Rich vs Wealthy: What’s the Key Difference Between the Two?

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The difference between being rich vs wealthy is 2 completely different concepts.

Although being “rich” and being “wealthy” may be considered similar, they mean 2 very different (and 2 very opposite) things.

And trust me, you’ll want to be known as being wealthy over being rich.

Keep reading.

In this article

What Does it Mean to be Rich?

If you want to know what being “rich” means, then I want you to think of some popular rappers, football players, and Hollywood superstars. 

Sometimes, it seems like they are screaming the words “I am rich.”

That’s because being rich is about:

  • Having a lot of income
  • Spending a lot of money
  • Showing off how much money you have

Yes, being rich means you have a lot of money. 

But being rich doesn’t necessarily mean you have a high net worth – or that you will always be “rich.”

In fact, being rich could mean you are in debt.


Most people who “are rich” spend more than they earn. 

And if you’ve read any of my budgeting articles, then you would know that to become rich (or wealthy), you need to spend less than you earn.

To build a positive net worth = Spending < Earn

I’ll never forget this story:

I was a teenager and met with one of my parents’ friends: He was a former American baseball star.

When he was playing baseball, he was:

  • 30-years old
  • Earning $4 million a year
  • Considered the next superstar

Then, an ankle injury put him out of the game and he was forced to retire at 34. 

That was 6 years ago (he’s 40 now). 

He and his wife are:

  • Driving $200,000 Ferraris
  • Live in a $3 million mansion
  • Earning $30,000 a year (from a lawnmower business)
  • Buy their 16-year old daughter a $60,000 car (which she crashed in week 1)

And you know what?

They are broke. Massively. And they will have to file for bankruptcy.

You cannot build wealth if you spend more than you earn. 

If you don’t believe my personal story, check out the many other celebrities that had “rich” lifestyles but ended up worse off than before they entered the starlight. 

Celebrity That Went Broke A Reason Why They Went Broke

Michael Jackson

The whopping cost of $10 million a year to operate Michael’s Neverland Ranch (he was at least $400 million in debt)

Lindsay Lohan

Partying, addiction, etc. causing Lindsay to file for bankruptcy in 2012

Mike Tyson

Divorce, excessive spending, etc. (was $23 million in debt)

50 Cent

Excessive spending (was $32.5 million in debt)

As you can see, you can be super-rich and famous, and still be massively in debt.

fiona smith the millennial money woman

The Bottom Line:

You can be rich and you can be on the verge of bankruptcy. Being rich is more about showing off your money than using your money as a tool to build long-term growth. If you’re rich, you’re also likely to go broke.

What Does it Mean to be Wealthy?

If you want to become financially independent,
then chances are that you’ll want to become wealthy.

Wealth has everything to do with your most precious asset: Time.

Becoming wealthy means you have:

  • Time to do the things you want to do
  • Time to spend with the people you love
  • Time to learn about the things you want to learn about

When you are wealthy, you are not living paycheck to paycheck.

Instead, when you are wealthy, you can decide when (and where) you want to work because you have the luxury to just walk away if you don’t enjoy your job. 

If you are wealthy, you have a large net worth.

To become wealthy, you’ll want to amass a positive net worth.

If you are wealthy, then you likely:

  • Have a large net worth
  • Spend less than you earn
  • Want to build long-term wealth
  • Are understated (aka don’t own the flashiest things)

Wealthy people focus on income-producing assets because they buy time.

Think about it: When you own income-producing assets and earn passive income (even when you sleep!), you’ll have all the time in the world to do what you want. 

That’s why wealthy people often diversify their assets through:

  • Real estate investing
  • Stock market investing
  • Investing in their business

If there is a shortcut to becoming wealthy, it has to do with building a business.

66% of millionaires own their own business

Source: The Millionaire Next Door

A business will pay you income (likely for the rest of your life) and your income earning potential is virtually unlimited, since you are your own boss. 

In fact, the majority of the wealthiest people in the world are business owners:

Wealthy Individual How They Gained their Wealth

Jeff Bezos

Business Owner (Amazon)

Warren Buffett

Business Owner (Berkshire Hathaway)

Elon Musk

Business Owner (Tesla, SpaceX, etc.)

Mark Zuckerberg

Business Owner (Facebook)

Bill Gates

Business Owner (Microsoft)

Larry Ellison

Business Owner (Oracle)

Chances are that you won’t see Warren Buffett approaching you with a gold chain necklace, golden rings, and a $300,000 Lamborghini. 

In fact, Warren Buffett is known as the frugal billionaire, living in the same home (in Nebraska) that he first bought, back in 1958. 

Even better, Warren Buffett “splurges” on $3.89 for breakfast at a McDonald’s drive-through…

So you see that being wealthy is very different from being rich.

True wealth is:

  • Health
  • Freedom
  • Relationships

In the end, it’s important to realize that money buys you time, which ultimately gives you freedom (and happiness).

fiona smith the millennial money woman

The Bottom Line:

Being wealthy means you have a positive net worth, you spend less than you earn and you have the time to do what you want to do in your life.

The Difference Between being Rich and Wealthy

The difference between being rich and wealthy has to do with time, freedom, and sustainability. 

A wealthy person has built sustainable, long-term wealth, which buys them time and freedom to do what they want to do. 

A rich person’s money often does not last very long, and rich people often go into massive debt because of their flashy, glamorous lifestyle. 

Someone earning $80,000 could be wealthier than someone earning $500,000.

It all comes down to:

  • How you spend your money
  • How much debt you build-up 
  • How much of your money you save
rich vs wealthy the differences

If you are truly wealthy, then your money will serve a specific purpose. 

For me and my husband, our money serves the following purposes:

  • Save enough for a sustainable lifestyle
  • Save enough to retire our parents early
  • Save enough to live without money worries

I would say these 3 purposes are pretty good reasons why we are so diligent when it comes to saving and investing money (we save just over 70% of our income). 

Wealthy people typically build their wealth by investing in real estate or by investing in the stock market.

how to become wealthy in 7 steps

How to Become Wealthy: 7 Actionable Steps

If you are ready to become wealthy, then you will love the 7 actionable steps that I’ve outlined below. 

Remember that to build long-term wealth, it doesn’t necessarily matter how big your paycheck is, but it matters how much you save and invest.

Let’s dive right in.

Save and Invest 20-30%

How to Become Wealthy Step #1: Save and Invest 20-30% 

If you want to become wealthy, then you need to start saving (and investing). Aggressively.  

Personally, I think saving and investing 20% to 30% of your paycheck is not enough. 

My husband and I save more than 70% of our gross paycheck and we haven’t looked back since. 

We spend money on:

  • Food
  • Mortgage
  • Bare necessities

And believe it or not, we still live a happy life. You don’t need to spend money to be happy.

So, what are some ways to invest your money?

  • You can invest your money at work, through your 401k plan
  • You can set reminders for yourself to invest a portion every so often
  • You can automatically have your bank account deposit a percent of your paycheck into your savings account

If you’re new to investing and don’t want to stash away $100’s right now, then consider checking out Acorns.

Acorns is probably one of the best beginner investment apps because you can start investing with as little as $5.

And trust me, any amount invested will make a difference in your financial future – as long as you are consistent and persistent when it comes to investing. 

Invest as much as Early as Possible

How to Become Wealthy Step #2: Invest as much as Early as Possible

There are 2 key factors that will determine your long-term wealth:

  • Time in the market
  • How much you invest

To optimize your wealth, you’ll want to invest your money as early as possible – and as much of your money as possible. 

The worst thing you can do is doing nothing.

If you want a little investment guidance, then you may want to consider looking at M1 Finance.

With M1 Finance, you can select (or you can create) your own investment allocation “pie,” which will invest your money in different stocks, bonds, etc. 

You just need $100 to start investing for regular accounts or $500 to start investing with retirement accounts.

Foster Close Family & Friend Relationships

How to Become Wealthy Step #3: Foster Close Family & Friend Relationships

As you 
build wealth, don’t forget to foster your relationship with your family and your friends. 

Remember that your network is your net worth.

Don’t go through life only focusing on money while neglecting your family and friends.

It’s important you take some time out of your busy day and spend it with those people who have always been there for you – no matter the ups or the downs.

Pay off High Interest Debt

How to Become Wealthy Step #4: Pay off High-Interest Debt

The next step is to pay off high-interest debt ASAP. 

If you carry high-interest debt, then you are robbing your future self.

High-interest debt is typically debt that has interest rates in excess of 10%, which could include:

  • Credit cards
  • Payday loans
  • Personal loans

It’s very important to pay off your debt fast so that you can focus on pursuing your other goals – like investing for your future.

Below are some of the steps my husband and I took, as we pursued our goal of paying off debt and better managing our money:

  • Refinanced our mortgage
  • Paid off credit cards every month
  • Paid off all student loans as fast as possible 
  • Bought cheap, used cars at low-interest rates for life

My husband and I worry about money when we know we have high-interest debt – and that’s the worst feeling ever.

So, we make it a point to pay off debt as fast as possible.

If you want to find additional (and somewhat crafty) ways to pay off your debt, you may want to look into debt consolidation with companies like Upgrade 👇

With debt consolidation, you could:

  • Receive favorable interest rates
  • Maintain a fixed payment schedule
  • Consolidate multiple lenders to 1 lender
  • Simplify your finances when it comes to paying back debt

Just remember that debt consolidation is only a temporary fix.

If you have a spending problem, then debt consolidation will not fix the underlying issue – which is spending excessive amounts of money and racking up debt. 

Focus on your Long Term Goals

How to Become Wealthy Step #5: Focus on Your Long-Term Goals

The key to building wealth lies in your 

If you focus on your long-term goals, then you can (and very likely will) become wealthy. 

The important part is to:

  • Stay patient
  • Stay focused
  • Stay consistent

Saving and investing money won’t always be easy, and you’ll probably see your wealth fluctuate throughout the years, since the stock market fluctuates, too. 

Whenever you feel unmotivated, remember your “why” – the reason why you’re doing everything that you’re doing. 

My why is:

  • My family
  • My future
  • My parents

Never forget what drove you to become wealthy in the beginning.

Stop Buying Stuff you Don’t Need

How to Become Wealthy Step #6: Stop Buying Stuff you Don’t Need

One of the fastest and easiest ways we seem to lose wealth is by buying stuff we don’t need to impress people that don’t care. 

No, I’m not saying that you’ll become a millionaire if you cut out avocado toast and lattes from your life.

But, if you spend $10 a day on avocado toast and lattes (that’s $3,650 per year), then yes, you could be missing out on quite a chunk of wealth (in the long term). 

That’s why it’s important to live frugally today so that you can make your tomorrow a reality.

Before you start spending money, think about what it is that you are buying.

I try to ask myself these questions before I buy something:

  • Is this necessary?
  • Will it improve my life?
  • Will I regret the purchase?

If I answered no to any of those questions, I seriously reconsider my purchase.

Guys and gals, if you want to change around your financial picture but just don’t know where to start, then check out the budgeting app, You Need A Budget (aka YNAB). 

This is easily one of the best budgeting apps out there.

If you sign up today, you’ll get a 34-day free trial, after which you’ll have to pay a subscription fee every month. 

New YNAB users claim that they:

  • Saved $600 in the first 2 months of using YNAB
  • Saved $6,000+ in the first year of using YNAB
Increase Income

How to Become Wealthy Step #7: Increase Income

Now that you have your financial picture in order – you’ve:

  • Created a budget
  • Paid off high-interest debt
  • Stopped splurging money on stuff you don’t need
  • Started saving and investing 20%+ of your paycheck

…it’s time for my favorite step in this guide: Making more money!

Saving money is limiting. Earning money is limitless.

Not enough personal finance articles talk about this – your ability to save money is limited by 2 main things:

  • How much you earn
  • Your basic living expenses

There is a finite amount of money you can save. Unfortunately. 

That’s why, if you want to accelerate the amount of wealth you build, you’ll want to focus on increasing your income.

And one of the best ways to make money is to start a side hustle.

Do some research on your own time as well to figure out which side hustle could be the best for you – and then start saving and investing that extra income!


In a recent 2021 survey, Americans said that to be “wealthy,” you would need a net worth of $1.9 million. Although being labeled “wealthy” really is a subjective matter.

Being wealthy has to do with your most precious asset: time. Being rich has to do with showing off your money through material objects. When you are wealthy, you don’t have to prove anything to anyone.

Being wealthy has to do with 2 things: The quantitative side (the numbers) and the qualitative side (the feeling). You could feel wealthy if you know you have a steady job, a loving family, wonderful friends, a roof over your head and food to provide for your family.

The Bottom Line: Rich vs Wealthy

Being rich and being wealthy are 2 very different mindsets. 

If your goal is to:

  • Spend sustainably 
  • Build long-term wealth
  • Achieve financial freedom
  • Become financially literate

…Then you will be wealthy.

On the other hand, if your goal is simply to have a lot of income (a high-paying job) and show off your income through the coolest high-tech gadgets, then you might as well call yourself rich.

Being rich, however, could also mean you:

  • Are in debt
  • Spend more than you earn
  • Don’t have a high net worth
  • Don’t understand personal finance

If you just want to show off your money, then you’re rich.

If you want to build a lasting legacy so you pass your money down to your kids, your grandkids, etc., then you are building wealth. 

Wealth is nothing more than a mindset.

Anyone can become wealthy – and it’s not like there is a magic number that you have to hit to become wealthy. 

Becoming wealthy has to do with these 7 steps:

  • Increasing income
  • Paying off high-interest debt
  • Focusing on your long term goals
  • Stop buying stuff you don’t need
  • Investing as much, as early as possible
  • Fostering close family and friend relationships
  • Saving and investing 20% to 30% of your income every month

The path to becoming wealthy is not easy and it will certainly take time, energy, and effort to build your family wealth.

But it’s absolutely worth it. 

As you build your wealth, remember to focus on your long-term objectives: Focus on why you are building your wealth.

My “why” is my family.

As you build your wealth, you’ll likely start to notice a shift in your mindset, your behavior, and your actions that will help you move closer to your financial goals.

What’s the biggest difference you’ve noticed between the rich vs wealthy? Let me know in the comments below!

Fiona Smith
Fiona Smith
Fiona Smith is the founder and CEO of The Millennial Money Woman. She has spent 10+ years studying finance, with the last 7 as a wealth and investment advisor. She has worked with clients with a net worth of up to $100M and holds her Master of Science Degree in Personal Financial Planning. She has also co-founded a local non-profit community teaching financial literacy and her work is featured on Forbes, FinCon, and MSN.

26 thoughts on “Rich vs Wealthy: What’s the Key Difference Between the Two?”

  1. Wealth is the real American dream – those 7 steps are also the key to living a very happy and rewarding life. It’s important to remember what our real priorities are, rather than spending everything we can get our hands on.

    Great article, as usual!

    1. Thank you so much for your kind words! I’m glad you enjoyed the article 🙂
      Absolutely, lifestyle creep is a real thing and it’s very important to live below your means in an effort to build long-term and sustainable wealth.



  2. In Kenya and what I have just read has impacted my brain positively…with this article I now understand why I earn a lot but never get to my long term goals…

    Very helpful nowonder America is a giant business country such a mind is what we need in Africa

    1. Hi Steve,

      Thank you so much for your kind words!
      I’m thrilled to hear that this information helped add value to your life 🙂

      You’re definitely right, mindset can certainly play a role in determining your future success.

      Best of luck,


  3. Based on your definition, we are wealthy. My last 5 years of employment, we were saving 20-35% of our gross income. Retired at 58 and 62, with full pensions. Debt free save our mortgage. We always have money left before our next monthly pension check. We are comfortably retired. If not for Covid19, we would be traveling.

    1. Hi Vanessa,

      I love hearing stories like yours – and congratulations on having the discipline to save 20% to 35% of your gross income AND being able to retire at such a young age. That’s honestly a great accomplishment. Hopefully you can start traveling soon!



  4. Thank you Fiona. The article has opened my eyes to the fact that l have no knowledge in personal finance. I am 50 years and l have no riches no wealth. Am very frustrated. Do you think l can start now and build some wealth in 10 years time?

    1. Hi Cece,

      Thank you so much for your kind words!
      I absolutely think that it’s possible to build wealth at any age – and I think it’s great that you have decided to start now. While I’m not saying that your journey to build wealth (and the definition of “wealth” typically is very subjective) in 10 years will be easy (and in fact, it will take discipline and it will probably be a difficult road ahead), I can certainly say that your wealth building journey will be rewarding and worth the time, effort, and energy.

      Good luck on your ventures!


      1. Hi Fiona! I loved this article! It’s incredible how important is to know all the facts you list in here. It opened my eyes on what I really want and stop pursuing fake goals based on what you see in social media.

        I want to create wealth and I am feel blessed of finding your blog. It clear my mind and helped me to create a Plan I want to accomplish on the next 5 years.

        I can’t thank you enough for all valuable information you share always!

        1. Hello Jose,

          Thank you so much for your kind words! I really appreciate it.
          You’re absolutely right in that creating a plan is one of the first and fundamental steps in moving closer to your financial goals.
          I look forward to reading more updates from you.

          Good luck in your ventures!


  5. I’m so happy to get this helpful information on becoming wealthy,I’m gonna put the 7 steps into practice and I Know things will become better for me.I’ve been wondering why I can’t see progress in my life financially, I’ll save more of my money and spend less…

    1. Hi Xolisile,

      Thank you so much for your kind words!
      I’m so glad this article added value to your daily life 🙂 As long as you’re consistent with your efforts and stay focused on why you started in the first place, chances are, you’ll see progress sooner than later.

      Good luck!



  6. Thank you Fiona, this is simply an amazing piece well summarized. I think the key word that stood out for me would be ‘investing as much, as early as possible’. Being wealthy as described above suggests to me that its more of a journey than a destination. This I shall explore. Thank you once again.

    1. Hello Michael,

      Thank you so much for your kind words! I really appreciate it 🙂
      You’re absolutely right – building wealth is a journey. In fact, I would even say that the journey is the destination when it comes to growing your wealth.



  7. Delroy Ettienne

    “ In fact, I would even say that the journey is the destination when it comes to growing your wealth”.

    I love that.

    (You should copyright that!!!)

    Quote of a lifetime.

    Thank you.

    Wonderful article.

    Let’s me know that I am in the right place.

  8. Tangy Stephens

    Regarding wealth…there is something that’s often times over looked and that is spending time investing in ones health. What good is it to store up theses things and not have good health to enjoy them in? 😘 here’s to living your best life ever!

    1. Hi Tangy, you’re absolutely right! Health and wealth go together, that’s why it’s so important to pay attention to your well-being, both mental and physical.

      Good luck on your journey!


      1. Melkiory George Ruvuma

        Thank you for your article.You changed my mindset on being rich.From now I start hustling for being wealthier.Thank you . Asante

  9. Agree with most of your article but wondering why you are carrying a mortgage? Why not pay it off? Seems like there are few places today to earn much interest on your money so why keep a mortgage? Thanks, just wondering

    1. Hey Tony,

      Thank you so much for your kind words!

      I think whether someone wants to carry a mortgage or completely pay it off really depends on their personal financial situation – and it probably also depends on their mortgage rate.

      So, for example, if I had a mortgage rate of 2.5% then I’d probably carry the mortgage and make minimum monthly payments instead of paying off all of the mortgage at once. In a sense, if I were to pay off the mortgage, I would be “earning” a 2.5% return (in other words, I would be saving the cost of the 2.5% mortgage rate). However, if I decided to continue making minimum mortgage payments and invest my money somewhere else (like the stock market or alternative assets like classic cars, art, etc.) then I’d likely have the opportunity to “earn” more than the 2.5% of the mortgage… stocks, for example, have earned about 7% on average over the past 50 years. However, if my mortgage rate was 7%, then I’d probably rethink that situation and likely try to pay a lot more toward my mortgage.

      However, there really isn’t one right way or one wrong way when approaching the question of whether one should keep a mortgage or completely pay it off. I think in the end, it comes down to your preference and your personal financial situation (aka do you have the cash flow, how does your retirement planning situation look, etc.). It would probably also be advisable to meet with your wealth advisor and accountant so you can better determine which direction might be more suitable for you.

      I know this was a long answer, but hopefully, this made some sense 🙂



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