If you go to thesaurus.com or a similar site and enter rich, you’ll most likely get wealthy among the results. And the same would be true the other way around.
In a dictionary sense, the words mean pretty much the same thing. However, in practical application, there is a difference between rich vs. wealthy.
Both are nice things to be, and both mean you have a lot of money, but one provides more financial freedom than the other. One of them is also more likely than the other to be a short-term status as opposed to one of long-term wealth.
Rich Vs. Wealthy? What Is the Difference Between Rich and Wealthy?
We’ll get into more details about rich vs. wealthy in the next two sections, but the biggest difference when it comes to rich vs. wealthy is how the depth and sustainability of that wealth.
A rich person earns a nice salary, has a fat bank account, and doesn’t have to worry too much about expenses, but they’re still susceptible to a downturn or unexpected event that could make them lose it all.
Wealthy people, on the other hand, have such a high net worth, so many assets, and so much financial stability that they not only don’t have to worry about things like mortgages and monthly expenses but also have little to fear from bankruptcies and other financial catastrophes.
It’s possible to squander fortunes (Mike Tyson is a good example), and it’s been done many times, but overall, it’s pretty rare. Wealthy individuals live debt-free and typically leave behind a generous inheritance for their next of kin.
What Does It Mean To Be Rich?
Usually, being rich means you have a high-paying job that returns an annual income, placing you among the highest earners. Unless you practice bad spending habits or other negative financial behaviors, you don’t have trouble with house payments, car payments, and paying off credit cards each month.
The amount of money you earn enables you to have nice material possessions if you want them. In short, you’ve achieved financial success.
On the other hand, you may be one recession, lawsuit, stock market crash, natural disaster, or other financial calamity away from ruin. When it comes to the rich vs. wealthy spectrum, you’re on the more at-risk end. You’re still better off than most of your fellow Americans, but you can’t live a financially worry-free life.
Good examples of people who are often rich but not wealthy include, just as a few examples, many business owners, doctors, and professional athletes. Another is lottery winners, who are infamous for being lured into flashy lifestyles and practicing poor money management; many lose most or all within a decade.
A business owner can go bust if market conditions drastically change. Doctors, who earn around 400K a year on average, are at risk of malpractice suits and, if found liable, losing their licenses. Some pro athletes earn eye-popping salaries, but they are at risk of losing everything if they suffer a serious injury.
Something else to know is that rich can be relative. If you’re single and earning 100K in a small rural town, you’re probably rich. But if you’re married with kids and earning that same income in New York City or San Francisco, you’re not.
What Does It Mean To Be Wealthy?
Now, being wealthy means that unless you’re incredibly unfortunate and/or irresponsible, you don’t have to worry about losing everything. You have financial security that will stand up to all but the most extraordinary challenges. These are people who are billionaires or who have a net worth in the tens or hundreds of millions of dollars. They can afford yachts that cost more than the mansions rich people buy.
Who are the truly wealthy? A lot of the biggest celebrities are. Others are familiar names who started and/or own some of the world’s biggest companies: Warren Buffett, Bill Gates, Mark Zuckerberg, Jeff Bezos, and so on. They’re mainstays on the list of the world’s wealthiest people, and some of them have topped it at some point.
There’s another tier as well. These are people whose names aren’t as well-known but who have amassed fortunes that shield them from economic peril. Some were born into wealthy families; others have made their way to this tier through hard work and sound financial practices as business owners, executives, or sheer talent (think incredibly successful authors, for example).
How To Become Wealthy
As you make financial goals and focus on building wealth so that when it comes to rich vs. wealthy, you’re in the latter camp in the end, you need to practice a wealth mindset. That includes the following:
- Create long-term goals.
- Work with a financial advisor who can help you invest wisely.
- Wealthy or sustainable lifestyle? Until you’re actually wealthy, don’t live a lifestyle of the rich and famous.
- Avoid high-interest debt. It can crush you over time and cost you so much money.
- Enjoy life, but don’t let the pursuit of material items take over.
- Develop passive income sources such as real estate income, stock dividends, and royalties.
- If you can’t avoid taking on student loans, pay them off as quickly as you can so you free income and save on interest.
- Always keep a focus on the long run.
We hope this helps you set a course for your financial dreams!