What is the difference between a rich person and a wealthy person? Being rich means having and spending high income, while being wealthy is based on building lasting wealth independent of work. Understanding this distinction is essential for a minimalist and frugal approach to achieving financial freedom.
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Rich Person VS Wealthy Person
- Rich person = Person with possessions
- Wealthy person = Person with great financial fortune
Wealth and fortune are debatable
What is a rich person and what is a wealthy person?
Note that these two financial aspects are very relative.
For example, in poorer countries, you are rich if you own a car. Even a $1,000 car. Or, having $1,500 in a bank account is considered a fortune.
On the other hand, if we compare our fortune to the biggest fortunes in the world, such as Zuckerberg, the CEO of Facebook, Warren Buffett of Berkshire Hathaway, or Arnault, one of the biggest fortunes in France.
In this case, even a new billionaire with a fortune of $1 billion... he is considered poor compared to those people with the greatest fortunes in the world.
In this article, I will explore this topic from a Western, middle-class perspective… and analyze some paradoxes 🤔
Acquisition of an object = Acquisition of an object
People tend to equate the possession of expensive items with personal wealth.
👉 However, as complicated as it may seem, it is possible to own very expensive material goods without actually being rich 😶
Difference between a rich person and a wealthy person
In reality, before, to own an item, you had to pay 100% for it. However, this is not necessarily the case today.
👉 Nowadays, it's possible to buy an item with easy payment options. For example:
- Leasing
- Credit
- The rental
Therefore, it is very easy to appear rich without being rich!
To give an example, with an average salary and some cash reserve, it is possible to lease a car that costs more than $100,000.
In reality, the buyer "just" has to accept losing a significant percentage of his monthly salary for a car that is not really his. And for a car that will certainly want half the price 5 years later.
👉 Therefore, yes. It is possible to drive an expensive car without being rich ❗
Devaluation of an object
The objects are in the majority of cases devaluing. Of course, there may be some exceptions where objects are valued, but this is rarely the case.
👉 As a result, people who have possessions, especially expensive possessions, are indirectly losing money on their acquisitions.
For example, between:
- Spend $1,000 on a Smartphone
- Add $1,000 to your fortune.
👉 In this case, there's a good chance the smartphone will depreciate more quickly compared to having $1,000 in a bank account. !
Acquisition of an object = Less wealth
👉 Another aspect that most people have difficulty understanding. This is the fact that once an item is purchased (especially expensive items). This means that wealth decreases 🤭
Therefore, possessions are not the definition of a wealthy person!
Rihanna's example
If we take the example of the famous singer Rihanna. She lost 9 million in a short time in 20091.
Consequently, she took her wealth manager to court for his ”Financial mismanagement”. According to several articles on the internet, Rihanna was known to be a big spender at that time.
According to the internet. The wealth manager's response to the court. Was as follows.
"Mrs. Rihanna needs to understand that she can have possessions or a fortune. But not both." 🔺
That makes sense.
In Rihanna's case, she subsequently had enough success to make up for her lost fortune.
On the other hand, imagine the same mistake with an elite athlete at the end of their career or a lottery winner? Not everyone can afford to recoup 9 million lost foolishly…
The wealth of poor people
In reality, many people still struggle to grasp this logic. Buying new acquisitions = Loss of fortune!
👉 Whether you have a big or small salary, your wealth can be zero if new possessions are added regularly ⚠️. Especially expensive possessions.
To give an example, I have understood from experience that often, people who complain about running out of money at the end of the month… regularly consume futile things.
For example, let's imagine a "poor" person who consumes every day:
| Daily purchase | Price |
| Croissant for 9am | 3 CHF |
| Soda for 12 o'clock | 3.5 CHF |
| Biscuit for 4 p.m. | 3.5 CHF |
| Snack for transport | 2 CHF |
| Total spent per day | 12 CHF |
In this example, although there is no consumption that is really necessary. There is about 12 CHF lost per day. In 30 days, it is 360 CHF. In one year, that’s 4,320 CHF lost.
Note that according to the Swiss statistical office2. A good number of people in Switzerland do not have CHF 2,500 in reserve for an unforeseen event.. However, in most cases, they have 12 CHF to spend per day on "frivolous things" 🤔
Rich VS Wealthy: Who is truly wealthy?
👉 Note that it is possible to be a more fortunate and less wealthy person than another 🤔
For example, let's imagine 2 owners.
The first man bought his house for $100,000 in one go. Without owing a single cent to the bank. Furthermore, he still has 20,000 CHF in his bank account.
The second owner bought a house for $300,000. But he made an initial payment of $50,000 and took out a loan of CHF 250,000 from the bank.
Who is the richest?
No doubt. The owner has an average house worth 300,000 CHF. Because his property is more expensive!
Who is the richest?
No doubt. The owner who has a small house worth 100,000 CHF! Because he owes nothing to the bank, he already has a paid-off house and he still has 20,000 CHF in a bank account.
Although in this case the "fortunate" person has a more modest house than the "rich" person, we tend to think that the "truly rich" person is the one with an average house. Why? 🤔
Wealth is invisible, but "possessions" are.
We tend to notice rich people more than wealthy people. This is only because one can draw conclusions about the possessions of rich people 😶. And rarely conclusions about wealthy people.
➡ Indeed, wealth is not visual! It's just a number in a bank account.
Therefore, it is entirely possible to have millions of dollars invested and live like an ordinary citizen.
Note that there are cases of wealthy people who drive a conventional car and only consume simple items!
For example, this was the case with former Ikea CEO Ingvar Kamprad, who had $34 billion in 2016 (equivalent to Cyprus's GDP in 2024), but he drove a cheap Volvo and ate lunch at Ikea.
Another example is Warren Buffett, one of the 10 richest people at the time of writing, who regularly eats McDonald's, drives a cheap car, and lives in a classic old American house.
Example of simplicity vs. ownership performance
Prioritizing simplicity over exponential wealth growth is the key to earning millions of dollars in the long term.
For example, if we compare:
- A wealthy person who owns a $200,000 car and a bank account with $0.
- A wealthy person, who has $200,000 in an account with no debts and no car.
In this case, we tend to notice the wealth of someone who has an unusual car for $200,000.
Why? It's more impressive and exciting to see an unusual car than to see a simple number.
👉 On the other hand, does a $200,000 car help to accumulate wealth or accumulate fortune? No, it's even the opposite.❗
In reality, the person who has $200,000 in a bank account and doesn't have a car. In the long run, they will be twice as wealthy compared to the person who owns a $200,000 car.
- 1, because he has the possibility of investing 200,000 CHF more and possibly having additional income.
- 2, because it avoids the costs that the CHF 200,000 car requires.
To illustrate, here is a table (roughly) comparing the losses and gains between owning a $200,000 car and owning a $200,000 fortune.
| $200,000 car | Fortune at 200,000 dollars | |
| Property maintenance | -3% | 0% |
| Loss of annual value | -3% | – 1.5% (inflation) |
| Possible gains with investments | 0% | 4% (shareholder who earns 4% net per year with a simple SP500 ETF) (example, not investment advice)) |
| Total gained or lost per year on average | -6% | +2.5% |
Although this table is just a quick estimate! We understand that the difference in gains and losses is significant! With this example, it is:
| $200,000 car | Fortune at 200,000 dollars | |
| Property maintenance | – $6,000 | 0 dollars |
| Loss of annual value | – $6,000 | – $3,000 |
| Possible gains with investments | 0 dollars | + 8,000 dollars |
| Total gained or lost per year on average | – $12,000 | + 5,000 dollars |
In conclusion, with the quick estimate of this table. There is about $17,000 difference per year.
Building Sustainable and Exponential Wealth
In reality, the wealthiest people in the world are not necessarily heirs to a huge family fortune.
In order to become wealthy, the most important thing is to build financial wealth that accumulates in a sustainable and exponential manner.
For example, as Warren Buffet does with the stock market and compound interest. Note that Warren Buffet is one of the richest people in the world.
👉 In reality, Warren Buffett invests in a very simple stock portfolio. He owns stocks that tend to appreciate over time. Meanwhile, he maintains a simple and frugal lifestyle. He understands that every unnecessary expense hinders the accumulation of wealth and fortune.
To give an example, he argued, why own a $1000 Apple smartphone when you can buy a $1000 Apple stock that tends to increase in value? At least, that was the case until 2024.
➡️ Indeed, becoming the next billionaire means earning more money than you spend. And not everyone is willing to accept that 😐
Difference between a rich person and a wealthy person?
Conclusion
The main difference between a wealthy person and a well-off person is that the wealthy person prioritizes material possessions, while the well-off person prioritizes substantial financial assets. In reality, their financial mindset and money management are not the same!
👉 Wealth is often visual possessions, but possessions are not necessarily a sign of wealth. On the contrary, possessions require maintenance, which diminishes wealth. !
👉 Additionally, most possessions lose value over time..
Therefore, “rich” people who have possessions, over time, they tend to become poorer as their possessions devalue.
In addition, let us note that nowadays. It is possible to acquire expensive possessions without paying the full price.. Therefore, it is possible to be "rich" with expensive possessions that depreciate over time! Not to mention, there is a debt that is difficult to repay.
Note that we, human beings, are often attracted to what is visual.. Therefore, we are more attracted to rich people than wealthy people.
In reality, wealthy people simply let their fortunes accumulate by buying the minimum possessions that make them happy. Indeed, as a general rule, they prefer a good investment that makes their money grow compared to an possession that depreciates and loses value.
➡️ In conclusion, frugalism, which favors material simplicity, is a path to fortune.
Thus, the frugal individual prioritizes financial assets over expensive possessions that depreciate in value, in order to value income generation and financial freedom.
Difference between a rich person and a wealthy person?
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About me
Faced with not very effective financial education, as was my case before. I actually decided to create this blog following a change in my life since my early adult life.
Compared to before, I was a person who consumed a lot until the day I understood that my consumption was making me sadder and poorer. From now on, I prioritize the minimum of my needs to be happy and achieve financial freedom.
Without realizing it, I also began to prioritize savings and investments to depend on a boss for as short a time as possible and to accelerate my personal projects.
For several years I have felt happy and I have become richer in a way that I would never have imagined given that I have an average salary in Switzerland.
It is for this purpose that I decided to create this blog. To share, learn and teach with others who seek freedom, simplicity and long-term wealth.
Are you rather minimalist or frugal Jonny?
I am both a minimalist and a frugalist. However, there are situations where I lean more towards an art of living.
To conclude, I think the most important thing is to feel comfortable in your life and I have found a balance between these lifestyles without reaching the extremes.
Difference between a rich person and a wealthy person?
Difference between a rich person and a wealthy person?
Minimalist frugal
Difference between a rich person and a wealthy person?
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