Rich vs Wealthy

In our everyday conversations, we often use the terms ‘Rich’ and ‘Wealthy’ interchangeably for the individuals who live their lives extravagantly. But in reality these two are quite different terms having few critical differences. Finance definitions are difficult to pin down because money is often in the eye of the beholder. 

Rich people often flaunt their wealth by buying expensive cars, big houses, vacations. They are the people who earn high incomes through jobs or business and highly depend upon their paychecks to maintain their lifestyles. If they do not keep pace with their jobs they might not be able to sustain their status of being ‘Rich’. 

Wealthy folks might not always display their wealth for example- Warren Buffett still lives in his house which he bought in 1958 for $31,500. They often have many streams of future-proof incomes. 

They have different approaches and perceptions of money. Rich people view money as a means of purchasing lavish lifestyles and luxuries. They do not think twice before spending thousands and thousands of dollars on shopping trips or last-minute travel. They tend to live in the moment not considering how spending such amounts will affect them tomorrow. Wealthy people tend to play the long game and spend their money mainly on assets which further make more money. They make their financial decisions based on certain values and goals.

Wealth creation is as much a science as it is an art, requiring patience, discipline, and emotional control. Wealthy individuals understand this and thus invest in properties and other valuable possessions which will grow over time. They often have diversified portfolios of assets. They own sustainable financial resources that generate passive income alongside their regular incomes. Meanwhile rich individuals are often attracted to short term liquid investments like sports cars, branded clothes and other possessions that develop immediate returns.

The use of debts is also not the same. Rich persons often amass huge debts by paying on credit cards or taking loans to satisfy their current needs. Whereas wealthy persons avoid taking debts and liabilities and have high net worths. They may take debts to leverage it against starting new business or purchasing appreciable assets.

“I want wealth to have a level of independence, that’s what I want, so things take a back seat to my wealth, even if it’s money that I have not spent and I might never spend it. I want the wealth there to give me independence.” —Morgan Housel

The more money, free of debts, a person has, the more freedom he has in life. He can choose to take a year off or to buy a home and travel. Having money creates options.The journey from being rich to being wealthy is about transitioning from short-term gains to building a sustainable financial future that can endure for generations. 

Wealthy people are generally involved in many philanthropic activities. They pass on the benefits, may it be from generational wealth to others and help others become rich.