Mike Tyson. Allen Iverson. Terrell Owens.
Imagine being a professional athlete and getting paid millions of dollars a year doing something you love. In some cases, these people make more per year than the average American does in their lifetime!
Yet, according to an article on CNBC 60% of NBA players go broke within 5 years of leaving the league. In the NFL, it’s worse. Over 70% have a financial hardship within the first 2 years of retirement!
This problem isn’t exclusive to professional athletes, either. There are countless examples of actors, doctors, and other high-income earners who end up broke. These people struggle financially because they don’t realize the difference between being rich vs wealthy.
From the outside, rich people are easy to spot. They’re high-income earners that have a big spender money personality and their appearance is important to them.
Often, you’ll see them driving around town in fancy cars, eating at trendy restaurants, and wearing designer clothes. They tend to live in big houses, wear flashy jewelry, and buy other status symbols they believe are smart investments.
But, most of them struggle with money despite earning more per month than some people do per year. They work hard, spend lavishly, and save little.
It’s common for people who look rich to have a personal financial statement full of liabilities. These monthly payments make them completely reliant and handcuffed to their jobs. Once they stop spending time at work, their income stops, too.
So, what happens if they lose their high-paying job? Or can no longer work? How will they afford the things they need and want?
Most of the time they can’t. Often, they live paycheck to paycheck, don’t have an emergency fund, and have little savings to rely on.
On the outside, being rich looks great. But on the inside, many of these individuals are miserable, stuck in the rat race, and exhausted from the 9 to 5 grind!
The wealthy aren’t as focused on money as you think. Sure, they’ve worked hard to build and accumulate assets. They own things like businesses and real estate which provide them with passive income. But, their main concern is preserving their most precious resource, time!
Wealth gets measured in the amount of time you can survive on the resources you’ve collected. The longer you can sustain your lifestyle without active income, the more wealth you have. The pinnacle of wealth is financial freedom. This point occurs your assets generate enough income to cover your monthly expenses forever!
The wealthy save and invest to get time freedom. This allows them to choose what they do and when they do it.
Feel like taking a random day off and heading to the beach? The wealthy can without asking their boss for permission!
Found cheap airfare to Bali? If you’re wealthy, you can go. No questions asked!
Want to sleep till noon? The wealthy can get up whenever they want without having a reduction in their income!
The wealthy built their fortune through financial discipline. They’ve made saving and investing a priority over spending which allows them to live life however they choose!
Wealthy people buy cash-flowing assets and have money flowing in regardless of what they do with their time. They’re free and aren’t forced to do things they don’t want to do just to pay bills. Yet, many of them continue working despite their wealth. They enjoy overcoming challenges, helping others, and pursuing their passion projects.
Many people think that being rich or wealthy is the same thing. They both appear to have a lot of money, yet there are many distinctions between the two!
One of the key differences between the rich vs wealthy is that you can see the rich. These people are blatant spenders and you notice the goods they buy. But, you can’t identify someone as being wealthy because wealth is invisible. You can’t see the assets and securities that someone owns, only the degree to which they consume!
Another division between the rich vs wealthy is the way they use money. The rich spend their paychecks to buy consumer goods, while the wealthy purchase assets that produce income which then allows them to buy the same goods.
For example, imagine you have $100k in the bank and a burn rate of $10k per month. A rich person would be able to live off this large amount of money for 10 months. But, a wealthy person would find ways to invest it and earn $10k per month so they could live on it forever!
The rich have high burn rates and the wealthy have high saving ratios.
The rich make money using their time and the wealthy make money using their money.
The rich have one source of income, while the wealthy have multiple streams of income.
The rich are consumers and the wealthy are investors.
Wealth creation has little to do with the amount of money that you make. Rather, it depends on how much of your income you keep and the length of time you can make it last.
There’s nothing wrong with having the finer things in life. But, there is a problem if you have to go into debt and jeopardize your financial future to get them.
It’s simple to become rich and wealthy. All you need to do is figure out what living a rich life means to you. Then, amass enough assets to support your cost of living, so that you’ll never have to work again. After all, choosing how you spend your time each day is the ultimate luxury!
The rich vs wealthy differ in many ways and not all of them have to do with money. According to Business Insider, they form different habits, too. The article found that the wealthy are more likely to follow to-do lists, read self-improvement books, and review their goals than the rich, too.
Start making changes in your life today and adopt the habits of the wealthy. The sooner you do, the faster you’ll see results. Results that won’t only increase the balances in your bank accounts, but ones that will give you the luxury of having time, too!
If you had to stop working today, how long could you survive? The answer will tell you if you’re forming habits of the rich vs wealthy.
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