Blog | Personal Finance

What’s the Difference Between the Rich and Poor?

Mindset has a Direct Effect on Success

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Over the years I have found that there’s a difference in the mindset between the rich and the poor, and it has a direct effect on success.

The rich typically attribute success to one’s abilities, hard work and an entrepreneurial spirit. The middle class believe success comes from traditional education and luck. And lastly, the poor attribute success to social connections and “cutting corners” (cheating).

Not everyone fits perfectly into these categories, but generally fall within the spectrum. Some people see the world full of opportunities and others see it as scarce wasteland with no hope. Some people are producers and generate success while others are consumers.

One day, I was talking with a friend and fellow Rich Dad advisor, Tom Wheelwright, who is a brilliant tax strategist. He told me the largest taxes people pay are called “consumption” taxes. This means that the people who consume the most, pay the highest taxes. On the flipside, there are producers. Producers stimulate the economy by creating things to consume. Our tax laws reward producers with tax incentives and tax breaks.

This simple fact made me reflect on real estate. As some of you may already know, there are numerous tax incentives for building and owning commercial real estate. I know from personal experience because I live it every day through my company. We buy or build multifamily housing units and we employ several people by doing so. From those two facts alone, we are considered to be a producer. Because we are producers (of jobs and real estate) we get huge tax breaks.

Being a producer isn’t as hard as people think it is. When looking for opportunities with financial advantages, try taking a look at the government. They tell you what opportunities are out through tax incentives laws and tax breaks.

I’ve been doing this a long time and I’ve realized that being a consumer costs you more than being a producer. Not to mention that a consumer’s income is generally lower and their taxes are higher. Producers are rewarded by the government with higher tax breaks and incentives. Why? Because producers stimulate the economy. They give options to the consumers.

Why doesn’t everyone become a producer? I strongly believe that the difference between the rich producer and the poor consumer is the mindset. But the good news is, your mindset can be changed. I’ve seen living proof from friends that you can go from a consumer mindset to a producer mindset.

It all starts with resources. The rich understand that to be successful there needs to be an abundant amount of resources at your disposal. You use these resources to fast-track your education and your business.

A poor mindset would either be intimidated by the work or would try the “get-rich-quick-scheme”. Typically, the poor mindset doesn’t want to pursue education and are close-minded.

Producers want to spend their time, resources and energy on work that continues to pay off long after the effort has been invested. They want to build a self-sustaining business that continues to build momentum and continues to generate value by itself.

Consumers want short-term returns that offer high dollars. There is no concept of putting in the time to earn the reward. It takes a lot of effort and time to be a producer but in the end, it can be extremely worth it.

My advice to anyone that is looking to start a business or become an investor is gain the rich mindset and invest in the resources. Don’t expect to get a reward right away, but stay in it for the long haul. It might seem like a risk, but without risk there isn’t reward.

Original publish date: July 24, 2019

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