Though both words are often used interchangeably, they mean slightly different things. Let us see what each of these means and which one we will want to be associated with if we want to achieve financial freedom.
I am sure most of us have been asked in the past if we want to be rich and we have answered yes. But do we really want to be rich? Let’s first look at what rich means before answering that question again.
What does it mean to be Rich?
Being rich is often categorized as having a lot of money or cash in the bank. Someone with a remarkably high income is generally considered a rich person without considering how much the person spends or how much debt she or he has. More often than not rich people are big spenders too. They end up spending as much as they earn or sometimes even more and get into a pile of debt. A lot of high-income earners, including celebrities take to over-spending when their income increases and end up going broke because such a rich lifestyle is not sustainable. Rich people often have fancy cars, use expensive accessories, or live in a mansion that is expensive to maintain. Being rich is more about showing off what you have.
What does it mean to be wealthy?
Now that we have an idea of what rich means, let us see what Wealthy means.
Wealth on the other hand is a measure of a person’s net worth which is the difference of all the assets and liabilities. Simply put, it means a wealthy person spends way less than she or he earns. Usually, a person having a net worth of 1 million dollars or above is considered to be wealthy.
The Difference between rich and wealthy
The major difference between the rich and the wealthy is their money mindset. Both a wealthy and a rich person can have the same high income. Or the wealthy person might even earn less than the rich. However, a wealthy person saves most of it and lives within their means, thereby accumulating the wealth. The rich person, on the other hand, keeps spending most of what they earn.
Let us see some mindset-driven traits that differentiate the wealthy from the rich.
Spending Habits: The rich often spend on things they desire without thinking through the value of money. In contrast, the wealthy would only spend on what they need after thoughtful consideration of the value of money.
For instance, the world’s most famous billionaire, Warren Buffet owns a 2014 Cadillac, whereas many of our rich neighbours owning a fraction of this wealth own massive sports cars costing over $200,000.
Income: Being rich is usually identified with having a large income which is primarily active sources such as work or successful business.
On the other hand, being wealthy means having substantial passive income from accumulated assets.
Investing: Another significant difference between truly wealthy and rich people is their investing habits. The wealthy invest their savings in income-generating assets such as properties, stocks, etc. while the rich use their money to buy expensive depreciating assets such as cars and boats.
Future focused: The wealthy are focused on growing wealth for the future. Contrastingly the rich tend to live in the moment without planning, saving, or investing for the future.
Key Takeaways
- Wealthy people have higher net worth than rich people.
- Wealthy people live within their means and spend money on things they need and not on things they want.
- Rich people rely solely on active sources of income whereas wealthy people also earn passive income from their assets.
- The rich spend what they earn on lifestyle expenses whereas wealthy people invest in income-generating assets.
Image Courtesy: Image by jcomp on Freepik
by 
by