The terms "rich" and "wealthy" are often used interchangeably. But are they really the same? As the saying goes, "Money talks, but wealth whispers." Here are some of the differences between being rich and being wealthy in terms of money, resources, and public perception.
Rich—Flashy, But Lacking Substance
Many people aspire to be rich—to go on luxury cruises, own high-end sports cars, or even buy a private jet. However, except for real estate, many of the possessions and trappings associated with being rich are depreciating assets that don't do much to build long-term security.
Once the money used to purchase these items is spent, it's gone—and without a good way to earn it back. This is one of the reasons many lottery winners wind up broke or struggling just a few years after collecting their jackpot. If you spend your winnings on material items or trips instead of investing in tangible assets like stocks, bonds, and real estate, you may return to where you started. The same might be said for those earning a high income but having low savings rates. An unexpected job loss or disability could quickly catapult a high-earner back into the working class.
The phrase "keeping up with the Joneses" also suggests being rich and showing off, instead of being wealthy. By coveting that sports car or lakeside mansion, you're trying to keep up with a lifestyle, not necessarily a bank account balance. On the other hand, wealthy individuals tend to avoid wearing their investment balances on their sleeves. Unless you're talking to Mark Cuban, Bill Gates, or Jeff Bezos, it's all but impossible to know someone's net worth.
Wealth—Sustainable and Long-Lasting
Wealth is all about sustainability and how one approaches investments, expenses, and financial planning. Wealthy individuals tend to prioritize income-producing assets like businesses and real estate. They also invest in stocks, bonds, and other securities to generate passive income.
While wealthy people may purchase the same depreciating assets as the rich (and non-rich), they don't do so at the expense of other financial priorities. And as Warren Buffett demonstrates, even billionaires may enjoy a cheap breakfast at McDonald's and drive a modest car.¹
While "rich" and "wealthy" are both aspirational terms, those who are interested in the long-term sustainability of their lifestyle would do better to focus on accumulating wealth, not just increasing income.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risks including possible loss of principal.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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Footnotes
1. Warren Buffett eats McDonald's for breakfast, drinks 5 Cokes a day, and devours cookies and ice cream. Here are the investor's 11 best quotes about his iconic diet.
https://markets.businessinsider.com/news/stocks/warren-buffett-diet-mcdonalds-coke-junk-food-soda-ice-cream-2023-4