Would you rather be Rich or Wealthy? Did you even know that there is a difference?

Many of the people you see driving expensive cars may be rich but may not be wealthy. I prefer to be wealthy.

Are you RICH?

Being Rich means that you have a high income. For most people this comes from a W-2 income that pays well. Consider people such as software engineers, doctors, lawyers, even professional athletes and music artists.

They make a lot of money. And when you make a lot of money, especially if you didn’t grow up with money and in particular not being educated about money, it is easy to spend a lot of money. For many people in this situation, it is the first time in their life where they feel like they can buy whatever they want. This also includes lottery winners.

They suddenly have a lot of money at their disposal. The instinct is to now buy whatever, and they usually do. A big house that they could have never afforded otherwise, with a large mortgage payment, a fleet of exotic cars, fancy clothes and shoes, in the case of some, even an entourage who follows them around and gets the perk of having everything they need paid for as well. But usually they are also in a lot of debt. They aren’t concerned about it because the consistent high income is there to pay it.

Unfortunately, a lot of that just becomes a lifestyle. And if something happens to stop the money from coming in, then that lifestyle drastically changes.

We don’t see it often with the average person, but someone famous, like an athlete or other celebrity, gets shown on all the news channels when they have to file for bankruptcy. Sometimes they can recover,not all do. I’ve seen this most often I think with some musical artists who have a one hit wonder and make a lot of money right away and live the good life, but then their hit goes away and they don’t sell any more records and now they can no longer afford that lifestyle and are forced to sell their home and things.

There is the key difference, they bought “things” not assets.

Wealth is Created

You do NOT have to be rich to become wealthy. But if you are rich it can be much easier and faster to become wealthy as long as you don’t give in to the temptation to live a rich life. At least not right away.

Wealth is usually what you don’t see. If you were to see Warren Buffet on an average day, if you didn’t know who he was, you would not know that he is one of the wealthiest people in the world. The outward showing of success usually comes from the Rich, the Wealthy think differently and don’t need to impress anyone. You can’t see what their net worth is on the outside.

Wealth is something that grows over time. It can be in the form of money that is saved. If someone makes over $100k per year, depending on where they live, they could save a large portion of that and live very frugally. It takes a lot of willpower to do it, but it can be done. It can be done at just about any income level. The more you make, the easier it can be done.

The “Wealthy” are the ones that truly get to enjoy life. Because no matter what happens, they do not depend on a job for income. Some may have a job because it is something they love to do, but they don’t need it to survive. If that job were to go away, they are not concerned because they have the means to continue to pay for their needs. For example Warren Buffett, Jeff Bezos, and Elon Musk, to name a few. Yes, they are the ULTRA-wealthy, but they did not start that way.

Had any of them just went and blew all of their income at the beginning of their path they would not be where they are today. They reinvested into their business and accumulated ASSETS, not Things.

You too can become wealthy. Maybe not to the level of those three named, but definitely a millionaire many times over if you get smart with your finances. Read the book “The Millionaire Next Door” and you’ll see what I mean.

Buy ASSETS not THINGS

We have covered this before in other posts. An Asset is something that produces income, and also tends to go up in value over time. The key point being that it produces income. If it does not produce income to pay for itself, then it is a liability. This is why YOUR personal residence, unless you are house-hacking or renting it as a short-term rental a couple times per month, is a liability and not an asset even though it goes up in value. But you are also paying for it with debt and interest where over the life of the loan you are probably paying more than what you would make on it when you sell it.

Assets in the best case scenario is rental real estate. Vehicles can also be an asset, as we discussed in an earlier post about using Turo. You will notice in my posts that I prefer Real Estate over any other asset class to create wealth. It produces income and someone else is paying down the debt and it goes up in value and it provides tax incentives so that income can be completely tax free.

If you spend your money just buying things, like those high income earners who spend to afford a lifestyle, or the average Joe who spends it to impress by buying fancy clothes, a cool car, and a nice place to live, then you never can accumulate wealth.

Start Building YOUR Wealth

You don’t need to be rich to start. I started accumulating real wealth when I turned 40 and bought my first rental property. I think my base pay for my W-2 was maybe $50k/yer at the time. But I sort of started much earlier than that. I started buying some stocks with the little money I had when the markets crashed in 2008. I think I started with about $500. Some of those stocks went up in value and I sold them to help fund part of my down payment on that first rental property.

However much or little money you have, you need to start investing it. Not just saving it in a bank account. Keeping your money in a bank account is losing value, especially in a high inflation period like we are in now.

There are some real estate investment options that allow you to buy shares of a property for as low as $10, $50, or $100. But to even be able to do that, don’t try to pay for a lifestyle that you can’t afford. Don’t try to impress your friends by spending more than they do. Be smart. Live frugally NOW so that you can build wealth and live your dream life in the future. It may not take as long as you think. I was able to reach financial independence in just about 5 years. But even if it takes 10 or 15, you can still live a better life and possibly retire sooner than you could have otherwise done. And you will have built up a massive amount of wealth.

Wealth and income can grow exponentially, but it will start slow. The momentum will get moving and you will very quickly start to see the changes.

YOU control your future. Make the sacrifices NOW so that your FUTURE self will THANK YOU!

Build up your WEALTH the right way. Build up ASSETS that will produce the income you need to live the lifestyle you dream of.

I will help you do it! You are NOT Alone!

Follow this blog for advice and connect with me and I will be happy to guide you on how you can do it.