I had a conversation this week with somebody who asked me: “How do I make sure that I build wealth instead of simply becoming well-off?”
It got me thinking — what is the difference, and how do you actively choose to become one over the other? A lot of this is going to be subjective and come down to definitions. To you, wealthy and well-off might be the same, while to someone else they could be vastly different. Let’s explore the nuances of these terms and what they mean for your life.
What is well-off?
When I think of someone who’s well-off, I think of someone who likely:
- Has a higher salary/income than those around them
- Can buy things others around them can’t buy
- Can take trips/vacations
- Portray an image of being well-off and comfortable
Now, I could say the same things about someone who’s wealthy. But as a practicing financial planner, I want to give you a peek behind the curtain and explain the difference in money management between a wealthy person and a well-off one.
Well-off is not something that is sustainable without high-level action (work). There’s no depth to the wealth. If the person stopped working, they would run out of money fairly quickly.
However, when I look at wealthy people, I see that it’s a lifestyle that’s sustainable for them regardless of whether they’re working or not. A well-off person has more of a facade of wealth versus a truly solid financial depth. There’s generally a level of stress that if they don’t work hard and stress hard, they will lose everything.
In fact, many households bringing in over $250k per year actually still live paycheck to paycheck. That might surprise you, but as a financial planner, it doesn’t surprise me one bit. I see people making a lot more than that… living paycheck to paycheck.
Those are people who are well-off, but not wealthy.
What is wealthy?
Wealthy is all about sustainability. When I’m working with a client to build wealth, we talk about how to create a sustainable plan that will allow them to maintain their current lifestyle, even once they’ve retired.
This isn’t about reaching a certain level of financial independence. This is about building your wealth to a place where you know that the decisions that you’re making today will fit in with the larger narrative of your life.
Yes, this is an extraordinarily nuanced conversation that will look different from person to person, and family to family. But what’s important is to start examining these things in your own life.
So, how much money IS considered wealthy?
For me, that number varies widely. Again, it ties back to the idea of sustainability. Should you lose your job, get sick, or decide to retire… can you maintain your current lifestyle without having to maintain anywhere close to your current output?
I want you to be able to live by the values that are important to you and your family!
Wealthy = sustainable wealth
I work with clients from all spectrums of financial wealth, and one of the things that’s most interesting to me is the idea of “enough.”
I don’t care how much money or things you have, there will always be someone who has more than you, and there will always be more things you want to buy. The idea here is to decide what life you want to live, instead of what things you want to buy.
Those are the happiest clients I work with. I have clients who live solely off their Social Security payments and earn less than $5,000 per month, and they’re perfectly happy. Conversely, I have other clients who couldn’t imagine living off of that amount of money. But for my client in question, that $5,000 is plenty enough to cover their living expenses.
Honestly, if someone is used to spending less money, I’m much less likely to be worried about their living situation.
Define your version of wealth
I want you to stop thinking of wealthy as a number, and instead think of it as a lifestyle that you want to live.
Recently, I was talking to a family who didn’t have much saved for retirement. They’re getting into their late fifties and are on track to have their house paid off within the next decade or so, and we were looking at the options for their Social Security checks each month.
And what we realized was… their monthly expenses would be completely covered by Social Security if they waited until they were 70 to take it.
Isn’t that a powerful idea?
Yes, if they’re able to continue saving and investing money, they should be able to. So we started looking into what they could do to make their living situation sustainable until they’re 70. Could they change jobs and take on a role they could age well in?
When you shift your perspective to look at what changes you need to make to have a sustainable lifestyle instead of working to achieve a number… your entire definition of wealth will change.
The key takeaway here? You can build a sustainable lifestyle at any income level. And that sustainability is going to be the difference between wealthy and well-off… not a number.
Resources Mentioned in This Episode
Thank you so much for checking out this episode of Everyday Money with Hannah Moore. I hope that this changes the way you think about “being wealthy” — for the better.
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Resources mentioned in this episode:
- Use our BudgetingBlocks™ to plan a financial future that includes the highs and lows of the market. A good budget includes all possible financial scenarios and helps you see where your money is going!
- Evaluate your money with our Live Wealthy Now resource library. You’ll find a balance calculator in there, along with budgeting tools, values exercises, and more.