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10 Differences Between Middle Class And Rich People

10 Differences Between Middle Class And Rich People

According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined. But what about the people in between? The middle class? You may be considered middle class. You’re not poor, but you’re not rich…yet. The middle class seems to be shrinking, according to the data revealed over the last couple decades. That means you’re going to be less likely to be middle class in the future. You’ll more likely be poor or rich. Which side do you want to be on?

If you want to be on the side with the rich, you’ve got to start thinking like the rich. Here are 10 differences between middle class and rich people for you to learn from…

1. The middle class live comfortably, the rich embrace being uncomfortable

“Be willing to be uncomfortable. Be comfortable being uncomfortable. It may get tough, but it’s a small price to pay for living a dream.”
-Peter McWilliams

middle class and rich differences

    “In investing, what is comfortable is rarely profitable.”
    – Robert Arnott

    It’s comfortable to work a “safe” job. It’s comfortable to work for someone else. The middle class think being comfortable means being happy, but the rich realize that extraordinary things happen when we put ourselves in uncomfortable situations. Starting your own business is a risk and risks can be uncomfortable, but a little risk is what it takes to create wealth and achieve superior results.

    Step out of your comfort zone. Look at all your options. You will have to be at least a little uncomfortable if you want to become rich. You might even have to fail and that’s great, because if you’re not failing, you’re not doing much.

    2. The middle class live above their means, the rich live below

    “There is no dignity quite so impressive, and no one independence quite so important, as living within your means.”
    -Calvin Coolidge

    rich and middle class

      You won’t catch the average millionaire in a $100,000 car or a multi-million dollar home. The rich don’t spend their money on depreciating liabilities, they spend their money on appreciating assets and they live below their means. On average, the rich drive cars that are a few years old and they don’t buy them new, according to studies done in the book “The Millionaire Next Door.” Even if they can “afford” that fancy new Escalade, they usually don’t buy it.

      Remember, if you earn $1,000,000/year and you spend $1,000,000/year, you’re still broke.

      3. The middle class climb the corporate ladder, the rich own the ladder

      “The richest people in the world look for and build networks; everyone else looks for work.”
      -Robert Kiyosaki

      Middle class corporate

        The middle class tend to work for someone else. They have a job. A career. Upper middle class tend to be self-employed. They own a job. The rich tend to own the business. They own that corporate ladder that the middle class are busy working up. The rich understand that they need more people working for them to earn more money. The rich understand the power of passive income.

        4. The middle class are friends with everyone, the rich choose wisely

        “It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.”
        -Warren Buffett

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        rich and middle class friends

          The rich understand that when you surround yourself with successful people, your own success will follow. Likewise, surrounding yourself with unsuccessful people tends to have the anticipated effect. Your income is usually the average of the incomes of your three closest friends. If you want to earn more, hang around people who earn more. It’s all about aligning your mindset with the mindset of successful people. If you want to be rich, you have to think rich.

          5. The middle class work to earn, the rich work to learn

          “When you are young, work to learn, not to earn.”
          -Robert Kiyosaki

          work to learn, not to earn

            The middle class are easily persuaded to change jobs when someone offers more money. The rich understand that working isn’t about the money, especially in the early years. It’s about developing the skills and traits you need to develop to become rich. That may mean working a sales job to better understand the world of selling. Or it could mean you work at a bank to better understand accounting. If you want to be rich, you should be working to learn the skills you need to become rich. Most rich people didn’t get there by earning a high salary.

            6. The middle class have things, the rich have money

            “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like.”
            ― Will Rogers

            middle class and rich difference

              Back to the fancy cars and big houses. That’s where much of the middle class spend their money. Drive through a middle class neighborhood and you will usually see brand new cars, expensive landscaping and high-dollar homes. The rich understand that to become wealthy, you have to want money more than you want things. If you keep buying things, your money will keep going with them. It’s funny how that works. For example, Warren Buffett still lives in the same home he bought in 1958. And he only paid $31,500 for it.

              Stop buying things and start focusing on keeping, saving and investing the money you earn. If you are a shopaholic, start shopping for assets. Become interested in investing, then look for bargains on stocks and businesses instead of shoes and electronics. That being said, it’s not all about saving your money.

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              7. The middle class focus on saving, the rich focus on earning

              “Your greatest asset is your earning ability. Your greatest resource is your time.”
              -Brian Tracy

              middle class and rich people

                “If you would be wealthy, think of saving as well as getting.”
                -Benjamin Franklin

                Saving is important. Investing may be more important, but earning is the foundation of both. You understand that you need to save and invest, but to really achieve extravagant goals with them, you need to earn more. The rich understand this and work on creating more avenues to earn and earning more with the avenues they have. If you really want to become rich, work on your earning ability, not your saving ability.

                8. The middle class are emotional with money, the rich are logical

                “Only when you combine sound intellect with emotional discipline do you get rational behavior.”
                -Warren Buffett

                middle class and rich money

                  Steve Siebold interviewed over 1,200 of the world’s wealthiest people over the past 30 years for his book “How Rich People Think”, and according to him there are more than 100 differences in how rich people look at money compared to the middle class. One of the key differences he found was that the middle class see money through the eyes of emotion, but the rich see money through the eyes of logic. Making emotional financial decisions will ruin your finances. Warren Buffett explains that investing has much more to do with controlling your emotions, than it has to do with money. Emotions are what cause people to buy high and sell low. Emotions create dangerous business deals. Leave emotions out of this and turn to logic.

                  9. The middle class underestimate their potential, the rich set huge goals

                  “Set your goals high, and don’t stop till you get there.”
                  -Bo Jackson

                  middle class and rich goals

                    The middle class set goals. Sometimes. It’s the capacity of the goals that differ from the middle class to the rich. The middle class set safe goals that are easily obtainable. The rich set goals that seem impossible, difficult or crazy. But they know they are achievable. It all comes back to having the proper mindset.

                    When you’re setting your goals, ask yourself if they could be bigger. Ask yourself if that’s really all you can do or if you can do more. I think you can do more.

                    10. The middle class believe in hard work, the rich believe in leverage

                    “It is much easier to put existing resources to better use than to develop resources where they do not exist.”
                    -George Soros

                    rich and middle class workers

                      Hard work is a necessity. For all of us. If you want to reach the top (whatever that may be for you), you’ve got to put in the work. The problem is that hard work alone will rarely make you rich. You can’t become rich by doing it all yourself. You have to use leverage to truly become rich and stay that way. Leverage works in many ways, from outsourcing to investing. The more leverage you can incorporate, the more time you will free up to work on the things that really matter in your business and your life.

                      Some differences between the middle class and the rich are vast, while others may seem simple and minor. The fact is that if you want to become rich, you have to think like the rich and do the things the rich do.

                      Featured photo credit: Dude Walkin/Alejandro Escamilla via unsplash.com

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                      Last Updated on March 3, 2021

                      Top 6 Hacks on How To Build Credit Fast

                      Top 6 Hacks on How To Build Credit Fast

                      When done right, credit can open doors and provide a lifestyle that you never imagined possible. Anything from flying around the world in first-class and staying at 5-star hotels entirely for free to starting and scaling businesses. It’s also an area where it can be easy to make mistakes and hard to recover from without the right information. In this article, I will break down how you can build credit fast so you can open doors in your life!

                      When you start to think about improving your credit score, you have to answer three important questions first:

                      1. What are you trying to achieve by having good credit?
                      2. What really is your credit score?
                      3. How is your credit score calculated?

                      What Are Your Credit Goals?

                      Having a high credit score is great, but ultimately, your credit score is a tool in your personal finance arsenal that you can use to open doors. The first question you should ask yourself is “what will a higher credit score do for me?”

                      I work with many clients directly at Freedom Travel Systems to help them fully leverage the power of their credit so they can enjoy free luxury travel and start or grow their business. For my clients and many others, here are a few common goals many credit-savvy individuals have:

                      • Free Travel – getting access to travel rewards cards so you can get tons of free travel and even get first-class flights, hotel suites, and luxury amenities all for free
                      • Start/Grow a Business – getting access to business credit so you can start and grow a business with 0% or low-interest financing that does not impact your personal credit
                      • More Approvals – getting approved for credit cards, auto loans, or mortgages so you improve your lifestyle or build your personal wealth
                      • Better Rates – getting better interest rates on any loans you get will save you tens or hundreds of thousands of dollars over your lifetime

                      What Is Your Credit Score?

                      Your credit score is simply a 3-digit number that tells potential lenders how reliable of a borrower you are. Keep in mind that lenders, such as banks and credit issuers, stay in business by lending. Their goal is to find the people that have the highest probability of paying them back and they assess this primarily through your credit score.

                      What’s important to know is that there are two major scoring models used to create your scores. These scores are your FICO Score and your Vantage Score. More than 90% of lenders rely on your FICO score, so when you are checking your score, you want to make sure you see the actual score that the lenders use. And no, checking your own score does not hurt your credit!

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                      Then enters the 3 main credit bureaus, which are essentially agencies that collect credit information on you. These are Experian, Equifax, and TransUnion. These bureaus then apply a scoring model to the information they have on you and voila, you now have a credit score! Bureaus sometimes have different information on your report, which is why you will see 3 different scores.

                      How Is Your Credit Score Calculated?

                      Next, you need to understand how the credit score is calculated. This will provide a high-level overview, but there is more detail to each of these factors alone.

                      There are 5 main factors in the calculation of your credit score:[1]

                      1. Payment History (35%) – This refers to the amount and percentage of on-time payments you have.
                      2. Utilization (30%) – This is how much revolving credit you use as a percentage of the total revolving credit issued to you. Note that installment loans like auto-loans or mortgages do not count towards this while credit cards do.
                      3. Age of Credit (15%) – This refers to how long your credit history is, primarily your “average age.”
                      4. Credit Mix (10%) – This is how many different types of credit you have. For example, there are credit cards, student loans, auto loans, mortgages, personal loans, and lines of credit.
                      5. New Credit (10%) – This primarily refers to how many inquiries you have for new credit.

                      Top 6 Hacks on How to Build Credit Fast

                      Now that you’ve learned more about your credit score, here are the top 6 tips on how to build credit fast.

                      1. Don’t Close Your Cards

                      Many of us are taught that getting a new credit card is bad and having too many will hurt your score. In fact, the opposite is true. You want to have many positive accounts reporting to your credit report. Logically, this makes sense because having more accounts with more on-time payments shows that you are a more reliable borrower. You just don’t want to open too many accounts too quickly since that can hurt your “new credit” factor.

                      Instead of closing a card, what you should do is simply keep the card open and put a small subscription service on it monthly. Why? Because each time you have an on-time payment, it helps build your payment history, the largest factor of credit.

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                      If you close a card, you are missing on potential on-time payments, age of credit, credit mix, and also lowering the total credit lent to you so your utilization percentage may go up. If you have an annual fee on a card you don’t like, see if there is a “no-fee” version of the card and downgrade it to that card rather than close it.

                      2. Use Autopay to Never Miss a Payment

                      This one is easy to do and easy not to do. Go into your credit card account and set up auto-pay. You can choose to either pay the full amount, the statement balance, or the minimum payment. Personally, I like to set up autopay to pay the minimum payment so that I never get a late payment. Then, I go in and manually pay the statement balance each month by the payment due date.

                      This helps me personally see my spending and have a manual review of my charges while ensuring, not have to pay interest, and still get the benefit of making sure that I never miss a payment if something goes wrong. Think about it, if you were to have a medical or family emergency, the last thing you want to experience on the back end of that is a late payment and a drop in your credit score. So, set up autopay.

                      A pro tip is to update your payment due dates across all bills and accounts to be the same so that you can “time batch” the process and have one time a month where you sit down and handle your payments. You can do this by simply contacting the credit card company or doing it online.

                      3. Get a Credit Limit Increase to Lower Your Utilization

                      One of the factors that get most people into trouble is using too much of their allotted total credit. Their utilization, which is the percentage of revolving credit they use, goes up, and their score tanks. You should aim for less than 30%, and in an ideal world, less than 10%.

                      To help drive this down, call your credit issuer and ask for a credit limit increase. This will help increase the total amount of credit extended to you and drop your utilization. Oftentimes, they will only give it to you when your utilization is fairly decent (less than 50%), so work to pay it down as best as possible before doing this. You should ask if the credit limit increase will give you an inquiry as some banks do a hard inquiry while some do not. If they do a hard inquiry, it is often better to just get a new card altogether or pass.

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                      4. Add Authorized Users to Increase Your Age, Add History, and Decrease Utilization

                      This is one of the best hacks out there as it helps with the 3 biggest factors of improving your credit: payment history, utilization, and age. This concept is also called “credit piggybacking” where someone with great credit history on a card adds an authorized user (AU) to the card. When the AU gets added, the credit history and information from that card are added to the AU’s report!

                      This is extremely helpful for people with young credit because it can drastically increase your age of accounts. It can also help many people with limited payment history or high utilization.

                      Please be aware that anything good or bad on that account you are added to will show up on your report. So, you want to avoid any cards with negative marks or high utilization. That being said, it is a one-way street, so nothing that you do with your credit can impact the primary account holder.

                      This is so valuable that there are companies that sell AU accounts. I always suggest starting with your family and/or personal network first as there are likely people in your network that can help!

                      5. Space Out Your Application Strategy

                      New credit is the smallest factor of credit, but it still matters! If you are looking to build up your credit, you should space out your applications. If you apply for too much credit in a short period, it looks very needy in the eyes of the lenders. For this reason, it is safest to apply for cards slowly over time unless you have really studied more in-depth how this works. A good rule of thumb is once every few months.

                      If you are in the credit game for the hopes of getting tons of credit card points for free travel, which is what I personally take full advantage of, you will want to familiarize yourself with the different bank rules and card promotions to put together the right application strategy. Applying blindly will waste inquiries and leave tons of benefits on the table!

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                      6. Review Your Report for Negatives

                      If you have any negative or “derogatory” marks on your credit report, this will hurt you drastically. They do impact you less as they age, however, you should review your credit report to ensure that everything on your report is 100% accurate and actually yours. Wrong information ends up on credit reports all the time and you will want to take personal responsibility for making sure it is accurate.

                      The “burden of proof” is on the credit bureau to confirm that any information on your report is in fact accurate. If you find inaccuracies, you can dispute that with them, or you could consider getting a credible credit repair company to help you.

                      Final Thoughts

                      There you have it, the top 6 tips on how to build credit fast so you can get closer to reaching your goals. Now that you’ve learned more about how credit score works and how you can improve yours, you’ll hopefully be able to make better financial decisions and achieve your financial goals quicker.

                      More Tips on How to Build Credit Fast

                      Featured photo credit: CardMapr via unsplash.com

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