Better to Be Wealthy Than Rich
The wealthier you are, the longer your money or assets work for you.
If you have a million dollars (or million pounds), does that mean you are rich? Well, that’s not always the case.
A millionaire by definition is someone whose net worth (asset value minus debt) exceeds a millionaire dollars/pounds.
But if a person had $1 million in assets that did not bring in any money, I would say that person is rich but not wealthy.
Why Making Money Won’t Make You Rich
You can be broke even if you make a lot of money. I know a lot of people who have made millions of dollars in their lives but aren’t rich or wealthy anymore.
What gives? Well, not everyone is born with skills for managing money and making investments.
Some people are more interested in living a certain way right now than in planning and building up assets that will allow them to live the way they want for the rest of their lives.
It doesn’t matter how much money you make, but how much you keep is what matters.
How Rich is Rich?
We often say that someone is rich because he or she has a high-paying job in a big company, buys brand-new luxury cars, and dresses in expensive clothes.
Even though these are signs of being “rich” on the outside, that doesn’t mean that these people are rich. They might be, but it’s not a given.
It’s hard to put a dollar amount on what it means to be rich. It can be different for each person, depending on how they interpret it.
It can also depend on where you live and how much it costs to live there.
In a Gallup survey of Americans, the median definition of “rich” was a $150,000 annual income or $1 million in assets.
But if you ask someone who already has $1m in assets, they might say that having $5 or $10 million in assets would make them rich. Some people never seem to be happy!
Is “Rich” a Feeling?
In a way, being rich is a feeling, and you probably never think you’re really rich or as rich as you could be.
If someone makes $30,000 a year, they might say that if they made $100,000, they would consider themselves “rich.”
How someone thinks about what it means to be rich depends on what they expect and how they feel about it.
So, if you don’t have much money, you think you’ll need less money to get rich. I think the more money you have, the more money you need to “feel” rich.
Wealth is Best Measured in Time
If there was one thing that made the difference between being rich and being wealthy, it would be that rich people can make money right now, but wealthy people can always make money.
I think the best way to describe being rich is if the passive income from all your assets is more than all your debts. If that’s the case, you’re basically rich.
The most important thing is how much time it takes to handle your money.
If you have to work 60–80 hours a week just to pay all your bills, even though you could be making more than, say, $200,000 a year, you are not wealthy.
Time, not money, is the best way to measure wealth. The wealthier you are, the longer your money or assets work for you.
The wealthier you are, the longer you can go without having to work and still pay all your bills and keep up your standard of living.
So, if your monthly bills are $2,000 and you have $10,000 in savings or other liquid assets, your wealth is equal to 5 months.
The lesson of the story is that if you are rich, don’t let yourself be tricked into thinking you are rich.
Don’t worry if you aren’t rich yet. Just focus on being rich, and you will be rich anyway.
Even though it may be hard to tell if you’re really “rich,” you’ll know if you are and for how long!
Don’t try to get rich; instead, try to build wealth.
