Rich vs Wealthy: Which One Are You?
What’s the difference between the rich and the wealthy? Since both have enough money to cover their needs, your answer will likely be “Nothing.” However, ‘rich’ and ‘wealthy’ are far from synonymous in the personal finance world. This article will examine rich vs wealthy in detail, clearing any ambiguities you may have about these terms by providing some useful tips, insights, FAQs, and examples highlighting the difference between the rich and the wealthy.
What Is Considered Rich?
Being rich means having enough money or income to live a relatively comfortable life. According to many experts, the three factors that qualify one to be considered rich are:
Having a Lot of Income
You’re a rich person if you receive a high salary that allows you to live comfortably while being primarily sustained by your paychecks and bank account, which help you navigate your high cost of living and many expenses.
Spending a Lot of Money
Another feature that highlights the rich meaning is the ability to spend a lot of money. If you’re rich, you’ll likely have little qualms about spending freely on many things that others would think twice about.
Showing Off How Much Money You Have
Rich people typically live flashy lifestyles that show off their status to outsiders. Glamorous displays of cars, clothing, shoes and other possessions are telltale signs of a rich person.
However, if you’re a rich person, your money is only good for a finite amount of time. Although you’re in a fairly good financial position, true financial independence eludes you, as many rich people spend more than they earn and end up in debt quickly. Think of lottery winners as examples of the filthy rich meaning—they make a lot of cash that helps them afford flashier lifestyles, splurging on fast cars, clothes, designer perfumes, expensive shoes, and other material objects. However, they often go broke because sustaining their lifestyle is unfeasible in the long run.
What Does It Mean to Be Wealthy
Not all rich people are wealthy, but all wealthy people are rich. The difference between being wealthy vs rich is that wealthy individuals can control and manage their money, spending their time making investments to create a sustainable lifestyle. Consequently, they can enjoy their riches without a time limit due to their sustainability.
Spotting a Wealthy Person
A defining feature of the wealthy is that they rarely look the part. Individuals at the apex of financial freedom are typically not as flashy as the rich. They generally aren’t interested in impressing others with how much money they have or engaging in what is considered rich. Consequently, spotting the wealthy can be challenging, because you may pass them by every day without even realizing it.
How the Wealthy Gain Their Wealth
There are various factors that contribute to becoming wealthy:
Saving may seem like a very elementary step to wealth building, but it’s arguably the most important. Small sums regularly saved over time can eventually add up to immense wealth, so it’s no surprise that the wealthy are some of the biggest savers around. There are many ways to achieve financial freedom through saving, including opening some great IRA savings accounts.
The wealthy complement their excellent savings habit by putting their money to work through investing, a key aspect of the wealthy meaning. Consequently, they usually have assets like real estate, shares in the stock market, antiques, gold, and art. Investing allows the wealthy to amass even more money and increase their net worth. Therefore, the straightforward answer to the popularly Googled question “Is investing a great idea?” is a resounding yes.
Being frugal is a mindset that makes, grows, and retains wealth. As such, the wealthy are often reluctant to lose their hard-earned money to unnecessary expenses.
It’s critical to note that the wealthy are also financially educated individuals who know all there is to learn about making and keeping money. This knowledge often confirms the difference between rich and wealthy.
Rich vs Wealthy: Differences
Although both being wealthy and rich means having enough money in your bank account to get by, it goes way beyond that. A rich person is usually someone with a huge salary or income stream. However, someone who makes way less may be in better financial health than a rich person if they invest and save aggressively.
Also, rich people will spend freely and use their income to fund lavish lifestyles, while wealthy individuals are more interested in saving and investing a huge chunk of their cash in profitable avenues like the top TaaS stocks to buy.
Another key difference between the wealthy and rich is that the wealthy maintain a middle-class lifestyle since they’re focused on building long-term wealth by generating assets. To simplify things, take a look at other key aspects of the difference between the rich and the wealthy:
• The rich engage in little to no financial planning, whereas the wealthy take notice of affordability and their spending habits, engaging in estate planning, budgeting, and tax strategies.
• Rich people have high expenses compared to income, while the wealthy have low expenses compared to income.
• Another key difference between the wealthy vs rich is that the rich have finite money that will soon run out, but the wealthy have sustainable money that will last.
• The rich usually store their money in cash and material assets, while the wealthy keep theirs in investments and long-term accounts. With a great Robo advisor’s assistance, you can start investing too, so keep this in mind.
• Rich people, mostly rely on a high salary or income, with no long-term investment plan. On the other hand, the wealthy have numerous revenue streams to reduce risk and diversify their income, so they don’t have to worry about pensions or 401K.
• The rich are obsessed with hoarding material items and upgrading their lifestyle frequently. However, buying assets is what is considered wealthy, even though the wealthy may also buy other things occasionally.
It’s preferable to be wealthy than rich. Wealth brings stability and financial security, offering you more time to spend as you please without having to stress about money, so the mental health benefits are enormous as well.
Furthermore, the concept of net worth is crucial in the wealthy vs rich conversation. The question of the possibility of retiring at 60 with $500k is often asked by ordinary individuals interested in net worth, or the value of your assets minus any liabilities you owe. Knowing about net worth is vital in the difference between rich and wealthy, while also offering a reference point to measure progress towards your wealth-building goals. As you continue earning, saving, and investing, your net worth will grow, but you’ll need to focus on saving more and spending less if your net worth is pretty low.
Why Rich People End up Indebted
As mentioned early on, being rich doesn’t necessarily mean having a high net worth or always having money—frequently spending significant amounts of cash on non-essential stuff also fits the rich definition. Rich people also often spend more than their income, getting into debt in no time. Therefore, even though you might be a rich person living in a fancy mansion or driving an expensive car and earning, say, $200,000 annually, if you spend $225,000 yearly in expenses, bankruptcy will come knocking on your door soon.
Is It Better to Be Rich or Wealthy?
Adequate savings, proper investing, frugality, and true financial freedom are what is considered wealthy in 2022. On the other hand, a huge income, excessive spending, extravagance, and possible debt are associated with just being rich. Therefore, it’s better to save, invest, and be frugal with your money to build wealth instead of being just rich.