Learn the difference between being rich vs. wealthy and why it is better to be wealthy. For those of us looking to increase our money and stop living paycheck to paycheck, the goal of becoming rich can seem similar to a goal of becoming wealthy. Trust me, it’s not.
The difference between rich vs. wealthy is so much more than how much money is in your bank account. It has to do with your money mindset and how you choose to spend your hard-earned cash.
As Robert Kiyosaki says “there is a difference between the two: The rich have lots of money but the wealthy don’t worry about money.”
This article breaks down the difference between people that are viewed as rich versus people that are viewed as wealthy and how they got that way. A look into those living the lifestyle you crave can help you decide for yourself what your financial goal should be. Do you want to be rich or wealthy?
Being Rich vs. Being Wealthy?
The difference between rich and wealthy can all come down to a few simple facts. The first, is how their bank accounts look. Clearly, to be viewed as rich or wealthy you need to have a lot of money in your account.
Look deeper into that account and you can begin to decipher the difference between the two.
Definition of Rich
Being rich is, simply put, having a lot of money in your bank account and/or making a large salary. You can buy the car, order the steak, or pay your kids field trip fees without batting an eye.
For so many of us, getting rich is the end goal. In fact, just avoiding living paycheck to paycheck is most Americans’ financial goals this year. What most people don’t understand, however, is that just because you are rich, does not mean that you have wealth.
Definition of Wealthy
Wealth is, essentially, an accumulation of assets. People who are wealthy use these assets to help them make money for themselves (learn how to generate passive income like the wealthy).
Have you ever heard the term ‘their money works for them?’ That’s referring to wealthy people. Oftentimes, people who are wealthy don’t have to hold jobs, since their net worth is so great.
A common example of people that are wealthy are often business owners. Think of Jeff Bezos at Amazon or a local real estate investor. They are able to look at their income and spend it in a way that will make them more money.
The concept of being wealthy boils down to this: the wealthy use their money to buy assets that make money so they eventually don’t have to work for money anymore.
Sounds amazing, right? Plus, you don’t even have to be a millionaire to be wealthy. You need to have enough assets to cover your expenses, escape the rat race and live the lifestyle you want.
When you are living your dream, you are wealthy.
Becoming Wealthy Require Sacrifices
In order to have enough money to be considered rich or wealthy, you must be able to sacrifice certain things. This might mean driving around your run-down car for a few extra years because it’s paid off.
I’ve been driving my car for 8 years now. The car before I drove for 12 years before I finally had to replace it.
People who are striving for wealth don’t buy things just because they are shiny and new, they purchase things when they are needed and follow some of these frugal living tips.
This also means getting on the same page as your significant other. You don’t want to start managing your money a certain way and not agree beforehand on a new grocery budget, for example.
You might try buying rice and beans while they bring home filet mignon. If you are striving for wealth for your family, you have to get on the same page!
This doesn’t mean that having a budget can’t be fun, though, you can still have a fun date night and not spend a lot of money with some of these cheap date ideas. You can acquire wealth and still have an awesome time.
The most important part of sacrificing to become wealthy is to come up with a strategic plan to get your income increasing for you as quickly as possible.
Why Strategic Planning is Essential
As you have probably figured out, you cannot wake up one day and choose to be rich or wealthy. These things take time, which is why strategic planning is so essential for your family to end up with some extra money.
Setting goals like saving money for a down payment or getting out of debt can take months or maybe even years, so making a plan and sticking to it are important for you and your family.
The first decision – do you want to be rich or wealthy?
The Typical Lifestyles of the Rich and Wealthy
When you begin to look into the lifestyle of people that live rich vs. those that are wealthy, the differences can be pretty significant.
People that are rich, for example, tend to flaunt their income much more than those that are wealthy. As a result, they tend to end up in more debt and file for bankruptcy along the way.
Remember when MC Hammer filed for bankruptcy in 1996? Despite being one of the richest people in the country, he was living so above his means that his finances couldn’t keep up.
And he isn’t the only one – plenty of celebrities have chosen to live above their means and ended up in extreme amounts of debt as a result (I’m looking at you Mike Tyson).
Those that are wealthy tend to live a little bit differently than those that are rich.
People that have accumulated wealth typically have worked hard and spent well below their personal means to keep their money with them. Warren Buffet, for example, bought his home in 1958 for a little more than $30,000, despite being worth over 80 billion.
Trust me, you want to earn wealth, not simply become rich!
There are plenty of ways for you to become just as successful and to earn wealth for yourself!
How to Become Wealthy
Choosing to be wealthy can seem like the obvious choice here – I mean who doesn’t want to create an income stream that works for you?! There are a few simple tips and tricks to help you become (and remain) wealthy for generations to come.
Choose to Live a Simple Life
There are plenty of easy ways to live a simple life to help you build wealth for several generations. Easy choices like making your own bread or buying things second hand will help you keep your money where it belongs- in your bank.
Save 10%-15% of Your Paycheck Every Month
This is one of those tricks that may seem hurtful, but once you begin saving that extra money, you will get used to it. If you make $1000 a month, then storing away $100 of that will help you save over $1000 by the end of the year.
When I was ready to buy a home, I knew that I would need a significant down payment and this practice was a simple and manageable way for me to successfully save.
Pay Off Debt Using Dave Ramsey’s Baby Step Plan
Debt is one of those dirty little secrets that everyone seems to have – unless you are wealthy.
That means, if you want to become wealthy, then you need to remove as much debt as possible. It’s no secret that I am a big believer in Dave Ramsey’s plan and his amazing baby steps to help everyone get out of debt.
This plan has worked for hundreds of thousands of families on their journey to become wealthy and I am convinced that it can help you too.
This cash envelope system from Dave Ramsey is also an incredible tool!
Invest as Soon and as Much as You Can
Making wise investments is the best way for you to accumulate assets that will lead you down the path to a wealthy life. It can seem daunting at first, but there are so many resources to help you nail down which investments are right for you.
My first recommendation is for you to learn the essential terms that go along with investing then from there you can begin to decide which method of investment is the way that will get you the most wealth.
Don’t Splurge on Unnecessary Things
When you splurge on unnecessary items, you act like someone who is rich. That’s great, unless your goal is to be wealthy.
Wealthy people are wise in their spending and don’t run out to buy the latest and greatest toy when they already have one that works from home.
A new smartphone, for example, can easily cost over $1,000 these days. While they are essential tools for most working people, make sure your old smartphone needs to be replaced.
Do you want one? Probably. But do you need one? Probably not. And when it is time, last year’s model will work just fine and is much cheaper!
Save that money for when you’ll need it and wealth will come – trust me!
Get Insurance on the Things that Matter
Wealthy people are prepared in any emergency – so you should be too. If you rent an apartment, get renters insurance for less than the cost of a pizza every month.
That way, you are covered in case something happens.
Before I moved into my home, my apartment was robbed and some very valuable things got taken. It was devastating, but they refunded all of the money that the items cost.
It was so easy to replace everything that was taken because I had renter’s insurance in place.
Now that I own a home, we have home owner’s insurance. A couple months back we had some terrible wind storms and part of our roof blew off. Luckily we had insurance because a new roof cost $30K!!
Trust me, insurance may seem like an unnecessary expense, but it is worth it on your quest to becoming wealthy.
When looking at those that are rich vs. those that are wealthy, there are so many things to consider. How does their bank account look? How much are they spending? Do they truly need what they are buying?
Thinking about these things then applying them to our own financial goals is essential for anyone hoping to become rich or – even better – wealthy.
The most important thing to take away when considering becoming rich vs. wealthy is your money mindset.
So tell me… what did I miss? What tips do you have for creating wealth in your own life versus simply becoming rich? Comment below so we can all grow!