Rich vs Wealthy: 13 Tips On How to Become Wealthy

Last updated on February 5th, 2024 at 06:41 am

In this post, you’ll discover the comparison of rich vs wealthy which helps you find out in which category you fall.

We always hear the word rich and wealthy in daily life. The majority of people are working harder to become rich one day.

Normally the meanings of rich and wealthy are taken the same which in reality aren’t.

It’s possible that you are rich but not wealthy and if wealthy then not rich. 

Another important thing is whether being rich is good or wealthy. Most people unfortunately make the mistake of answering this question. 

After reading this article you’ll be able to understand the rich vs wealthy comparison and be able to answer whether you’re rich or wealthy.

Let’s dive right in.

What does it mean to be “RICH”?

When you think about rich there is a number of things that come to your mind. For example an expensive house, a $300,000 Lamborghini, expensive sunglasses, a private jet, and lots of other things.

From these materialistic things, you can easily define the term rich. 

Being rich means earning a lot of money and spending it on unnecessary things in a foolish way to show off and impress others around you.

In simple words being rich means “fake rich” and you find lots of examples of these types of people in society. 

That is why being rich doesn’t always mean that you have large assets value. It is possible that a person looking rich is actually in debt.

The reason is rich people spend more than their actual income which is a dangerous habit. This behavior doesn’t allow you to keep the money.

History is full of a lot of examples that people who are looking rich a few years ago are now massively in debt. Here are some examples:

Celebrity	What Happened?
Eike Batista	Once seventh-largest billionaire with a $30B net worth filed for bankruptcy when his oil company failed to satisfy demand and the economy declined.
Björgólfur Gudmundsson	The second richest man in Iceland with a $1.3B net worth but his all-net worth was used to settle a $759M debt. Now standing at zero.
Elizabeth Holmes	Owner of $9B blood-testing company Theranos and now has zero net worth.
Bernard Madoff	His net worth was $823M but accused of running the largest Ponzi scheme that’s why sitting at $0.
Jocelyn Wildenstein	Once the seventh-largest billionaire with a $30B net worth filed for bankruptcy when his oil company failed to satisfy demand and the economy declined.
Sean Quinn	She was spending $1M a month and finally filed for bankruptcy at $0.
Vijay Mallya	Once the richest man in India. Most of his wealth was used to recover bank loans and penalties for fraudulent activities.
Patricia Kluge	The richest divorced model earning 1 million a year filed for bankruptcy in 2011.

“It is not about how much money you make but how much money you actually keep.”

_Robert Kiyosaki

Usually, a majority of rich people don’t follow this rule. That is why you should understand what is wealthy.

Let’s jump to the next section. 

What does it mean to be wealthy?

Unlike richness, wealth has to do with two things.  

• Financial freedom 
• Time freedom

In other words, they both have freedom of time and money. And if they choose to resign from their job they have enough money reserved to support their needs.  Regarding time they have enough time to spend with their loved ones, friend, and things they love to do.

Their net worth is usually positive with assets greater than liabilities. Their spending behavior is also on the right path and chooses to live through frugal lifestyle.  they don’t care about Impressing others and living a lavish lifestyle to show that they are wealthy.

They think long-term for building wealth. That’s why they used to invest in real assets and financial assets like stocks, bonds, real estate, and different other businesses. This helps them amass a lot of wealth.

That is why they make money while they sleep. Here are some famous billionaires with their own businesses:

Business Owner	Company Name
Warren Buffett	Berkshire Hathaway (a stock investing company)
Bill Gates	Microsoft (technology company)
Elon Musk	Tesla (automotive and clean energy company)
Jeff Bezos	Amazon (e-commerce retail company)
Larry Page	Google (technology company)
Mukesh Ambani	Reliance Group of Industries (diverse category of businesses)
Bernard Arnault	LVMH (luxury goods company)
Larry Elison	Oracle Corporation (computer technology)

If they spend their money in big amounts then give it to charitable purposes. This is to help people living below standards to establish and become successful.

The very shortcut and easy way of building wealth is by starting your own business. In fact, 66% of the world’s millionaires have their own businesses.  Because business climbs in value faster and earns a passive income that they can enjoy while sleeping. 

They don’t live a leveraged lifestyle and don’t care what people think about them.  You never see Warren Buffet in a $300,000 car or Bill Gates in a billion-dollar house. They are all frugal and always work on long-term goals to build more wealth.

What matters is their health, freedom of life, and good relationships with their loved ones and the people around them. That way their money helps them have time to spend with their loved ones and on activities, they love which makes them happy. 

What is the difference between the rich and the wealthy?

Now you understand the terms rich and wealth. But what are the factors in the rich vs wealthy that create a difference?

Let’s take a look at the below table: 

Rich:

• Rich people don’t follow their long-term vision and follow short-term goals 
• they try to impress others with money and show off luxurious items
• don’t build assets that earn passive income instead buy depreciating assets
• their expenses are more than their income and are in a budget deficit  
• try to earn a lot of money but can’t keep it due to their lavish lifestyle 
• spend with credit cards which builds a massive debt
• their savings are very low for emergency and investment purposes 
• are financially illiterate which is why money controls throughout their life 
• poor money management increases their financial problems day by day
• don’t have the freedom of time and always work for money
• financial freedom is low because their wealth is not sustainable
• are prone to bad financial habits which eat up their money
• do social comparisons which leads them to buy expensive items

Wealthy:

• don’t buy liabilities like credit cards and loans
• build assets to generate passive income for the long term
• they repeatedly save and invest a certain percentage of money 
• spend money less than their actual expenses and love frugal living 
• don’t care about what people think about them instead focus on their goal
• avoid glamorous items and expensive things
• don’t follow illegal, unethical, and short-term ways like gambling and lotteries
• sometimes they earn less than rich people but are wealthy
• their wealth is sustainable and gets the freedom of time 
• having less worry about losing jobs and economic conditions  
• make passive income because they buy income-generating assets 
• they can retire early and have large funds because invested at the right time 
• save money for emergency needs to avoid swiping a credit card
• have a lot of tax knowledge and pay way less money to uncle sam

The main things that differentiate the rich and wealthy are sustainability money, financial goals, and freedom of time.

Rich people spend a lot so their wealth is not sustainable. They normally don’t care about long-term goals which is a big hurdle in their way to building wealth. They live a flashy lifestyle that eats out their money. As a result, they have less time you spend on interesting activities and well-loved ones.

If a person earns a million dollars each month his expenses are 1.2 million dollars he is not wealthy. Because his budget is negative and he might have taken into debt to cover the extra expenses. 

In comparison, if a person earns $100,000 and his expenses are only $20,000 that means he saved $80,000. The second person was successful in keeping his money that’s why considered wealthy.  

Watch this video to understand the rich vs wealthy difference more clearly:

You can apply this situation to your own to see whether you are wealthy or rich.

Let’s rich vs wealthy.

Let’s jump to the next section. 

How to become wealthy with These 13 Tips

Becoming wealthy isn’t about becoming the next Bill Gates. Instead, it means that you have a positive net worth with the help of saving, investing, and having no debt. And if you’re doing a job and have money in a savings account to cover three to six months of expenses then you’re wealthy. You don’t have to rely on debt. 

Considering these points here are 14 tips on how to become wealthy starting now: 

1. Mindset and long-term goals

The first is in the rich vs wealthy comparison.

While building wealth you’ve to change your normal mindset. The reason is normally most people have an employee mindset to sell their time and earn money. They have short-term memory and want to get results fast.

Building wealth is a long-term thing. You’ve to continuously follow the principles of wealth for a certain time frame to build a fund and achieve financial goals. 

For example, your goal is to have a one-year emergency fund while your capability is only to save $500 a month. If your monthly expenses are $2,500 a month then you’ve to save $30,000 in 60 months. You have to wait for 5 years while continuously saving that $500 each month to see that amount in your savings account. 

This sense of patience and regular work towards your financial goal is key. The actual success is a sum of all the small steps you take throughout your journey.

But long-term thinking is only a single element of a wealthy mindset. Let’s jump to the next tip.

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2. Budget your money

In the rich vs wealthy comparison the second major factor.

Budgeting is a future forecast of your income and spending for a certain time frame (week, month, or year). It tells you where your cash flow is coming from and where you’re actually spending. That way you take control of your finances. 

For building wealth you’ve to have a budget in place. It’s the first tool for becoming wealthy. The reason is that in a normal course of action, you don’t know how much money you’re spending. You haven’t any idea of which expenses you’re spending on.

When you budget all your income sources and expenses then you become able to take a birds-eye view of which expenses are necessary and vice versa. So you can easily cut down extra expenses and save that money to build an emergency fund, or retirement fund, and pay off debt faster.

How to make a budget?

Making a weekly, biweekly, or monthly budget is easy. What you need to do is either take a pen and paper or a budgeting template and write down your income sources and expenses. You also write their estimated amounts in front of them. After that subtract total expenses from total income to see whether a budget is in surplus or deficit. 

Cut down any extra expenses to put more money towards savings and investments. 

You can make your budget using:

• traditional manner
• zero-based method
• 50 30 20 rule 

This is upto your choice but the purpose of the budget remains the same. 

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3. Avoid a rich lifestyle

This doesn’t mean that you don’t spend money at all. Instead, avoid screaming the words that I’m rich. Avoid showing off to people and impress others that you have a lot of money. Because no one cares what you’ve instead you’re hurting your financial health.

Adopt a frugal lifestyle. Spend money on those things that matter and avoid the lavish lifestyle which doesn’t provide any real benefits and is just a waste. 

You see dozens of examples of millionaires who are now living on a road. The reason was that their expenses were more than their income. For example, if they were earning 4 million a year then expenses were 4.5 million a year. As a result, now they’re in massive debt mountains and their personal and financial life is ruined.

Keep your expense less than your income and avoid spending money just for taking temporary joy from expensive things that depreciate later.

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4. Avoid the love of money

You heard a famous proverb that money is the root of all evil. Many people believe that this is true. But the people who have financial literacy and know the rules of building wealth have opposite opinions. 

They say that love of money is the root of all evil. The reason is that when you get stuck into greed for making more money then you stop thinking logically based on solid analysis and reasoning. 

As a result, you start making investments in highly risky assets without looking well into the case. Which can result in a massive financial downfall that takes years to recover from.

The purpose of avoiding a love of money is to don’t follow a herd of people (like dot com and mortgage recessions) to amass huge wealth faster. Instead do a proper analysis of assets whether it’s real estate, stocks, bonds, or any other investment opportunity. So that your risk can be mitigated and your returns will be maximum.

5. Save money for emergency

In the rich vs wealthy comparison saving money is also a factor that creates a major difference.

The objective of building an emergency fund is to cover expenses in any unexpected and unforeseen bad events. For example, health issues and illness, losing a job and losing a business. 

The emergency fund helps you cover basic necessary expenses like rent, food, utility bills, and child fees during that event. 

You should have emergency funds to cover 3-6 months’ worth of your expenses. For example, if you’ve monthly necessary spending of $2,500 then you should have at least $7,500 to $15,000 in emergency funds. But here 3 months is for those with secure jobs with low risk like government jobs. While 6 months is for private and high-risk jobs. 

An emergency fund helps you avoid swiping credit cards or taking consumer loans to cover spending needs. Instead, you use your own money so you don’t have to bear interest costs.

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6. Invest 10% to 20% of your income

Another is the rich vs wealthy comparison.

Investment helps you generate income by putting your money to work for you. If you want to earn passive income then taking the help of investing is crucial. 

You see all the big and wealthy joints have investments in the back end which earns them more and more money to build more wealth. For example, Warren Buffet is the king of stock investing, Jeff Bezos is the king of e-commerce investments, and Bill Gates and Elon Mask are kings of tech investing. 

But you don’t need to invest like big millionaires and billionaires. Instead, you can invest starting with as little as $100 a month. 

The ROI depends on two main things: 

• How much amount is invested?
• How long did you invest?

The more money you invest and the longer you hold it to grow the more wealth you build at the end and vice versa. 

There are hundreds of investment opportunities available.

You can invest in:

• Municipal and treasury bonds
• Real estate 
• Stocks and mutual funds
• High-interest saving accounts
• Retirement funds like 401k and IRA

And a lot more others.

It depends on your choice and financial goals which option is best for your condition. You can also use investing apps for investing little money starting from just $5 or $50. 

But investing that little amount is not recommended. Because it makes it much more difficult to achieve your wealth goals. 

According to Investopedia “most financial planners recommend to save at least 10 to 15% of your after-tax income. And the sweet spot is at least $500 each month”.

I think if you invest that amount out of income it will help you achieve your financial goals and build wealth a lot faster. Along with that earns you a handsome amount of return as income.

7. Begin to invest early

Whether it’s retirement investing, savings, stocks investing, real estate, or mutual funds you should start early. 

I mentioned the reason already in the above-investing section that your investment growth depends on the amount and time. After how much you invest, it’s important to give it enough time to grow as well.

Starting investment early in your 20s is the best option as compared to investing in 30 or 40s. 

Let’s understand it with a simple example. Let’s say you start investing $500 in your 20s until you retire in your 60s at a 6% compounded monthly. When you reach 60 you have these figures in an investment fund. 

On the opposite side if you start investing at 35 then here is the calculation: 

You can see that starting early can help you build 3 times more funds as compared with starting at 35 years of age. Becasue you gave 15 years more time to grow your investment. 

8. Pay off debt

I think the most dangerous factor is the rich vs wealthy comparison.

Debt is a sweet predator of your money. Normally you don’t realize this and swipe your credit cards in that coffee shop in the morning to in the big shopping malls of the city. 

But how debt is a predator that is eating your money?

You know lenders don’t give money without charging interest. When you use a credit card, take a student loan, personal loan, mortgage, or go into another type of loan you’ve to pay interest and loan origination fees.

At the start, you don’t realize that it’s a burden you’re taking on your shoulders. Your income will suffer after that. 

When you spend the loan you need to repay it back. This is where things start getting against your financial health. Now from the first month, you are required to make repayments of specific amounts including interest. 

The longer your debt takes to repay as more interest you have to bear. As a result, as much your wealth-building goal is negatively impacted. 

What you can do to get out of debt?

Here are some simple tips and tricks to help you deal with this predator:

• don’t have any credit card or other type of loan then avoid it at any cost in future
• cut down multiple credit cards so you spend less with them and less interest incur
• payoff highest interest debt first like that is more than 10% using the debt avalanche method
• if you’ve motivation issues then use the debt snowball to pay the lowest amount first
• spend as much as extra money towards paying off debt to get out soon
• use debt consolidation, debt settlement, and forgiveness kind of strategies if applicable

If you follow these tips you will surely get out of debt very fast. The more money you save in interest costs and spend on building your wealth with a positive net worth.

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9. Increase income

This strategy always works fine because you’re increasing cash inflows. When you’re more income after tax the more money you have to pay off debt invest, save, cover necessary expenses, and build a retirement fund. 

According to data, an average millionaire has at least seven income streams. 

Increasing your income means building more income streams to have more money. There are plenty of ways you can use it. 

Here are a few of them: 

• A savings account that gives you interest
• Purchase municipal bonds
• Invest in high-interest saving accounts
• Start a side hustle like a part-time job or business
• Do online freelancing if you’ve any valuable skill

Many others you can find online just by Googling.

When you have those income streams then spend as much towards building income-generating assets to make money while sleeping. 

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10. Stop buying non-essentials

A common factor differentiating between the rich vs wealthy comparison. Because the rich spend on non-essential items and waste their money.

One of the worst habits of financially miserable people is buying unnecessary things that they don’t need. They want to either impress others or just can’t control their appetite to purchase that fancy watch. 

In fact, Americans spend an extra $18,000 a year on non-essentials. This includes doing outside meals, buying meals from outside, having drinks, and different others like that.

To stop doing this activity you need to follow frugal living tips. For example, having a shopping list, cutting down online subscriptions, and stopping impulse purchasing. 

Another good strategy is to use the “rule of 30”. It means before buying an expensive product you should let yourself think for 30 days before purchase. It’s possible that you realize that it’s not needed yet and don’t waste your money. 

You ask yourself the following questions:

• Is this product necessary for your living?
• Does it provide you with a benefit you can live without?
• How it will make a difference in your life (like ease, time-saving)?
• Do your finances allow you to spend money on it?

If you checkmark all of these questions then sure you can buy that thing otherwise avoid it.

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11. Protect your assets

Asset protection doesn’t directly relate to your wealth-building process but obviously helps you secure your wealth. If you face loss due to any reason in your assets then if they’re protected then you can recover them easily. Commonly protected assets are your car, house, life, and business. 

The method for protecting these assets is insurance. It incurs an insurance payment expense you need to the company but benefits in the longer term. 

There are many types of insurance like health insurance, life insurance, car insurance, house insurance, and business insurance. 

12. Take financial education

In the rich vs wealthy comparison, it’s another important factor.

The main secret of billionaires and millionaires is financial literacy. Wealthy people like Warren Buffet, Bill Gates, Jeff Bezos, and Robert Kiyosaki know the money rules very well. They know how to control money and put it to work and make money while sleeping.

But how you can learn the rules of becoming wealthy and getting out of a poor or foolish rich mindset?

It’s very easy if you follow these tips:

• read financial books written by wealthy people like the “Rich Dad” series by Robert Kiyosaki
• study articles on top financial blogs like Forbes, nerd wallet, and other personal finance blogs
• listen to financial podcasts by famous financial experts like Dave Ramsey and Robert Kiyosaki

Last but not least implement that knowledge to see results and make them stick to your memory. Without taking action you will go nowhere. For example, if you’re under debt and you learned debt payoff methods then practically implement them to see a change in your life. 

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13. Do tithing

Giveaway at least 10% of your income to charity. When you take out a portion for needy people then god bless you. Remember that God gives more to those who spend on his creature. 

All big billionaires do that like Warren Buffet gave $4.1B and wished to spend 99% of his wealth by the end of his life. Bill Gates and Melinda Gates gave collectively over $50B in charity. 

Conclusion

In the rich vs wealthy comparison, I hope you understand this concept. Now you are able to define what is rich and what is wealthy. 

A rich is a person whose lifestyle tells that he/she has a lot of money. Because they wear expensive clothes, drive expensive cars, and live in big mansions. 

While wealthy people may not have a big house, expensive car, or costly lifestyle but their assets are larger than rich people. Because they keep the money through frugal living instead of flying it in the air.

If you want to solve financial problems to get financial freedom then adapt to wealthy people’s mindset.

Avoid getting stuck into the impressive lifestyle of rich people and try to impress others. It is a bad gateway that gets you down the hole.

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