What Does It Mean To Be Wealthy?

Wealthy or rich, it's your choice.

How much money would it take for you to feel rich?

Investment firm, Charles Schwab asked 1,000 Americans that very question. The answer? $2.4 million.

There some interesting findings in the survey about what being rich meant for people.

Spending time with family (62 percent)

Having time to myself (55 percent)

Owning a home (49 percent)

Eating out or having meals delivered (41 percent)

Subscription services like movie/TV and music streaming (33 percent)

Other things that make people feel rich in their daily lives include owning the latest tech gadgets (27 percent), having a gym membership or personal trainer (17 percent), and using a home cleaning service (12 percent).

And almost half of those surveyed felt that saving money and investing was the way to achieve their definition of rich.

The difference between rich and wealthy

When I was a young boy, my rich dad told me about the difference between being rich and being wealthy.

“Many people think that being rich and being wealthy are the same thing,” said rich dad. “But there is a difference between the two: The rich have lots of money but the wealthy don’t worry about money.”

Almost half of people surveyed feel that saving money and investing was the way to achieve their definition of rich. About Schwab

What rich dad meant was that while being rich might mean you have lots of money, you also might have lots of expenses that keep you up at night. These could be expenses like your mortgage, your car payment, credit cards, private school tuitions, and more. In short if you’re rich, you’re often trying to keep up with the Rat Race. (The Rat Race is a horrible place to be, which is why my board game, CASHFLOW® is designed to help you get out of it). Often if you’re rich, you have a high paying job to pay for the Rat Race, and you have to get up to work every day. You probably also have a fear of getting fired or laid off. What would happen if you didn’t have your job and your salary? That’s often a scary proposition of rich people.

This is why I find interesting what the people surveyed by Charles Schwab consider being rich. With the exception of the first two, which had to do with more free time, they were about liabilities like eating out, subscription services, and gadgets. Truly the worries of those in the Rat Race.

This signals that most people do not understand what it means to be truly wealthy. In fact, most people are confusing wealthy with being rich, that is with having lots of money to spend but no real financial independence.

Being wealthy means you don’t have these worries. Why? What’s the difference?

The definition of being wealthy

I’ve come across many definitions of the word wealthy in my three decades of teaching financial education. The best way to define wealthy is through an equation.

I first heard about the equation for wealth while studying under one of the true American geniuses, R. Buckminster Fuller. He defined wealthy as: “A person’s ability to survive X number of days forward.”

Financially speaking, that equation translates to “How many days could you survive if you stopped working today? How long could you survive on the amount of money you have?”

It’s that simple.

“ The rich have lots of money but the wealthy don’t worry about money.”

For example, if your monthly expenses are $5,000 and you have $20,000 in savings, your wealth is approximately four months or 120 days. But if you’re expenses are $5,000 and you have investments that provide $5,000 a month, you are infinitely wealthy.

Wealth is measured in time, not dollars.

This question of rich vs. wealthy is an important one because it often exposes poor mindsets. Being rich means little if you can’t stop working and are busting your tail to buy liability after liability to keep up with the Rat Race. This is why so many millionaires feel so poor.

Wealthy vs. rich. What does it look like?

In 1989, Kim and I became millionaires, but we weren’t financially free until 1994. This is because there’s a vast difference between being rich and being wealthy. By 1989, our business was making us a lot of money. We were earning more and working less. We had what most people considered financial success.

Though we were rich, we still were not wealthy; much of our time was spent working to build our business and its systems. We loved it, but our goal was to build the business to the point that it would cover all our expenses from cash flow each month—without us working. Additionally, we were invested in other assets like real estate and commodities to add to our cash flow.

By 1994, the passive income from our business and assets was greater than our expenses. At that point, we were wealthy, not just rich. From there, we have built our wealth even more to the point where we have a great lifestyle and also never have to work a day for the rest of our lives (if we want to).

Which do you want to be, wealthy or rich?

As the Charles Schwab survey mentioned, most people think that achieving wealth means saving and investing. And while that is a way to get richer, it is only one part of the equation to becoming wealthy.

Ultimately, it’s not how much money you make that matters but how much money you keep—and how long that money works for you.

Rich or wealthy? If you're ready to create a wealthy life for you and your family, start with a Rich Dad personal finance class. Learn more here

Every day, I meet many people who make a lot of money, but all their money goes out of their expense column. Every time they make a little more money, they go shopping. They often buy a bigger house or a new car, which results in long-term debt and more hard work. Nothing is left to go into the asset column. It’s this kind of behavior that separates the rich from the wealthy.

I like the fine things in life just like everyone else; the difference is that I don’t have to work to purchase them, or go into deep debt. Rather, I spent the time necessary to be smart with my money, work hard, and build a business and investments that provide enough cash flow each month to cover my expenses—including my fun liabilities like cars and houses.

I don’t work for my money. It works for me.

Play your way to wealth

Lots of people can become rich. But only financially intelligent people can become wealthy—and that takes a strong financial education that allows you to build cash-flowing businesses and assets.

Learn how to grow your wealth playing our free, financial education game—CASHFLOW® Classic.