Rich vs. Wealthy: What’s the Difference?

Hold up—wealthy and rich can be two different things? That’s right. Well, technically, they have the same definition, but I’ve always seen them as being different. One of them is a long-term life goal, and the other one, not so much. Let’s break down each of these words so we can learn how to work toward being as financially healthy as possible.

What Does It Mean to Be Rich?

The way I see it, rich people spend a lot of money, whether they have it or not. Think about it: What comes to mind when you hear the word rich? Someone wearing designer sunglasses, surrounded by piles of cash? A mansion in Hollywood? Two people clinking champagne glasses on their private jet? Having a closet full of Jordans, Louis Vuitton and Gucci?

This is what I like to call “fake rich,” or blowing money on a bunch of super expensive items so you can impress everyone around you (plus all your social media followers). No one knows if you actually are rich—you could’ve bought everything with credit. All that matters is that you look rich and powerful. People want to be friends with you. People want to date you. Life’s good, right? It’s no biggie that you’re thousands of dollars in debt, right?

Wrong.

What Does It Mean to Be Wealthy?

On the other hand, being wealthy is when you have your finances in order and are making wise money decisions—it’s what I call “real rich.” You care more about actually building wealth for the future than impressing other people, and you don’t blow money just for the heck of it. You have a plan. You’re focused on the long term instead of the short term.

This doesn’t mean you don’t have nice things, but you budget and save up to pay for them with cash—and you buy them because they bring you joy or enhance your life, not because you want to flex on your neighbors.

I don’t know about y’all, but I want to be real rich.

How to Become Wealthy

Now, this isn’t a get-rich-quick scheme. There’s no magic trick or investment game that will make your bank account skyrocket overnight—unless you get lucky and win the lottery or write Drake’s next #1 hit or something. Real wealth building takes a lot of time and patience. But it will pay off. (See what I did there?)

Here are 10 important things you need to do in order to become wealthy!

1. Shift your mindset.

If you’re going to really be intentional about building wealth, something has to change in your mind (and maybe even in your heart). You have to think about the legacy you want to leave for future generations—not just getting what you want in the now. You need to have a why behind all of this and a vision for how you’re going to get there. Any major goal you’re going to achieve in your life starts in your mind—and building wealth is no different.

2. Get out of debt.

Listen: You can’t build wealth if you have negative dollars in your bank account. Take care of your financial foundation by getting on a budget and getting rid of your debt as quickly as you can. Do whatever you need to do. Sell your designer stuff. Buy a less expensive used car. Start a side hustle or extra job. Do whatever it takes to be intense about crushing your debt. You’ll be glad you did!

And of course, if you don’t have any debt right now, go on ahead and skip this step.

3. Live below your means.

In other words, live on less than you make. This goes hand in hand with having a budget. It’s all about having self-discipline and being willing to forego some expenses now so that you can save more in the long run.

An example of living below your means would be choosing to live in an apartment where the rent is 15% of your income, even if you could afford to live in one that costs 25% of your income. It could mean buying generic brands at the grocery store when you could afford to buy name brand, simply because the products themselves are pretty much the same. You don’t have to be a total cheapskate, but it just makes sense to save and cut back where you can.

4. Become an entrepreneur.

When I say entrepreneur, I don’t really mean you need to own a full-blown brick-and-mortar business (even though you could do that if you wanted to). Having an entrepreneurial spirit means looking for creative ways to bring in extra money. It could mean starting an Etsy shop, driving for Uber, or walking dogs in your spare time. Because your income is your #1 wealth-building tool, it’s a good idea to have more than one source of income just in case—you never know what will happen to the job market.

5. Tithe.

I’m a man of faith, and I’m not shy about it. I believe that when you realize that your money isn’t really yours, but God’s, and you give some of it back to Him in gratitude, He will entrust you with more. That’s called godly wealth building!

6. Stop comparing.

Comparing what you have to what others have is one of the worst things you can do for your budget, plus it can make you more likely to fall for money traps. It just kills the mood all around. Be thankful for everything you do have and get off social media for a while if you have to. Remember: We’re trying to be the best version of ourselves, not the best version of someone else’s life!

7. Invest.

I get it—investing kind of sounds like an old person thing, right? Like, anything that’s related to retirement kind of feels like you don’t have to worry about it until way later. But truth is, you should start investing as early as possible!

Once you’re debt-free and have a fully funded emergency fund with three to six months of living expenses, it’s time to start investing 15% of your income into growth stock mutual funds for retirement. You can do this with a 401(k) if you have one, or you can open up a Roth IRA. Some people even have both! I recommend the Roth IRA instead of the traditional kind because that means your money is taxed ahead of time and can grow tax-free. You’ll get more bang for your buck long term that way.

8. Own real estate.

Let’s face it: There’s only so much land on our planet. As buildings keep going up, so will the value of the land! That’s why it’s a great idea to to work with a real estate agent to help you buy your home and your property the smart way—by getting a 15-year fixed-rate mortgage and putting at least 20% down. It’s important to be in the right place financially before you purchase. But when you do get the chance to buy real estate, it’s an awesome investment.

9. Get term life insurance.

Life insurance . . . so fun, right? For anyone who might not know, life insurance is basically a plan to replace your income when you pass away so the money goes to your beneficiaries (whichever family members you choose to give the money to). That’s another one of those things you don’t think you have to worry about until you’re 100 years old. But honestly, anyone who wants to prepare for the future by making sure their loved ones are financially taken care of in a worst-case scenario should think about getting it (especially if you’re married or have a family to provide for). Plus, the younger you are, the less it will cost you per month. So get on it!

Now, you’ll notice I said term life insurance. Not whole life! This is huge, people. Term life insurance is way more affordable because it’s only worth something if you pass away during whatever term you’ve agreed to (usually 20 to 30 years). Eventually, the goal is for you to be self-insured—meaning you’ll have a ton of savings and investments that will be more than enough to replace your income—so getting expensive whole life insurance would be a waste of money.

10. Be generous.

This right here is my favorite one because it’s so fun. Why is giving away money on my list of wealth-building tips? Because the ability to be a blessing to other people is one of the best motivators to build wealth in the first place. Why be wealthy if you can’t give back, take care of your kids and grandkids, and help those in need?

In my opinion, this world needs less “fake rich” and more people who are building wealth for the right reasons.

Want to learn more about how you can take control of your money and build wealth the right way (and track your progress while you’re doing it)? Check out Ramsey+ for free!

 

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About Anthony ONeal

Since 2003, Anthony has helped hundreds of thousands of people make smart decisions with their money, relationships, and education. He’s a #1 national bestselling author of Debt-Free Degree and national bestselling author of The Graduate Survival GuideHe recently released Destroy Your Student Loan Debt. He travels the country spreading his encouraging message to help teens and young adults start their lives off right and people of all ages succeed with money. You can follow Anthony on YouTube and Instagram @AnthonyONeal and online at anthonyoneal.com or facebook.com/aoneal.