The Difference Between Being Wealthy and Being Rich
Personal finance is less finance and more personal. The ideas I’m sharing in this article are the ones that resonate for me.
What does rich versus wealthy mean?
Being rich is having things: the nice house, car, clothes. Being wealthy is the money you hold onto. You can see when someone is rich. You cannot see when someone is wealthy.
“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 wealthiest person owns their time
This didn’t become clear for me until recently, so I’m excited to share. I’ve often struggled with: “well what’s the point of accruing more money if you never spend it or use it?”
Then, I heard Morgan Housel on a podcast and it clicked: I want the money there to create my own feeling of freedom.
The more money I have (not the more money I spend), the more freedom I have in life. I can choose to take a year off. I can choose to buy a home. I can choose to travel. I can choose to start my own business.
Having money creates options and I wouldn’t want it any other way.
It also allows me to set up a business that pays myself, so I can do work that fulfills me.
Wealth in terms of dollars is great. But wealth in terms of your time? That’s priceless.
The wealthiest person invests
I prioritize putting my money into investments over spending. I also choose to view any purchases as investments whenever possible. Even a quick trip to the grocery store can be viewed as an investment in your health.
Wealthy people know money improves their quality of life, not the quality of their belongings
Similar to the above, every dollar we spend should be an investment in something. Whether it’s our well-being (a massage), happiness (going out for dinner), or our future (education).
Wealthy people are generous (yet mindful) with their money
People who hold onto their money for dear life are absolutely no fun. Even getting the extra appetizer when out for dinner can be a gesture (or investment!) toward a relationship you are building. Being stingy almost never pays off when you’re out, living life, and investing in a great life.
I see every transaction as an opportunity to be mindful of the life I’m building.
Wealthy people understand compounding (and it makes them more likely to invest and less likely to spend their money)
I love the example of Warren Buffet that I learned from Morgan Housel. He shared:
“Warren Buffet would be worth $12M if he invested from ages 25-65. Instead he's worth ~$90B because he's been investing from ages 10-90. 97% of his wealth compounded after his 65th birthday.” —Morgan Housel
Wealthy people automate their wealth systems
It’s not fun to think about your money 24/7. Instead, set up a system.
Open a stock account and create an auto-deposit each month.
Start your Roth IRA if you don’t already have one and set up another auto-deposit to max it out each year.
Automate that you’ll save a certain percentage of your income.
That way, your money is being saved and invested for you and you don’t have to think about it.
Even better, you’re GOING to out-perform people who choose to manually log in and purchase or sell assets. You’re auto-purchasing whether the price is up or down. And that will always get you ahead in the end.
Wealthy people know that their financial health boosts their mental and physical health, too
We talk about nutrition, fitness, and mental health a lot. But what about our financial well-being?
If you’ve ever been stressed about money, you know that it can create a strain in your life. So any time we pay attention to our money, set up systems, and create room for more wealth, we are setting ourselves up for a healthy life where we feel stress-free and simply… free.
Next steps
Are you building a rich life, or a wealthy one?
Are you purchasing objects or assets?
