How To Get Out of Debt, Boost Your Active Income, and Start Investing for Passive Income
In This Article
Do I want to be rich or wealthy?
In order to create your own personal finance goals on your journey towards financial freedom, you may run into terminology that can be confusing.
When we hear of someone being rich, we might also think they are wealthy.
When we hear of someone being wealthy, we might also think they are rich.
Wait, don’t these two terms mean the same thing?
Although “wealthy” and “rich” are used interchangeably, they have very different meanings.
In this article, we’ll break down wealthy vs rich — and, more importantly — which one you should strive for on your personal finance journey.
What Does It Mean to be Rich?
Rich refers to having a high income — a lot of money stashed away.
If you are rich, you likely have a high salary.
You have the ability to live comfortably off of your paychecks, which may help to offset your higher cost of living.
You will also spend a lot of money and are likely to live lavishly by spending large amounts of money freely.
A new home with more bedrooms than you need.
Just because you are rich does not necessarily mean you are wealthy, though.
This is because your expenses could be higher than your income.
Or, you could be in debt to make your lavish lifestyle work.
Being rich means that your money will only be available to you for a finite amount of time because you are not financially independent.
This is because those that are rich may believe this large amount of money will always hit their bank account, so they do not set up parameters for sustaining their lifestyle for the long term.
Being “rich” is all about lavish living in the now, and only thinking short term.
If the economy experiences a downturn, you lose your job, or something unforeseen happens, you can go from “rich” to being in financial trouble quickly.
Imagine you’re a professional athlete making six figures. If an unforeseen accident happens that renders you without the ability to play.
Imagine you get a high-paying job out of college, and you spend all of your income on items with a short-term mindset. Vacations. Cars. Designer clothes. Then, the economy hits rock bottom, the company files bankruptcy, and you’re laid off.
In both of these situations, your paycheck will stop coming in.
But your bills certainly won’t.
What Does It Mean to be Wealthy?
Wealthy is not just a number in a bank account; wealth is a cumulation of health, freedom, relationships, and assets.
Wealthy refers to those who have income-producing assets to allow them to save time and money.
Wealthy people don’t put all of their money in enormous houses, luxury cars or designer clothes. Instead, wealthy people often diversify their assets through:
Their perspective is on the long term, not the short term.
Instead of working for their money, they make their money work for them.
This allows wealthy people to do what they want when they want.
What is The Difference Between Rich and Wealthy?
A rich individual may have enough money to live comfortably and spend their money freely in the short term, but they may be in debt and also do not have an investment plan for the future.
That’s why you should strive to be wealthy, not rich.
Wealthy individuals have the financial independence and responsibility that those who are rich are lacking.
Wealthy people know how to control and manage their money, as well as their spending.
They utilize their spending to create investments that secure a sustainable lifestyle for themselves, formulating a long-term plan for the future.
Some other key differences between wealthy vs rich include:
- Wealthy individuals have low expenses when compared to their income, whereas rich people have high expenses when compared to how much they make.
- Wealthy individuals take note of their budgeting and spending habits, whereas rich people partake in minimal financial planning.
- Wealthy individuals have sustainable finances, whereas a rich person typically has a finite amount of money.
- Wealthy individuals rely on a long-term investment plan to aid in their financial planning, as well as may have numerous revenue streams, whereas a rich person typically has one source of income.
- Wealthy individuals put a heavy focus on financial assets that will bring security for the future, whereas rich people tend to focus more on short-term gain or materialistic spending.
- Wealthy individuals may have multiple streams of revenue, as well as an adequate savings account, whereas a rich person may not have any money put away into savings.
How to Become Wealthy
Now that you know it’s better to be wealthy than rich, the next question is his:
How do I become wealthy?
Knowing the steps you can take to become wealthy is the first step in the journey.
Here at WealthFit, we offer a way to learn these steps — on demand — in the online training class Wealth Building 101: How To Get Out of Debt, Boost Your Active Income, and Start Investing for Passive Income.
In this class, you’ll learn:
- How to determine the amount of passive income you need in order to live your dream lifestyle
- How to reverse-engineer a clear-cut path to early retirement
- How to get out of bad debt and leverage good debt to build wealth faster
- How to boost your active income by negotiating a higher salary, starting a side hustle, or launching your own business
- How to start investing for passive income and long-term wealth
- . . . PLUS how to leverage a “Wealth Accelerator Account” to shortcut the path to your financial goals
If you’re ready to become wealthy and not rich, watch this class today.
The Bottom Line: Wealthy vs Rich
Remember: wealth is not just a number in a bank account; wealth is a cumulation of health, freedom, relationships, and assets.
At the end of the day when discussing wealthy vs rich, you want to be the former; not the latter.
Don’t focus on the size of your paycheck.
Focus on what you are doing with your paycheck to set yourself up for a long lasting financial freedom.