Written by Whitney Queen, President of Mentoro
Terms like “rich” and “wealthy” are often used interchangeably, despite the fact that they have very different meanings. At first glance, they may seem similar, but the truth is that one of these attributes does not guarantee the other. In other words, you can be rich but not wealthy, and you can be wealthy but not rich (depending on how you define the quality of “richness”). In any case, it is extremely important to differentiate the two terms and understand exactly what it means to pursue the status of being rich versus the state of being wealthy.
Rich vs. Wealthy: What’s the Difference?
If you look up these terms in the dictionary, they will appear as synonyms of one another. However, there are greater social, financial, and even linguistic nuances involved when we use these terms. Being rich implies a certain status. Perhaps you feel that you are rich if you own a big house, have $1 million in the bank, or drive a luxury car. Thus, rich is the more subjective of the two terms and it can mean something different to everyone.
For example, most people would agree that Elon Musk is rich. He is worth over $260 billion (as of this writing) and owns multiple high-value companies, to say nothing of his personal assets. However, someone who has worked at the same job for 30 years, owns a house, has ample savings, and has the ability to take luxurious vacations could also be regarded as rich, even if their total assets or net worth do not even come close to “billionaire” status. Thus, being rich is something that many people strive to reach based on their own goals and definitions.
On the other hand, being wealthy implies positive financial behaviors that lead to positive net worth. In other words, your assets are greater than your liabilities. Moreover, the state of being wealthy means that you have accrued enough money, assets, and resources to live the kind of life you want to live. So, while there is a certain degree of subjectivity with the term “wealthy” as well, it is easier to define concretely. This also makes it much easier to differentiate the state of being wealthy from the status of being rich.
So, how can one be rich and not wealthy, or vice versa? Let’s say that you have lifestyle goals that exceed your income and assets. This means that, in order to get the house or car or status symbols that you want, you have to take on liabilities. As a result, your liabilities exceed your assets. You may have $10,000 in the bank, but you may also have $100,000 in debts through mortgages, loans, and credit cards. In this case, you have the status of being rich, but not the state of being wealthy.
Alternatively, you may have ample savings and assets to cover your living expenses, but you choose not to spend your money on things that would give you the status of being rich. Perhaps you choose low-cost housing, stick to a frugal budget, and forego luxuries like designer clothes or expensive trips. In this case, you would be wealthy insofar as you have accrued enough assets and resources to live well, but still lack the status of being rich (at least from most people’s perspective).
Understanding How Financial Status Affects Our Decisions
Naturally, one can be both rich and wealthy, and this is the ideal state. In this situation, you have control of your finances, valuable assets, and the kind of lifestyle that makes you feel and look rich. But the key to the definition of wealthy and the definition of rich is understanding how these terms affect our financial decision-making. Unfortunately, society often promotes the status of being rich over the state of being wealthy.
As a result, being rich is the big shiny thing that everyone chases. It is what consumers see on social media through influencers or even their friends and family. Someone can appear “rich,” but have negative dollars in their bank account. Moreover, many people want to make a quick buck instead of thinking about the long term. This can lead to poor financial decisions that might make it easier to appear rich but much harder to actually be wealthy.
Reinforcing Financial Wellness in the Workplace
To add to the complexities of money and status, there can be a lot of misperceptions of how much people make within the workplace. Chasing richness and “keeping up with the Joneses” can cause financial stress for employees. This, in turn, can increase turnover, decrease morale, reduce employee engagement, and cause people to be less productive. A lack of financial wellness in the workplace can even make people feel shame or anxiety about their finances. Fortunately, positive financial behaviors can help move people closer to a wealthy state of being, regardless of their income. Having the right educational and financial resources available to your employees can help ease anxieties surrounding money and improve their financial state at the same time.
If you want to learn more about encouraging wealth in your organization, or if you are interested in learning more about a financial wellness program, be sure to contact the experts at Mentoro today!