On the face of it, the two words seem to mean the same thing. But, that is not actually the case.
It struck a chord with him as it validated his own father’s approach to money. Basically, being “rich” is related to how much money you earn, while being “wealthy” is much more focused on the freedom you have to do what you want with your time.
Unfortunately, many “rich” people fall into the trap of using their income as a way to validate who they are as a person. They “peacock” themselves by buying material things like cars, homes and watches – using these material possessions to prove how successful they are.
On the flipside, people focused an accumulating wealth don’t do it to impress others. They are more concerned with the financial security and independence their money can provide. Their understanding that material possessions are fleeting allows them to use their money to take care of family, for philanthropic reasons, or to simply create memories and experiences.
Which one of these two camps do you find yourself falling into?
Sure, it is nice to have nice things, but are they really that important when you consider the aspects of wealth.
The funny thing is, the people who are great at accumulating wealth aren’t always the ones you expect them to be. Most of the time, they aren’t the ones in flash cars and big mansions.
So, what are the principles of wealth accumulation?
Based on 35 years in the financial advice industry, Drucker’s advice is:
- Live within or below your means
- ‘Stay away from debt (other than a manageable mortgage)
- Save aggressively
- Create a “bucket plan” for your savings, splitting it into three categories – Now (6-12 months away), Soon (5-7 years away), Later (10+ years away), allowing you to have funds for all your upcoming expenses, and still keeping a healthy amount for retirement.
In such a consumer driven society, it can be hard to keep your focus on accumulating wealth, rather than proving how rich or successful you are. There is a certain endorphin boost that comes along with buying a material something.
But, consider this…
Imagine the endorphin boost you will get when you realise that you and your family are comfortable and happy. Even better than that, realising that you have set your kids up to be financially smart, with a strong sense of worth.
If you aren’t sure whether you are on the right path for wealth accumulation now, then we can help you. It isn’t about scrimping and saving for some distant date in the future. Rather, it is about making your money work for you and beginning an accumulation of wealth that you can take advantage of right away.
We’ll leave you with one final thought from Drucker.
He says it is important to play both a good offence and defense to win in sport. The same is true for money. When you are fortunate enough to cover your expenses, then the focus should be on saving and accumulating. That will make you both rich and wealthy.
When you are ready to talk, we are here to listen and help. Drop us an email or click on this link to find a day and time that suits you to have a chat with us, we’re really very friendly. Best of all, it’s absolutely free!
This piece was adapted from an article written by Lance Drucker, President & CEO of Drucker Wealth, a financial adviser with more than 35 years of industry experience.