Understanding the Difference: Rich vs Wealthy

You must have heard the terms rich and well almost interchangeably in different contexts. However, with the philosophy of F.I.R.E., being rich or being wealthy are two entirely different things. By definition, a rich person is easily identified by looking at their expensive clothing, the luxury car they are driving, the costly places they are dining in, or the mansion they live in. At the same time, a wealthy person may look ordinary and live a modest lifestyle. A wealthy person can afford what a rich person does. However, they do not see any point in spending the money just for a show-off. Wealthy people believe in investing every dollar to make it work for them. They understand the difference between good and bad debt or good and bad expenses.

A rich person might take a loan to buy a luxury house in a high-cost-of-living area. In contrast, a wealthy person will choose to buy or rent sufficient accommodation and put that remaining money into purchasing a rental property. Some might label a wealthy person driving an old car as old-fashioned with no taste. A rich person driving a Ferrari could blow your mind but do not be fooled by that Ferrari. The reality of these people is buried in their bank accounts, though sadly, that’s not easy to look into, like that shiny Ferrari Parked in their driveway.

Just a word of caution: it does not mean that a wealthy person cannot enjoy a luxurious lifestyle. The key idea is that a wealthy person believes in generating passive income before spending money on depreciating assets such as big mansions, luxury cars, or expensive travel. Once a wealthy person overcomes the problem of taking care of their expenses by generating enough passive income, it makes sense for them to indulge in some luxury. Most people who reach this milestone eventually reach a point where their passive income exceeds their expenses by a great Margin. The generation of excessive passive income means that they never have to worry about money. Once your passive income exceeds your expenses, it is more popularly known as infinite wealth or building generational wealth, as you will not run out of money.

So next time you see someone showing off, do not blindly wish for a life like that; rather, repeat in your head that your focus is to be well-off, not rich.