Rich vs. Wealthy - Who Has More Money?
Being rich and being wealthy are two very different concepts. For some reason, these two ideas are often used incorrectly. Often, you may hear people use them interchangeably. However, when it comes to finances, there are some key differences between the two terms.
It may be hard to spot the differences between a rich person and a wealthy person on the surface. Of course, a few similarities do exist. In this article, however, we will take a look at the key distinctions that make one better than the other.
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What Does it Mean to be Rich?
Put simply, a rich person has a lot of money. Being rich comes down to the amount of cash you have in your bank account. But having a lot of money doesn’t directly translate into being wealthy. Being rich can oftentimes mean that you are spending a lot of money – not necessarily making a lot of it. It can also mean that you are in a lot of debt. You can be rich and still have expenses that are higher than your income. A rich person is exactly what you think of in your head when you think of someone with money: they drive a fancy car and have an amazing house with expensive furniture. But it all comes down to cost.
This is the reason why we frequently see celebrities going bankrupt all the time, despite earning so much. If you make $100,000 a year, but spend $150,000, you may seem rich, but you are actually on your way to being broke.
What Does it Mean to be Wealthy?
When it comes to understanding the difference between being rich vs wealthy, being wealthy is not only about having enough money to take care of your needs. It is also about being able to afford a comfortable lifestyle without having to work all the time. In essence, it is about amassing tangible assets that appreciate over time and make money for you. It’s about having a significant net worth.
A wealthy person may not own the most expensive cars or have the latest gadgets. What they do have, though, is a rich set of assets, such as investments, real estate, and so on. If you have $30,000 in savings but your monthly expenses amount to $5,000, then you have wealth that is about six months’ worth. This is what it’s like to be wealthy. Having wealth gives you financial security beyond what you already have.
A Rich Person vs a Wealthy Person – Who has More Money?
There is a bit more to being rich vs wealthy than how much money you have and what your expenses are. In fact, it is very much possible for someone to make less than a rich person but still be wealthy. While a rich person has a lot of money, that doesn’t necessarily mean that they know money. This is because rich people spend a lot of money. On the other hand, wealthy people save and invest their money.
Being wealthy is not about spending money. Rather, it is about making the best use of it and finding ways to make it grow. Another thing that speaks to the fact that wealthy people have more money than rich people is that wealthy people don’t normally use debt. Unless it’s for a clear purpose – such as buying a house or making a lucrative investment – debt is something a wealthy person steers clear of.
Instead, a person with wealth focuses on saving money as opposed to spending it. They believe in investing that money in assets. That might mean buying stocks. Or it may mean building a source of passive income. The possibilities are endless. Regardless of how they invest it, wealthy people know that to grow their wealth, they need to turn their current cash into assets.
How to Become Wealthy
Now that we know the differences between being rich vs wealthy, what can we do to take steps and become wealthy? Instead of falling for get-rich-quick schemes, here are a few ways you can build wealth.
Probably the most important step you can take in becoming wealthy is to save. Set a goal to save a portion – say, 10% to 15% – of your monthly income. Of course, how much you can save would come down to how much you make. To get an in-depth guide on how to start cultivating good savings habits, read my article here to get started on the right foot. A financial planner can help you budget and take charge of your expenses so that you become more like a wealthy person instead of a rich person.
Further Reading: 5 Easy Money-Saving Challenges That Really Work in 2022
One of the fastest ways to become wealthy is to dabble in investing and trading. Of course, you don’t want to dive headfirst into these concepts without doing your research and learning about them.
If you want to learn about trading, reading Trading for Success can help you build a strong foundation, ultimately guiding you on how to make influential money moves in the world of investment and trading.
Another difference between being rich and wealthy is being free of debt. If you want to be a wealthy person, always focus on not accumulating any debt. If you already have debt – such as a student loan – make paying that off your first priority.
Further Reading: Avoid and Manage Debt – 9 Useful Strategies
As mentioned earlier, rich people are all about spending money and buying luxury items. If you want to become wealthy, your focus should be to save and invest, not to spend your money. A big part of your savings will grow from being frugal and living within your means. I would suggest going a step further and living below your means instead of just within them. This will help you save more money much faster.
Resist the urge to buy those designer shoes or change your phone every year to the latest model. Make the things that you already own work for you. Look at everything that you buy as an investment. Think of how long they will last. Be smart about what you spend your money on by only buying things that you need.
Think Long Term
Probably one of the biggest differences between rich vs wealthy people is their vision for money. Wealthy people think in the long term. This is because they understand that growing wealth is a long game and requires persistence. Conversely, rich people think in the short term. Their money goes as fast as it comes.
Wealthy people believe that building strong net worth is about setting and achieving long-term financial goals. They understand that it doesn’t happen overnight. It could take years to build your wealth. And that’s okay. The key is to stick with the journey and never give up!
It all starts from the right mindset. We can only build wealth if we have the right attitude toward money. Having the right attitude helps us make wise financial decisions. And wealth occurs as a direct result of spending your money prudently. Being wealthy doesn’t mean that you need to have a wallet full of cash all the time; it means that you have a wealth mindset. Decisions such as saving, investing, and paying off debt only happen if you make the right mental changes.
Further Reading: Tips To Make Your Positive Affirmations Work
You can be rich and still be on the verge of bankruptcy. A big part of that is because being rich is more about showing off your money rather than using your money as an instrument to build a sustainable income.
When it comes down to it, being rich vs wealthy is only separated by the fact that wealthy people understand the true value of money. Hopefully, this article has helped you understand the differences between being rich and being wealthy, and has, consequently, motivated you to work toward your money goals and crush them!
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