At first blush, the title of this post is an absurd question to pose, isn’t it?!
And yet, if you dig a little deeper, it’s clear to see that the choices and habits that go with being rich are different than what’s required when it comes to being wealthy.
Such is the point I made when I did a financial training workshop for professional athletes several years ago. I told them, “Yes, you are rich. But you are not wealthy.”
I did this a mere two months after they were drafted and signed contracts that ranged from approximately $5.6 million for the first round pick to $1.1 million for the lowest round. Pretty ballsy of me, right?!
I did it because I wanted to highlight the difference between being rich and being wealthy, and the danger of conflating the two.
And if they remembered nothing else from my presentation, I wanted them to know that while…
…you can become rich overnight, you can’t become wealthy *overnight.
(*Not on your own efforts, anyway!)
A Necessary Distinction
Rich vs. wealthy is a necessary distinction to keep top of mind – for many reasons, at least in the world according to me. -:)
Especially when there’s so much (social) media attention centered on celebrity lifestyles of the “rich and famous.” (If you’re of a certain age, you may even remember the 80’s television show of the same name.) This particular focus on what “rich” looks like and who is can dramatically distort the amount of money you may think one has to earn to be considered rich in the United States.
The 2018 American Community Survey, by the US Census Bureau, won’t be released until September of this year. But according to the data from its 2016 report, the national threshold for being rich is $118,080. This figure does vary depending upon where you live; for example, it is approximately $143,794 in New York City; $146,462 in Minneapolis, Minnesota; and $220,080 in San Jose, California, according to Business Insider.
Does any of this data surprise you? I was certainly surprised that Minneapolis was greater than New York City!
What’s Your Number
Data aside, I believe each person has a particular number that represents what it is to be rich for them; what’s your “I’m rich” number? Have you achieved it, or are you actively trying to reach it? And, what does this number mean to you?
I can’t say for certain, but it’s pretty safe to assume the athletes I stood in front of had achieved their number!
And the thing I wanted to impress upon them is that being rich is connected to how much you earn — your income. So, with their million dollar contracts, they now have the ability to spend lots and lots of money. But if you spend every dime of it (or more), you’ll end up broke and possibly bankrupt. Sadly, even they knew plenty of high profile celebrity examples (athletes and entertainers) that proved my point.
Spending all your income is one way that prevents a rich person from being a wealthy person.
I didn’t discourage the athletes from enjoying their millions. (That would be rude and obnoxious!) I simply suggested they create priorities. For example: I said buy the fancy car but purchase the floor model or get a pre-owned one. Or, wait a season before buying a house because you might get traded.
Not spending according to pre-establish priorities is another way that prevents a rich person from being wealthy.
Here are three other ways being rich can prevent you from being wealthy:
- You don’t “spend” some of it saving and investing, making wise and diversified investments.
Again, I had several examples to share of poorly-made investments by their fellow athletes. In most cases, unfortunately, it was because they were poorly advised and didn’t know that.
- You don’t expand your network – especially when it comes to your team of “off the court/field” advisors.
One of the challenges many athletes have with bringing on new advisors to help them navigate this new terrain is not wanting to alienate those who’ve been with them from the beginning. It’s a tricky, but necessary, path to walk. Because sometimes, the skills, knowledge, resources and access of the people who got you to where are now aren’t the ones who can help take you to the next level.
As I shared with the athletes, changing with whom you work (and perhaps how) doesn’t remove them from your life.
- You don’t give the things that take time to grow the time they need to grow. Immediate gratification and creating wealth do not go hand- in-hand.
It’s Not a Crazy Question
I’m not sure why or when “rich” became synonymous with “wealth,” but clearly they aren’t!
As I like to say, “you can be rich and not wealthy, but it’s kinda hard to be wealthy without also being rich.”
Being rich is simply a matter of income – which is about you working for your money. As such, it is short-term in nature. Whereas wealth is about your money working for you. As such, it is sustainable and long-term in nature.
In this post, I’ve outlined five ways being rich can prevent you from being wealthy! They are all connected to whether or not you are intentional about the choices you need to make to convert the former into the latter.
This is why the question posed by the title of this post isn’t absurd, after all.
Maybe you aren’t making millions like the athletes I presented to a few summers ago. Maybe you don’t earn what is considered the “rich” threshold in the city/state where you live. But the key takeaway is still useful: There’s a difference between the income you earn from working and the income you earn from what you own.
I purposefully used my experience with athletes to help frame this post (and the June series) so as to instigate what I believe is an important conversation and distinction. Because, let’s face it, sometimes it’s easier to be self-reflective when you can “see” yourself through how you react (or don’t) to the stories of other people’s lives.
There isn’t a singular path to being rich or to being wealthy. But, it’s time to stop conflating the two – for our individual and collective emotional and financial well-being.
Fundamentally, the questions I asked the athletes by way of my presentation, I am now asking you: What does it mean to be rich; what does it mean to be wealthy? Are your behavior, choices and expectations aligned accordingly?
Oh, and what about the other kinds of wealth besides money??
Exploring different types of wealth is up next in this series….stay tuned!