The average person wants to learn how to get rich but may not understand the difference between rich vs wealthy.
You may be asking yourself "rich and wealthy are two different things?" Technically they have the same definition but we believe they have different meanings.
The key difference is one is a long-term life goal and the other one not so much.
In fact, most people think having a million dollars means being wealthy. However, a high-income or big bank account is not all that you need.
Early in our lives, we didn't fully understand the difference between rich vs wealthy.
But, now it's becoming clearer to us. Living a wealthy lifestyle involves investing in the future when the rich are focused on spending.
Let's dive into what being rich vs wealthy really means and how you can work towards gaining financial security.
What is the meaning of being rich?
Simply put, rich people like to spend a lot of money. Regardless if they have the money or not.
When you think about someone describing a rich person, you probably think about the car they drive, the house they live in, or even the designer clothing they wear.
Being rich is more focused on materialistic things and what we like to call "faking it."
In fact, being rich could be all for show and everything was purchased on credit.
Above all, it only looks like someone is rich but you can't be 100% certain if it's true.
People want to be likable, famous, and appear that life is perfect. However, most of the time it doesn't work that way.
The person appearing to be rich is probably in debt and not living the way you may think they are.
What is the meaning of being wealthy?
In contrast, being wealthy is when you make smart money moves and have your finances taken care of. We call this "truly rich."
Ultimately, being wealthy you are more focused on building wealth for the future than impressing people in the short term.
Above all, you have a plan for your money and you're not just blindly spending it.
Certainly, you will still buy nice things and enjoy life. However, you will budget for those things and experiences and pay for them in cash.
When you're focused on being wealthy you do things that make you happy and create memories not just to act like you're rich.
We are all about being truly rich!
What are the differences in rich vs wealthy?
As you can see, there's a difference between rich vs. wealthy. It's more complicated than simply having money in your bank account.
For instance, it's possible to have a lower income than a person who appears to be rich but be wealthier in the long run.
This is because rich people spend money while wealthy people budget, save, and invest their money. Wealthy people live on less than they make.
Wealthy people are strategic with their money and don't use debt unless for a very specific reason like purchasing a house.
Saving and investing lead to wealth building. Ultimately, wealthy people understand that in order to grow their assets they have to invest their cash.
This is the real difference between a rich vs wealthy person.
Now, let's talk about the process to become wealthy.
Process to become wealthy
Becoming wealthy takes a few steps to get on the right track.
Above all, it's more than just a paycheck for you to build wealth. Yes, earning money is a key part of building wealth but it's not about how much you earn, it's about how much you save.
So, follow these steps to create a financial plan to become wealthy.
1. Live with purpose
Building wealth requires living with purpose so you can be intentional.
Ultimately, you have to think about the legacy you want to leave when you're no longer living. It's not only about what you have today.
Finding your why in life will help uncover your true purpose and keep you motivated each day.
Above all, the goals you want to reach in life start with your approach, and building wealth is no different.
2. Pay off debt
It's very hard to build wealth if you stay in debt. Getting out of debt starts with creating a budget so you can use your money wisely.
In fact, find ways to increase your income with side hustles to pay off debt quickly. You can even sell things you don't need. Whatever you have to do to make more money will get you out of debt faster.
You will be glad you got out of debt but the key is to stay out of debt!
Most importantly, if you're already debt-free, you can skip this step and keep moving towards building wealth.
3. Live a frugal life
Simply put, live on less than you make. It's hard to live a frugal life if you don't have a budget. Budgeting creates the necessary self-discipline you need to build wealth.
Being rich vs wealthy is all about how you live.
For example, living a frugal life could be choosing a cheaper apartment to rent or purchase a house that's only 25% of your household income.
You could even purchase generic brands at the store or buy in bulk.
It all depends on which route you want to take. Certainly, you don't have to live a miserable life to live frugally. However, it's all about choosing things you can sacrifice so you can save money to allocate elsewhere.
Related reading: Save Money: Here are 20 of the Best Ways
4. Invest your income as early as possible
Investing is one of the best ways to build wealth. This is a key difference between being rich vs wealthy.
At the end of the day, you need to have your money work for you.
Investing your income as early as possible creates a habit and routine of saving. You will grow your money over time and have much money in retirement.
Certainly, investing can seem overwhelming and stressful. But, you have to take it slow and learn as you go.
The sooner you start investing the more you will earn. This is due to compound interest. Compound interest is when your interest is earning interest.
Important to note, sitting your money in a savings account earns you nothing. You only want to place money in a savings account that you may need access to in the short-term.
Otherwise, you should start investing your money so you increase your chances of building wealth in the future.
A great way to start investing is with M1 Finance. We recommend M1 Finance if you are looking to invest your money with an easy-to-use and modern platform. Their platform makes it easy to buy stocks, bonds, or ETFs.
5. Start your own business
You can start your own business pretty easily nowadays. This doesn't have to be a physical location. You can start an online business that you do from anywhere.
Ultimately, it's all about finding creative ways to increase your income. Your income is the main way to build wealth and it's helpful to have more than one source of income.
You never know what can happen with your main source of income. So, it's important to find additional ways to make money, and starting a business is a great option.
Starting a blogging business can be a great way to start as a side hustle and grow over time.
You can start a blog for only $3.95/mo with Bluehost. Here's a step-by-step guide on how to start your blog in less than 15 minutes.
6. Purchase real estate
Owning real estate is a great way to build wealth. In fact, there are buildings and houses to purchase all over the country.
According to Forbes, real estate is one of the top ways billionaires build their wealth.
Above all, it's important to be financially stable before purchasing real estate. This is why budgeting, getting out of debt, and investing are so crucial for financial success.
If your money is tied up paying debt, you won't be able to purchase real estate with cash.
Purchasing real estate is a great investment that can lead to generational wealth.
7. Be generous and give to others
In our opinion, this is the definition of true wealth. Being rich vs wealthy is directly related to what you do for others.
In fact, most wealthy people are very generous because they've figured out that the more you give away the more you get in return.
There's no better feeling than building wealth to give back, take care of your kids and grandkids, and help make the world a better place.
Building wealth for the right reason should include being generous.
Learn more about what it takes to control your money and build wealth the right way with our online course Find Your Money Master Plan. Check it out here!
Final words - being wealthy is a mindset
The difference between rich vs wealthy is all about mindset. It's not about just having a bunch of money in the bank. Wealth involves saving, being debt-free, and investing as early as possible.
It's important to think about the reasons you want to be wealthy and set your long-term goals.
Do you want to learn how to become wealthy? What does "wealth" mean to you?