Of course, everyone wants to be rich. The idea of not having to worry about money seems like a dream for most. But, becoming rich takes lots of discipline and determination. The reality is that it’s easier to be poor.
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In a recent YouTube video from financial guru Humphrey Yang, he outlined the seven major differences between rich and poor people that are important to understand.
The Rich Are Subtle About Their Wealth
The rich are more focused on “stealth wealth”: they’re not trying to impress people with fancy cars, designer clothes and handbags, or expensive vacations. They’re modest and they’ve developed financial freedom and autonomy, rather than spending money on discretionary purchases.
When poor people come into money for the first time, they’re tempted to go out and spend money on things that they believe will give them some sort of status. This is exactly how not to become rich.
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The Rich Know It Takes Money To Make Money
The rich save and invest their money rather than spend it right away. They understand the idea of leveraging capital to scale their well. Poor people frequently tend to spend money rather than save money.
The reality is that the more you save, the easier it is for your money to work for you. Reaching a 6 figure portfolio is key to accelerating your financial growth.
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The Rich Understand Delayed Gratification
The rich know that resisting impulsive purchases will lead to a big payoff later in life. Poor people tend to spend money on the things that bring them gratification now rather than save and invest that money for the future. Delayed gratification and stretching out your time horizon are both key to long-term wealth accumulation.
The Rich Invest in Assets
Rich people love to invest in assets. Poor people tend to just leave their money in a savings account rather than invest it. An asset is defined as a resource with an economic value that will provide a benefit to you at a later point in time. Assets can include real estate, stocks, index funds, retirement funds, etc. Typically, assets go up in value and some pay you just for owning the asset.
The Rich Know Money Management Is Imperative
Generally, rich people understand where their money is going at all times and they don’t overspend. A good financial rule to follow is the 60/30/10 rule: 60% of your income can be spent on your needs, 30% can be spent on your wants, and 10% can be allocated toward savings and investing. A 10% savings rate is usually enough to achieve a comfortable retirement and perhaps even reach millionaire status later on.
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The Rich Have Excellent Credit
The rich don’t overextend themselves when it comes to mortgage debt, auto loan debt, or consumer debt. The key to a high credit score is making payments on time and utilizing as low a percentage of your available credit as possible. A good credit score leads to better interest rates which will save you money when taking out a mortgage or other loans.
Poor people tend to take on more debt to pay for things and utilize a higher percentage of their available credit.
The Rich Continually Pursue Higher Education
The rich understand that continuing education throughout their lives is crucial. This can come in the form of reading educational books, listening to podcasts, attending live seminars, and networking with others.
The poor don’t tend to follow this rule. Ultimately, when you stop learning you stop growing your knowledge base which could stifle your own net worth in the process. After all, knowledge is power.
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This article originally appeared on GOBankingRates.com: 7 Major Differences Between Rich and Poor People, According To Money Expert Humphrey Yang
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