Many people use the terms rich and wealthy synonymously because they have similar meanings, at least on the surface. Digging a little deeper into their definitions can lead to some differences, though, mainly in the sustainability of income they represent.
A financially rich person might have a significant income right now while living a posh lifestyle and blowing through much of their money on material items. A wealthy individual, on the other hand, enjoys a more sustainable lifestyle made possible by the accumulation of assets and investments, and they could have passive income sources, as well.
Both rich and wealthy people have a lot of money, but a wealthy individual is better set for the future because they don’t need to actively generate income to continue living their lifestyle. This guide examines some wealthy vs. rich differences and explains how you can become wealthy in the future.
The Differences Between Wealthy and Rich
Understanding some rich vs. wealthy differences can help you develop a plan for your financial future. Wealthy people typically aren’t reliant on their job-related income, as they have other ways to generate money. The main differences include the following:
There isn’t a predetermined income level that separates rich vs. wealthy status, as it depends on the individual situation. A better barometer involves looking at assets and debt. A wealthy person typically has a significant net worth, while a rich person could have a high annual income but a negative net worth because of debt.
Rich and wealthy people often have different expenses because of their lifestyles. Mortgages, car payments, credit card bills, and loans could take up a considerable portion of a rich individual’s income, while a wealthy person won’t always have those payments because they have the money to avoid debt.
Extremely wealthy people are in an entirely different category and could have additional expenses like vacation homes, private jets, and full-time staff.
Many rich people prioritize the accumulation of material goods while ignoring investments and other techniques for passive income generation. Wealthy individuals focus on investments because they understand how putting money away leaves income for later in life so they aren’t stuck working in their golden years. Wealthy people turn their income into more money, and rich people spend it.
Rich people can become wealthy but must adjust their lifestyles to reach that status. Understanding the long-term benefits of wealth generation can assist as you dig into these wealthy vs. rich differences.
Six Tips for Becoming Wealthy
You won’t become wealthy overnight, as winning the lottery or building a multinational corporation from scratch are out of reach for most people. Some steps you can take today will move you closer to a wealthy future, though, as long as you’re willing to stick with them. Six tips include:
1. Develop a Plan
You won’t get very far without a plan. Creating wealth involves developing goals and planning the actions you’ll need to take to reach them. Speaking with a wealth management advisor is a good idea if you don’t know where to begin your wealth creation strategy.
2. Create Expectations
Having expectations of what being wealthy entails is part of the process. It’s unlikely you’ll achieve a level of wealth where money no longer matters as you cruise the globe in your personal super-yacht, but living a comfortable lifestyle with enough money to travel and relax is entirely possible. Setting some expectations along with your goals can point you in the right direction.
3. Live Within Your Means
One thing all wealthy people have in common is living within, or even below, their means. Warren Buffett is one of the world’s wealthiest people, and he lives in a 6,570-square-foot house in Omaha, Nebraska, which he originally bought in 1958 for $31,500.
Showing off the money you’re making with fancy cars, lavish dinners, and massive houses won’t move you closer to becoming wealthy, but living within your means can.
4. Avoid Debt
Most wealthy people also stay out of debt. All debt does is create interest payments that cut into your income and leave you with less money to invest. Don’t buy anything unless you can afford it with cash, and if you are forced into debt to buy a home, don’t spend any more than you can comfortably afford for a monthly mortgage payment.
5. Save Excess Money
Rich people tend to blow through their money quickly by living a lavish lifestyle and showing off their income. We often see rich athletes, musicians, and movie stars end up broke once they’re no longer employable in their industries, and it’s because they chose the path of a rich person instead of a wealthy person.
Saving your money rather than spending it and accumulating debt leaves you in a much better position if your income dries up in the future.
6. Invest Wisely
The investments you make today could determine whether you become wealthy in the future. It isn’t enough to invest once, though, as you should have an investment plan in place you contribute to regularly to help you take advantage of the money you’re making right now. An advisor can walk you through the best investments to make with long-term wealth generation in mind.
It is possible to become wealthy if you’re committed to the cause. You don’t need to make millions of dollars annually to get there, either, as creating a plan, avoiding debt, and investing your money will put you on the right track as you create and preserve your wealth.
Where to Find Wealth Management Services
Blindly throwing your money around might make you seem rich to your peers, but it isn’t a sustainable method of wealth generation. Becoming wealthy in the future will take some discipline, but it will be worth the effort when you’re living a comfortable life in retirement.
Bogart Wealth offers financial and investment management services in Houston, Texas, and McLean, Virginia. Our team can assist as you develop a financial plan and investment strategy that allows you to live comfortably in the future.
Contact Bogart Wealth to learn more about our custom financial planning services.
FAQs About The Difference Between Wealthy and Rich
The main differences between being rich and being wealthy lie in their income sustainability and lifestyle choices. A rich person may have a significant income but may not have accumulated assets, leading to a less sustainable financial situation. On the other hand, a wealthy individual has a significant net worth and passive income sources, making their financial future more secure.
The key distinction lies in their net worth. A wealthy person typically has a substantial net worth, which takes into account their assets minus any debts they might have. A rich person may have a high annual income, but if they have significant debts, their net worth may not be as impressive.
Rich individuals often have higher expenses due to their lavish lifestyles, including mortgages, car payments, credit card bills, and loans. Wealthy individuals, on the other hand, may have fewer such expenses, as they can afford to avoid debt and may have additional expenses related to luxury items like vacation homes or private jets.
Rich people can become wealthy by focusing on investments and passive income generation. Shifting their spending habits towards saving and investing rather than excessive consumption can help them build a more sustainable financial future.
Bogart Wealth offers financial and investment management services in Houston, Texas, and McLean, Virginia. Their team can assist you in developing a financial plan and investment strategy to achieve your financial goals and live comfortably in the future.