Hey there! What's the difference between being rich and being wealthy? Well, when it comes down to it, there's a few things. Before we go into that, let's talk about what it means to be rich, and what it means to be wealthy.
We hear about rich people all the time. Celebrities, for example, are generally considered rich. Then, we think of others, such as Warren Buffet, who is a wealthy person. As I'll discuss in this post, there is definitely a difference between wealthy people and rich people, so let's jump right into it.
What Does It Mean To Be Rich
In the world of personal finance, being rich simply means having a lot of money and a lot of income. Rich doesn't necessarily have anything to do with assets and net worth. If you make $200,000 per year and drive a fancy car, but have hundreds of thousands of dollars in debt, or spend just as much as you make, then you very well might be considered rich.
Rich people aren't necessarily financially free. Their financial well-being is dependent on them continuing to earn a high income so that they can support the way they live. Some rich people go broke down the road. According to NEFE, 70% of lottery winners end up going bankrupt. As rich as they became winning the lottery, they were unable to properly manage their money, and they went from rich person status to broke sometime later.
Some rich people spend a lot of money and don't keep their living expenses down. Others might be drowning in debt, such as student loan debt or credit card debt.
What Does It Mean To Be Wealthy
A wealthy person has come to the point where their money has bought them time. For wealthy people, they no longer have to worry about money, as they have enough of it to have reached financial freedom.
Wealthy people buy up assets and make their money work for them. They may own real estate, stock, businesses, and other assets that builds sustainable wealth. They may have several sources of passive income that keeps them afloat regardless of what curveball life throws at them.
Through long term planning, keeping their monthly expenses low, and maximizing their wealth generation, wealthy people reach financial independence and never need to worry about money again.
The Differences Between Rich and Wealthy
When it comes to rich vs wealth, the main difference is that rich people have a lot of money but their lifestyle is dependent on continuing to make the money that they do. Wealthy people have enough money to not have to worry about it.
Rich people generally spend a lot of money whereas wealthy people do not. A rich person may have an extravagant house, several cars, and have expensive habits. A wealthy person may have a simple home, one or two cars, and find joy in doing low-cost activities with friends and family. Simply put, a wealthy person lives far below their means.
How To Become Wealthy
Being wealthy doesn't have to be excluded to billionaires. You can become wealthy by pushing for financial independence. Below are some ways that you can grow your money so that you become wealthy.
Save as Much of Each Paycheck as Possible
The first thing to do to become wealthy is to save as much money from each paycheck as possible. The more money you have leftover each month, the faster you can grow your nest egg. Some people seeking an early retirement will save 50% or more of their paycheck. To do this requires you to increase your income as much as you can.
Pay off All of Your Debt
In order to become financially independent, you'll need to pay off all of your debt. Wealthy people do not carry consumer debt or other debt. To remain sustainably wealthy, it's important to have paid off your debts so that you can continue to grow your money and live off it year after year.
Invest Your Money for Your Future
Investing your money will help it grow faster. When you have your money invested in assets that pay you regularly, you not only build sustainable wealth, but you also build passive income. An example of this is when you buy steady stocks that pay dividends. The stocks grow over time and the dividends pay you monthly or quarterly.
Automate your finances so that you can invest in your future incrementally without worrying about your money day after day.
Don’t Just Work a Job, Hustle on the Side
Having a side hustle or two will help your build wealth faster. Some people who are gung-ho about retiring early will hustle 7 days a week for 5-10 years so that they can earn enough money to retire in their 30s. That way, they can spend the rest of their life doing whatever they want.
Wrapping It Up
There are notable differences between being rich and being wealthy. In the end, I believe being wealthy is the way to go as when you're wealthy vs rich, you no longer worry about money and can live your life the way you choose.
What have you done to help yourself build wealth?