Rich vs. Wealthy: What’s the Difference?

Isn’t it funny how childhood experiences shape our views of rich vs. wealthy, as well as who has money compared to who doesn’t? There are several memories from my own childhood that made me think I knew how to tell if someone was rich, yet one in particular still sticks in my mind.

When I was in high school, there was a kid in my class who I definitely *thought* was rich. His family owned several fast-food restaurants and they had a huge house that was a lot nicer than mine.

He also drove a brand-new Dodge Stealth when he was just 16 years old, which is pretty over-the-top when you think about it.

In the meantime, his parents were more than happy to pay for all his friends to watch any pay-per-view event that came around – think OG boxing matches like Mike Tyson vs. Evander Holyfield.

This was a huge deal to me since my dad would never pay a few hundred bucks for me and my friends to watch a boxing match or some other pay-per-view sporting event. I could only imagine how rich his family was. After all, they always had extra cash to spend on cars, entertainment, and basically anything else they wanted.

Now that I’m older, however, I know most people who spend lavishly on material possessions and “stuff” are rich but not wealthy.

They might earn a lot of money, but that’s not the same as being wealthy.

In fact, earning a lot of money can easily put people on the path to going broke.

Rich vs. Poor: Difference

Before I dive into all the differences between being rich and wealthy, I also want to point out that the stats are all skewed for those of us lucky enough to live in the United States. Incomes considered “poor” here could put you in the “rich” or “wealthy” categories in a number of developing countries. Plus, the American version of “rich” is basically unheard of in many regions around the globe.

The World Bank classifies different countries into four different categories for analytical purposes — low income, lower-middle income, upper-middle income, and high income. When you look at the map on their website, you can easily see that the United States, most of Europe, and Australia are all high-income countries, whereas most of the continent of Africa and parts of Asia are considered low-income and lower-middle-income.

They also break down average incomes in various parts of the world, and the figures are very eye-opening. Just look at the difference between incomes in the United States and some of the other countries listed, and you’ll quickly see what I mean.

Average Monthly Income In 2023 (USD)

• Argentina: $785

• Bhutan: $340

• Ghana: $351

• Indonesia: $823

• Myanmar: $200

• Uganda: $111

• United States: $6,228

What Does “Rich” Mean?

With this in mind, I still want to nail down what it means to be rich vs. wealthy in the United States. For the most part, being rich in the United States means:

• Having a high income;

• Making it obvious you spend a lot of money; and

• Having the best of everything.

How much money do you need to be considered “rich” in the United States? That figure can vary by quite a bit since all kinds of people use credit cards and loans to fund the lifestyle they want. You know the type — they work in a “regular” job where you know their salary, yet they somehow have an exotic car and a huge house.

People who fall into this category earn a lot of money for sure, but that doesn’t mean they always keep it. It just means they earn that much in their jobs or with their business, and that they make sure everyone around them knows it.

I have actually met people who fall in this category — a ton of people, in fact.

Being Rich Is Limited to Living a Rich Lifestyle

I still remember the story of a married couple I worked with as a financial advisor. They each earned $250,000 per year, and they were only in their mid-thirties. My initial conversation with the couple helped me learn they wanted to retire at the age of 50, and that they were super motivated when it came to working hard for what they wanted.

Still, looking over all their financial accounts left me absolutely dumbfounded. While they earned half a million dollars per year, they only had $17,000 in total assets. That’s right; they were in their mid-thirties and they wanted to retire at age 50, yet they only had $17,000 in actual assets to their name!

This was partly due to the fact they weren’t saving or investing much at all, but it was also due to the massive amount of debt they had. They traveled a lot and they had a huge house. They also had nice cars and the boats and toys you would expect, and pretty much all of it was financed with debt.

This couple had a high income for sure, but their net worth was so low it actually shocked me. How can you calculate your own net worth? For the most part, figuring out your net worth involves taking all the assets you own and subtracting your liabilities. Whatever is left over is your net worth, which is an excellent measure of your actual wealth.

Crazy enough, this couple actually had a negative net worth when you subtract all the debt they had from the assets they had. You can watch my video on this couple here, but you probably have the gist of it already. This couple was definitely “rich” based on their income alone, but they were not wealthy at all. In fact, they had almost nothing to show for their incomes at all — at least, nothing but a mountain of debt and a pile of “stuff.”

Of course, this couple is not an anomaly at all. In fact, plenty of “rich” people have blown through their incomes with nothing to show for it in the end.

Some examples include:

Celebrities and Athletes Who Went Broke	What Happened?	Fortunes Lost
Dennis Rodman	Excessive spending, back child support, and legal problems	$27+ million
Evander Holyfield	Excessive spending and tax problems	$200+ million
Johnny Unitas	Excessive spending	$3.5+ million
MC Hammer	Living beyond his means	$70 million
Nicholas Cage	Over-the-top spending, legal issues, back taxes	$150+ million
Wesley Snipes	Over-the-top spending coupled with legal issues and back taxes	$40+ million
OJ Simpson	Excessive spending and legal problems	$40+ million

These are just a handful of celebrities and athletes who earned millions of dollars but wound up broke in the end. However, there are many, many others that have done the exact same thing or are doing it as we speak.

In fact, most of us have been watching the fortunes of Johnny Depp disappear in real time. The cost of his legal battle with Amber Heard will cost untold millions on its own, and reports say he blew $1.1 billion dollars on private jets, islands, booze, and failed business ventures to boot.

We can hope he’ll be able to resurrect his career once his current legal battle is behind him, but he’s definitely on the way to losing it all if he doesn’t. After all, you can’t live like a king if you’re not earning anything, and he’ll have to make huge changes to his spending habits if he wants to get back on track.

Either way, examples like these show you can earn millions of dollars and still have nothing to show for it in the end.

However, that doesn’t happen if you’re actually “wealthy,” which I’ll explain in more detail below.

What Does “Wealthy” Mean?

According to recent data from Schwab’s 2023 Modern Wealth Survey, being wealthy required an average net worth of $2.2 million dollars or more in 2023. That’s higher than the $1.9 million in net worth that was required to be considered wealthy in 2022.

According to some background information shared by CNBC, different age groups also had their own feelings on how much money someone needed to have to be considered wealthy in the United States. Nearly two thirds of survey respondents say enjoying relationships with loved ones better describes what wealth means to them, rather than having a lot of money and nearly 66% of respondents say having time is more important than having money

While “wealthy” people also earn a lot of money, they handle their finances in a totally different way. For example, wealthy people focus on buying income-producing assets instead of depreciating assets. And they sure as heck don’t blow all their extra money at the mall.

Wealthy people also save and invest diligently over their entire lives, which helps them harness the power of compound interest so they can build even more wealth over time.

When people are wealthy, they don’t have to live paycheck-to-paycheck because they have considerable assets to back them up. Wealthy people often work in flexible jobs as a result, or they own their own business and work when they want to.

Wealthy people also:

• Have more control over their time and how they spend it;

• Keep track of their assets and investments so they can grow; and

• Spend time learning how to build even more wealth.

At the end of the day, wealthy people are like Bob Lotich, who recently launched a new book called “Simple Money, Rich Life: Achieve True Financial Freedom and Design a Life of Eternal Impact.” Lotich worked hard to build real wealth over the course of his life, and he ultimately gave away a percentage of his income based on his age while still paying off his home. Over the last few decades, Lotich has given away more than $1 million dollars without going broke or losing his “wealthy” status.

While wealthy people may get where they are in a few different ways, many people become wealthy through:

• Starting a profitable business;

• Investing in the stock market; and

• Building a real estate portfolio.

Some of the wealthiest people in the world also take all three of these steps plus several others on their way to riches.

Either way, wealthy people actually keep their money because they invest it for the future. They also live within their means, and they usually don’t feel the need to flash their money around. Ultimately, that’s why many wealthy people don’t drive fancy cars or live in huge homes. Instead of spending their extra money, they put their money to work.

A good example of this is Warren Buffet, who still lives in the home he bought in 1958 and drives a 2014 Cadillac XTS. Buffet lives frugally despite having billions of dollars, and he focuses on building more wealth instead of spending it.

Key Differences Between the Rich and the Wealthy

So, what are the biggest differences between people who are rich and people who are wealthy?

The chart below explains everything you need to know.

THINGS RICH PEOPLE DO	THINGS WEALTHY PEOPLE DO
Earn a Lot of Money	Earn a Lot of Money
Invest in Depreciating Assets (i.e. Cars, Boats and Toys)	Invest in Income-Producing Assets (i.e. Businesses, Real Estate, Etc.)
Spend What They Want and Try to Save the Rest	Invest First and Spend What’s Left
Show Their Wealth Through Physical Possessions	Live Modest Lives
Borrow Money to Buy “Stuff”	Use Leverage to Invest
Live Paycheck-To-Paycheck	Live Financially Independent Lives
Stay Content Working for Someone Else	Look For Ways to Work for Themselves

Rich or Wealthy: Which is Better?

By now, you are probably realizing that being wealthy is a lot better than being rich! After all, being rich means you’re still part of the rat race, and that you may wind up working forever. Being wealthy, on the other hand, means you get to live your life how you want and spend money on things you actually care about.

You won’t be surprised by this, but I definitely consider myself a “wealthy” person, and that actually has to do with a lot more than money. Being wealthy allows me to have complete control over my time — to attend all my children’s events and to pick them up from school each day.

Having wealth also means getting to pick and choose how I spend money, and being able to splurge on things that add true value to my family’s lives.

I could have bought 1,400 shares of $VOO, but decided my backyard paradise was a better investment.

Lifetime memories = generational dividends. pic.twitter.com/Hs7gsklEKt

— Jeff Rose, CFP® (@jjeffrose) April 9, 2022

For example, I recently built a backyard oasis at my home, which I couldn’t have done if I was simply “rich” and just blowing all my income on flashy stuff. Our backyard pool is going to help my family create lifelong memories, which will yield generational dividends for decades to come.

You can’t put a price tag on that. And when you’re truly wealthy, you don’t really have to, either.

9 Key Steps to Becoming Wealthy

If you want to become wealthy instead of rich, you’ll have to change your thought process when it comes to how you spend your money. You will also need to stop caring whether other people think you’re rich or not, which can be a challenge when your ego has always been tied up in how much money you earn.

Want to become wealthy instead of rich? The nine steps below can help you get started.

Step 1: Avoid Debt Like the Plague

If you want to become truly wealthy, the first thing you should do is stop borrowing money! I’m not talking about taking out a mortgage to buy a home or borrowing money to start a business.

I’m talking about:

• Using credit cards to buy “stuff” you can never seem to pay off.

• Financing everything you can, from new appliances to furniture.

• Spreading out the payments on everything for as long as you can.

One specific monthly payment that’s likely killing your wealth is your car payment. This is especially true if your family has two car payments at a time, and if you’re the type of person who likes to upgrade to a new ride every few years.

According to the most recent State of the Automotive Finance Market report from Experian, which is from Q2 of 2023, the average monthly payment on a new car worked out to $729 at last count. Also, the average car loan lasted for 67.4 months!

Either way, becoming wealthy means making different decisions — decisions like picking a car you can buy in cash or driving your car for a decade so you can avoid car payments for several years.

Becoming wealthy also means skipping debt that doesn’t help you build wealth. For the most part, that means paying off your credit card balances each month and learning to live within your means.

Of course, wealthy people do take on debt — they just use it to their advantage. For example, wealthy people use leverage (a.k.a. debt) to invest in businesses and real estate so they can earn more money. That’s totally different from how rich people use debt, which usually involves financing cars, boats, furniture, and other “stuff” they cannot truly afford.

• Related: How My Grandmother’s 1998 Chevy Lumina Made Me Over $2 Million Dollars

Step 2: Invest in Personal Growth

Next up, you’ll want to invest some time and money into your own personal growth. This can mean things like:

• Hiring a mentor;

• Joining a mastermind group;

• Investing in personal coaching;

• Learning with the help of books and courses; and

• Building relationships by investing in others.

I like to refer to these investments as “income accelerators” because they can help you boost your income in ways other investments cannot.

I have personally participated in all five of these moves over the years, and I can say with confidence my investments in myself have yielded millions of dollars in added returns.

So, look for a mastermind group you can join, or reach out to someone you know who is doing work or running a business you’re interested in. Whatever you do, invest in yourself. I promise you won’t regret it.

Step 3: Build an Emergency Fund

Next up, you’ll want to make sure you have adequate cash stashed away for emergency expenses. After all, you cannot build wealth if a single financial emergency or unexpected bill could easily wipe out everything you have.

Unfortunately, not enough people have this kind of additional savings. In fact, a 2023 report from the Federal Reserve showed that 37 percent of adults don’t have enough cash to cover a $400 emergency expense.

How much do you need in your emergency fund? Most experts recommend stashing away three to six months of expenses somewhere you can easily access it, such as a high-yield savings account. If your current expenses are $7,000 per month, for example, this means you would try to save $21,000 to $42,000 just for emergencies and other expenses you can’t necessarily predict or plan for.

This may sound like an overwhelming task, but remember that you don’t have to build your emergency fund all at once! You can do it little by little over the course of several months or years. This might take some time but even possible for someone making $20 an hour.

Start by figuring out how much you can afford to save for emergencies each month, then set up a bank transfer for that amount at the beginning of each month or around your payday. Your money will inevitably grow over time, and you can earn some interest on your savings along the way.

Step 4: Build Your All-Star Team

Next up, you’ll want to build a team of people who are in your corner and supportive of your goals. Your team can include professionals who help you build wealth and manage your money, but it should also include friends and family members who don’t sabotage you or make fun of your ambitions.

As an example, you could:

• Finally hire a CPA to do your taxes and help you find areas to save.

• Hire a bookkeeper for your business so you can spend more time building wealth vs. doing grunt work.

• Join mastermind groups so you can meet like-minded professionals who support you in your endeavors.

• Spend more time with successful and happy people you know.

• Ditch friends that consume your energy and time without adding to your life.

• Hire a fee-only financial advisor that can help you create a long-term investment plan.

Motivational speaker Jim Rohn famously said most people become the average of the five people they spend the most time with, and I totally agree.

If you spend your time with your “rich” friends who are constantly looking for new ways to spend their money, it’s easy to do the same. If you spend time with “wealthy” people who are constantly working toward their next set of goals, on the other hand, some of that may rub off on you.

So, build your team of professionals and friends who can help you get where you want to be, and don’t be afraid to ditch anyone who is holding you back.

Step 5: Invest Your Income (20% or More)

Of course, you also need to invest faithfully if you want to build long-term wealth. Fortunately, there are many ways to do exactly that, and you will likely want to take part in several investing strategies at the same time.

Strive to invest 20% or more of your income in the following ways each month:

• Boosting contributions to your workplace retirement plan.

• Opening a Roth IRA and maxing it out.

• Investing additional money you have in a brokerage account.

• Learning more about crypto investing.

• Building a real estate portfolio, either through property ownership or alternatives like REITs.

No matter how you decide to invest, you should try to make your contributions automatic each month. Setting up automatic contributions will help you stay on track toward your investing goals, and that lets you spend your time and energy on some of the other steps on this list.

Where should you invest? Consider looking into the best investing apps like Robinhood, M1 Finance, and Acorns. If you want to get started in real estate without having to be a landlord, you can also look into investing with a real estate app known as Fundrise.

Here are some other resources that can help you start investing right away:

• What is a Brokerage Account?

• The Best Online Brokerage Accounts: For Beginners To Experienced Investors

• Should You Invest in Cryptocurrency?

• Best Crypto Exchanges of 2023

• 15 Ways To Start Investing Small Amounts Of Money

Step 6: Create Passive Income

Next up, you’ll want to focus on finding ways to build streams of passive income. After all, passive income hits your bank account whether you’re working or not, and you can use this income to build even more wealth over time.

Some of the best ways to build passive income include:

• Investing in dividend stocks.

• Investing in index funds.

• Creating a course you sell online.

• Writing a book or e-book you can sell over the over.

• CD laddering.

• Investing in Real Estate Investment Trusts (REITs).

• Starting an income-producing blog or website.

• Building an app or product you can sell.

These are just some of the ways you can build up passive income, but there are plenty of others. Either way, you’ll want to find ways to get your money working for you whether you show up or not. After all, it’s a lot easier to become wealthy when your money is constantly growing and producing income on your behalf.

This brings me to one of Warren Buffet’s best and most famous quotes: 

“If you don’t find a way to make money while you sleep, you will work until you die.”

Step 7: Focus On Your Goals

Most wealthy people also got to where they are by coming up with goals and pursuing them with fervor. I’m talking about short-term goals and long-term goals, and usually both at the same time.

When it comes to building wealth, common short-term goals to shoot for include:

• Creating (and sticking to) a household budget.

• Cutting spending so you can save and invest more.

• Paying down high-interest debt.

• Building an emergency fund.

• Looking for ways to earn more money.

Common long-term financial goals include:

• Building a profitable business.

• Investing a larger percentage of your income each year.

• Investing enough to retire on your own terms.

• Paying off your home.

If you’re aware you need to set goals but you’re not sure where to start, you should know you’re not alone. That said, you can start creating a list of goals by sitting down with pen and paper and making a list of things you want to accomplish. Some of them may be short-term goals you can work on right away, whereas others may take years or decades to complete.

If you’re struggling with goal-setting, my 10X GOALS ACCELERATOR™ course is also worth checking out. This course helps you figure out what your goals should be and how to execute on your plans.

Step 8: Focus On Contentment

As you start learning more about truly “wealthy” people, you’ll also notice they tend to be happy with what they have. They may not live in a mansion or drive a Ferrari, but they have a certain level of contentment that “rich” people never seem to achieve.

The fact is, becoming wealthy is really about a lot more than money. It’s about leaving the rat race so you have more time and energy to focus on the things and the people you love.

Becoming wealthy is about getting your kid off the bus each day and never having to miss their big game because you have to work.

In the meantime, being wealthy is also about controlling your money instead of letting it control you.

As Garth Brooks famously said, “You aren’t wealthy until you have something money can’t buy.”

This quote is so important because it’s so incredibly true. Becoming wealthy in a financial sense won’t mean anything unless you learn to be happy with the things you have that are priceless — things like relationships you have with your children, your spouse, your other family members, and your friends.

So, focus on building wealth for sure, but then learn to be happy with the life you’ve built and pour plenty of time and energy into nurturing the relationships you have been blessed with. After all, all the money in the world means nothing if you’re miserable in the end.

Step 9: Give Back

There’s one final step to being wealthy, and it’s one thing “rich” people rarely get the chance to do.

When you’re wealthy, you have to learn to give back. When you do, you’ll quickly learn that being generous is one of the most rewarding things a person can do.

Ways to give back can include:

• Giving money away to charity.

• Tithing at your church.

• Donating funds to causes you feel passionate about.

• Being generous with your time.

• Mentoring the next generation of people who want to become wealthy.

Giving back means you have finally made it — you can afford to give money away, yet you’ll still be immensely wealthy at the end of the day.

Is there anything better than that?

Work on becoming wealthy, and you can answer that question yourself.

Best Quotes About Wealth

Be Ethical

“All you have in business is your reputation. So, it’s very important that you keep your word.”

– Richard Branson, Founder of Virgin Group.

Money Is a Commodity

“Money is misunderstood. The fact is if you want to be successful the money will follow you. If you are a doctor, something else will follow you. If you are successful, there is an accompaniment and if your goal is just to make money, you won’t succeed. Money is a commodity to use, not to be dictated by.”

– Frank Lowy, former chairman of Westfield Corporation

Be Patient

“No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.”

– Warren Buffett, Chairman and CEO of Berkshire Hathaway

Everyone Won’t Agree With You

“If you want to do something different, you’re going to come up against a lot of naysayers.”

– James Dyson, Inventor and Founder of Dyson Company

Be Persistent

“Never give up. Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine.”

– Jack Ma, Founder and Executive Chairman of Alibaba Group

Question Yourself and Get Feedback

“I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better. I think that’s the single best piece of advice: constantly think about how you could be doing things better and questioning yourself.”

– Elon Musk, Founder and CEO of Tesla Inc.

Quotes from Well-Known Entrepreneurs or Business Tycoons

Jeff Bezos

• I believe you have to be willing to be misunderstood if you’re going to innovate.

• Life’s too short to hang out with people who aren’t resourceful.

• There’s no bad time to innovate.

Sara Blakely

• It’s important to be willing to make mistakes. The worst thing that can happen is you become memorable.

• We don’t have the luxury of time. We spend more because of how we live, but it’s important to be with our family and friends.

• We can make the world a better place, one butt at a time.

Michael Bloomberg

• Taxes are not good things, but if you want services, somebody’s got to pay for them so they’re a necessary evil.

• To a contrarian like me, constant advice not to do something almost always starts me quickly down the risky, unpopular path.

• I don’t know why you should be proud of something. It doesn’t make you any better or worse. You are what you are.

Warren Buffett

• There seems to be some perverse human characteristic that likes to make easy things difficult.

• Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.

• If past history was all there was to the game, the richest people would be librarians.

Larry Ellison

• When you innovate, you’ve got to be prepared for everyone telling you you’re nuts.

• I believe people have to follow their dreams–I did.

• I have had all of the disadvantages required for success.

Bill Gates

• Success is a lousy teacher. It seduces smart people into thinking they can’t lose.

• We make the future sustainable when we invest in the poor, not when we insist on their suffering.

• Your most unhappy customers are your greatest source of learning.

Elon Musk

• When something is important enough, you do it even if the odds are not in your favor.

• The only thing that makes sense is to strive for greater collective enlightenment.

• The single best piece of advice: Constantly think about how you could be doing things better and question yourself.

Larry Page

• Especially in technology, we need revolutionary change, not incremental change.

• If you’re changing the world, you’re working on important things. You’re excited to get up in the morning.

• We don’t have as many managers as we should, but we would rather have too few than too many.

J. K. Rowling

• It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all, in which case you have failed by default.

• It takes a great deal of bravery to stand up to our enemies, but just as much to stand up to our friends.

• It is our choices… that show what we truly are, far more than our abilities.

George Soros

• The worse a situation becomes, the less it takes to turn it around, the bigger the upside.

• Unrestrained competition can drive people into actions that they would otherwise regret.

• An open society is a society that allows its members the greatest possible degree of freedom in pursuing their interests compatible with the interests of others.

Oprah Winfrey

• What God intended for you goes far beyond anything you can imagine.

• Real integrity is doing the right thing, knowing that nobody’s going to know whether you did it or not.

• Breathe. Let go. And remind yourself that this very moment is the only one you know you have for sure.

Mark Zuckerberg

• The biggest risk is not taking any risk … In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.

• I think a simple rule of business is, that if you do the things that are easier first, then you can actually make a lot of progress.

• I think that people just have this core desire to express who they are. And I think that’s always existed.

Conclusion

The concepts of “rich” and “wealthy” are often used interchangeably, yet they represent profoundly different financial states and mindsets. While being rich is about flaunting monetary success and spending without restraint, being wealthy is about long-term financial stability, investing wisely, and prioritizing value over vanity.

Childhood memories and societal definitions might shape our perceptions of what these terms mean, but as adults, we realize that the surface glitz and glamour often mask underlying financial fragility. By contrasting the lifestyles of the rich, who often fall into the traps of debt and financial ruin, with the sustainable habits of the wealthy, the article sheds light on the importance of fiscal responsibility and forward-thinking. Ultimately, true wealth isn’t just about the balance in one’s bank account but the freedom, security, and quality of life it affords. It’s about living with purpose, intention, and, above all, financial peace of mind.

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