Financial Planning 101: The Difference Between Having Wealth and Being Rich

Often, people consider having wealth to mean the same thing as being rich. The two phrases are indeed quite similar, but in the world of financial planning, us Certified Financial Planners see the two as concepts that are more different than not. Unless you have wealth to back up purchases like a big home, fast car or expensive clothing, these “nice things” do not come without higher monthly bills and a significant overall liability. So, what does it mean to have wealth?

Are you looking to be rich or wealthy?

I recently listened to an interview with Steve Sims, the author of “Bluefishing: The Art of Making Things Happen,” where he posed the question: “Are you looking to be rich or wealthy?” During the interview, Steve talked about the effects of social media skewing users’ perspectives on how an average person or social media influencer lives each day. Instagram images of trips to Fiji and a walk-in closet full of the latest styles permeate our cell phone and computer screens. Steve’s point was that the images people share on social media are not actually someone’s real life. Instead, social media users are projecting dream lives that are not really their own. This, unfortunately, leads many people to chase other people’s goals or dreams, rather than their own, as a result of what they see on social media.

As a Certified Financial Planner, who works with clients daily, this question resonated with me. The idea of what it means to be rich can be completely different depending on whom you ask.

Financial Freedom

When I imagine wealth, I see a clear picture of someone with financial freedom, whether that person’s bank account has $10,000 or $1,000,000 sitting in it. Despite these vastly different amounts, budgeting and saving for the future, no matter what your income is, offers attainable financial freedom that keeps you from worrying about the next bill coming in the mail or struggling to make ends meet.

As an added bonus, you can start saving at any age (it’s never too early or too late). Get started by:

• If you’re currently employed, start contributing to your company’s 401(k) or retirement fund each pay period. On an annual basis, aim to increase your contributions.
• Review your finances each month. Chart and track where you’re spending and what expenses are unnecessary. Would you rather jog outside in the summer than visit the gym? Cancel that membership until next season and save that monthly charge.
• Start investing now. You can start off investing a little and eventually grow your account.
• Identify your long-term goals so you know, financially, where you want to be and what you need to do to get there.

Keep in mind, you can’t tell who is wealthy based on appearances. Not everyone has healthy spending habits, so nice cars and fancy toys shouldn’t always be associated with wealth. Be wise with your money, and you’ll have the freedom to do what you want and when you want.

Being rich and wealthy are not the same thing. To be financially sound in the long run, you have to choose if you want to keep up with others or make decisions that will allow you the financial freedom you require. Make a plan, pursue your own dreams and enjoy the fruits of your labor.

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