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What Separates The Rich From The Middle-Class 

If I could name one factor, one defining differentiator that separates the rich from the middle-class, the rich accumulate wealth while the middle class accumulates toys. Everything else revolves around this one central theme.

The person with the big house, the European cars, the fancy clothes, and the exotic vacations aren’t rich – they have a lot of stuff. Stuff does not make you rich.

​​Independence is what makes you rich.

​​Having the resources to do what you want, where you want, and when you want. That is true wealth, and it’s certain habits that keep the middle class from achieving that wealth.

What kind of habits are keeping the middle class from achieving wealth?

I work hard and have a high-paying job, so that makes me rich… The wealthy may have worked hard at one time, but their goal was always never to have to work hard again. The middle class may pooh-pooh that idea, but that’s why they’ll always be punching a clock. It’s an old cliche that the wealthy trade money for time, and the middle-class trade time for money. The only way to get to the point where you’re repurchasing your time is when you put your money to work for you instead of the other way around.

It doesn’t matter how many hours you work or how much money you make; until you stop equating success and wealth with working hard, you’ll never break free from a time clock. Until you find a way to get your money to work for you 24-7, you’ll always rely on your job to pay the bills.

​​The wealthy seek out passive income streams – and not only one but multiple streams – so that their passive income exceeds their expenses one day. When they reach that milestone, they will no longer rely on their jobs to make ends meet.

I won’t get rich unless I get a degree and climb the corporate ladder… This goes back to the first point. Many in the middle class have it fixed in their heads that because they didn’t go to college or ever graduated, that they can never be wealthy, so they stop trying. Steve Jobs and Bill Gates never graduated college, so there goes that notion.

I have a lot of toys, so that makes me rich… What do assets like expensive cars, fancy clothes, and big houses have in common? They all erode wealth. Something that’s eating away at your wealth does not make you rich. ​​How do they eat at your wealth? They require money for upkeep. Instead of giving back, they only take.

​​And don’t be fooled about your primary residence being an investment asset. Let me dispel that myth right now. How much money do you pour into your house to maintain it? Think of all the landscaping, HVAC, roofing, and structural expenses. You put into your home without getting any income in return, and then you’ll understand why a house is not an investment asset. It may appreciate over time, but what good is that appreciation if the replacement house you’re moving into after selling yours also appreciates at the same rate?

What do income-producing real estate, cash flow businesses, private debt instruments, private equity interests, and productive oil & gas rights have in common? ​​They are all productive assets that build wealth instead of destroying it.

​​The combination of income plus appreciation that many of these assets offer is exactly the type of assets the wealthy are drawn to build and maintain wealth. Cash flow allows the wealthy to leverage compounding power, while appreciation provides another source of return upon exit.

Wealth is luck… The middle class thinks the rich are rich because they got lucky – striking the proverbial gold mine. This mindset prevents them from being proactive in taking the necessary steps for building wealth. If they think being rich is left to chance, then chances are they’ll never be rich. The wealthy leave nothing to chance.

They think short-term… The middle class rarely looks beyond next week when it comes to their finances. According to Forbes, 78% of workers live paycheck to paycheck. The wealthy think long-term, and they invest accordingly. That’s why they avoid what’s trendy and driven by emotion – because it can all disappear overnight. You only have to think back to the latest stock market or Bitcoin crash for proof.

The rich seek assets with long investment windows that take emotions and crowd behavior out of the equation. They have patience and are typically disciplined, but they’re still humans – prone to act on emotions. To avoid making mistakes stemming from emotions, they invest in assets with long lockup periods to prevent them from acting on their whims.

They think that relying on others is a sign of weakness… The middle class has a DIY (do it yourself) spirit, but this mantra can be a disadvantage in the investing world. The rich have no problem relying on more qualified and experienced venture partners because relying on their own expertise in an unfamiliar field could spell disaster. 100% upside on nothing is still nothing. The rich have no problems leveraging others’ time and expertise if it means another passive income stream in their pockets.

The rich are rich, and the middle class is middling for a reason. Their attitudes and habits separate them, but the good news is it’s never too late to defect from the land of the middle class over to the land of the ultra-wealthy.

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