Spend Money Like the Rich: How to Change Your Spending Mindset

Tired of the way your personal finances are moving forward? It is time to start spending money like the rich. Learn how to change your spending mindset to become wealthier!

We all have the opportunity to become successful one day. Getting there depends on several factors such as your persistence and dedication.

Another factor I never thought of until I saw an awesome video on Entrepreneur Mindset’s Facebook page. This factor has to deal with our very own mindset about spending. The theory is that each income class has different spending mindsets.

Honestly, my jaw dropped while the light bulb turned on in my head.

Instantly, I started looking into the mirror to see where I was with my mindset. This was a rude awaking but very welcoming. To be honest, this video also helped me write about the 8 personal finance moves I wish I knew before turning 30.

But I digress, today we will talk about where my mindset was and where it is going since watching this video.

First, let’s talk about the theory and the different spending mindsets. Hopefully, this will be a rude awaking for you as well to get you on the right track to financial success!

The Idea

The thought behind this theory is that each income class in society looks at money differently. Each class spends their money on different items that will either give them short-term pleasure, cost them more money, or will make them more money (I wonder who that could be).

The intent of this article is to look at things from a 30,000-foot perspective. Yes, I do agree, this might be an over-generalization of everyone and all of the variables that come into play. But that is not the intent. We could write a whole book if we dug that deep into this subject. While reading this article, keep this in mind.

After reading this article, I want you to come out thinking about your own spending habits and taking a serious look in the mirror to how you can make those habits better.

Before we dive into the spending mindsets of each income class I want to clarify a couple terms.

  • Assets: Something that pays you after you purchase it.
  • Liabilities: Something that costs you money after the initial purchase.

Okay, now I think we ready to discuss the different income classes. Let’s take a look at each class to figure out what mindset you have.

Lower-Income Class

The lower income class is defined as any family of four who makes less than $42,000 a year (Pew Research Group).

These people tend to spend money on frivolous stuff that really has no value. Typically this stuff is not needed and is bought for that short-term sense of satisfaction.

I used to be like this not long ago. I would convince myself that I had to buy stuff because it was a good deal. Between my wife trying to correct this thought process and me working on Wallet Squirrel, I have turned my mindset around to not buy any unnecessary stuff anymore.

So what is this unnecessary stuff? As I think about my previous purchases it would be the Xbox One or a new TV or an iPad that is never used.

One of the poorest people I know currently has this spending mindset. It is really interesting actually how his spending habits match the exact definition of the lower-income class. He spends any of his hard earned money on very unnecessary items that he has convinced himself that he needs. If the item is on sale at the local REI, he buys it.

The sad part is he wants to purchase a home one day but this continuous frivolous spending pushes him farther and farther away from that goal. Especially as home prices are just going higher and higher here in Denver.

Middle-Income Class

According to the Pew Research Group, “Middle-income households – those with an income that is two-thirds to double the U.S. median household income – had incomes ranging from about $42,000 to $125,000 in 2014.” (Pew Research Group).

You can find out what income class you belong to by using Pew’s calculator. The middle class is the income class that my wife and I fall into. Let’s see if we spend like the middle-income class typically does.

The middle class is very similar to the lower class, just with bigger toys.

Typically the middle class appear to be rich but really are not. Since the middle class can spend more money, they can buy more fancy toys such as cars, boats, second homes, and so on. These items are known as liabilities or things that cost you more money after the initial purchase.

Since they have all of these toys they appear to be rich but really are not. This is because they are spending all of their extra money maintaining their liabilities.

Because of these more expensive toys, you might have more debt. I know I did with our car and that is why I started blogging with Andrew. To pay off more debt. Blogging helped me pay off our $7,000 car loan in three months! If you are interested in blogging, check out our article on how you can start a blog.

Upper-Income Class

This leaves the upper-income class or anyone who makes more than $125,000 a year. (Pew Research Group).

I see a lot of gray area within the upper-income class and their spending habits. I know a lot of people that earn more than $125,000 a year and still have the spending habits of the middle-income class. These people from the upper-income class typically do not become richer because they are too busy propping up those liabilities.

For this article’s argument, we will look at the upper-income class that spends their money on assets. Remember, assets are purchases that will earn them more money rather than cost them money.

Looking at the ROI (Return on Investment) for each purchase, the rich will analyze whether they will make enough money for the purchase or not. These purchases are typically items that will move them forward financially such as stocks, rental properties, and advertisements.

Where are you now?

So where do my wife and I fit? I kind of see us within the middle-class spending mindset. We have two cars and an old house that needs a lot of updating.

Since we are not even close to being rich, I also see us as transitioning from a frivolous spending mindset to a very frugal mindset. We, mainly me as my wife was already there, really analyze the purchase before we make it.

This leads me to the last spending mindsets, being frugal. You can be within the lower or middle spending classes and not spend like they typically do. You do not spend your money at all and save it. I believe this is how you can naturally move from one income class to the next.

I have talked about similar thoughts before in my 9 Spending Habits That are Killing Your Budget article.

What income class’s spending mindset do you most relate too?

How to Change

When I started changing my mindset, the first thing I did was start using Mint to track our spending with an eagle eye. With an honest review of our spending my eyes were again opened so wide it was impossible not to change our spending mindset. If you are curious about Mint you can check out our Mint Review here.

The next steps after you really start analyzing your past spending habits, it is time to start analyzing each and every future purchase. Ask yourself the following questions.

  • Do you really need it?
  • Is it a liability or an asset?
  • What is your ROI of the purchase? FYI, ROI does not always have to be a financial gain, it can be something like a health gain.

Now, it is your turn to go out an change your spending habits!


Andrew and I are always looking for new ways to earn more money so we can invest more or pay off our debt quickly. If you are too, I recommend checking out our Ways to Make Money page. Here we find and test out new ways to earn more money on the side.




13 replies
  1. Mike H.
    Mike H. says:

    I’ll admit that I haven’t done any in-depth research into this, but if the theory is that rich people (define it however you like) don’t spend money on frivolous and short-term items…that’s going to be tough sell.

    There are a massive amount of external and correlating factors here, including and especially access to information. Wealth tends to correlate loosely with education, and if not education, the ability to hire professionals. At the very least, you’ll be in a room with someone smart.

    Next, you need to examine disposable income: poor people have less. That means less ability to get utility out of anything, so you can’t blame them for buying that which might impart a short term happiness spike.

    Finally, time horizon is important. Wealth tends to lend itself to long-term planning above short term planning, because money is affected by time more than anything else.

    I could write a full essay about this, but basically it seems like this theory is lazy thinking, a way of saying that rich people have better and smarter habits. That’s almost textbook survivorship bias.

    • Wallet Squirrel
      Wallet Squirrel says:

      Hi Mike. I agree with most of what you are saying but this article’s intent was to not look that deep into things. It was to look at things from a 30,000-foot perspective to have people start thinking more and looking into the mirror at their own spending habits. Yes, this might be over-generalizing when really there are so many variables happening at the surface. We could write a whole book if we dug deeper into this subject. I appreciate you pointing these out though!

      – Adam

  2. Dave
    Dave says:

    The wealthiest people who I know do not buy or think short term. They look for value. They also focus on quality. They will spend more on products that last.

  3. Ms ZiYou
    Ms ZiYou says:

    I agree with the premise here, and can definitely see a difference in spending long term vs short term. If you define rich people as self made wealthy people, then this fits. Less so with those the have high income but little wealth.

    • Wallet Squirrel
      Wallet Squirrel says:

      I would agree Ms. ZiYou. This article is a look at things from a 30,000-foot perspective. There is obviously so much more going on when you take a deeper look at different variables. We could write a whole book.

      – Adam

  4. Aaron
    Aaron says:

    I agree with Mike that there are some additional factors involved from a socioeconomic perspective, but the main idea is true: most rich people understand that acquiring assets that (1) will appreciate in value or (2) pay them back is the key to wealth, and they have the education and resources to make it happen.

    Financial habits don’t always correlate with these income levels: you can see the professional athlete who is a high-income earner but spends it all on status symbols vs. the frugal low-income earner who takes the FIRE route.

    I like your question: “What income class’s spending mindset do you most relate too?” It’s not always about how much money you make (although it helps), but how you use it. This post is a great reminder to consider your mindset, thanks for sharing!

    • Wallet Squirrel
      Wallet Squirrel says:

      I totally agree with you Aaron. This article would have dug into those different factors and variables if I had time to write a book 🙂 Sadly I did not so I took a look at it from the 30,000-foot perspective. I am glad you enjoyed the read even though it is an over-generalization.

      – Adam

  5. Hustle Hawk
    Hustle Hawk says:

    Interesting post touching upon some intriguing concepts. I think chief among them is what we ascribe value to. For any product or service that explicitly has financial outputs of inputs associated with it, using your definition of assets and liabilities above, this is relatively easy to determine. But for goods and services without these characteristics or with different outputs (e.g . increased health) their value is more difficult to determine. Using your definitions, is a gym membership an asset or a liability? In strict monetary terms it would look like a liability but if it ‘pays you (in some way) after you purchase it, the membership begins to look a lot more like an asset.

    As you allude to in the post, not all of one’s assets and liabilities are easily measurable or identifiable using a purely financial analysis.

    • Wallet Squirrel
      Wallet Squirrel says:

      Hi Hustle Hawk! I would take a serious look at the gym membership by asking the following questions. Are you really using it? Is it really improving your health? If you answer yes to these questions then I believe it is an asset. Your health is such a crucial aspect of living life to the fullest. Also, health can become very expensive if it were to go South. Great question!

      – Adam

  6. freddy smidlap
    freddy smidlap says:

    i think we have a rich lifestyle and have hit those number a few times and here is what has helped us get the wealth snowball going. we own 2 cars outright, but try and stagger that so we’re not paying for 2 at the same time. we take very good care of the durable goods we own (cars and home). maintain them, wash them a couple of times in winter at a car wash (salty roads). we will drive them until they die. we have an 1860’s paid off stone house. if you’re new at this here are my 2 cents: take care of the very necessary (roof, plumbing, electric, paint) and let some of the cosmetic updates wait. some if this crap gets expensive and if you already shot your budget on granite counter tops you might not be able to pay cash for that 30,000 asbestos roof replacement.

    you probably already know this. good luck with the house.

  7. Kyle @ NYPFGuy
    Kyle @ NYPFGuy says:

    I really liked the point about spending on assets vs. liabilities. I completely agree that this is the biggest difference betwee “rich” and “poor”. Rich people save up to buy assets (stocks, rental properties, a business, etc). It’s what will pay you back in the future instead of the short-term reward.


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