Rich vs wealthy

by | Sep 15, 2022 | Personal Finance

Some key differences between being rich and being wealthy and how to attain wealth

We’ve all seen the picture. It’s glitz, it’s glam, it’s mountain living, and electric car cruising. Our favorite celebrities are instagraming about it and our favorite foes are holding it against everyone else. However, those in the real know will tell you that all that glitters is not always gold. This is the prime reason someone might be rich enough to afford a flashy lifestyle one minute, and  battle to keep a roof over their head the next. On the polar end of this spectrum of is a group who have built sustainable, long-term wealth, affording them time and freedom to do what they want to do over and above a collection of instagramable moments. The former we call rich, and the latter are what is regarded wealthy.

There are several key contrasts between riches and wealth, however arguably the most crucial and surprising factor is that while riches (marked physical large sums of money and lavish material possessions) may be sometimes due to stroke of luck and oftentimes incredibly difficult to acquire and while easy to lose. However, wealth, on the other hand (distinguishable by acquiring a lot of assets, such as real estate, investments, and cash to sustain their lifestyles and create a lasting financial legacy), is long lasting and can be achieved by almost anyone through a series of wise money management habits.

Okay, so let us unpack some of the fundamental differences between being rich and being wealthy. By definition, being rich is simply having a lot of money or income. However, being rich, doesn’t necessarily equate being comfortable and well-off. As a matter of fact, being rich can often entails overspending and sometimes over indebtedness which, regardless of how much money you have is never a good thing. While rich people might drive a fancy car or live in an amazing house in the best part of town, all of this comes at a cost and has led to the economic downfall of many. Having more expenses than income if often the lived experience of many rich people.

For this reason, it is possible for someone who earns R20000 a month to be wealthier than someone earning R100000 per month. It all comes down to how you spend your money, how much debt you build-up, and finally, how much of your money you save. Essentially, anyone can enjoy wealth as long as they spend their money wisely by acquiring lucrative assets and investments, saving up for their comforts (such as the luxury car, nice travels, and household items and gadgets), instead of buying them on credit, and finally keeping their debt obligations to a bare minimum.

While saving the bare minimum (like 20% or 30%) of your income can be beneficial for emergencies and achieving specific goals, however if you want to acquire wealth, you’ve had to raise the saving margin to much higher (aim for 60% of your income and more) the less you spend on your journey to acquiring wealth, the quicker you can reach your goals. There are also various savings and investment programmes that can help accelerate the process, so you are able to enjoy the real fruits of your labour which are essentially the real fruits of your labour which is time and freedom to enjoy your life as you wish.

The good news is, it is never too late to start building wealth, or to turn things around if you are already over-indebted and suffering financial hardships. Tackling your debt issue should commence with understanding the different types of debt because the truth is not all debt is bad. In fact, some debt, such as mortgages, may even be considered “good” debt due to their low interest rates and potential for wealth accumulation. Mortgage payoffs have actually been considered as a type of forced savings account because you will almost certainly receive a portion of your monthly installment back when you sell.

However, if you carry a lot of bad debt, such as high-interest credit card bills, every month, you may jeopardize your financial goals. This is why it is important to have a repayment strategy in place, with the ultimate goal of living a debt-free life.

If you’re not sure where to begin, consider the debt snowball or debt avalanche payoff methods. And keep in mind that it is possible (and often preferable) to save money while paying off debt. As your balances decrease, you’ll have even more money to put toward your emergency savings and investments.

If you need help with solving your debt issue and building wealth, contact National Debt Advisors today.

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