The Difference Between Being Rich and Being Wealthy

The Difference Between Being Rich and Being Wealthy

Being rich and being wealthy seems to be synonymous as both involves having a lot of money. However, there’s a big difference between the two. If you notice, there are a lot of so-called ‘get-rich-quick’ schemes but there are no ‘get-wealthy-quick’ schemes.

The main difference between being rich and being wealthy is knowledge. Wealthy people know how to make money while rich people only have money. Rich people are motivated by money but wealthy people are motivated by their dreams, purpose and passion. Most rich people make a lot of money with their paychecks but the moment they stop working, they also stop making money.

Being wealthy is defined as that status of an individual’s existing financial resources that supports his or her way of living for a longer duration, even if he or she does not physically work to generate a recurring income.

For example, if a person’s monthly expenses amount to Php 25,000 and he only have Php 100,000 in his savings, his wealth is approximately four months or 120 days. Wealth, therefore, is measured in time, and not in amount of money that you have. It suffices to say that wealth is dependent not only to the amount of income but also to amount of expenses one makes.

Wealthy people can build sustainable wealth that can last for years through asset investments producing multiple streams of income.

Rich people, on the other hand, may get money in an instant such as inheritance or winning a lottery. However, because of lack of proper mindset and poor money management skills, all of it can be lost in a short period of time. It makes sense that if you did not work hard to earn and build it, then it can just easily pass on your hands and splurge it on things which are not important. Some of these people are more commonly known as ‘one day millionaires’. Now they have it, the next time they don’t.

Wealthy and rich people both may experience downfalls and failures in their ventures. However, because wealthy people are knowledgeable when it comes to money matters, they can start all over again and build wealth over time. In contrast, rich people may find it hard to attain what he or she previously has. In essence, wealthy people are financially free while rich people are not.

Since wealth is not an overtime success, one must learn to distinguish an asset from a liability. Focus on creating and buying income-producing assets to generate a passive or a portfolio income.

How Strong is Your Wealth?

Now that you’re on your way in building your wealth, the next thing to do is to calculate and monitor your wealth ratio on a monthly basis to properly administer the financial and economic aspect of your life. The formula is:

The objective of calculating your wealth is to have your passive and portfolio income equal or greater than your monthly expenses. The moment you have a ratio of one is to one or more at any given month, then it indicates that you have increased your financial capacity to live a better life. On the other hand, if your wealth ratio is less than 1, it implies that you are still in a financial dilemma and your cashflow does not meet your basic life standard.

As I have discussed in the 3 types of income, passive income is the residual income that you get from compound interest or compound growth. They come in the form of rental income from real estate properties, residual income from network marketing or franchises, interest from savings and time deposits, income from a virtual assets, etc. Meanwhile, portfolio income comes mainly from paper investments such as stocks, bonds, trust funds, and other marketable securities.

The key in improving your wealth is to regularly monitor and increase your passive and portfolio income by increasing your means to earn more instead of acquiring more expenses. The moment you decide to make the passive and portfolio income a part of your financial habit and discipline yourself in building it, your are on your way to financial freedom. This is the path in maintaining a strong wealth foundation.

Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

30 responses on “The Difference Between Being Rich and Being Wealthy

  1. Great point Tyrone. Wealthy people have wealth; rich people have riches. But yes there may be difference between wealth and riches. Wealth contains profit generating assets… while riches may only contain assets, which are not generating profit or may only contain profit without based assets.

  2. Now i know that wealthy people knows how to make money even starting from 1 peso but rich people can’t and fears of losing someday for their money which is to be happen in the future. Wealthy people able to value their health than money because, it is their instinct on how to make money and making money works for them. That’s why, wealthy people are much more healthier than rich people. Kaya nga health is wealth and wealth is health,.Hehe..thanks anyway Tyrone…

  3. When talking about freedom their possession of being rich and wealthy is not enough if they are not happy. I agree with the formula but we can improve it by taking away some percentage for thanks giving. Because giving is one of the many ways of making happy.

  4. I agree with you. Most rich people gain their wealth thru inheritance. My concern is that why there were only few Filipinos know how to invest their money. Mutual funds I think is a great opportunity for us but a lot of people do not know about it. I hope soon people will learn and know about mutual funds.

    Great post tyrone.

    • Thanks! It clearly shows that a lot of people are not financially literate. According to the recent survey released by BSP, majority of Filipino households do not have savings accounts. That’s why we are here financial bloggers, speakers, mentors, and coaches to educate more Filipinos about financial education. 🙂

  5. I just loved the article to bits. The thought process which originated this content is absolutely praiseworthy and I agree with each and every word of it. Being wealthy doesn’t only provide you money, but at the same time gives you a proper intellectual mindset to secure it as an asset for the life long process. It basically makes your life prosper not only at financial sector, but at educational, cultural and societal sector as well. where as people who get money by fluke, doesn’t learn the impact of hard earned income, hence lose it within a limited time period. Thanks a ton for sharing it.

  6. It’s a shame that I am one of those Filipino who are NOT financial literate. But I am starting to read and be literate. Thank you for your blogs, please continuep posting those relevant topics as it enlightens and inspires us somehow.

  7. I am a male based in Uganda, East Africa region, Africa continent. Just want to say many thanks for this edifying article. I am on my way to become wealthy by God’s grace, but was not to clear on difference between the rich people and the wealthy people. Now I know exactly what I need to do to become wealthy not just being rich. Critically I have learnt further that wealthy people have more freedom in giving money, time and skills

  8. This means if the rich get’s bankrupt, it’s hard for them to get back to their riches. If the wealthy gets bankrupt, they rise back even more succesfully than before because they acquired knowledge from their failure. Kaya pala we see a lot of this like this happening and they easily bounce back.

    • If your wealthy u r ideas thoughts will be spread to everyone which is useful for them for their mental activities if u r rich u can share only money

  9. Well said Tyrone, well said! This is something I keep telling many of my clients and the youngsters I meet. Mindset has a lot to do with seeing things the right way. Society has a part to play in the thinking of those wanting to get Rich rather than striving for Wealth and giving back to the community.

    Most times I see the rich get consumed by their own riches whereas the wealthy live life so humble that those around are not even aware of their wealth or net worth. One wealthy neighbour is a postman.

  10. Very informative information. I thoroughly understand the difference between wealthy and rich people. I am grateful for you sharing this information on your blog. Wow, knowledge is wonderful! Applying this concept to ones life will be amazing!

  11. Thank you for the article.
    I am a full time author and am constantly pushed by my family to get a real job as they consider me dirt poor according to their standards. I now realize that although I am not rich like them, I am way more wealthy than them plus I am financially independent as my book royalties exceed my expenses. Plus i keep adding to my passive income with each book I write, making me more wealthy. I may not have the fancy car they have, but I have far more free time and less stress. I now consider myself a success.

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