As far back as the roaring 20s, writer F. Scott Fitzgerald
noted that the rich are “different from you and me.”
Many a person has quipped since then that it’s because the
rich have money, but recent research suggests it is more than that. The rich
have a different philosophy about money and a different attitude towards it as
well.
Understanding these differences is becoming increasingly
important as the wealth gap between the rich and the poor widens. Estimates are
that by next year, if current trends hold, the richest one per cent of the
world population will own more wealth than the remaining 99 percent.
We need look no further than the borders of the United States
to see the impact of this trend, since of the top 10 billionaires listed on
Forbes’ annual list, eight are Americans.
What can be learn from the attitudes of the really rich?
Playing to win
Rich people buy and sell stocks and make financial
investments with a philosophy that this is a game to win. They think big. They
don’t think about just breaking even or not losing money as a good end result.
Poor people do. They make their investments cautiously and
carefully, always telling their financial planners that at best, they don’t
want to lose their money. If they make money, that’s a bonus.
That impacts the level of risk and thus, the level of
payback. The poor person has very little money, and they are terrified that
they will lose it. The rich person has enough that they can afford to lose some,
so their creativity is ignited and they have more courage in the investment
game.
Interestingly enough, both economic groups know and accept
that reality about the other. A 2012 nationwide study by Pew Research Center
found that many Americans believe the rich do think differently than other
people.
Besides their creativity in handling their money, the rich
were deemed to be more intelligent and hardworking. On the downside, they were
seen as greedier and less honest.
Questions of virtue and
value
In fact, wealth and value of character were deemed to be
another divide between rich and poor, but upon further analysis, it all comes
down to perception.
The poor person has a perception that the rich person is
greedy because they think big. They interpret their efforts to increase their
already considerable wealth as a sign of greed.
The wealthy person, however, believes that they owe it to
everyone around them to make their money work for them and create the best of
all possible lives. If they don’t help themselves first by making their money
multiply, they won’t be in any position to help other people.
Poorer people are advised to pay themselves first and create
savings, but they are more inclined to give up that money to a needy friend or
family member in the short term, rather than earn interest on it so they can
offer more help in the long term.
A question of
commitment
Rich people are totally committed to staying rich and will
reasonably do whatever it takes to protect their wealth and generate its
growth. This contrasts to the attitude of poor people who want to be rich, but
are not as dedicated to doing something about it.
The poor person is more apt to buy a lottery ticket and hope
that someone else will send them a windfall, as opposed to concentrating every
waking moment on building up their wealth.
It’s also has to do
with relationships
As Steve Siebold, author of How Rich People Think (http://www.amazon.com/Rich-People-Think-Steve-Siebold/dp/1608102793) suggests, poor people have an
emotional relationship with money, but rich people have a logical relationship
with it. They see it merely as a tool that represents options and
opportunities. To that end, they are more inclined to use other people’s money
(such as banks).
Siebold suggests that rich people also find ways to get paid
for doing what they love, whereas poor people end up doing jobs they hate to
make money, which they then must spend on pursuing the pastimes and hobbies
that they love.
But attitude isn’t
everything
What is contentious is whether or not the rich person is
actually more intelligent in their quest for wealth, or whether the poor person
is mentally shortchanged by their circumstances.
A study conducted by researchers at Princeton, Harvard and
the University of Warwick and published in the journal Science (http://www.citylab.com/work/2013/08/how-poverty-taxes-brain/6716/), found that poverty in itself can
deter our ability to make decisions about finances and life. Living in a
constant state of scarcity amounted to a mental burden equivalent to losing 13
IQ points.
The researchers described the attitude of poverty as bleak,
noting that it cuts off your long-term brain. While the rich person makes
unlimited long-term plans, confident of achieving them, the person with little
or no money doesn’t plan long term because they don’t want to be disappointed
when their dreams don’t happen.
Eldar Shafir, author of the study, points out that this
attitude about money and decision making is not determined solely by the
person, but rather by the context they are inhabiting.
In other words, in discussing the philosophy both the rich
and the poor have about money, the poor cannot be glibly chastised for making
bad decisions because their context is completely different.
As sociologist Tressie McMillan Cottom notes in her blog, you
have no idea what you would do if you were poor until you are poor.”
Financial planning
helps at all levels
Nonetheless, experts agree that regardless of how much or how
little money you have, acquiring some financial planning education on how to
manage it gives you the best chance to grow your wealth and regain some
semblance of control.
The biggest issues that keep the average person from growing
their wealth are not keeping or maintaining a budget, not tracking their
spending, buying everything brand new, spending more than they make, not
setting aside any money for retirement, and not saving for emergencies.
In essence, whether we are rich or
poor, our prosperity will either increase or decrease largely because of how we
use our money, not by how much we have.
