Why being wealthy is different (and better) than being rich
When I was a young boy, my rich dad told me about the difference between the rich and the wealthy.
“Many people think that being rich and being wealthy are the same thing,” said rich dad. “But there is a difference between the two: The rich have lots of money but the wealthy don’t worry about money.”
What rich dad meant was that while the rich might have lots of money, they also might have lots of expenses that keep them up at night. Or they might have a high paying job but have to get up to work everyday and have fear of getting fired or laid off.
The wealthy, on the other hand, don’t have these worries. Why? What’s the difference?
The definition of wealth
The definition of wealth is the number of days you can survive without physically working (or anyone in your household physically working) and still maintain your standard of living.
For example, if your monthly expenses are $5,000 and you have $20,000 in savings, your wealth is approximately four months or 120 days.
Wealth is measured in time, not dollars.
The difference between being rich and being wealthy
In 1989, Kim and I became millionaires, but we weren’t financially free until 1994. This is because there’s a difference between being rich and being wealthy. By 1989, our business was making us a lot of money. We were earning more and working less. We had what most people considered financial success.
Though we were rich, we still were not wealthy; much of our time was spent working to build our business and its systems. Our goal was to build the business to the point that it would cover all our expenses from cash flow each month—without us working. Additionally, we were invested in other assets like real estate and commodities to add to our cash flow.
By 1994, the passive income from our business and assets was greater than our expenses. At that point, we were wealthy, not just rich.
It’s not what you make…
Ultimately, it’s not how much money you make that matters but how much money you keep—and how long that money works for you.
Every day, I meet many people who make a lot of money, but all their money goes out of their expense column. Every time they make a little more money, they go shopping. They often buy a bigger house or a new car, which results in long-term debt and more hard work. Nothing is left to go into the asset column. It’s this kind of behavior that separates the rich from the wealthy.
I like the fine things in life just like everyone else; the difference is that I don’t have to work to purchase them, or go into deep debt. Rather, I spent the time necessary to be smart with my money, work hard, and build a business and investments that provide enough cash flow each month to cover my expenses—including my fun liabilities like cars and houses.
I don’t work for my money. It works for me.
Lots of people can become rich. But only financially intelligent people can become wealthy—and that takes a strong financial education that allows you to build cash-flowing businesses and assets.
The rest is just playing at wealth, and a lot of worry.
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