Do You Know the Difference Between Being Rich and Being Wealthy?

Rich vs Wealthy: What's the Key Difference Betwixt the 2?

• past Fiona Smith
• Updated February 3, 2022

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The difference between being rich vs wealthy is 2 completely different concepts.

Although being "rich" and beingness "wealthy" may be considered similar, they mean 2 very unlike (and ii very opposite) things.

And trust me, you lot'll want to be known as being wealthy over being rich.

Go along reading.

In this article

What Does it Mean to be Rich?

If you desire to know what beingness "rich" means, then I want you to think of some popular rappers, football players, and Hollywood superstars.

Sometimes, it seems like they are screaming the words "I am rich."

That's because being rich is about:

• Having a lot of income
• Spending a lot of money
• Showing off how much coin you have

Yes, being rich means yous take a lot of money.

But being rich doesn't necessarily mean you have a high internet worth  – or that you will e'er be "rich."

In fact, being rich could mean yous are in debt.

Why?

Most people who "are rich" spend more than they earn.

And if yous've read any of mybudgeting articles, then you would know that to become rich (or wealthy), you need to spend less than y'all earn.

To build a positive internet worth = Spending < Earn

I'll never forget this story:

I was a teenager and met with one of my parents' friends: He was a quondam American baseball star.

When he was playing baseball, he was:

• 30-years old
• Earning $4 million a yr
• Considered the side by side superstar

Then, an ankle injury put him out of the game and he was forced to retire at 34.

That was 6 years ago (he's xl now).

He and his married woman are:

• Driving $200,000 Ferraris
• Alive in a $three 1000000 mansion
• Earning $thirty,000 a twelvemonth (from a lawnmower business)
• Buy their 16-twelvemonth onetime daughter a $60,000 car (which she crashed in calendar week 1)

And y'all know what?

They are broke. Massively. And they will have to file for bankruptcy.

You cannot build wealth if you spend more than y'all earn.

If yous don't believe my personal story, check out the many other celebrities that had "rich" lifestyles but ended up worse off than before they entered the starlight.

Celebrity That Went Bankrupt	A Reason Why They Went Bankrupt
Michael Jackson	The whopping price of $ten million a yr to operate Michael'southward Neverland Ranch (he was at least $400 million in debt)
Lindsay Lohan	Partying, addiction, etc. causing Lindsay to file for bankruptcy in 2012
Mike Tyson	Divorce, excessive spending, etc. (was $23 million in debt)
50 Cent	Excessive spending (was $32.v million in debt)

As you can see, y'all tin can be super-rich and famous, and nevertheless be massively in debt.

The Bottom Line:

You can exist rich and you can exist on the verge of bankruptcy. Existence rich is more nearly showing off your money than using your money as a tool to build long-term growth. If y'all're rich, yous're also probable to become broke.

What Does it Mean to be Wealthy?

If you lot want to achieve financial freedom , and so chances are that y'all'll desire to become wealthy.

Wealth has everything to practise with your most precious asset: Fourth dimension.

Becoming wealthy means you have:

• Time to do the things you want to practise
• Fourth dimension to spend with the people yous love
• Fourth dimension to learn almost the things you desire to learn nearly

When you are wealthy, y'all are non living paycheck to paycheck.

Instead, when you are wealthy, you can decide when (and where) you want to work considering you lot accept the luxury to just walk away if yous don't savour your chore.

If you are wealthy, you lot have a big internet worth.

To become wealthy, you'll want to aggregate a positive net worth.

If yous are wealthy, then you likely:

• Take a large net worth
• Spend less than you earn
• Desire to build long-term wealth
• Are understated (aka don't own the flashiest things)

Wealthy people focus on income-producing assets because they buy time.

Call back about information technology:  When yous ain income-producing assets and earn passive income  (fifty-fifty when you lot sleep!), y'all'll have all the fourth dimension in the world to do what you want.

That'southward why wealthy people often diversify their assets through:

• Existent estate investing
• Stock market place investing
• Investing in their concern

If there is a shortcut to becoming wealthy, information technology has to practice with building a business.

Source: The Millionaire Next Door

A business organisation volition pay you income (probable for the residual of your life) and your income earning potential is nearly unlimited, since you are your own boss.

In fact, the majority of the wealthiest people in the world are business owners:

Wealthy Individual	How They Gained their Wealth
Jeff Bezos	Business Owner (Amazon)
Warren Buffett	Business Owner (Berkshire Hathaway)
Elon Musk	Business Owner (Tesla, SpaceX, etc.)
Mark Zuckerberg	Business Possessor (Facebook)
Nib Gates	Business Possessor (Microsoft)
Larry Ellison	Business organization Owner (Oracle)

Chances are that yous won't see Warren Buffett approaching you with a gold chain necklace, aureate rings, and a $300,000 Lamborghini.

In fact, Warren Buffett is known as the frugal billionaire, living in the same abode (in Nebraska) that he starting time bought, dorsum in 1958.

Even better, Warren Buffett "splurges" on $three.89 for breakfast at a McDonald's drive-through…

So you meet that being wealthy is very dissimilar from being rich.

Truthful wealth is:

• Wellness
• Liberty
• Relationships

In the finish, it's important to realize that money buys you lot time, which ultimately gives y'all freedom (and happiness).

The Bottom Line:

Existence wealthy ways you have a positive internet worth, you spend less than yous earn and you have the time to do what you lot want to exercise in your life.

The Difference Between existence Rich and Wealthy

The difference betwixt being rich and wealthy has to practise with time, freedom, and sustainability.

A wealthy person has built sustainable, long-term wealth, which buys them time and freedom to do what they desire to do.

A rich person's money often does not last very long, and rich people often go into massive debt considering of their flashy, glamorous lifestyle.

Someone earning $80,000 could be wealthier than someone earning $500,000.

It all comes downwards to:

• How you spend your money
• How much debt you build-up
• How much of your money you lot save

If y'all are truly wealthy, then your coin will serve a specific purpose.

For me and my husband, our money serves the following purposes:

• Save enough for a sustainable lifestyle
• Save enough to retire our parents early
• Salvage enough to live without coin worries

I would say these 3 purposes are pretty skillful reasons why we are so diligent when information technology comes to saving and investing coin (we save simply over seventy% of our income).

How to Become Wealthy: 7 Actionable Steps

If y'all are ready to get wealthy, and so you volition love the 7 actionable steps that I've outlined below.

Remember that to build long-term wealth, it doesn't necessarily matter how big your paycheck is, but it matters how much you save and invest.

Allow's swoop right in.

How to Become Wealthy Footstep #one: Save and Invest 20-xxx%

If you want to become wealthy, so you demand to start saving (and investing). Aggressively.

Personally, I retrieve saving and investing xx% to 30% of your paycheck is not enough.

My husband and I relieve more than than 70% of our gross paycheck and nosotros haven't looked back since.

We spend money on:

• Food
• Mortgage
• Bare necessities

And believe it or not, we even so alive a happy life. You don't need to spend money to be happy.

So, what are some ways to invest your money?

• You can invest your money at work, through your401k plan
• You tin set reminders for yourself to invest a portion every so often
• Yous tin automatically have your banking company account eolith a percent of your paycheck into your savings account

If you're new to investing and don't want to stash away $100'south correct at present, then consider checking out Acorns .

Acorns is probably i of the best beginner investment apps  because yous tin start investing with as little every bit $5.

And trust me, any amount invested volition brand a difference in your fiscal future – equally long as you are consistent and persistent when information technology comes to investing.

How to Become Wealthy Step #2: Invest as much as Early as Possible

At that place are ii key factors that will determine your long-term wealth:

• Fourth dimension in the market
• How much you invest

To optimize your wealth, you'll want to invest your money as early every bit possible – and every bit much of your coin every bit possible.

The worst matter y'all tin can do is doing nothing.

If y'all're merely starting and don't exactly have the means to invest $100'due south, so you lot should check out the pop investing app Acorns.

If you can invest $100's at once and still desire a little investment guidance, so you may desire to consider looking at M1 Finance .

With M1 Finance, you lot can select (or you lot can create) your ain investment allotment "pie," which volition invest your money in different stocks, bonds, etc.

You lot just need$100 to start investing for regular accounts or $500 to commencement investing with retirement accounts.

How to Go Wealthy Step #three: Foster Shut Family unit & Friend Relationships

As you lotbuild wealth, don't forget to foster your relationship with your family and your friends.

Remember that your network is your cyberspace worth.

Don't go through life only focusing on money while neglecting your family unit and friends.

It'south important yous take some time out of your busy day and spend it with those people who have always been there for you – no affair the ups or the downs.

How to Become Wealthy Footstep #iv: Pay off Loftier-Interest Debt

The next footstep is to pay off high-involvement debt ASAP.

If you acquit high-interest debt, and so you are robbing your hereafter cocky.

Loftier-interest debt is typically debt that has interest rates in excess of x%, which could include:

• Credit cards
• Payday loans
• Personal loans

It's very important to pay off your debt fast  so that y'all tin focus on pursuing your other goals – like investing for your future.

Below are some of the steps my husband and I took, as we pursued our goal of paying off debt andameliorate managing our coin :

• Refinanced our mortgage
• Paid off credit cards every month
• Paid off all student loans as fast as possible
• Bought cheap, used cars at low-involvement rates for life

My husband and Iworry virtually coin when nosotros know we have loftier-interest debt – and that's the worst feeling ever.

So, nosotros make it a indicate to pay off debt as fast as possible.

If you lot want to discover additional (and somewhat crafty) ways to pay off your debt, you may desire to look into debt consolidation with companies like Upgrade 👇

With debt consolidation, you lot could:

• Receive favorable interest rates
• Maintain a fixed payment schedule
• Consolidate multiple lenders to 1 lender
• Simplify your finances when it comes to paying back debt

Simply remember that debt consolidation is only a temporary fix.

If you have a spending problem, then debt consolidation will not fix the underlying issue – which is spending excessive amounts of coin and racking upward debt.

How to Go Wealthy Step #5: Focus on Your Long-Term Goals

The key to building wealth lies in your mindset .

If you focus on your long-term goals, then you can (and very probable will) go wealthy.

The important role is to:

• Stay patient
• Stay focused
• Stay consistent

Saving and investing money won't e'er be easy, and y'all'll probably see your wealth fluctuate throughout the years, since the stock market fluctuates, too.

Whenever you feel unmotivated, recollect your "why" – the reason why yous're doing everything that yous're doing.

My why is:

• My family unit
• My time to come
• My parents

Never forget what drove you to become wealthy in the starting time.

How to Become Wealthy Pace #6: Finish Buying Stuff you lot Don't Need

One of the fastest and easiest means we seem to lose wealth is by buying stuff we don't need to print people that don't care.

Stop spending money on unnecessary things.

No, I'yard not maxim that you'll get a millionaire if you cut out avocado toast and lattes from your life.

Merely, if you spend $ten a twenty-four hours on avocado toast and lattes (that's $3,650 per year), and then yes, y'all could be missing out on quite a chunk of wealth (in the long term).

That's why it's important to alive frugally  today so that y'all can brand your tomorrow a reality.

Before y'all start spending money, think near what information technology is that y'all are ownership.

I try to ask myself these questions before I buy something:

• Is this necessary?
• Will it improve my life?
• Will I regret the buy?

If I answered no to any of those questions, I seriously reconsider my purchase.

Guys and gals, if you desire to change effectually your fiscal moving picture just just don't know where to start, then check out the budgeting app, You Need A Budget  (aka YNAB).

This is easily i of the best budgeting apps  out there.

If yous sign upwards today, you'll go a 34-solar day free trial, later which you'll have to pay a subscription fee every month.

New YNAB users claim that they:

• Saved $600 in the first ii months of using YNAB
• Saved $6,000+ in the first year of using YNAB

How to Become Wealthy Pace #vii: Increment Income

Now that you have your fiscal motion-picture show in order – you've:

• Created a upkeep
• Paid off high-interest debt
• Stopped splurging money on stuff yous don't demand
• Started saving and investing 20%+ of your paycheck

…it'south time for my favorite step in this guide: Making more than coin!

Saving money is limiting. Earning money is limitless.

Not enough personal finance articles talk most this – your ability to save money is express by 2 principal things:

• How much yous earn
• Your bones living expenses

There is a finite amount of money you can salve. Unfortunately.

That's why, if you lot want to advance the amount of wealth y'all build, yous'll desire to focus on increasing your income.

And one of the all-time ways tomake money is to start a side hustle .

Practise some research on your own time as well to effigy out which side hustle could be the all-time for you – and and then start saving and investing that extra income!

FAQs

What is considered existence wealthy?

Being labeled "wealthy" really is a subjective affair.

There is 1 part of the definition that everyone can concord on: Whether or not you are wealthy depends on your internet worth.

In a recent 2021 survey, Americans said that to be "wealthy," yous would demand a net worth of $1.9 million .

Why is beingness wealthy meliorate than being rich?

Being wealthy has to do with your most precious asset: time. Beingness rich has to do with showing off your money through fabric objects.

Existence rich could hateful you are massively in debt. Being wealthy, on the other mitt, ways you have a positive internet worth, which gives you lot the time to do the things yous want to do.

Being wealthy also means that you:

• Have a positive cyberspace worth
• Don't need to piece of work every day
• Aren't living paycheck to paycheck
• Have the time to do what you want to do

When yous are wealthy, y'all don't have to prove anything to anyone.

How do I know if I'm wealthy?

Being wealthy has to do with 2 things: The quantitative side (the numbers) and the qualitative side (the feeling).

But, to be wealthy, you don't accept to look at the quantitative side of things.

Being wealthy as well ways looking at the qualitative side. You could feel  wealthy if you know you have:

• A steady job
• A loving family
• Wonderful friends
• A roof over your head
• Food to provide for your family

That could be the best feeling in the world – and you lot are certainly better off than many others in this world if yous have those 5 things.

For other people, feeling  wealthy may accept to do with having a higher paying job, a higher net worth, belonging to exclusive social clubs, etc.

The Bottom Line: Rich vs Wealthy

Being rich and being wealthy are 2 very different mindsets.

If your goal is to:

• Spend sustainably
• Build long-term wealth
• Achieve fiscal liberty
• Become financially literate

…And so you lot will exist wealthy.

On the other hand, if your goal is just to accept a lot of income (a high-paying task) and show off your income through the coolest high-tech gadgets, then yous might as well telephone call yourself rich.

Existence rich, however, could also mean you:

• Are in debt
• Spend more than you earn
• Don't have a high net worth
• Don't understand personal finance

If you just want to prove off your coin, then you're rich.

If you want to build a lasting legacy then you lot pass your money downwards to your kids, your grandkids, etc., so y'all are building wealth.

Wealth is zippo more than a mindset.

Anyone tin become wealthy – and information technology's not like at that place is a magic number that you have to hitting to become wealthy.

Becoming wealthy has to do with these 7 steps:

• Increasing income
• Paying off high-interest debt
• Focusing on your long term goals
• Stop buying stuff yous don't need
• Investing as much, as early on equally possible
• Fostering close family and friend relationships
• Saving and investing 20% to thirty% of your income every month

The path to becoming wealthy is not easy and it volition certainly take time, free energy, and effort to build your family wealth.

But it'southward absolutely worth it.

As you build your wealth, call back to focus on your long-term objectives: Focus on why you are building your wealth.

My "why" is my family unit.

Equally y'all build your wealth, you'll probable start to observe a shift in your mindset, your behavior, and your actions that will help yous move closer to your financial goals.

What'south the biggest difference y'all've noticed between the rich vs wealthy? Let me know in the comments below!

Fiona Smith

Fiona Smith is the founder of The Millennial Money Woman. She holds her Primary of Science Degree in Personal Financial Planning, has advised decamillionaires for 6 years in the corporate wealth management sector and has co-founded a local non-turn a profit community education fiscal literacy. She is the author of the personal finance volume How to Get Rich from Nothing and her work is featured on Forbes and FinCon.

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Source: https://themillennialmoneywoman.com/rich-vs-wealthy/

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