Wealthy vs Rich: Know The Difference

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  • Wealthy vs Rich: Know The Difference
Author: Joseph Reinke, CFA

Many people think being wealth and rich are the same thing.  The two are not the same!

There is massive confusion when it comes to being wealthy vs. rich.  Your goal is to be wealthy, not rich. 

In this article, I describe being both wealthy and rich.  By the end, you’ll understand why being wealthy is the ultimate goal.

Being Rich

First off, being rich is focused on income.  In short, the more you make the richer you are.

The sad part is that many rich people are in a really bad financial situation because they spend more than they make.

Growing up in Silicon Valley, I’d see people living in the most expensive areas, driving six-figure cars, making seven figures a year.  In short, they were rich. 

They were rich until they were suddenly broke living in a tiny, overpriced apartment.  This happens to rich people because they have way too much debt and overspent.  Rich people tend to have a spend first financial mentality.

You see the same thing with professional athletes, movie stars, singers, and those that inherit money.  A large percentage of them go bankrupt with 3 years of receiving a large windfall.  They were rich but again have the wrong financial mentality. 

At the end of the day, if you make $200,000 you may be rich. But if you are spending $195,000 a year, you are not wealthy.

One Reason Why You Can’t Be Rich

If you strive to be rich, you’ll never get there.  The reason being is its an arbitrary amount that is different based on who you ask.

For example, you may think making $100k in income per year is a lot and makes you rich.  However, you cousin might think 75k makes you rich.

Ask someone else and they may think 200k makes you rich.

Since its different for everyone, you can never truly obtain being rich.

Being Wealthy

In short, being wealthy vs rich is a mindset.  The mindset of the rich as stated above is on spending.  The mindset of the wealthy is on accumulating. 

Also, unlike being rich, being wealth can be defined and is definitive.

Specifically, being wealthy means that you own assets that generate enough passive income to cover your expenses.  The ultimate goal is generate enough passive income to cover your monthly expenses.  Once you do that you are wealthy.

For example, let’s say you have monthly expenses of $5,000.  If your assets are generating more than $5,000 a month, you are wealthy.

The most common sources of passive income are dividends, interest payments, rental income, and royalties.

The amount of assets needed to be considered wealthy is different for each person.  It largely depends on your life style and how much is needed to cover expenses.

Most people think that the “magic number” to be wealthy is a large number.  They are focused on what they see rich people buying. 

However, most wealthy people don’t live an extravagant lifestyle.  In fact, most drive older cars, have old model phones, have the same clothes from 15 years ago, etc…

Therefore, you may think being wealthy is beyond your ability, but it is not.

How To Generate Wealth

Your focus should be driving your income as high as possible or developing your human capital.  The next step is to use that income efficiently to pay off debt and/or accumulate assets.  

This is why our financial planning technology focuses so much on investments/assets and debt. I.e. we want to make sure you are on your way to becoming wealthy. Being wealthy is the ultimate way to let money complement your life, not dictate it!

The next item to take into consideration is your current amount and streams of passive income.  This is key to understand how close you are to becoming wealthy.  Therefore, when you are tracking your financial plan using FitBUX’s technology, we show your current passive income streams, from items such as dividends and interest payments.

For example, if you have $5,000 a month in expenses and your assets are generating $2,500 a month you are half way to becoming wealthy!

One more thing to remember.  Being wealthy vs rich is a mindset.  Accumulating assets is the mindset of the wealthy while spending tends to be the mindset of the rich.

That is why we do so many podcast on mindset.  We hope you get a lot out of them so you can be on your way to generating wealth.


When it comes to being wealthy vs. rich, the obvious one you should be seeking is to become wealthy.

This is how you make sure that money complements your life, not dictate it!

By Joseph Reinke, CFA

Joseph Reinke, CFA

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About the Author

Joseph Reinke is a Chartered Financial Analyst (CFA) Charter Holder and founder of FitBUX which has helped over 14,000 young professionals on their journey to financial freedom. Joseph has been personally investing since he was 12 years old.

In addition, he has experience in student loans, mortgages, wealth management, investment banking, valuation, stock trading, and option trading. He has been on 100s of podcast and has been invited to 100s of universities to discuss financial planning with their soon to be graduates.

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