What Does It Mean to be Rich vs. Wealthy?

Rich vs. wealthy. What’s the difference between these two seemingly synonymous terms? Don’t beat yourself up if you’re unsure. After all, most of us use them interchangeably, jumping from one to the next with little thought for potential divergences in their definition. Heck, even the dictionary conflates them…

Being rich is defined as “having wealth or great possessions; abundantly supplied with resources, means, or funds; wealthy.” And in a monetary context, the same source defines being wealthy as “having great wealth; rich; affluent.”

Differences exist, though – subtle yet meaningful distinctions that can play a role in your financial future as soon as you understand them. Today, we’re revealing what each term really means in financial circles and discussing how they differ.

What Does It Really Mean to Be Rich?

Generally speaking, being rich is a product of having a high income and lots of cash in the bank compared to other people. But what constitutes “a lot?” A relative concept, this magic number’s different for everyone.

If you say it’s the top 1% of earners, then, according to the IRS, you’d need an annual salary of over $540,000 to be considered rich. For people earning minimum wage, though, $100k a year or less could fit the bill. And if you live in a developing country? Well, getting the minimum wage in the US may suffice.

Expenses come into play, too. Being rich usually implies a focus on having a luxurious lifestyle and accumulating material possessions. From jet-setting around the world and enjoying 5-star vacations to wearing luxury watches, owning multiple homes, and driving exotic cars, rich people often relish spending.

That’s why the difference between seeming rich and being rich is also worth noting. Someone might earn $540,000 a year, but if they use it to fund an opulent lifestyle and have nothing left in the bank, or have accrued significant amounts of debt in the process, then their “rich status” gets called into question. 

What Does It Really Mean to Be Wealthy?

More often than not, being wealthy is a measure of net worth, which is defined as the difference between your assets (what you own) and liabilities (what you owe). With a high net worth, you’re generally considered wealthy; with a low net worth, you aren’t.

Take famous business people like Jeff Bezos, the founder, and ex-CEO of Amazon, who has a whopping personal net worth of $127 billion. Or look at Warren Buffett, the CEO, and chairperson of Berkshire Hathaway, who’s currently worth over $107 billion. They’re two of the wealthiest people to have ever walked the earth.

This focus on net worth over income is key in any discussion of being rich vs. wealthy. Someone can have the highest salary in the world. But if they spend every cent and go into debt, they’d have a negative net worth. In other words, they’d be rich but far from wealthy.

Rich vs. Wealthy: What’s the Difference?

With the definitions behind us, let’s pick through the main differences when it comes to being rich vs. wealthy. From mindset to spending habits, there are various factors in play that add color to how the two terms vary.

1. Sustainability/Duration

Both rich people and wealthy people tend to have lots of money. However, the wealthy often sustain (and grow) their net worth more effectively over time. To put it another way, wealth is longer-lasting. Think “old money,” where capital earned centuries ago is continually passed from generation to generation.

By contrast, being rich can be temporary. Think of lottery winners who become multi-millionaires overnight, only to spend it all in a matter of months. It’s feast and famine – an entire fortune could disappear in a single generation.

2. Spending Habits

One of the main reasons wealth stands the test of time is the different ways rich vs. wealthy people spend their money. As noted earlier, the classic rich lifestyle is characterized by materialism, excess, image, and instant gratification. Wealthy individuals, on the other hand, live within their means.

This is why someone can earn less than a rich person but end up wealthier. Instead of splashing out on fancy cars and designer clothes, they live frugally, save steadily, and invest consistently – watching their net worth increase over time. 

3. Expenses

How they spend money isn’t the only thing that differs between the rich vs. wealthy. A byproduct of their respective lifestyles, what they spend money on also varies.

For example, rich people may have car payments, credit card bills, loan repayments, and mortgage payments that siphon away large chunks of their income; wealthy people often avoid those types of expenses altogether. Their pennywise, financially savvy way of life means they a) have fewer outgoings in the first place and b) have money available to avoid debt. Having saved and invested for years, for instance, they might purchase outright their phone, car, and even their house.

Then there are extremely high-net worth individuals who fall into a totally different category! They might have extra expenses, such as private jets and vacation homes.

4. Mindset

This feeds into a fourth difference between the rich and wealthy: their respective mindsets around money. For rich people, it’s a means to a material life – a key that unlocks the door to a luxurious lifestyle. For the wealthy, money’s a way to make more of it, either via investing or starting their own business.

These different mindsets determine what they do with their cash. In simple terms, the rich spend most of theirs while the wealthy seek to save and invest! Likewise, the latter are more careful and prudent, avoiding debt unless it’s for a clear purpose. This culminates in longer-term financial stability – if not the lavish lifestyle that’s sought-after by so many.

Rich Vs. Wealthy: Which Describes Your Aspirations?

While people often perceive “rich” and “wealthy” as synonyms and use the two terms interchangeably, significant differences exist between them both in terms of their meaning and implications. We hope this article has shed light on the primary rich vs. wealthy distinctions!

Keeping them in mind should help you recognize your financial priorities, set realistic goals around them, and make wiser money-related decisions that set you up for the future.

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Disclaimer: This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any major financial decisions.

Author Bio

Danny is a digital nomad, freelance writer, and travel enthusiast who’s determined to make the most of his life. His new website, wisehealthynwealthy.com, is full of useful resources on a wide range of topics to help you do the same.