“Rich is about how much you make. Wealthy is about how much you keep, how hard it works for you, and how long it lasts. Rich is a necessity for becoming wealthy, but it’s not sufficient on its own.
Rich and wealthy, two words that many people use interchangeably but mean vastly different things.
Being rich means having a lot of money coming in, but it does not mean you are wealthy.
Being wealthy is not only having enough money to meet your needs, but being able to afford not to work if you do not have to. It is about amassing assets and making your money work for you.
A person who makes $50 million in a single year but spends $49.9 million is rich, but not wealthy. They might have a great lifestyle, but they have no financial security, no financial independence, and no real wealth to show for it.
On the other hand, a person who makes $50,000 a year but saves and invests wisely can become wealthy over time. They may not have the same flashy lifestyle as the person who made $50 million, but they have the security and independence that comes with having a strong financial foundation.
We have all heard the stories of famous people being rich but going bankrupt. MC Hammer, Antoine Walker, Nicholas Cage, and Mike Tyson are just a few of the many.
We all wonder how someone could burn through $100,000,000 or more in a lifetime, but their stories aren’t that much different than what is stopping many other people from being wealthy themselves.
Therefore, it’s important to focus on building wealth, rather than just chasing after riches. It’s easy to get caught up in the excitement of making a lot of money, but it’s much more rewarding in the long run to focus on building a solid financial foundation that will serve you for a lifetime.
It is not hard to spot rich people. They often go out of their way to make themselves known. But wealth is hidden. It is income not spent. Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.
Being swayed by people playing a different game can also throw off how you think you are supposed to spend your money. So much consumer spending, particularly in America, is socially driven subtly influenced by people you admire and done because you subtly want people to admire you.
How should we define wealth?
I view wealth as the ability to wake up in the morning and say, “I can do whatever I want today.”
Morgan Housel said “Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.”
The thing that often goes overlooked is realizing that you do not need a specific reason to save. It is fine to save for a car, or a home, or for retirement. But it is equally important to save for things you can’t possibly predict or even comprehend.
It does not need to be something so severe as a pandemic for you to benefit from increased savings.
A small amount of wealth means the ability to take a few days off work when your child is sick without it breaking the bank. Some people may take this for granted but is huge if you do not have it.
A little bit more means waiting for the right job to come around after you get laid off, rather than having to take the first one you find. That can be life-changing.
Six months’ emergency expenses mean not being terrified of not putting up with BS at work, because you know you will not be ruined if you must take some time off to find a new job. It also means you may be able to change to a more flexible job and start that side hustle that may one day develop into a business.
More still means the ability to quit your job and starting that business you know would make you happier. Or that the business you are running can make it through lean times because you can stop taking money out of it for living expenses.
Wealth means being able to deal with an emergency without the added burden of worrying about how you’ll pay for it.
So, the next time you think about the difference between being rich and being wealthy, remember that it’s not just about how much you make, but also about how much you keep and how well it works for you.”
Housel’s words are a powerful reminder that wealth is about so much more than just how much money you make. It’s about building a strong financial foundation and having the security and independence that comes with it. By focusing on building wealth, rather than just chasing after riches, we can create a more secure and fulfilling financial future for ourselves.