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Rich vs. wealthy…what’s the difference? Is one better than the other? Can I be both? Let’s get down to the bottom of this and find the answers we are all looking for.
Listen, we all want to be financially secure.
When most of us dream of being rich, we think about being carefree and not ever having to worry about money again. Unfortunately, we tend to think of rich people as not ever having such worries or concerns, which is truly not a fact.
If you want to reach that goal of worry-free wealth, you have to change how you think of what it means to be rich vs. wealthy.
Aren’t Rich And Wealthy The Same Thing?
I know it might sound crazy, but being rich and being wealthy are not the same thing.
It isn’t that they are totally different. They just aren’t the same. The difference between them may be slight in terms of defining one or the other, but they can blow up and completely throw off your view of money.
I want you to picture a target. If you shoot for the target, thinking that the whole thing is your goal, you are likely to miss the bullseye.
Before we do a rich vs. wealthy comparison, I want you to look at that bullseye a little closer. Don’t think of rich and wealthy as things to compare. Otherwise, when you compare them, they look the same. That’s why there is so much confusion about what we consider having a lot of money.
That confusion leads to problems in trying to get a lot of money.
Gaining a better view that shows us why rich and wealthy can be separate but same helps us to sharpen our focus and reach our financial goals.
It shows us what to shoot for!
Take Your Budget Into Consideration
When you think of rich vs. wealthy in terms of people, it helps to consider the one thing that is so important in all financial matters: budget.
Starting and maintaining a budget is a major contributor to whether you become rich or wealthy. Not just if you have a budget or not, but figuring out what’s your budget’s bottom line.
You can always make a lot of money and have little to show for it. You may even be in debt despite making a lot of money. Your income may put you in the rich category, but you are not wealthy.
Those who are wealthy will often focus on building wealth and creating a nest egg by investing in things such as the stock market, real estate, and an emergency fund. Wealthy people will ensure they have a sustainable lifestyle (thanks to budgeting!).
On the other hand, while the rich have lots of money, they often will spend the income on fancy cars, designer clothes, private jets, and blast it all on social media. The rich can often struggle with lifestyle creep – increasing their lifestyle as their money goes up, rather than working within a budget.
Think of it this way. Mike Tyson is a great example of a rich person, while Jeff Bezos and Bill Gates are examples of the wealthy. All three of these men made hundreds of millions of dollars (or more), but only one filed for bankruptcy.
Financial Success Is Not Always What It Seems
Now, rich people can be wealthy, but you don’t have to have a lot of income to be wealthy.
Another way to look at people in terms of rich vs. wealthy is that rich people may appear wealthy because they have all the trappings of financial success, but despite appearances, it may just be a house of cards waiting for a breeze to blow it all down.
Wealthy people may also appear to be wealthy people, but not always. In most cases where people accumulate wealth, they actually do so by not flashing their money around and buying expensive things.
So, Do You Want To Be Rich, Or Do You Want To Be Wealthy?
Are you closer to getting your answer? If not, let choose another example to showcase both sides pros and cons.
Instead of comparing two circles to see where they overlap, picture a circle within a circle.
- The big circle is all that it means to be rich—the high income, the high expenses, fancy cars. All the fun showy things!
- The small circle drills things down to a finer point. There is a lot of money in it, but that money doesn’t quite flow or circulate the same way. It represents the sweet spot where you don’t have to worry about money the way that rich people often do.
That’s the bullseye. That’s wealth!
Why It’s Better To Be Wealthy
Yes, rich people worry about money- And it’s not because they’re greedy. Rich people may earn a lot of money, but that doesn’t mean they keep it all.
There are all kinds of ways rich people lose wealth!
They are still rich, but they can never be wealthy unless they too start looking at the target a little more closely.
What that means for us is that we may not be rich, but we are no further away from being wealthy. We all have to set our sights on the same thing, no matter how many zeros come at the end of our paycheck.
Rich people generally have high expenses. Their budget may balance, but just barely. You’ve heard the expression, “It takes money to make money”? That’s the rich.
Now, that doesn’t mean that all wealthy people inherited their money and there is nothing we can do to reach that goal for ourselves. We can become wealthy, just as easily as we can become rich.
It all comes down to habits and determination.
Don’t Constantly Be Worrying About Money
If you make a lot of money, you have a choice of what you can do with that money. Everybody does!
If you are in debt, you may think you would use that money to get out of debt. For most of us who want to grow our wealth, that is our top priority.
However, rich people don’t always think that way. In fact, many rich people have loads of debt! It comes back to the “It takes money to make money” philosophy. If you don’t have the money, you borrow it. This leads to the idea that debt is good.
It’s a fallacy that traps us in a cyclical pattern of earning and paying, no matter how much money we make. But, that’s not the only way rich people fall short of wealth.
It doesn’t always come down to borrowing money.
You can live within your considerable means and still lack wealth. As your income grows, you may want to spend your money on things you can afford. That’s what rich people do. Those things may even cause you to make more money.
But, that money isn’t necessarily wealth. It all depends on what you do with it.
Rich people tend to have hired staff to see to all of the things they own but can’t personally manage. That goes from groundskeeping on their hundred-acre estate or managing their personal finance.
In short, in order to stay rich, rich people sometimes abandon wealth. They have a lot, but their bottom line is small. They have to be very careful with their budget and, if they are not responsible for the money they make, it can easily fall apart.
Wealthy people don’t worry about money. That’s the primary difference in the rich vs wealthy debate. Wealthy people have a lot of money and they don’t need to spend it in order to keep making more money.
How You Can Get Wealthy- Now!
So, having a lot of money can be a minefield, and getting to wealth means following a more sustainable path. Here are some tips that will help you sharpen your focus on the bullseye so that you too can be a wealthy person.
Be Frugal With Your Money
One of the best ways to grow wealth is to be careful with the money you spend. The fancy car is a rich person icon, but cars lose value quickly.
Wealthy people have a habit of not spending too much money on things they don’t need. They may not look rich, but they have money.
A friend of mine once told me that her dad always complained about his wealthy brother. He’d say, “He only has money because he never spends it.”. The point is that it’s true what they say about the penny. Saving it is just as good as earning it.
Note: If you looking for some more ways to save some money, take a look at these 45 frugal living tips I put together to help you and your budget!
Consider Making Some Investments
I love investing. Love it! It’s a total hack for anybody who has a spending habit.
Sometimes, you might just get that itch to go buy something. It feels like money is burning a hole in your pocket.
It used to be you had to go to a store for retail therapy, but everything is online now. It’s also easier than ever to invest your money in stocks and retirement funds.
If you’re new to investing and you aren’t sure where to start, you aren’t alone! The good news is that investing doesn’t have to be difficult. My friend Jeremy has an incredible course about how to invest using Index Funds. Check it out here.
Too many people think that they missed out on their chance to invest. The truth is investing is always better for building wealth.
You may have seen those charts that show how much more Person A has than Person B because she started investing five years earlier and then stopped, while Person B kept investing.
If you are Person B, start investing NOW! You still have the opportunity to end up with a lot more money at retirement.
Get Income Tax Savvy
Part of investing is taking advantage of tax breaks!
There are tax-advantaged accounts that can help you save money in the short term and help you deal with some of the rich vs. wealthy conflicts by helping to direct the path of your income tax dollars.
Expensive cars and private schools may not get you much tax advantage, but mutual funds and rental income can. Pick and choose where you spend your hard-earned dollars and make money work for you!
Budget Now So You Don’t Have to Later
Investing is something you will continue to do as long as you have the income to invest. The same cannot be said of budgeting when you have wealth.
That doesn’t mean you will no longer account for your spending, but you will not be tied to your budget the way that you are now. Budgeting now makes room for you to grow your wealth.
A quick look at your budget will tell you what road you’re on. Is it the rich path, or the wealthy one?
That’s it! I hope this guide helps you find the answers you were looking for. Financial freedom is all about building enough money to live a sustainable lifestyle.
If you are ready to learn how to write a budget so that you can find ways to build wealth over time, then sign up for my free budgeting course below. I’ll teach you how to write a budget you can stick to so that you can ultimately be wealthy!