3 Mindsets That Make Ordinary People Wealthy

I was talking to a friend recently about strategies that make ordinary people wealthy. Often, people talk about trying to spend less by budgeting, saving more, and investing. Or working harder to earn more.

These things definitely help. But we all know that without a good budget, savings, and investing plan, it’s hard to build wealth.

After all, even rich people go broke when they spend more than they earn without saving anything.

This happens to lottery winners who suddenly don’t know what to do with their windfall . It also happens to normal folks who go bankrupt after mismanaging their finances.

Interestingly, a recent study found that most American millionaires are the owners of a regional business, such as an auto dealer or a beverage distributor.1 They’re not some high-flying tech CEO or social media influencer who travels to different exotic beaches every weekend.

In other words, these millionaires are normal people having normal jobs.

These millionaires might be “normal.” But they do things differently than most other folks. This is where mindset comes in. The way their mind works makes them go beyond the crowd.

Here are the 3 mindsets and habits that make ordinary people wealthy.

Mindset #1: Grow from your comfort zone

Most people don’t become rich because they don’t take action . They just keep doing the same thing over and over again. The result? They stay where they are.

They make roughly the same amount of money and debt, year after year. And they never build wealth.

That doesn’t mean you have to jump out of your comfort zone, leave your job, and start your own business right away. Or worse, start gambling with crypto and individual stocks you read about on Reddit.

You can also build wealth whilst staying within your comfort zone. As long as you act, remain consistent, and are not afraid of failure.

Mohnish Pabrai, for example, is one of the most successful investors who came from an ordinary background.

He wasn’t born into generational wealth and he didn’t study in an Ivy League university. Instead, he grew up in cheap apartments with his family in India, while his father started and failed various business ventures.

In the book, Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life , Pabrai said:

“I watched my parents losing everything multiple times… And when I say losing everything, I mean not having enough money to buy groceries tomorrow, not having money to pay the rent… I never want to go through with that again.”

Pabrai didn’t leave his IT company job until his startup business had acquired enough clients. And when his business made enough money that he could invest full-time, he still pooled most of his capital from other investors.

Pabrai always had a safety net for when things went wrong. But unlike other people who are content with being safe, Pabrai actively pursued his goals.

That’s the key to ordinary people becoming wealthy: They act. They take calculated risks. And they don’t quit when things get hard. They remain consistent.

Mindset #2: Optimize your environment

There are three levels of environments that make a major impact on your finances: The city you live in, the people you work with, and the people you spend time with the most outside of work.

• Live in a cheaper city — I never met anyone who got wealthy (unless they’re earning millions) by living in a big, expensive city. I used to work at a big company in London. At the time, I was spending most of my income on rent, commuting, and simply living in an expensive city. Then I moved back to my hometown, Leeuwarden, in The Netherlands. First back to my parents, and later, I bought an apartment. My mortgage was €500. In London, I paid almost three times more in rent, for a smaller place. The same apartment I bought for 135K is now worth 200K. So I didn’t only save in rent, I also built equity.

• Avoid working with bad people — That’s also one reason I quit my corporate job in London. I couldn’t stand the office politics. There was a lot of backstabbing and people who didn’t want to see you do well. If you’re in a negative environment or deal with people who don’t want to see you win, you’re only destroying chances of success.

• “Marry the right person” — This is actually money advice from Warren Buffett.2 It might not seem related to personal finance at first. But when you think about it, who else but your spouse/partner has one of the biggest impacts on your financial decisions? This applies to other people who become close to you as well: Friends, family members, etc.

Mindset #3: Think 50% when you spend. And 10% when you don’t

Let’s say you want to buy the latest $1000 iPhone.

The thing with most of the stuff we buy is that their value goes down over time. That applies to cars, furniture, clothes, electronics, etc.

So before I spend money on big purchases, like a new phone, a new car, and so forth, I always think about them in future terms.

I estimate that most of our stuff degrades by at least 50% in value within 3 years. And I don’t know about you, but I just can’t be bother with reselling most of my old stuff on marketplaces.

So after years of using my devices, I end up trading them in for even less than what they’re worth. I know I’m leaving money on the table. But I do that the moment I buy something.

Compare buying stuff to investing your money. The S&P 500 index grows at around 10% per year on average.

With the power of compounding, $1,000 is worth $1,610.51 in 5 years.

That $1,000 iPhone is really worth $1,610.51 when you think about the other option you have, which is to invest.

Spending your money on something means giving up a bit of freedom and options. That’s what money truly represents. We all spend money to buy a certain level of freedom .

Every dollar you spend is another dollar lost from your freedom goals. That doesn’t mean you become a money hoarder. But whenever you spend, always try to ask yourself:

“Is this thing worth the freedom I’m losing?”

If you want to retire early, you’ll need a certain amount, usually a million bucks or more. That amount of money won’t materialize by itself. You’ll need to keep earning enough to enjoy life while building your nest egg.