Image courtesy of Wikimedia Commons Sailko, CC BY 3.0
We often hear “rich” and “wealthy”. They are related but different. Let’s explore being rich versus wealthy.
Being Rich
Being rich means having a lot of money to spend right now. It is often associated with a lavish lifestyle and buying expensive things. However, being rich doesn’t always mean you’re financially stable for the long run. A rich person might earn a lot but also spend a lot to support their lifestyle. They might have come into a big fortune suddenly, like from winning the lottery or getting an inheritance. Or, they might not have a lot of cash on hand, but can borrow on a credit card. This can support a rich lifestyle for a while.
Being Wealthy
Being wealthy means having a lot of assets and financial security that lasts longer than just an income. Wealthy people own things that make money over time, like stocks, bonds, real estate, or businesses. A wealthy person might not need to work to afford their lifestyle. Their wealth makes enough money on its own to cover their needs. This is a big benefit of being wealthy. It lets you use your time however you want. Some wealth, like a house or a business, is visible. Other wealth, like stocks or bonds, is not visible.
Being rich is having money, being wealthy is having time.
Margaret Bonanno
How Rich Do You Want to Be?
You are as rich as what you spend. How rich do you want to be? Maslow’s hierarchy of needs helps us look at our spending priorities.
Image courtesy of Wikimedia Commons, Androidmarsexpress, CC BY-SA 4.0
At the bottom are basic needs like food and shelter. The next level is about safety and security. These are basic needs, not really about a rich lifestyle, so we move on to the next level.
The third level is about love and belonging, like friendship and family. Spending on luxury items can show up here, albeit in a nuanced manner. Luxury items, like fancy gifts or vacations, can help strengthen relationships. But real relationships are about emotional connections, not fancy things. Luxury spending adds comfort through shared experiences or conveys thoughtfulness and care but isn’t the main part.
The fourth level is about esteem needs: respect, self-esteem, status, and recognition. Here, a rich lifestyle is more obvious. People often seek a rich lifestyle not just for pleasure but for the status it brings. Fancy watches, jewelry, or expensive cars can symbolize “success” and boost self-esteem and recognition from others.
The question “how rich do you want to be?” is essentially “how much do you want to spend to meet your esteem needs?” Can spending a lot meet these needs? What if you can’t afford it anymore? Will the respect and status last if you stop spending? Are there other ways to meet these needs without spending beyond your means?
This might sound like moralizing. Remember, we’re asking these questions to simplify our lives. A Simple Project is focused on mitigating the 3 Cs in your life: Complexity, Complicated, and Confusion. Marketers work overtime to complicate matters and confuse us. All in an effort to make us spend on products and services. Our best defense is understanding ourselves and our finances. This clarity helps us keep things simple. Without that clarity, money problems, like overspending or losing financial security, can complicate life.
A rich lifestyle is a personal choice, but one that should be pursued with a clear understanding of why you are pursing it. We urge you to think about how much you need to spend to meet your esteem needs. To that end, we recommend Morgan Housel’s podcast series here (Apple) or here (Spotify). You can start with the first episode, The Art of Spending Money. You may also read his excellent book, The Psychology of Money.
Thinking About Wealth
Wealth gives us time and freedom to live as we want. This ties back to the topmost level, self-actualization, in Maslow’s hierarchy. Pursuing self-actualization takes time, resources, and effort. Wealth helps you seek fulfillment, personal growth, and great experiences.
We believe that wealth should be seen as something permanent, or at least long lasting. We see wealth in nature, like apple or olive trees, which live long and keep giving us fruit. Other forms of wealth such as stocks, bonds, businesses, and real estate can also be designed to be long lasting. If possible, enjoy the income generated by your wealth and let it be. Where possible, let wealth compound over time.
Wealth lets you live life on your terms.
Subscribe to receive updates in your email: