9 Things That Distinguish the Rich From the Poor
Written by
Cindy Lamothe
Edited by
Chris Cluff
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Learning about the habits and behaviors of both the rich and poor alike can give us a greater understanding of what contributes to financial success. And according to experts, it can also help us make more informed decisions when it comes to our money.
“Based on my financial and career insights, mindset is a critical factor,” said Nikita Sherbina, founder and CEO of AIScreen. “The wealthy tend to adopt an abundance mentality, seeing opportunities where others might see obstacles. This mindset encourages risk-taking and innovative thinking. In contrast, a scarcity mindset can limit one’s ability to take calculated risks and seize opportunities, often hindering financial success.”
With that said, let’s dive into more things that distinguish the rich from the poor.
Financial Mindset
Rich people frequently have solid financial educations and mindsets, knowing the fundamentals of saving, investing and building money.
“They place a high value on financial literacy and make wise financial decisions,” said Vikas Kaushik, tech expert and CEO at TechAhead. “Conversely, a large number of people with lower incomes might not have access to financial education, which could result in a lack of knowledge and a dependence on conventional, less profitable financial practices.”
Andy Chang, financial expert and founder of The Credit Review, believes the attitude of individuals can substantially set them apart in terms of financial success.
“The rich generally exhibit an abundance mindset that fuels their passion for investment and allows them to take measured financial risks,” he said. “They believe that opportunities for wealth creation are plentiful and can be pursued. On the other hand, the less fortunate often have a scarcity mindset that may make them more risk-averse and less likely to explore opportunities for financial growth.”
Risk Tolerance and Investment Strategy
Rich people usually have better risk tolerances and make more calculated investments, Kaushik said. “They experiment with entrepreneurship, diversify their holdings and take measured risks.”
On the other hand, he said, people with less money could be risk-averse and choose assets that yield a lesser return but are safer.
“Some wealthy people choose stability over financial development,” he said, “while others may choose to take on more risk in the hopes of earning larger returns–this divergence in risk appetite greatly adds to wealth inequalities.”
Education
Experts cite education as one of the key factors that distinguish the rich from the poor.
“While education may not guarantee wealth, it can significantly increase an individual’s chances of success and upward mobility,” said Linda Chavez, founder and CEO of Seniors Life Insurance Finder.
She noted that those from wealthy families are more likely to have access to quality education, both in terms of primary and secondary schooling, as well as higher education opportunities.
“They are able to attend prestigious schools and universities, which often have better resources and networks for future job opportunities.”
On the other hand, Chavez said those from lower-income families might not have access to the same level of education, leading to fewer job opportunities and lower-paying jobs.
Network and Connections
“The saying, ‘it’s not what you know, it’s who you know’ holds true for many successful individuals,” Chavez said. “Those from wealthy families often have a strong network of connections that can open doors for them in terms of job opportunities, business partnerships and other beneficial connections.”
She said they also might have access to mentors or family members who can provide valuable guidance and advice, whereas those from lower-income backgrounds might not have the same level of access to networks and connections. “This can make it more difficult for them to find employment or start their own businesses.”
Financial Literacy
According to experts, financial literacy refers to the knowledge and skills needed to manage one’s finances effectively. Those from wealthy families often have greater exposure to financial education and discussions at a young age, said Chavez.
“They may also have access to financial advisors or mentors who can provide guidance on investments, saving strategies and other financial decisions,” she said.
In contrast, those from lower-income families may not have the same level of exposure or resources when it comes to financial literacy. She said this can ultimately lead to poor money management habits and a limited understanding of how to build wealth.
Chang noted that the rich commonly possess a substantial understanding of financial concepts.
“This knowledge empowers them to make informed investment decisions and implement effective wealth-building strategies,” he said. “Their financial literacy enables them to navigate the intricacies of the market and take advantage of opportunities that arise.”
Debt Management
“High-net-worth individuals typically maintain a healthy relationship with debt,” Chang continued. “They use it strategically to generate income or fund investments with potential returns.”
He also said the less affluent often struggle with high-interest consumer debt, hindering their financial progress and limiting their ability to build wealth. “Effective debt management plays a significant role in differentiating these two groups.”
Saving and Investing
“In my experience as a finance expert, one key distinction [between the rich and poor] is the approach to saving,” Sherbina said, noting that wealthy individuals tend to prioritize investing over traditional saving accounts, leveraging the power of compounding.
“The rich 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. I would emphasize the importance of starting to save early and making consistent investments, even if they are small amounts.”
Continuous Income Streams
“The rich often, but not always, have multiple streams of income, which contributes to their wealth,” Goldstein said.
He suggests those with fewer means begin discussing the concept of passive income and the different ways they can generate additional income, such as starting a side business, investing in rental properties or creating online courses.
Long-Term Financial Planning
Experts agree that the wealthy have a long-term view of their finances and plan for their future.
“They set clear financial goals and regularly review and adjust their plans as needed,” Goldstein said.
For those with fewer resources, he recommends following the lead of the wealthy.
“I would stress the importance of setting financial goals, creating a budget and working with a financial planner to develop a comprehensive financial plan.”
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