Rich vs Wealthy—The Difference Between Pure Excess and Established Assets
Updated · May 08, 2022
What is the difference between rich and wealthy? It's not just about how much money you have in your bank account, but also your mindset, and how it informs decision making.
If you're rich, you may have a lot of money every month, but could still be living paycheck to paycheck.
If you're wealthy, you may live below your means, but have a lot of money saved and invested for the future.
Join us as we discuss the difference between being rich and wealthy in this blog.
Most people want to be rich. But what does that mean? Does it mean having a lot of money in the bank, or does it mean something else entirely? And how do you become rich in the first place?
There are many misconceptions about what it means to be rich. Many people think that if they just had more money, they would be happy. But research shows that this is not always the case.
In fact, once you get beyond an annual salary of $75,000, stats show that more money doesn't necessarily lead to more happiness. Still, the phrase “money doesn’t buy happiness” is overblown, because poverty breeds misery.
So what does it mean to be rich then?
It means being able to spend a lot.
The rich can buy whatever they want whenever they want it; but it’s contextual to the person.
For some, being rich might mean being able to afford the latest iPhone or having a new car. For others rich could mean much more, like being financially free and not needing anything more than what they have.
Here we start seeing the border between being rich and being wealthy. In short, being wealthy is being able to sustain a good standard of living, while being just “rich” is sort of a surface level.
People we consider “rich” often become this way quickly.
Launching into a high-paying job, becoming an overnight sensation, or hitting it big in gambling.
Wealth on the other hand is built over time. It can start with someone getting rich, but in order to become wealth, a solid foundation needs to be built. This is why we often hear of wealth being generational.
Wealthy people are more than rich.
They may have more money than most, but it was a long process. It usually takes a lot of work or strategizing and time to amass their wealth.
Wealth is not just about having a lot of money. It’s also about having assets that generate income for you, whether that’s through investments, businesses, or rent from properties.
It’s also isn’t just about the amount of money you have – it’s about how well you manage it. Wealthy people are careful with their money, know how to sustain it, and make it grow.
The wealthy also tend to spend money differently than the purely “rich.” Where the thought of being rich invokes images of diamonds and fast cars, the notion of being wealthy comes with the idea of legacy and expansive resources.
This also tends to be a point of tension amongst new and old money, the first generally being rich, and the latter wealthy.
Having lots of money, but not taking care of it it is a danger. In order to maintain riches, and therefore become wealthy, steps should be taken to preserve it, and even expand it.
There are countless examples of people who were rich, but that ended up going bankrupt.
Examples of Rich People That Ended Up Bankrupt
The story of Icarus is often called on to teach a lesson about flying too high, and so succumbing to a mighty fall.
Celebrities often amaze onlookers with their extravagant lifestyles, but if overdone, it can come at a great cost. Let’s look at a few who seemingly had it all, and lost it.
MC Hammer, most known for the song “U Can’t Touch This” went from being a rich man to bankrupt in just a few years. How did that happen? It's all about bad habits. The rich can become poor if they have terrible money management skills and keep making the same mistakes over and over again.
When you're rich, it may be easy to get carried away with your spending because it might seem like you’ll always have enough money for everything. If you don't know when or how much is too much, then soon enough you'll find yourself running out of cash flow with no way to make more fast enough—or at all.
In MC Hammer's case, he had an expensive lifestyle with extravagant tastes in clothes and cars as well as a bad habit of giving things away to family and friends. At his height, he was worth about $70 million, but today is only worth $2 million.
Wayne Newton, one of the most popular entertainers in Las Vegas history, once filed for Chapter 11 bankruptcy. The news was a surprise to many who thought that with all his years of performing and his rich lifestyle, Newton would have been immune to money troubles.
But as it turns out, even someone as famous and wealthy as Wayne Newton can go bankrupt if he doesn't manage his money properly. In fact, according to court documents, Newton's debts total more than $19 million, including over $11 million in back taxes.
Despite the bankruptcy, Newton managed to bounce back and is today worth around $50 million.
Mike Tyson was rich, but not wealthy. For a rich person, money can be just an abstraction—something that constantly flows in and out of their lives. Wealthy people are different, as we’ve said they have the ability to sustain their riches.
Mike Tyson lost his wealth because he didn't know how to do this, or more accurately because his bad habits prevented him from doing it. Like MC Hammer he was very generous to his friends and family and enjoyed a lavish lifestyle.
Tyson earned roughly $300 million throughout his boxing career, but today holds a net worth of $3 million.
A common thread among a lot of people that get rich fast and then lose it is their background. A lot of the recently rich don’t come “from wealth.” A lot of building wealth comes down to knowledge, which is something a lot of people don’t have the chance to get, and so when they finally get money, they don’t know how to preserve it.
It’s unfortunate because it means that’s an extra challenge preventing those without money from building it and allowing those born into it to maintain the upper hand.
Luckily finance is a popular topic, so there are a lot of resources available for those who want to learn about it.
More people are paying attention to the fact that it’s often high flyers that end up broke, and so big sports teams such as the Lakers have begun offering finance and investment courses to their players.
It's not just about how much money you have, it's about how you use it. Those who are rich, need to know how to manage their money and make it work for them to become wealthy.
Many wealthy people do come from humble beginnings and understand the value of a dollar, being unafraid to work hard and take risks. Others are lucky enough to be born into and are trained from a young age to hold on to it.
If you want to be wealthy, start by learning from them. Follow their lead and think long-term about your finances. Work hard and invest in yourself, with luck, you'll be on your way to building wealth for years to come.
Garan is a writer interested in how tech reshapes the environment, and how the environment reshapes tech. You'll usually find him inoculating against future shock and arguing with bots.