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The Difference Between Being Rich And Wealthy

Rich man in suit in bathtub throwing around money

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Is there a difference between being rich and being wealthy? The answer is yes.

We often interchange the words rich and wealthy, but the truth is being rich and being wealthy are somewhat different. 

Rich people are those who generally make a lot of money and spend a lot of money. Another way to look at being rich is that rich people lose their ability to live their current lifestyle if they lose their primary source of income, usually their job.

But, on the other hand, wealthy people never have to worry about money because they’ve built up so much wealth that they have enough money to last them the rest of their lives, and possibly the lives of their children and further descendants. This is generally because wealthy people have multiple streams of passive income that fund their way of living, even if they’re not working.

In this article, we’ll go over what it means to be rich, what it means to be wealthy, the key differences between rich and wealthy, and how to become wealthy so that you don’t need to worry about money anymore.

What Does It Mean To Be Rich

When it comes to being rich, think of high salaries and high spending. A rich person may be a lucrative businessman in a big city, a doctor, lawyer, or other highly paid professional who lives in a big house, drives a fancy sports or luxury car, and travels a lot.

A rich person wears expensive clothes, buys top-of-the-line phones, and doesn’t think twice when spending their hard-earned money. 

Rich people don’t have assets that earn them more money. Instead, they earn large sums of money and use their money to buy possessions and have experiences. When someone wins the lottery and immediately buys a whole bunch of things, we consider them rich. 

A rich person doesn’t have financial freedom. Their financial well-being is dependent on them continuing to earn a high income so that they can support their expensive lifestyle.

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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 could not properly manage their money, and they ended up losing everything they had won.

Here are some more attributes of a rich person:

  • High income: Rich people generally have a very high income, often well over $100,000 per year, if not in the several hundred thousand dollars annually. 
  • Often have professional jobs: Jobs include lawyers, doctors, sports athletes, and similar. Some may also be entrepreneurs that live a lavish lifestyle.
  • Spend much of their income: Rich people tend to live “the rich life” and may spend their money on lavish things such as large houses, sports cars, expensive vacations, going out to clubs, bars, and fine restaurants frequently, and may shop online excessively.
  • Don’t save as much as wealthy people: The term HENRY is sometimes used among financial advisors, which stands for High Earner Not Rich Yet. Rich people are sometimes HENRYs in that they earn a lot of money, but don’t save much of it. 
  • Lifestyle is incredibly dependent on their main income: Many rich people would be completely unable to continue their lifestyle if they lost their job or primary source of income. That’s because they often don’t have several sources of passive income because they don’t invest a large share of their money.

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 build sustainable wealth. In addition, they may have several sources of passive income that keep 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.

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Wealthy people generally have little to no debt, live within or below their means, and have portfolios of investments that allow them to live comfortably now or at retirement.

A typical wealthy person will have passive income to keep them going, so that working has become optional. 

There’s no set net worth number for a wealthy person. Instead, it’s more of a mindset and ability to live life the way you want. For example, a wealthy person could have a net worth of $1M, $5, $10M, or more.

One way to look at being wealthy is: If you have enough money to live off of the rest of your life without having to work – that is enough passive income to last you for life and that your wealth would not deplete – then you can consider yourself wealthy.

Common attributes of wealthy people include:

  • Have several sources of income; many (or all) are passive: Wealthy people have passive income that come from sources such as dividends from stocks they own, income from businesses they own but may no longer manage, real estate rental income, P2P loans owed to them, and more.
  • Work is optional: A wealthy person does not need to work to afford the living they’ve chosen for themselves. A wealthy person can live their life however they wish and have enough passive income to support that lifestyle.
  • Enough money for life: Wealthy people have enough money to last them for their entire lifetime and may never deplete their wealth as they primarily live off money created by the money and assets that they already have.
  • May be relatively frugal and not flashy: Many wealthy people have no need for flashy possessions and may actually be frugal. To obtain wealth, most wealthy people understand that frivolous spending won’t help them and that one key component of gaining wealth is to maximize your savings rate.

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 depends on continuing to make the money that they do. On the other hand, wealthy people have enough money not to have to worry about it.

Rich people generally spend a lot of money, whereas wealthy people do not. For example, a rich person may have an extravagant house, several cars, and have expensive habits. On the other hand, a wealthy person may have a simple home, one or two cars, and find joy in doing low-cost activities with friends and family. 

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Rich people’s lifestyles can be hindered by the loss of their paycheck. On the other hand, wealthy people have diversified income sources and are cushioned in case one is lost.

Many rich people show off that they’re rich, whereas it’s common to have no idea that a person is wealthy. Many wealthy people wear typical t-shirts and jeans, drive common cars, and live in modest homes. Rich people are more likely to wear fancy clothes, drive expensive cars, and live in lavish homes. Find out how to look and act rich on a budget.

How To Become Wealthy

Being wealthy doesn’t mean having a specific amount of money. Instead, it means having enough money and income that you no longer need to worry about your money in general. There are several ways to walk down the path of becoming wealthy, even if you don't have much now.

Save as Much Money From Each Paycheck as Possible

Whereas the rich spend the money they earn, the wealthy save and invest it. To become wealthy, maximize your savings rate. That means minimizing your expenses and maximizing your earnings. Your savings rate is your saved money each month divided into your total income. So if you save $1,000 in a month and in that month you earned $4,000, then your savings rate is 25%.

If you struggle to save money, consider incrementally saving more money each month. Start with whatever makes sense to you, and then increase your savings as best as you can. 

Financial experts generally agree that saving and investing a minimum of 10-15% of your monthly income is wise. Those who want to retire at an earlier age or accumulate wealth faster will want to raise this significantly higher.

Pay off All of Your Debt

Wealthy people have little to no debt. In your journey to become a wealthy person, focus your energy on paying off all of your debt, especially bad debt such as credit card debt, personal loans, auto loans, and student loans.

Check out this article for tips for paying off debt. Once you’re out of debt, you can start investing, which will build wealth over time.

Invest Your Money for Your Future

When you have your money invested in assets that pay you regularly, you build sustainable wealth and passive income. An example of this is when you buy stocks that pay dividends. The stocks grow over time, and the dividends pay you monthly or quarterly.

Diversifying your investments make sense. For example, you may have money in the stock market, money in peer-to-peer lending, money in real estate, and money in a business you own.

Automate your finances so that you can invest in your future incrementally without worrying about your money day after day.

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Don’t Just Work a Job, Hustle on the Side

Wealth is built quicker when more money comes in. Consider picking up a side hustle to push your net worth higher. Those who pick up one or more side hustles may be able to replace their full-time job eventually should they desire. 

Almost anyone can do a side hustle as some require a few hours a week, and some can be done with as many available hours as you have. 

Get in a Wealthy Mindset

Being wealthy is a mindset. It means living within or below your means, saving and investing regularly, and keeping debt to a minimum. You won’t spend your money on things you don’t need, and you’ll look for ways for your money to make more money for you.

You’ll stop trying to keep up with the Joneses and instead focus on your nest egg. You’ll remember that sacrificing some fun now will help you have more wealth later, which will create a more comfortable life for you and your loved ones later on.

Wrapping It Up

In this article, we discussed the notable differences between being rich and wealthy as well as how to obtain wealth. Living a rich life is completely acceptable if you earn enough to support it, but with that in mind, building wealth and never worrying about money is certainly appealing.

What have you done to help yourself build wealth?