4 Key Differences Between the Financial Habits of the Rich and Middle Class
Written by
Laura Beck
Edited by
Amber Barkley
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It’s common knowledge that there’s a big gap between the rich and the middle class, but have you ever wondered why that is? Well, a lot of it comes down to how the rich handle their money. GOBankingRates spoke to financial experts to learn exactly why the rich stay rich and the middle class stays the middle class.
Here are the key differences between the financial habits of the rich and the middle class.
The Rich Own Assets, the Middle Class Pays for Them
One of the biggest differences between the rich and the middle class? Asset ownership.
As Sam Hodgson, pensions expert at SIPP Advice, put it, “The rich own the assets that the middle and lower classes, and even governments, pay for through rent or interest. That includes real estate, businesses, commercial real estate and even debt in the form of mortgages and other loans — essentially, any type of asset that can generate income, the rich will own.”
So, while people in the middle class might own a home, they most likely have a mortgage, which means they’re sending their money straight to the rich, who own the loans. Instead of “owning” things that cost them money, the rich own things that make them money.
The Rich Save for Later, the Middle Class Lives for Now
Melanie Musson, a finance expert with Clearsurance, shared, “Rich people tend to prioritize retirement, while the middle class prioritizes their current lifestyle.”
By thinking long-term, the wealthy are able to save their money — and, more importantly, invest it! — while the middle class often struggles to balance their current lifestyle with their future goals.
The Rich Avoid Debt, the Middle Class Relies on It
The rich and the middle class have very different attitudes when it comes to debt.
“Rich people tend to avoid borrowing money, while the middle class depends on borrowing money to buy a house, a car and other high-ticket items,” said Musson.
By steering clear of debt, the wealthy keep a tighter grip on their finances and avoid throwing away money on interest. The middle class, however, can get caught up in a never-ending cycle of borrowing just to keep up with their lifestyle, which can make it tough to build wealth in the long run.
The Rich Fix Things Before They Break, the Middle Class Waits Until It’s Too Late
According to Musson, the rich and the middle class also have different approaches to home maintenance.
“Rich people spend money keeping their houses in excellent condition, while the middle class waits for something to go wrong before fixing it,” she said.
Wealthy people protect the value of their assets and avoid pricey repairs down the road. In contrast, the middle class can avoid repairs and, in turn, face unexpected bills that can drain their financial reserves.
The Final Word
As Thomas Brock, CFA, CPA, a financial professional with over 20 years of experience, shared, “The rich own growth-oriented assets and income-bearing instruments, which enable them to save substantially more than they spend, facilitating the long-term accumulation of wealth. Conversely, a broad swath of the middle class is simply struggling to meet their day-to-day financial obligations.”
If the middle class wants to improve their financial situation, they need to start thinking like the rich. That means focusing on owning assets, prioritizing retirement savings, steering clear of debt, investing in real estate and staying on top of home maintenance.
It might not be easy, but by making these changes, the middle class can start to close the gap between themselves and the wealthy and build a more secure financial future.
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