Rich VS Wealthy: Key Differences Between The Two
When we think of someone being rich vs wealthy, we might think it’s the same thing but it’s not. For some reason, the words rich and wealthy are often incorrectly used to describe the same thing.
The two words might seem like synonyms, but they are completely different. It’s hard to spot the difference, but being rich and being wealthy is not the same thing.
What does it mean to be rich?
Being rich is simply having a lot of money or income. It comes down to how much cash you have in your bank account. But just because you’re rich, doesn’t mean you are wealthy.
In fact, being rich can often mean that you are spending a lot of money. It can also mean that you have a lot of debt. It doesn’t matter how much money you have if your expenses are higher than your income. Being in debt is definitely not something to aspire to!
People who are rich might drive a fancy car or live in an amazing house in the best part of town, but it comes at a cost. If you make $200,000 a year, but spend $225,000 a year in expenses, you might seem rich, but you’re on your way to going broke.
As a matter of fact, plenty of celebrities have gone broke because of their rich lifestyles.
MC Hammer at one point had $30 million in the bank, a $1 million house with 200 staff members, and a horse stable with 19 racehorses. But all those expenses took a toll and all that spending (along with a number of lawsuits), resulted in Hammer declaring bankruptcy in 1996. He ended up in $13 million in debt.
What does it mean to be wealthy?
Being wealthy is not only having enough money to meet your needs but being able to afford not to work if you don’t have to. It’s about amassing assets and making your money work for you. In other words, it’s having a significant net worth.
Wealthy people don’t necessarily own the latest gadgets or cars or throw lavish parties. What they do have, is a lot of assets, such as real estate, investments, and cash. For example, if your monthly expenses are $5,000 per month, and you have $30,000 in savings, then you have about six months worth of wealth. If you invest that $30,000 and you end up with $5,000 a month in investment revenue, you are wealthy.
The most wealthy people in America are often business owners. Jeff Bezos, the founder of Amazon, is worth $145 billion, while Warren Buffet is worth $80.8 billion. Buffet is considered a frugal billionaire. Despite his massive wealth, he still lives in the Nebraska home he bought in 1958 for $31,500. And while he bought a vacation beach house in California for $150,000 in 1971, he ended up selling it for $7.5 million.
This will be the topic and discussion in a two part series, this is one of two. I hope you enjoyed the blog and learned a few new facts, thank you for reading.