If you ask most people what the difference is between being wealthy and being rich, they will look at you with a blank look on their face. For the majority of the population, both those words are, after all, synonymous. It defines someone who has a lot of money and a comfortable lifestyle.
However, to put it in the words of Robert Kiyosaki, the best-selling author of Rich Dad, Poor Dad, nothing could be further from the truth: “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.”
Therefore, wealthy people are rich. Rich people, on the other hand, are not always wealthy. Here is the difference.
What does it mean to be rich?
A rich person has enough money to cover all their needs and then some. They may have all the indications of a luxury lifestyle, such as luxurious homes, flashy cars, or travel to exotic locations on a regular basis. According to a 2018 study by investment firm Charles Schwab, that magic number would be $2.4 million.
However, there is no indication regarding how the person came into possession of that amount of money. It could be an inheritance or a lucky strike in Las Vegas just as much as earning it the hard way. The downside of that situation is that someone who is rich could very well lose that money. Maybe it is because they are living above their means or perhaps because they are hitting a string of bad luck. Either way, they may not be able to remediate to the situation.
What does it mean to be wealthy?
On the other hand, someone who is wealthy may have a lot of money at his or her disposal as well. But more importantly, a wealthy person is capable of replicating that wealth indefinitely.
If you only have access to more money through a single source of income – as a salary, for example – you are dependent on that single stream of revenue. You would quickly find yourself in a tight spot if you were to lose your job. However, you could invest your hard-earned money in assets that can bring enough cash flow every month to cover your living expenses. In that case, you are building wealth.
In order to build wealth, you need to diversify your sources of revenue. The easiest way to achieve that goal is through passive income or residual income. Real estate is a popular form of building wealth for a reason. It has a proven track record of performing well in the long term.
Besides, with some knowledge and the help of an experienced team, real estate is also one of the few forms of investment that can be considered passive. Investing in real estate, commercial or residential, can take many different shapes. Depending on your interest, time, and qualifications, you can find out which one is the best fit for you.