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How the Rich think differently to the Poor

My uncle once told me:  “The only difference between the rich and the poor is simply the way they think.  It’s their mindset.” 

And this has been proven over and over again, and even the people that have won the lottery, they’ve lost it again within a very short span of time.

And this is a generational problem, it’s got nothing to do with the amount of income that you earn.

So, you know, clients of mine that earn a lot of income are not necessarily today very well off. You know, the people with the different mindset are the ones that are very wealthy.

Okay. I’m going to share some myths with you…

There’s 12 myths of the poor…

You know that 95% of the population is doing “A”, you should be doing the opposite of “A”.  Now, 12 truths of the rich.  Test yourself – are you a rich thinker or a poor thinker? Find out by simply answering these questions.

The first thing that the poor think is that debt is bad, so they try to reduce their debt.  So just ask yourself – I’m not going to ask anyone to put their hand up and embarrass anybody.

Just ask yourself, which way do you think?

And I’ll give you my right arm ….if the bottom line isn’t reflective of the way you think.  The poor think that they’ve got to reduce their debt.  The rich think the opposite; they’ve got to increase their debt.

Whenever I was at home with my parents, whenever my parents heard how much debt my uncle went out and got, my dad would say to me, “Gee whiz, I couldn’t sleep at night if I had all that debt!” and my uncle would go, “Yes, Ed, guess what?  I got another $5 million today!” so even the language they use is completely different.

So he used to celebrate the amount of debt he had, and my dad used to frown on it.  So that, of course, then dictated the way they thought.  So that’s the first one.

The second one is that the majority of Australians – the “poor” people here think that to make a profit, you’ve got to buy and sell.

The rich don’t.  They don’t sell.  They simply invest.  What they do is, they don’t buy and sell assets or real estate or shares, what they do is, they buy time.  So they don’t buy shares, they don’t buy property.  What they buy is time.  And it’s really important to understand that.

The poor think that, to earn a lot of wealth you’ve got to work hard and earn big income.  The rich think that they’ve got to work their capital, not their body.

The poor think that size does not matter.  And the rich people think size does matter.

The poor – 95% of Australians think that positively geared investments are good.  The rich understand that positive geared investments are simply half the picture.  It’s not the whole picture.

You know how you go to some seminars, and they say, “Oh, you need positively geared properties?  Well, that’s only half the picture.”

The poor people say that paying tax must be good, because I’m making money.  The rich minimise their tax, because it’s a form of risk management, as well.  So the less tax you pay, the lower the risk.

The poor think that they’ve got to own their own home, the Great Australian Dream is, I’ve got to own my own home.  The rich people understand that if you own it, it’s a sure way to poverty.

Is this now challenging your belief systems?

The poor argue forever about what’s better, property or shares?  The rich say that that argument is a nonsense argument.

The poor say that they should not pay mortgage insurance.  The rich insist on paying mortgage insurance.

The poor believe that the rich are lucky.  The wealthy understand the rich have a different mindset, that’s all.

The poor) save hard, whilst the rich gear, or they leverage their efforts.  They don’t save.

The poor think that debt is risky.  These the rich  say it’s only risky if you can’t get more debt.

So just ask yourself, do you think this way?  Or do you think this way?

This article is a transcript of part of a video program – Wealth for Life – featuring Ed Chan



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About

Ed is a founding partner of Chan and Naylor accountants and a leading property tax specialist. He has co-authored 3 best selling books. As a seasoned property investor he shares his unique understanding of the relationship between property investment and tax. Visit www.Chan-Naylor.com.au


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