Money vs. Wealth: How do you define it?

[DieHard_772]

I'm reading a new book called "Wealth Happens One Day at a Time: 365 Days to a Brighter Financial Future,"
and it is asking me to look at how having money versus being wealth are different.  Here's a quote from the
book:

"Now that you have thought about what money is, consider the difference between money and wealth.
One relates to your income, the other is defined by what assets you collect and how you use them.
True wealth has nothing to do with an obvious display through the clothes you wear, the car you drive, or the
bulge in your wallet, particularly if that bulge is a stack of credit cards that finance that conspicuous
display of your power to consume material goos.  True wealth comes from the self assurance and sense of
well-being that comes form knowing you have money and you have used it well."

I think MMM in particular is helping us create true wealth.  It's not about just earning the money, it's about
keeping it, channeling it to proper investments, and watching it grow.  It also reminds me of the Millionaire
Next Door, its description of high accumulators who KEEP their money, not spending it all.

How do you define the difference between making money and being wealthy, and how is this
value important to you in your life?

Thoughts?

[clarkfan1979]

Money = paycheck

Wealth = net worth

[monstermonster]

Interesting question: My take is that wealth has more to do than just money. It has to do with ability to be generous and flexible, access to resources, and security/well being. Money helps with wealth, but wealth is not simply money. Wealth can also being things that money cannot buy: health, natural resources, talent, good relationships.

For example, nearly everyone living in the US near a major city has access to a great variety of wealth, regardless of their income. Between public sanitation, emergency room care, and public safety, there's far more wealth even for someone without much money has access to than someone in a developing country who may have access to middle class levels of income.

[little_brown_dog]

I define wealth as having options/flexibility in ones life due in part to your financial stability. For example, despite not being millionaires (yet) I consider our family wealthy. Our income and financial management allowed me to quit my job to stay home without blinking an eye and because we keep our expenses to income ration low, we could survive a solid 40% income cut right now and still save well for retirement and college and keep our life as it is. In other words, we have options that many others dont have. Most people cannot afford such flexibility. We have friends who are dinks making more than we are who cant afford to have one of them drop to part time or quit....their living expenses are just too high. So even though they make more than we do and live in a more expensive house, they arent as wealthy in many respects.

[aceyou]

To use a boxing analogy,  I look at money as one's ability to DELIVER a punch.  Wealth is the ability to TAKE a punch. 

So, I have a net worth of about 450,000.  So we can dole out a 450k punch.

Wealth is the answer to the question: If a catastrophe were to occur to your net worth, how able would you be to bounce back and rebuild. 

Here's my wealth:

Education:  I have a math degree and a teaching certificate, and I'm a PTR certified high performance tennis instructor.  My wife is close to a PHD in ESL and has a degree in spanish.  So, if we lost all our money tomorrow, we have lots of power to earn more money quickly and in many ways. 

Soft skills: We can cook.  We can fix things and are willing/able to do things ourselves.  We have grit, ambition, we aren't afraid to fail, etc. 

Health: We are very healthy. 

Family/Friend:  We have lots of family who could and would help us in a time of need, and we have built up lots of connections in our community.  We could use these connections if we needed to get a new job or wanted to start a business venture. 

Money skills: We know how to invest/save/seek out opportunities/avoid scams. 

You could take away our money and we would quickly bounce back over and over again.  We are very wealthy. 
-------------------------

Now compare this to many lottery winners, or many professional athletes.  They may have a few million dollars, so they have MONEY.  They can deliver a massive punch.  But most of them have little wealth.  They lack the skills/connections I mentioned above, so they quickly lose their money and have limited means to make more money when the well runs dry.  This is why so many lottery winners/pro athletes go bankrupt quickly IMO.  They can deliver one hell of a punch, but can't take one. 

[monstermonster]

To use a boxing analogy,  I look at money as one's ability to DELIVER a punch.  Wealth is the ability to TAKE a punch. 

I am in love with this analogy and may steal it when I teach classes.

[DieHard_772]

For example, nearly everyone living in the US near a major city has access to a great variety of wealth, regardless of their income. Between public sanitation, emergency room care, and public safety, there's far more wealth even for someone without much money has access to than someone in a developing country who may have access to middle class levels of income.

Fair point.

[DieHard_772]

I define wealth as having options/flexibility in ones life due in part to your financial stability. For example, despite not being millionaires (yet) I consider our family wealthy. Our income and financial management allowed me to quit my job to stay home without blinking an eye and because we keep our expenses to income ration low, we could survive a solid 40% income cut right now and still save well for retirement and college and keep our life as it is. In other words, we have options that many others dont have. Most people cannot afford such flexibility. We have friends who are dinks making more than we are who cant afford to have one of them drop to part time or quit....their living expenses are just too high. So even though they make more than we do and live in a more expensive house, they arent as wealthy in many respects.

It sounds like what you are talking about has a lot to do with having a healthy balance of INCOME/MONEY to EXPENSES, so that you are able to save a lot of your income, versus someone who is living month to month because their expenses equal their income (or exceed their income). 

This is definitely a good distinction when it comes to true wealth.

[DieHard_772]

To use a boxing analogy,  I look at money as one's ability to DELIVER a punch.  Wealth is the ability to TAKE a punch. 

So, I have a net worth of about 450,000.  So we can dole out a 450k punch.

Wealth is the answer to the question: If a catastrophe were to occur to your net worth, how able would you be to bounce back and rebuild. 

Here's my wealth:

Education:  I have a math degree and a teaching certificate, and I'm a PTR certified high performance tennis instructor.  My wife is close to a PHD in ESL and has a degree in spanish.  So, if we lost all our money tomorrow, we have lots of power to earn more money quickly and in many ways. 

Soft skills: We can cook.  We can fix things and are willing/able to do things ourselves.  We have grit, ambition, we aren't afraid to fail, etc. 

Health: We are very healthy. 

Family/Friend:  We have lots of family who could and would help us in a time of need, and we have built up lots of connections in our community.  We could use these connections if we needed to get a new job or wanted to start a business venture. 

Money skills: We know how to invest/save/seek out opportunities/avoid scams. 

You could take away our money and we would quickly bounce back over and over again.  We are very wealthy. 
-------------------------

Now compare this to many lottery winners, or many professional athletes.  They may have a few million dollars, so they have MONEY.  They can deliver a massive punch.  But most of them have little wealth.  They lack the skills/connections I mentioned above, so they quickly lose their money and have limited means to make more money when the well runs dry.  This is why so many lottery winners/pro athletes go bankrupt quickly IMO.  They can deliver one hell of a punch, but can't take one.

Great analogy.  I look forward to one day being in your position financially!

[Livingthedream55]

Rich dad's definition of wealth:


Truly wealthy people, however, those who are financially free, have assets that provide cash flow (passive income) month in and month out that cover at their living expenses and often much, much more.

[Laura33]

I like Chris Rock's version:

"Shaq is rich; the white man that signs his check is wealthy."

I tend to view "money"/"rich" as earned income, and "wealth" as assets.  "Wealthy" = having enough of the latter to be perpetually self-sustaining without the former.

[dude]

To use a boxing analogy,  I look at money as one's ability to DELIVER a punch.  Wealth is the ability to TAKE a punch. 

So, I have a net worth of about 450,000.  So we can dole out a 450k punch.

Wealth is the answer to the question: If a catastrophe were to occur to your net worth, how able would you be to bounce back and rebuild. 

Here's my wealth:

Education:  I have a math degree and a teaching certificate, and I'm a PTR certified high performance tennis instructor.  My wife is close to a PHD in ESL and has a degree in spanish.  So, if we lost all our money tomorrow, we have lots of power to earn more money quickly and in many ways. 

Soft skills: We can cook.  We can fix things and are willing/able to do things ourselves.  We have grit, ambition, we aren't afraid to fail, etc. 

Health: We are very healthy. 

Family/Friend:  We have lots of family who could and would help us in a time of need, and we have built up lots of connections in our community.  We could use these connections if we needed to get a new job or wanted to start a business venture. 

Money skills: We know how to invest/save/seek out opportunities/avoid scams. 

You could take away our money and we would quickly bounce back over and over again.  We are very wealthy. 
-------------------------

Now compare this to many lottery winners, or many professional athletes.  They may have a few million dollars, so they have MONEY.  They can deliver a massive punch.  But most of them have little wealth.  They lack the skills/connections I mentioned above, so they quickly lose their money and have limited means to make more money when the well runs dry.  This is why so many lottery winners/pro athletes go bankrupt quickly IMO.  They can deliver one hell of a punch, but can't take one.

Nicely put!  Very apt analogy!  Two thumbs up.

[Much Fishing to Do]

I think of money as paycheck/lifestyle, so if you have a lot you're "rich".

I think of wealth as net worth, but I generally think of it more in the relative term to your spending instead of as an absolute (therefore, your FI level).  So "Wealthy" I think of as FI, having invested 25x the spending you require to live the life you want, etc.

So someone who makes $500k/year and spends $400k/year and has a $1M net worth is not very wealthy, but definitely has the potential to be very wealthy.  Someone who makes $50k/year and spends $40k and has a $1M net worth is wealthy.

Just how I generally think about those terms.

[arebelspy]

Money is a tool.
Wealth involves having enough of that tool to cover your basic needs, and then having other essentials that make life worth living.

Joshua Kennon proposed my favorite definition for wealth in this post.

"Wealth is waking up and looking around saying, "There is nowhere else I would rather be, nobody else with whom I would rather be experiencing this moment, and nothing else I would rather be doing."

I love that.  Have it saved to my Evernote good quotes file.

I don't just use it when waking up; the wife and I all the time say to each other "I feel very wealthy right now" in a direct reference to this idea, of nowhere else we'd rather be, nothing we'd rather be doing, and no one we'd rather be with.  That's our code for this quote to let the other know how we're feeling.  "I feel very wealthy right now."  :)

It's actually a longer quote on his blog, I just snipped out my favorite part to save.  All of it is good, I just like the succinct version above. Here's the full definition of wealth as given by Joshua:

As I see it, wealth is a combination of several things coming together: Good health, financial independence, achievement, excellence and pride in your work, a loving family that you know has your back and wants the best for you (give me the sound of multiple generations running around laughing and talking, the scent of a roast in the oven, and a good book off in a corner and that’s my idea of heaven), personal integration so you know you’re living your moral and ethical values, surrounding yourself with people who challenge you, an understanding somewhere deep within your soul of who you are as a person that nobody can take away from you – that core identity that makes you who you are.  Wealth is waking up and looking around saying, “There is nowhere else I would rather be, nobody else with whom I would rather be experiencing this moment, and nothing else I would rather be doing.”  Yes, the money is a wonderful tool in facilitating that but that is all it is – a tool.  Alone, it isn’t enough.  It will never be enough.  Money should never be the most interesting thing about you.

[DieHard_772]

I like Chris Rock's version:

"Shaq is rich; the white man that signs his check is wealthy."

I tend to view "money"/"rich" as earned income, and "wealth" as assets.  "Wealthy" = having enough of the latter to be perpetually self-sustaining without the former.

Love it

[DieHard_772]

Rich dad's definition of wealth:


Truly wealthy people, however, those who are financially free, have assets that provide cash flow (passive income) month in and month out that cover at their living expenses and often much, much more.

Yeeeeeaaahh

[Dances With Fire]

I'm reading a new book called "Wealth Happens One Day at a Time: 365 Days to a Brighter Financial Future,"
and it is asking me to look at how having money versus being wealth are different.  Here's a quote from the
book:

"Now that you have thought about what money is, consider the difference between money and wealth.
One relates to your income, the other is defined by what assets you collect and how you use them.
True wealth has nothing to do with an obvious display through the clothes you wear, the car you drive, or the
bulge in your wallet, particularly if that bulge is a stack of credit cards that finance that conspicuous
display of your power to consume material goos.  True wealth comes from the self assurance and sense of
well-being that comes form knowing you have money and you have used it well."

I think MMM in particular is helping us create true wealth.  It's not about just earning the money, it's about
keeping it, channeling it to proper investments, and watching it grow.  It also reminds me of the Millionaire
Next Door, its description of high accumulators who KEEP their money, not spending it all.

How do you define the difference between making money and being wealthy, and how is this
value important to you in your life?

Thoughts?

"Knowing you have money and (also) have used it well." I really like that quote, knowing you have (assets) and also have spent wisely over the years. Having that balance should not be underestimated...

[Mr Chin Stubble]

I don't agree that wealth is not displayed as a hard and fast rule, and your salary isn't a part of that.

[Bateaux]

Money isn't wealth till it's saved and expanding.   Wealth converts to money when it's cashed to be spent.

[Mr Chin Stubble]

Well what if you're a highly paid physician who spends all they make? (As many do/they have reputations for being horrible at saving).

While admittedly all of their expensive things wouldn't fetch nearly enough as what they paid for it on craigslist or whatever--I still think that skill set and their things should be defined as wealth. Money saved is just money.

[Indexer]

I like Chris Rock's version:

"Shaq is rich; the white man that signs his check is wealthy."

I tend to view "money"/"rich" as earned income, and "wealth" as assets.  "Wealthy" = having enough of the latter to be perpetually self-sustaining without the former.

+1

This is what came to mind for me too.

[DocMcStuffins]

Well what if you're a highly paid physician who spends all they make? (As many do/they have reputations for being horrible at saving).

While admittedly all of their expensive things wouldn't fetch nearly enough as what they paid for it on craigslist or whatever--I still think that skill set and their things should be defined as wealth. Money saved is just money.

But some physicians live off 1/3rd of their money. 😉

[Metric Mouse]

For example, nearly everyone living in the US near a major city has access to a great variety of wealth, regardless of their income. Between public sanitation, emergency room care, and public safety, there's far more wealth even for someone without much money has access to than someone in a developing country who may have access to middle class levels of income.

This is a powerful statement. Thank you for posting it.

[doggyfizzle]

Being (truly) wealthy allows one to be a master of his time.  You need a certain amount of money to make that happen.  I'd say my definition of "wealthy" would be Jamie Dimon rich; not a second goes by in each day there isn't anything you are limited in doing except for by your imagination.