Rich vs Wealthy: How Are They Different?

Rich and Wealthy are two words people talk about interchangeably, but why? 

Is being rich the same thing as being wealthy? “NO!!!”

Being rich and being wealthy are two different things. Yes, a wealthy person can be rich, and a rich person can be wealthy, but we have seen that high-priced athletes make vast sums of money but end up broke while a janitor makes a little bit of money and ends up super-wealthy. 

How does all of this make sense? There are significant differences between being rich vs wealthy.

What Does It Mean to be Rich?

Rich is an adjective we use to describe how much money you are bringing in via your income. In the dictionary, it says having a great deal of money or assets. An athlete making over a million dollars a year is considered rich. They would be regarded as some of the richest people in America. 

A teacher bringing in $50,000 a year is considered not rich at all. They would be regarded as middle income or middle class. 

Being rich may also mean that you have high expenses. Your house is the biggest on the street. You drive fancy cars. Going out to eat at excellent restaurants is a norm for you. These things come with massive debt as well. 

If you are rich and spend the money as a rich person would, you will be poor once that job and income cease to exist. You will have high debts but no way to pay them off. 

How is being rich different than being wealthy?

What Does Being Wealthy Mean?

Being wealthy is about having the money to cover your expenses and being able to have the freedom to do as you like. Wealthy people have accumulated assets that help produce a good flow of income. 

In the book, Rich Dad Poor Dad Rober Kiyosaki talks about accumulating assets. It is not about how much you make it is about how much you keep. The wealthy people work on using their money to accumulate assets that can produce wealth for them. It is not about spending the money; it is about accumulating assets that will make income to hit financial freedom. 

Most Wealthy people have a few traits that have:

• Buy Income producing assets
• Own their own time
• Can do what they like
• Spend less than they earn

Many people see those that drive in fancy cars with big houses and think these people are wealthy. I would like too. Seeing how 78% of Pro Football players go broke and that huge stars in entertainment like Mc Hammer and Mike Tyson have spent their fortunes away make you wonder if these people are wealthy. 

It is all about the spending rate and what you buy. Robert Kiyosaki says, “The rich buy assets and the poor and middle class buy liabilities.” I feel he meant to convey the Wealthy buy assets.

Even in the book, The Millionaire Next Door, you see ordinary Americans living frugal lives but becoming a millionaire while living next door to you. These millionaires next door may come from households that come from middle income, but they know how to make money and put it to work.

They do not follow the ways of the Joneses; they follow the practices of Munger and Buffett buying assets that will produce cash flow.

The Key Differences between being Rich vs Wealthy:

It is all about your spending habits. Rich people will save less than those that are wealthy. Those that are wealthy will spend less and use their money as a tool to create a portfolio full of assets that bring in income. 

These assets can be:

• Stocks
• Real Estate
• Businesses
• Cryptocurrency

I have seen this in my own life. Visiting some friends back home, we visited a bar to have some drinks. One friend asked me how much I save living in Taiwan. I told him I save about 60% of my income, around $30,000-$40,000 a year. The shock on his face was priceless. This guy was making double what I was making but saving a third to half of what I saved.

I have the mindset to accumulate more assets, but he was living a life of high spending.

You can make a lot of money and be considered rich, but if you do not save it and invest it, you will be like those who do not have much. It is time to start thinking differently and not being a slave to money.

The Path to Wealth:

Here are some steps to lead you to your path of wealth. These steps may seem like no-brainers, but you too can be considered wealthy if you follow them.

Step 1: Save More than you Earn

Your first step towards wealth should be to spend less than you earn. This step cannot be overlooked. If you make a high salary, then that gives you the income to create massive wealth quickly. You need to have the discipline to save it. 

Saving 20-50% of this income is a sure-fire way to become wealthy. It may be hard at first, but you need to take steps to save as much as you can. This can be cutting costs and just learning how to stop spending money.

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Step 2: Invest Your Money

Use these savings to invest your money. Investing is key to becoming successful. There are many places you can start. Investing is key to producing necessary income to achieve financial freedom. 

We live in a world where it is so easy to invest these days. It is as easy as opening up an app on your phone and start the investment path. 

Somethings to start you off on investing is buying in the stock market. My favorite thing would be simple total stock market index funds. I like to use the ETF VTI or invest in VTSAX. These two funds can give you exposure to a massive assortment of the entire U.S. stock market. Having this base as you build up your portfolio is the pivot for gaining wealth. 

Next, you can start investing in real estate and other investment avenues. It starts now. The best time to plant a seed was 20 years ago; the next best time is today.

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Step 3: Pay Off High-Interest Debt

Debt can be a massive deterrent to your wealth-creating. Having high-interest debt can be something that slows you down. I have learned from many people on their debt-free journeys about how they have knocked out debt and created a better life for them. 

In his Baby Steps, Dave Ramsey creates a framework to help produce discipline within people to pay off debt and not go back to the way of debt creation. 

I did say pay off high-interest debt. There is low-interest debt like buying a house or even using leverage to create more income-producing assets. The simple thing is to get to pay off those high-interest debts, so you can use that money to buy more investments.

Step 4: Creating Financial Goals

Financial goals are the path to a healthy financial future. If you make goals, then you have plans to be successful. You create habits to make sure to achieve these goals. 

The same thing can be done with finances. I started to track my net worth to know where I am financially, creating new thinking about setting goals. Each month as one goal or another gets accomplished, the goal of financial freedom gets even closer. 

Being able to set good habits to achieve goals is a must. If you want to be wealthy, you need to create financial plans. This way, you can see the progress you are accomplishing as you reach each goal. 

The difference between the rich vs wealthy is accomplishing goals for your money. You need to put your money to work, and it starts with goals.

Step 5: How to Stop Spending Money

The massive difference between being rich vs wealthy is the amount of money you spend on stuff. Those are the items that you continue to spend money on. It could be going out to eat and spending unceasingly on things that are not needed in life. 

You just need to learn how to stop spending money and start living below your means. That can be as easy as living in a lower living area or even creating a budget. Tracking expenses can be away. 

It is time to create some discipline in tracking your money and making a plan to reduce spending. Spending is the key between rich vs wealthy. Wealthy people spend their money on assets and investments that produce income. The rich would rather spend it on useless things like Mike Tyson owning a tiger.

Final Thoughts:

Rich vs wealthy is a topic that many people think about. People will think if you have high pay, you must be wealthy. On the contrary, you can have increased income and be rich, but you may also spend all of that money and be living paycheck to paycheck every month. They are often confused about that too and group them together. 

The wealthy are those that save and invest their money into assets. These assets give the wealthy cash flow, which allows them not to have to live for paychecks. They have freedom of time, money, and opportunities are there for them to keep investing. 

As you see, you can look rich but have no money. You can look poor or middle class and have tons of money working for you. The choice is yours. Are you willing to be rich or wealthy?