Financial Planning

Wealthy vs Rich

Everyone has their own view about money. Like many things in life, the way we think about money as an adult comes in large part from the experiences we had growing up. Whether you realized it or not, watching the way your parents’ handled money and working the after-school shift had huge impacts on the way we see and use our money today. 

At an early age, I remember my parents teaching me and my siblings that yes, money mattered, but it wasn’t the most important thing in life. It was cemented into me that we needed to work hard for our money, but also be wise with it. Every week if we did our chores, my parents would give us an allowance that correlated with the age we were. For example, when I was 10 years old, my parents would give me $10, but $1 would go straight to my savings account, $1 would be donated, and then I could keep the remaining $8. Looking back now, they did this to teach us how important it was for us to save early and often. And because of this, I have become a huge saver. For the longest time, I believed the importance of saving was the most important thing they taught me financially. But after some recent reflection, I’ve changed my mind.  

Last week a WSJ article came out that talked about Morgan Housel’s new book “The Psychology of Money.” If you have been following this blog, then you know just how much I love Housel’s writing. He has an ability to humanize very complex financial topics and make them relatable to almost anyone, which is a skill very few have.  

Anyways, this article dug deep into a topic in his new book about the difference between being ‘wealthy’ and being ‘rich’. He argues that there are many people who are rich, but few who are wealthy. The rich choose to spend their money in a way that proves how successful they are. They buy fancy clothes and cars just to show off. When in reality, true wealth doesn’t come from these material possessions, it comes from using your money to control your time. Too often we focus on getting the highest paying job, even if we hate it and it takes away our free time. That path, however, typically only leads to us being rich, not wealthy. Morgan argues that “the ability to do what you want, when you want, with who[m] you want, for as long as you want to, pays the highest dividend that exists in finance.” 

After reading this article, I realized that the greatest thing my parents ever taught me was not about saving. It was that being ‘wealthy’ is much more important than being ‘rich’. Looking back, I don’t think my parents ever missed a single game or event that was important to their kids. And, I know they never would’ve picked a higher paying job if it meant sacrificing time with their family or friends. To them, true wealth doesn’t come from making the most money, it comes from having the freedom to spend time with the people they love the most. Don’t get me wrong, my parents worked, and they worked hard, but they never would’ve chosen money over time with us. I think that that decision is the sign of true wealth. One day when I have a family of my own, I plan to make similar decisions to prioritize my children and pass this very same principle on.

Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimers page.

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