savings. Moreover, the amount in his account was lower than the month prior.
On the other hand, when John gets paid, $500 is automatically deducted and funneled into a saving account he cannot access. He then pays for the mortgage, utility bills, monthly installment of income tax to the government. At the end of the month, he notices a growth in his bank balance, making him richer than he already is.
Therefore, the third difference is that the rich pay themselves first and the poor pay themselves last.
4. The Rich have a Growth Mindset while the Poor have a Fixed Mindset
One night after work Tim is watching TV and saw an advertisement for newly released high definition TV. Tim desires to buy it. However, he has long desired to buy the PlayStation as well. He only has $1000 to spend on electronic devices in a year. Instead of deciding one, he starts thinking as to how he can get both.
John, on the contrary, decides to reward himself for success. He figures that he can take the site consulting project to earn an extra $500 he needs to cover the costs of the PlayStation. He also decides to set up a gaming zone to celebrate his accomplishments.
Therefore, the fourth difference is that the rich have a growth mindset while the poor have a fixed mindset.
5. The Rich Understand Delayed Gratification but the Poor Seek Short-term Pleasure
Because Tim dreads going to work every day, he has made grabbing a Frappuccino from Starbucks. Without a sugar latte, he cannot make it to work for long.
John, on the other hand, walks by the Starbucks every day. But instead of buying expensive coffee, he prefers free coffee served at the office. Though, the coffee at the office does not match the quality of Starbucks at all. But saving $5 every day is the point to ponder.
John saving that little amount daily now has grown up to $1,500. John will use that money for going on vacation with friends.
Researchers believe that a person’s ability to envision larger future rewards makes them much less likely to short-term pleasures. This is why turning down a daily craving will definitely reward you bigger. Therefore, difference number five is that the rich understand the power of delaying gratification while the poor seek short-term pleasure.
6. Rich Makes Several Streams for Income while the Poor Rely on One
As the economy starts to fall on hard times, many companies start to lay people off as cost-cutting tactics. Tim gets a note from the boss that the company is letting him go. He starts freaking out, thinking about how he would pay all his bills and debts. He always believed that a job provides security to the person. Now that his sole source of income is gone, his thoughts are reversed.
On the other hand, John too faces the same fate in terms of a job. He went to his boss, thanked him for the great opportunity the company provided him, and departed from the office.
You see, John knew that no job is secure and accepted the reality. He began building an online business and contributed to a dividend-stock portfolio which is now established enough to keep him afloat until he finds a new job. Therefore, the sixth difference is that the rich build several streams of income whereas the poor rely on only one.
7. Rich Sits with Richer People while Poor Surround Themselves with Broken Individuals
After a week of letting go, Tim is at home enjoying himself with his other friends. They are discussing how the economy fell off and how life is unfair to them. Also, they are wishing to get a break as rich people get.
Contrarily, John invites his friends to dinner. Meanwhile, he told them that the company has let him go because of the financial crisis. One of his friends advises him to join his construction company and offers a post of executive.
Another friend asks if he wants to join consulting company and carry on business with her. Therefore, the seventh difference is that the rich surround themselves with other rich people whereas the poor surround them with broken individuals.
To summarize the difference that separates the rich from the poor is that the rich never stops learning. They prefer value over time. They pay themselves first. Moreover, they have a growth mindset full of new ideas. Also, they harness the power of delaying gratification and build multiple streams of income. And lastly, they have rich company. Whereas the poor do the opposite thus creating a clear difference between the two classes.
