Wealthy vs Rich: The Key Difference
Wealthy vs Rich
Is there a difference between being wealthy vs rich? As it turns out, there is a key difference between the two, and I will discuss it with today’s post.
In 1997, Robert Kiyosaki published a personal finance book called Rich Dad, Poor Dad. The book instantly became a phenomenal success and in no time catapulted Kiyosaki to the world of fame.
In his book, he mentions that there’s a disparity between being rich and being wealthy. He went on to say something surprising:
The rich have lots of money but the wealthy don’t worry about money.Robert Kiyosaki
I found this very interesting because I’ve always thought that the two go hand in hand. The common thinking is that if you’re rich then you’re probably wealthy. and if you’re wealthy then you’re probably living a very comfortable life!
The fact is, this is not always true.
Being Rich and Wealthy
When I think about someone who is rich, I think about someone with a lot of money. A rich person is also very showy with their money.
They drive fancy cars and live in a fancy house and wear fancy clothes and eat at fancy restaurants.
Growing up poor, I wanted to be rich. I wanted to own a big house, live in a fancy neighborhood, drive a luxury car, and buy expensive clothes.
Additionally, I wanted to be seated in the best seat in sporting events and travel the world anytime I wish.
And let’s be honest some of these things still sound good to me now.
Kiyosaki said that the rich have lots of money but the wealthy don’t worry about money.
This is indeed thought provoking. Let’s focus on the second half of his statement. The wealthy don’t worry about money.
Growing up, I was poor. only my dad worked at a minimum wage job and my mom was on disability benefits.
However, they worked really hard to provide for me and my siblings and for that I am very grateful.
Our priorities were a roof over our heads and enough food to eat. I was excited to visit the nearest thrifty store to stuff clothes into a bag for $1.
Also gas for only 99 cents per gallon and a movie only cost $5 dollars. Oh how I missed the good old 90’s!
Imagine never having to worry about money? Who wouldn’t want that? I wanted to be wealthy and rich!
The Difference Between Wealthy vs Rich
After some research, i.e. Googling. I found that there is a difference between being rich and being wealthy.
To put it simply. The difference between a rich person and a wealthy person is that the wealthy person has sustainable wealth.
In other words, wealthy people will always be wealthy. Whereas someone who is merely rich, they will only be rich for a period of time until the money runs out.
I am sure a lot of you have heard of stories of rich actors, celebrities and professional athletes who once lived in fancy lifestyles.
They owned big houses, nice cars, and expensive clothes and vacationing in luxury all over the world. But they are now on the verge of financial ruin due to poor financial skills and trying to sustain this kind of lifestyle of many years.
You’ve also heard of lottery winners who went to bed one night with debts and woke up the next morning an instant millionaire.
But due to poor financial management, ends up where they started or perhaps worst.
Rich Case Study: Pharmacist
Let’s look at Andrew as an example.
Andrew and his wife are rock star pharmacists with an annual salary exceeding $300,000. Most Americans say that you need an income of more than $100,000 to be rich.
By all accounts and standards Andrew is a rich man.
He has a big house, he’s living in a good neighborhood. He has two luxury cars between him and his wife. His kids go to a good private school. He has membership in the local country club.
So clearly, Andrew has lots of money at his disposal. So he uses his money to make sure he fits in and looks the part of a respectable pharmacist in society.
Obviously Andrew has expenses, so does every other person. He has a mortgage to pay, transportation costs, feeding his family, and an annual vacation with his family.
Altogether, Andrew spends $12,000 per month and he has savings amounting to $24,000 in his bank account.
Since wealth is defined as the status of an individual’s financial resources to sustain the individual’s way of living long periods of time.
In other words, this is money coming on a consistent basis that’s able to sustain your current standard of living for many years.
In this case, should Andrew and his wife lose their jobs, together with all the benefits accruing from it? He’s only able to provide for his family for only two months.
After which, he will need to immediately find an alternative source of income. Therefore, Andrew is rich, he is NOT wealthy.
Wealthy Case Study: Bill Gates
Bills Gates is one of the richest men in the world. he’s a business magnate, an investor, a philanthropist, a humanitarian, and an author.
As of 2020, Bill Gates has a net worth of $115.8 billion USD.
It is estimated that every second, Bill Gates earned $380 , $22,800 per minute and $1, 368,000 per hour.
In one hour, Bill Gates earns more per hour than Andrew’s yearly annual income.
Yet Andrew is considered rich.
Being wealthy is essentially being financially free. It means you don’t live paycheck to paycheck.
You don’t need to necessarily need to make any more money over a long periods of time.
Because you have the money saved or passive income flowing in from your assets and investments.
Bill Gates doesn’t actively work to earn his money. He earn money from his passive income.
He earn the money when he’s playing golf, watching TV or traveling the world. You get the idea.
Wealth is sustainable richness. Basically a rich person who will never run out of money.
Bill Gates can maintain his current lifestyle for hundreds of years at his current rate of wealth.
On the other hand, if Andrew and his wife quit working then they will run out of money and stopped being rich.
You don’t need to make as much money as Bill Gates.
As long as you have income flowing in that you are not directly working for.
But you can still maintain your current standard of living then you’re considered wealthy.
Usually when you think of a rich person, you think of someone who buys both their wants and their needs.
The $5,000 suit, $3,000 watch, a luxury imported car, the big house on the beach and so on.
Just because someone exhibited “rich behaviors” it doesn’t mean they have their personal finances in order.
Sometimes, these people who you considered rich are actually living paycheck to paycheck and are drowning in debts.
Many people who say, “I want to be rich” aren’t actually looking for financial security.
What they want is the social status and the prestige they associate with the “millionaire club.”
Now that you know the difference between wealthy vs rich.
Let me pose this question for you. Do you want to be a rich or do you want to be wealthy?
Actually, there those of us who chose to be wealthy by blending in and practice a good financial strategy. These people are practicing stealth wealth and may the millionaire next door.