What is the first thing that comes to mind when you hear the term “wealthy?” Perhaps you think of someone that is of royalty, a well-respected individual, or a leader of a large group of people?

What is the first thing that comes to mind when you hear the term rich? Maybe rich portrays the vision of someone driving a Lamborghini, living in a mansion or royalty like mentioned above?

Is there a difference between a wealthy person and a rich person? If so, what are they and what makes a person wealthy vs being rich? Is one better than the other? These answers may be slightly different for everyone, but there is certainly something to say about the difference between being rich and being wealthy. Here’s an interesting perspective on the topic…

Some of Chris Rock’s language might be too strong, cover your kid’s ears. 

https://www.youtube.com/watch?v=Ov4VzYgIF8c

Riches VS. Wealth

Perhaps we all classify the two terms to be similar in a lot of ways. In short, there are little differences between the two. However little they may be, the differences in the two terms make all the difference in the underlying meanings.

One seeks to obtain material and financial gain quickly and easily, while the other seeks indefinite growth and knows it requires a lot of responsibility. One is long term, the other is short term. One often results in a lower standard of living and more stress, while the other builds upon a comfortable satisfying and sustainable style of living.

One feeds a habit to satisfy pleasures of today, while the other seeks to forgo instant satisfaction with hopes of greater benefits in the future. As we discuss the differences between being rich vs. being wealthy, it will become apparent which of the above statements belong to which category. Do you seek to be rich or do you seek to be wealthy?

What does it mean to be rich?

According to Mariam Webster’s Dictionary, the term “rich” means “having abundant possessions and especially material wealth.” Obtaining riches might be easy to compare to someone having a lot of material possessions or winning the lottery for example. It’s a term used to describe “a lot of” something, and in this case, a lot of money or material possessions.

Most of the time, when people want to be “rich” they are looking for a quick and easy way to obtain a lot of money. They want the results, often without putting in the effort to achieve said results. People who seek to obtain a lot of money, in extreme circumstances, may be willing to cut some corners to get there.

Does that sound like the type of financial future you are pursuing? In most cases, probably not! And we’ll explain why here in a minute when comparing that scenario to what it means to be wealthy. 

Becoming rich often leads to financial failure, here’s why…

While the exact statistic isn’t totally clear, it is obvious that a large portion of those who play and win the lottery end up going bankrupt within a relatively short period after their winnings. One-third of lottery winners declare bankruptcy eventually. 

For example, a man in West Virginia who won a whopping $315 million stated it was lost within about 4 years’ time, and he later said that “I wish I’d torn that ticket up.”

Stories like these are not uncommon at all. Have you ever heard of some of the most famous athletes who make hundreds of millions of dollars through their career, and once they retire, they suddenly go bankrupt? Famous athletes such as Mike Tyson, Allen Iverson, and Antione Walker are all examples of well-known athletes who ended up broke quickly after retirement.

In both instances of winning the lottery and when professional athletes go broke, there is a common denominator: a lack of financial literacy and sudden acquisition of wealth. In each instance, these people acquired a lot of money which soon ran out much quicker than they ever thought. These are examples of becoming “rich.”  So, if being rich is obtaining a lot of money and material possessions quickly, then what does it mean to be wealthy?

What does it mean to be wealthy?

Merriam Webster’s Dictionary defines wealth as “abundance of valuable material possessions or resources.” Those who have obtained wealth have obtained more than just money. And, in most cases, they walked the path it takes to become wealthy rather than inheriting it, winning the lottery or suddenly going from making nothing to $10 million per year.

Along with wealth, comes knowledge, abundance, and resources. When wealth is obtained, it’s true financial independence. You have obtained the knowledge, financial means, and access to resources insomuch that you will be taken care of indefinitely. 

Wealthy people, although they have a lot of money, still live on a budget. They are still conscious of their expenses, and they know how hard it was to get to where they are now. They understand that money needs to be approached with responsibility and that it can either help you or hurt you if not controlled properly. Just refer to the instances above of those who obtained riches quickly and later regretted their former decisions that lead to riches.

To get to your journey faster, read up on our epic post on how to budget your money to live the life you want. This post covers 10 reasons to budget, 8 steps to create a successful budget, 5 risks of not managing your money, 4 tools to manage your money including our free budget template, and to cap it off, we discussed the money habits of millionaires from reputable sources.

Why seeking to be wealthy is a safe path to financial freedom…

Financial experts such as Dave Ramsey have studied tens of thousands of millionaires throughout the US in efforts of determining the habits they have that got them to their millionaire status. The stats are surprising and telling in what real wealth is and how to obtain it. Among the many revealing numbers the found from their studies are:

• 3 out of 4 millionaires said that regular and consistent investing for the long term lead them to success.
• On average, millionaires work for about 28 years before they achieve millionaire status, and most of them at the age of 49.
• 79% of US millionaires did not become millionaires from an inheritance. In other words, they are self-made millionaires.
• ONLY 31% of millionaires made $100,000 per year, and one-third of millionaires NEVER made a six-figure income.

In other words, true wealth is obtained through hard work, obtaining knowledge, and managing your wealth responsibly so that it creates indefinite wealth. 

Our review of the most famous financial book – The millionaire next door also reiterates the same concepts. 

Lessons taught from the world’s wealthiest individuals

One of the most well known and wealthiest individuals of today is Warren Buffett. How did he get to where he is today? The answer is that he followed the true path to obtaining WEALTH, and not just seeking RICHES. 

His wealth started out slow and steady, to be one of the wealthiest billionaires in the world. Here are a few statistics and lessons we can learn from Warren Buffet on his path to wealth:

• Warren Buffet bought his house in 1958 for $31,500 which is about $250,000 in today’s dollars. He still lives in that very same house purchased back in 1958, 61 years later.
• Buffet is a perfect example of true persistence. He often preaches that persistence and thinking long term are requirements for building wealth.
• When Warren Buffet and Bill Gates went out to eat at McDonald’s, when it came time to pay as Bill pulled out his wallet, Warren Buffet said “Don’t worry Bill, this one’s on me” as he pulled out a stack of coupons to use. You heard that right, a guy worth over $80 billion dollars still uses coupons![vi]
• When Tony Robbins asked Warren Buffet how he got rich, Buffet responded saying “Three things: Living in America for the great opportunities, having good genes so I lived a long time, and compound interest.” In other words, investing in appreciating assets like the stock market allows the magic of compound interest to be on your side.

What was reinforced about the lessons taught by Warren Buffet and other wealthy individuals, is that their responses on how they obtained their wealth are almost always the same in some fashion. While the context of how they got there and what industry they specialize in may be different, the rules by which they play are tested and true. 

Rich VS. Wealthy – Which Would You Rather Be?

Today, Warren Buffet’s net worth continues to grow year over year. Compare that to a lottery winner or broke and retired athlete, and you get the idea of why it’s better to seek to be wealthy rather than become rich.

In conclusion, seeking to be rich is often associated with people who wish to obtain a lot of money or material possessions in a relatively short amount of time. Most often, it means both getting rich quick and getting rich easy, and the less amount of effort required the better.

Wealth, on the other hand, is more than just financial independence. With it comes lessons learned from hard work, persistent investing and thinking long term. Wealthy people still live on a budget, watch their expenses and save and invest on a regular basis. They plan for the future and seek to keep building their overall net worth. 

The ultimate result of becoming wealthy is the ability to choose to work, without any obligation to work. Your income and financial assets are enough to pay for your cost of living. It’s also obtaining a status in which your wealth will last indefinitely as you continue to maintain it responsibly.

Adebayo

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I am a pulmonary and critical care doctor by day and personal finance blogger/debt slaying ninja by night.

After paying off close to $300,000 in student loan debt in less than 6 months into my real job, I started on a mission to help others achieve the same. There is no magic to this than to strap up and get it done. Some of the ways we achieved this include side hustle, budgeting, great negotiation skills, and geographical arbitrage.

When I was growing up, common knowledge in Nigeria is that there is one thing you cannot trust anyone else with, and you guessed it – your money.

Being frugal came easily to me based on my background. However, the concept of building wealth did not solidify in my mind until when I finished medical school. I wish I knew what I know now when I was 14. Still, I don’t know enough and I am constantly learning to improve my knowledge.

My goal is to reduce financial illiteracy among young professionals. I am catering to the beginners – babies and toddlers in financial literacy.