There’s a BIG difference from being rich and being wealthy. How many rich celebrities, sports athletes or even lottery winners do you know who are rich but in the end they wind up poor? The most famous rich person I can think of who went poor is MC Hammer because of his rich spending habits.
MC Hammer at one point had $30 million in the bank, a $1 million house with 200 staff members, and a horse stable with 19 racehorses. But all those expenses took a toll and all that spending (along with a number of lawsuits), resulted in Hammer declaring bankruptcy in 1996. He ended up in $13 million in debt.
Who Is Rich?
Simply having a lot of money in the bank or bringing a large income in may make you rich but you aren’t wealthy. In fact, being rich can sometimes mean you are spending a lot of money and are in a lot of debt. If your expenses are higher than your intake, you’re not rich. Oh, you may be driving a fancy car, live in an amazing house in the most expensive area in town but you’re slowly on your way to going broke. That’s usually most often how rich people wind up: broke and poor.
Who Is Wealthy?
Wealth means you have enough money to meet your needs without working, if you don’t want to. It’s about having amassed enough assets that in turn work for you and not the other way around. Being wealthy means you have a significant net worth. Wealthy people don’t usually live in mansions, drive expensive cars, buy the latest gadgets or throw lavish parties. Wealthy people do have, however, lots of assets, such as real estate, investments, and cash.
I personally am not rich. On the contrary, I am a very wealthy person. I live in a wealthy neighborhood. I drive luxury cars. I own exclusive designer clothes. I vacation always in luxury resorts. I own very expensive furniture and possessions. I come from a very wealthy family, of which its wealth has been passed down from generation to generation. I could have either squandered said wealth or I could have followed in my parents footsteps and guarded such wealth as my fiduciary responsibility to them. I chose the latter.
It’s no secret that I detest working for a living. Because of that I have handled my wealth in such a way that it gives me the money I need, each month to live my life the way that I want to without succumbing to having a job. There are no quick-rich schemes in my life’s blueprints (although I did try my hand at self-employment twice in my lifetime with disappointing results)
My family’s wealth came from working hard, accumulating money and buying lots of real estate (my parents died owning 5 to 6 rental properties as well as their own multi-million dollar residential home complete with waterview and a yacht parked in their backyard tethered to their own dock (they owned the water rights to 100 feet). They did invest in the stock market but their main holdings were cash and bonds. My father loved to brag to people that he lost one million dollars from his investments in the stock market. Never mind that he still had over eight million dollars left in the bank. He wanted people to know that losing a million dollars meant nothing to him!
Their true claim to wealth fame was to buy low and sell high. That meant they bought distressed properties, reclaimed luxury vehicles and repossessed yachts. They benefited on the calamities of others and laughed all the way to their own bank.
I purposely keep my own expenses low so that I can cover all of my bills from my passive income. I live on between $30,000 to $38,000 per year. All from passive income. I have no debt and own many of my assets free and clear. I utilize many of the tricks-of-the-trade my parents taught me such as to buy from distressed, at pennies on the dollar and benefit from their increase in value. When my parents passed, my sister and brother were ‘rewarded’ much more plentiful than I (because technically I was the black sheep of the family). Nonetheless, as my father told me, “It’ll be enough“. And it is.
If you think you’re rich, it’ll be just a matter of time before you end up broke. Most rich people usually do. Wealth however, goes on and on and on. Provided you follow the path provided to you. Being wealthy has a bit more to it than how much money you have in your bank account. Someone who makes less money than a rich person is actually wealthier than the rich person with the expensive car and fancy duds. That’s due to the rich person spending a lot of money vs the wealthy person investing most of their money. Wealthy people certainly don’t use debt unless it’s for a reliable investment, such as a home or real estate. Wealthy people accumulate assets. They don’t spend money all in one go as most rich people do. Regardless of how wealthy people invest, they know that in order to keep their wealth they are to save as much money as possible and accumulate as much as they can in assets.
I’ve decided to add a different catch phrase to my blog: “Living A Wealthy Lifestyle On A Lower Income And Loving It” I’ve come to realize that I am not like anyone else. Everything about me is different. I’m not frugal like other people are frugal. In reality, I’m cost-effective. I live a wealthy lifestyle without spending a lot of money. My food is different. My home is different. My vehicles are different. My lifestyle is different from anyone else. I live like no other because I live like no other (thank you Dave Ramsey!)
I seek out bargains and I utilize them to my advantage. It’s a gift I inherited from my mother. She was the financial brains of the family operation. Graduating magna cum laude from New York University with a major degree in business, which was unheard of back in the 1940s, let alone for a woman. My mother could ooze money out of a dead stone. Lord help you if you owed my mother any money. She would sit in your face (with me along in tow) and would refuse to leave until she had said money in her cold, hard, little hands.
My mother taught me the true value of money. She showed me how to handle money, how to shop, how to balance books and how to ooze money out of those dead stones. She lived high without breaking any bank. She was the wealthiest person I ever knew. She died when I was only 28 years old. But she lived long enough to teach me everything she knew. And for that, I will be forever grateful for that blessing.
Most of all, I don’t work for a living. I never truly needed a 9 to 5 job to get my bills paid on time. I learned very early on in life, that if I lived a very cost-effective lifestyle I didn’t have to work nor answer to any corporate ‘man’ for moeny. I get to enjoy my life to its fullest. I can go wherever it is I want to go. I can choose whatever it is I want to choose. The reason for all of this is because on my mother’s death bed, she taught me one last valuable lesson.
When my mother was 58 years old, she took her first vacation. She and my dad flew to Italy for what was supposed to be a three week whirlwind tour. As soon as the plane landed my mother told my father she didn’t feel well. She had a strange ache inside her stomach. My father pooh-poohed it but he did make it a point to tell me that my mother was driving him crazy in Italy. She didn’t feel well to do anything.
When they got back to the states, my mother visited Lahey Clinic up in Boston, went through a barrage of tests and was told she had esophagus cancer, which was incurable. The doctors gave my mother three months to live. She lingered for eleven. I got to witness my mom go through a painful death at age 59. All the money she and my dad had accumulated over the years couldn’t give my mother one extra day of life. It was there on my mom’s death bed, as I held her hand that I decided I wasn’t going to be a slave to wealth accumulation. I was going to live my life, do whatever it is that I wanted to do and suffer the consequences for any of my actions. Which I most surely did. In the end, however (which is today) I learned the most valuable lessons of wealth management surely well. By keeping my lifestyle on a very low, tight budget ($2700 to $3000 per month), I can continue to be wealthy, healthy and very wise. I don’t need to worry about money. Ever.
Mom and me. Those two-family houses you see in the background were built by Fred Trump (Donald’s father). My parents bought five of them, all in an alternate row for $8,000 each. Today, one of those houses is worth $600,000 and more. My parents left one home each to my brother and me. My brother sold his immediately. I lived in mine for a while, then sold it, bought another home with the proceeds in the Hamptons, NY. I later sold that and officially retired at the age of 50 with enough passive income to cover my living expenses without working ever again. My sister still owns and rents her’s out. Yup, she’s a muliti-millionairess.
To better understand the difference about being rich vs being wealthy, take a quick look at this YouTube video: