In 1997 Robert Kiyosaki published apersonal finance book called Rich Dad Poor Dad. The book instantly became aphenomenal success and in no time catapulted Kiyosaki to the world of fame.In one of his books he mentions that there is a disparity between being richand being wealthy and he went on and said something surprising that the richhave lots of money but the wealthy don’t worry about money.
And I found this veryinteresting because I’ve always thought that the two go hand in glove that ifyou’re rich then you’re also wealthy and that if you’re wealthy then you’reprobably living a very comfortable life. But this isn’t always true, when I thinkabout someone who’s rich, I think about someone with a lot of money and Itypically think about someone who’s quite showy with their money.
They drivefancy cars and live in a fancy house they wear fancy clothes and eat at fancyrestaurants. Growing up I wanted to be rich, I wanted to own a big house, live ina fancy neighbourhood, drive a luxury car and buy expensive clothes, I wanted to sitin the best seats at sporting events and travel the worldany time I wished. Heck I wanted to go to Mars and I’ve got to be honest some ofthose things still sound good to me now. Kiyosaki said the rich have lots ofmoney but the wealthy don’t worry about money.
I thought about this for a while,the wealthy don’t worry about money. Growing up I’ve lived in a relativelyfinancially stable family, we’re not rich but we’re not poor eitherwe’re middle-class if you will. Both my parents work nine to five jobs and theywork really hard to provide for me and my siblings somehow they’ve managed topay for mine in my siblings tuition while at the same time making sure wehave food to eat and a roof over our heads I can’t say things have alwaysbeen rosy there have been months where money was a serious concern and weweren’t sure whether they would manage to pay for all our tuition, bills, andexpenses.
I watched my parents struggle and I didn’t ever want to live a lifelike that and when I read that statement the wealthy don’t worry about money Ithought to myself well that must be a really nice thing to have.Imagine never having to ever worry about money, who wouldn’t want that? I want tobe wealthy and rich so I decided to do a bit of digging to try and find out thedifference you see having lots of money is nice and all but I believe not everhaving to worry about money is even better.
So after a bit of research thisis what I found out and I think this might surprise you a lot. There actuallyis a difference between being rich and being wealthy. The simple differencebetween a rich person and a wealthy person is that a wealthy person hassustainable wealth, in other words a wealthy person will always be wealthy.Whereas someone who is merely rich will only be rich for a short period of timeuntil the money runs out.
I’m sure a lot of you have heard stories of rich actors,celebrities, professional athletes and so on who were once living fancy lifestyleswith big houses, nice cars, expensive clothes and vacationing all over theworld, but are now on the verge of financial bankruptcy because of poorfinancial skills and trying to sustain this kind of lifestyle for many years.You’ve heard of the lottery winner who went to bed one night in debt and wokeup the next day an instant millionaire, but due to poor financial management,ends back up where they started or in an even worse situation.
So let’s use Lucasas an example, Lucas is a surgeon with an annual income of $310,000 most of this income is earned from his work with only 5% comingfrom some investments a couple of his colleagues enticed him to invest in. Byall accounts and standards, Lucas is a rich man, he has a big house, he’s livingin a good neighborhood, he has two luxury cars, one for himself and the other hebought for his wife. His children go to good private schools and he hasmembership in the local Country Club.
So clearly Lucas has lots of money at hisdisposal, so he uses this money to make sure he fits in and looks the part of arespectable surgeon in society, obviously Lucas has expenses, as does every otherperson, he has a mortgage to pay, he has transportation costs, he has to feed hisyoung family, he has to pay health insurance, he has topay taxes, he has to put aside money for his kid’s college fund and he has to buyanother expensive anniversary gift this year.
Did I mention the annual vacationhe takes with his family? when you subtract these expenditures from hisannual income, then remove the savings and the little investments he makes here andthere, Lucas is not left with much. In total Lucas spends about $21,500 everymonth on expenditures and he has savings amounting to $43,500 in his bank account. And so since wealth is defined as thestatus of an individual’s financial resources to sustain the individual’sway of living, for a long period of time even if the individual stops working.
Inessence, this is money coming in on a consistent basis that’s able to sustainyour current standard of living for many years.This means that should Lucas lose his job today together with all the benefitsaccruing from it, Lucas should be able to feed his family for only two months.After which he’ll immediately need to find an alternative source of income.Lucas is rich, he’s not wealthy. Now let’s look at an example of a wealthy person.Kiyosaki said that while the rich have lots of money the wealthy don’t reallyhave to worry about money.
Let’s look at Bill Gates. Bill Gates is one of therichest men in the world he’s a business magnate, an investor, a philanthropist, ahumanitarian and an author. As of early 2018,Bill Gates was worth a mammoth $97.4 Billion Dollars. It’sestimated that every second, Bill Gates earns about one hundred andthirty dollars, which translates to around $78,000every minute. This is to say that in an hour bill makes more money than Lucasearns after a whole year of working, yet Lucas is considered rich. Being wealthyis essentially being financially free.
This means that you don’t live paycheckto paycheck and you don’t necessarily need to make any more money over a longperiod of time, because you have enough money saved or passive income flowing infrom your assets and investments to maintain your current lifestyle for therest of your life. Bill Gates doesn’t actively work for the $135 thathe made this second or the almost $78,000 he will learn by the end of this video.This is passive income that he gets in his sleep when he is playing golf andwhen he is giving away four billion dollars annually to cause us that hecares about.
Wealth is sustainable richness, basically a rich person whonever runs out of money. If Lucas quits his job today, he will most likely getbumped into the middle-class. If Bill Gates decided to retire today and becomea sedentary person who eats sleeps and eats again, he could maintain his currentlifestyle for the next 213 years.
But you don’t necessarily need to havegates kind of money, or own a large business like Microsoft. As long as youhave income flowing in that you’re not directly working for, such that if youwere to stop working today but you can still maintain your current standard ofliving, then you are considered wealthy. Usually when you think of a rich person,you think of someone who buys both their wants and their needs.
You knowthe $5,000 suit, the $3,000 watch, a luxury imported car, usually German made.The big house on the beach and so on. Just because someone exhibits these “Rich behaviours” it doesn’t mean that they have their personalfinances in order, sometimes these people you consider rich are actually livingpaycheck to paycheck or drowning in debt.
Many people who say I want to be richaren’t actually looking for financial security, what they want is the socialstatus and prestige they associate with a million dollars Club. So now I posethis question to you, do you want to be rich or do you want to be wealthy? and ifso how? Thank you guys so much for watching andI’ll see you in the next one.