Are you of the opinion that rich vs wealthy is the same thing? Well, you are not the only one thinking in that direction. I for one used to think the same way until I got a better understanding. The term rich and wealthy are often incorrectly used to describe the same thing. Even though the two words seem synonymous, understand that they are completely different. It may be hard to spot the difference, but being wealthy and being rich are not the same thing.
What Does It Mean To Be Rich?
What one person may term as being rich may be quite different from how another person thinks as rich. As such it can differ from person to person. For some people it is wearing designer labels, being surrounded by piles of cash, a mansion, drinking the best of wines or flying private jets.
I for one consider this fake riches. This is because most people only blow money on a bunch of super-expensive items just so they can please their circle of friends or everyone else who cares to notice. What you need to know at this time is that people don’t actually know if you are rich. Some people can even go all out and buy on credit just so they can please others just to look rich and powerful. If you keep living like this without having the actual income to fund these lifestyles, you’ll only end up looking rich and powerful. But in the actual sense, you may be neck-deep in debt.
What Does It Mean to Be Wealthy?
As opposed to being rich, being wealthy is when you have your finances in order and make wise money decisions. This is what I call “being wealthy”. At this stage, you actually care more about building your wealth for the future rather than living just to impress other people. At this point, you are not just blowing your money just for the fun of it. Here you have a plan and are focused on the long term instead of the short term.
Being wealthy does not actually mean that you don’t have nice things. Rather you make a budget and save up to pay for them with cash. You’ll only be buying things because they are things that you need and bring you joy and enhance your life not because you want to impress your social media friends. Being wealthy means amassing assets and making your money work for you. Simply put, it is having a significant net worth.
How to Become Wealthy
Becoming wealthy does not happen overnight neither does it happen out of the blues or by folding your hands and doing nothing. To become wealthy, there are a few things you can do to get started. It is best not to just focus on how big your paycheck is. You should also avoid schemes that sell you ideas to get rich quickly. Rather you should follow these steps to eliminate debt, and have the right mindset when it comes to amassing wealth.
So here are a few tips on how to get wealthy:
Save 10-15% of your paycheck every month
The first step to becoming wealthy is to save a portion of your paycheck every month. You have to faithfully do this every month, no matter how much or how little you make monthly. Try as much as you can, to set aside at least 10% – 15% every month.
To do this without fail, you can set up your bank account such that a portion of your paycheck is deposited directly into your savings. This will be an easy way of saving without even needing to think about it.
Pay off debt, starting with high-interest debt
To be wealthy, you have to be debt-free. So you should focus on paying off your debt, starting with high-interest loans like a credit cards. Find out if it makes sense to refinance your student loans or mortgage to get a better interest rate. You can also look into things like student debt forgiveness. In your pursuit to becoming wealthy, you have to make becoming debt-free your number one priority.
Invest as soon and as much as you can
You can quickly grow your wealth by investing it. Even though investing comes with its own risk, there are numerous options available. You can use an automated service like a Robo-advisor. You can also, get investment advice from a broker, or even invest in things other than the stock market, like physical assets.
No matter what the situation is, ensure you do something. If you can’t think of anything else, you can even put your money in a high-yield savings account where you can accrue interest until you are ready to invest it. Just make your money work for you.
Don’t indulge in unnecessary expenses
Another key to growing your wealth is by being frugal and living within your means. It is best to live far below your means. This will enable you to invest your extra income and savings.
This will mean resisting the urge to indulge your latest cravings be it buying designer labels or the latest phones when you can still make do with the old ones. Only spend money on things that you only need and things that will also last in value.
Consider your long-term financial goals and assets
Since growing wealth is a long-term commitment and not something that happens overnight, it may take some years to build up. So you have to give it time. When things get rough, you have to remember your long-term goals and the reason you choose to become wealthy in the first place.
Shift your mindset
Being wealthy does not start with having a bank account full of cash, you need to have the right mindset. So you should save a portion of your income, focus on becoming debt-free, and invest early and often. If you really want to be wealthy, you have to think about your long-term goals. If you want to retire early, own your own houses, and travel, then you shouldn’t just focus on your income. Rather you should focus on building up your investments and assets to last you a few lifetimes.