The Difference Between Being Rich And Being Wealthy
It seems that in the public’s eyes, all doctors are rich and wealthy. But is there a difference between the two?
There actually is but most of us don't know what that difference is.
All Doctors Are Rich, Right?
Typically after graduating, new docs think they'll become rich because of their high income potential. In today's society, those that earn six figures or more are typically considered rich. As a doctor, your income potential is much higher than the average Joe. The U.S. median annual household income averages $60,000 and the average physician’s salary is $300,000. How much of your salary you save and invest will dictate how wealthy you ultimately become.
Most people think doctors are rich because they typically drive fancy cars, wear expensive clothes, golf/socialize at country clubs, live in fancy neighborhoods, and/or send their kids to private schools. I know many white collar professionals (and you probably do too), that look rich but behind closed doors, are cash-poor with little assets to show for it.
What Do Wealthy People Look Like?
Many doctors never accumulate "real" wealth as they start their careers later in life accumulating large amounts of student loan debt. One of the best books that portrays what true wealth looks like is “The Millionaire Next Door.” The authors, Drs. Stanley and Danko, determined whether someone was wealthy or not was based one number: net worth.
Their wealth formula: Net worth = Assets - Liabilities
Another book that gives guidelines to becoming wealthy is JL Collins's book, “The Simple Path to Wealth.”
He recommends the following: Spend less than you earn, invest the surplus, avoid debt. Do simply this and you'll wind up rich and NOT just in money. Avoid fiscally irresponsible people; never marry one or give them access to your money. Money can buy many things, but nothing more valuable than your freedom. Save a portion of every dollar you earn. Try saving and investing 50 percent of your income. With no debt, this is perfectly doable. When you can live on four percent of your investments per year, you are financially independent.
Being Rich Or Being Wealthy
One of the main differences between a rich person and a wealthy person is that a wealthy one has sustainable wealth that can last for years through investments that typically produce multiple income streams.
Another difference between the two is knowledge.
Wealthy people know how to make money whereas rich people only have money. Many doctors fall into the “rich” category. They make a lot of money but when they stop working, they also stop making money.
Once you know how to make money, you can build sustainable wealth. The money never stops coming in, even if you have a downturn in your practice or investments. You have the smarts to get it flowing again. Ultimately, being wealthy means that you're financially free — no matter how much money you make. It’s not how much money you make that matters, but how long that money works for you.
For me, I could care less what people think of me based on where I live or what I drive. Designer clothes and expensive cars aren’t important to me. I love practicing “stealth wealth.” For those with kids, we know how fast they grow up. Parents have a small window of opportunity to spend time with them until they're gone for good. I'm happiest spending time and creating lasting experiences with them rather than buying stuff I don't need. For me, “wealth is measured in time, not dollars.”
What is Wealth?
You can do a quick Google search and find many examples of wealthy people who obtained it through knowledge and valued it more than money.
My favorite one can be found in the Book of Proverbs, with King Solomon. You think Jeff Bezos is wealthy? King Solomon was extraordinarily wealthy and wise. When he first became king, he was granted anything he wanted and he chose wisdom over riches. In the Book of Proverbs, Solomon lists wisdom and knowledge as the two most important gifts to ask of God. Want to know how to acquire wealth? The same way Solomon created his: Through wisdom and knowledge.
Dr. Anzalone is a Periodontist in Northeast Louisiana. He is a family man, author and blogger at www.DebtFreeDr.com. His mission is to help doctors get out of debt and build mountains of wealth.
Previously published on The Debt Free Dr.
