When we think of someone being rich vs wealthy, we might think it’s the same thing but it’s not. For some reason, the words rich and wealthy are often incorrectly used to describe the same thing.

The two words might seem like synonyms, but they are completely different. It’s hard to spot the difference, but being rich and being wealthy are not equal. So, let’s dig into the difference between rich and wealthy.

What does it mean to be rich?

Being rich means having a lot of money or a high income. It comes down to how much cash you have in your bank account. But just because you’re rich, doesn’t mean you are wealthy.

In fact, being rich can often mean that you are spending a lot of money. It can also mean that you have a lot of debt e.g. high-interest credit cards, car payments, personal loans, etc,

It doesn’t matter how much money you have if your expenses are higher than your income. Being in debt is definitely not something to aspire to!

People who are rich might drive a fancy car, live in an amazing house in the best part of town, or have a high-paying job, but it comes at a cost. If you make $200,000 a year but spend $225,000 a year in expenses, you might seem rich because of your high salary, but you’re on your way to going broke.

As a matter of fact, plenty of celebrities have gone broke, some because of their rich lifestyles which lacked sustainability.

What does it mean to be wealthy?

When it comes to being rich vs wealthy, being wealthy means not only having enough money to meet your needs but being able to afford not to work if you don’t want to. It’s about amassing assets and making your money work for you. In other words, it’s having a significant net worth.

Wealthy people don’t necessarily own the latest gadgets or cars or throw lavish parties. What they do have, is a lot of assets, such as real estate, investments, cash, and financial stability. They think about building wealth, not owning more possessions.

For example, if your monthly expenses are $5,000 per month, and you have $30,000 in savings, then you have about six months’ worth of wealth. If you invest that $30,000 and you end up with $5,000 a month in investment revenue, you are wealthy.

What is the difference between rich and wealthy?

So, what is the difference between being rich and being wealthy? Well, there is a bit more to being rich vs wealthy than how much money you have in your bank account.

1. Net worth

It’s possible for someone who makes less than a rich person to actually be wealthier than a rich person with a fancy car and the latest fashion designs. The best measure of a person’s wealth is their assets and debt.

In general, a wealthy person will have a large net worth. A rich person might have a high income but if they have a lot of debt, their overall net worth will be low or even negative.

2. Expenses

Rich people tend to spend a lot of money, but wealthy individuals save and invest most of their money. Wealthy people might have a lot of money, but they don’t spend it all in one go.

And they certainly don’t use debt unless it’s for a very clear purpose, such as an investment in a house.

3. Investment

Rich people don’t necessarily adjust their lifestyle to ensure future wealth. They might buy the latest gadgets or increase their lifestyle inflation instead of investing.

A wealthy person saves as much money as possible and invests it in assets. That might mean buying real estate or investing in the stock market. Regardless of how they invest, wealthy people know that in order to grow their wealth, they need to turn their cash into assets and create a high net worth. They focus on making this a sustainable lifestyle.