By learning about the habits and behaviors of both the rich and the poor, you can gain a deeper understanding of what contributes to financial success. And experts say it can also help you make more informed decisions about your money.
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“Based on my financial and career insights, mindset is a key factor,” said Nikita Sharbina, founder and CEO of AIScreen. “Wealthy people tend to adopt an abundance mindset and see opportunities where others may see obstacles. This mindset encourages risk-taking and innovative thinking. In contrast, a scarcity mindset limits one's ability to take calculated risks and seize opportunities, and often impedes financial success.”
That being said, let's dig deeper into what differentiates the rich from the poor.
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financial mindset
Wealthy people often have a solid financial education and mindset and know the basics of saving, investing, and building money.
“They value financial literacy and make smart financial decisions,” said Vikas Kaushik, technology expert and CEO at TechAhead. “Conversely, many low-income people may lack access to financial education, which can result in them being ill-informed and relying on traditional, less profitable financial practices.”
Andy Chan, financial expert and founder of The Credit Review, believes that an individual's attitude can make all the difference in terms of financial success.
“Wealthy individuals generally exhibit a mindset of wealth that inspires a passion for investing and allows them to take prudent financial risks,” he said. “They believe that opportunities to create wealth are plentiful and that they can pursue them. On the other hand, disadvantaged people often have a scarcity mindset and therefore avoid risks and pursue economic growth.” are less likely to explore opportunities.”
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Risk tolerance and investment strategy
Kaushik said wealthy people typically have a higher risk tolerance and make more calculated investments. “They try their hand at entrepreneurship, diversify their holdings and take prudent risks.”
On the other hand, people with less money may be risk-averse and choose safer assets with lower returns, he said.
“Some wealthy individuals may choose stability over financial development, while others may choose to take more risk in the hope of greater returns. This risk appetite Differences greatly increase wealth inequality.”
education
Experts cite education as one of the key factors that differentiates the rich from the poor.
“Education may not guarantee wealth, but it can greatly increase an individual's chances of success and upward mobility,” says founder and CEO of Seniors Life Insurance Finder. ) said Linda Chavez.
He noted that people from wealthy families are more likely to have access to quality education, both in primary and secondary education and in higher education opportunities.
“They can attend prestigious schools and universities and often have better resources and networks for future job opportunities.”
Meanwhile, President Chávez said people from low-income households do not have access to the same level of education, which could lead to fewer employment opportunities and lower-paying jobs.
Network and Connect
“The adage, 'It's not what you know, it's who you know,' applies to many successful people,” Chavez said. “People from wealthy families often have strong connections that can open doors in terms of job opportunities, business partnerships, and other beneficial connections.”
She said that while they may have access to mentors and family members who can provide valuable guidance and advice, people from lower income groups may not have access to the same level of networks and connections. “This can make it more difficult for them to find work or start their own businesses.”
financial literacy
According to experts, financial literacy refers to the knowledge and skills needed to effectively manage finances. Chavez said people from affluent families are often more exposed to financial education and discussion at a younger age.
“They may also have access to financial advisors and mentors who can provide guidance on investments, savings strategies, and other financial decisions,” she said.
In contrast, people from low-income households may not have the same level of exposure or resources when it comes to financial literacy. This can ultimately lead to poor money management habits and a lack of understanding about how to build wealth, she said.
Chan pointed out that wealthy people generally have a good understanding of financial concepts.
“This knowledge will enable you to make informed investment decisions and implement effective wealth-building strategies,” he said. “Their financial literacy allows them to navigate complex market conditions and take advantage of opportunities as they arise.”
debt management
“Wealthy people typically maintain a healthy relationship with debt,” Chan continued. “They use it strategically to generate income or fund investments with potential returns.”
He also said less wealthy people often suffer from high-interest consumer debt, which hinders economic development and limits their ability to build wealth. “Effective debt management plays a key role in distinguishing between these two groups.”
savings and investment
“In my experience as a financial professional, there is one important difference. [between the rich and poor] That's the approach to saving,” Sharbina said, noting that wealthy individuals tend to leverage the power of compound interest and prioritize investments over traditional savings accounts.
“High-net-worth individuals understand the power of saving and investing early on,” said Douglas Goldstein, CFP and president of Profile Investment Services. “They prioritize saving a portion of their income and investing it wisely to grow their wealth. The importance of starting saving early and investing consistently, even if it's a small amount. I would like to emphasize that.”
ongoing source of income
“Wealthy people often, but not always, have multiple sources of income that contribute to their wealth,” Goldstein says.
He suggests that people with less means start discussing the concept of passive income and different ways to generate additional income, such as starting a side hustle, investing in rental real estate, or creating online courses.
long term financial planning
Experts agree that wealthy people take a long-term view of their finances and plan for the future.
“They set clear financial goals, review their plans regularly, and adjust as necessary,” Goldstein says.
Those with few resources are advised to follow the lead of those with wealth.
“I would like to emphasize the importance of setting financial goals, creating a budget, and working with a financial planner to develop a comprehensive financial plan.”
GOBankingRates Details
This article was originally published on GOBankingRates.com: 9 Things That Separate the Rich from the Poor
