How to spot if someone is ‘rich’ or ‘wealthy’ — and which one should you strive to be?

What does it mean to be rich?

Remember shows like Lifestyles of the Rich and Famous or even the more recent Real Housewives franchises? They epitomize what it means to be rich: living large with plenty of cash to throw around on luxury goods.

When we see social media influencers wearing Rolexes, relaxing on luxury yachts, or riding around in Lamborghinis, we think of them as rich.

According to a survey conducted by RubyHome, Americans think the average rich person's home costs around $2 million.

The same research found that people believe rich Americans typically partake in hobbies such as flying on private jets, racing cars, and sailing.

However, rich people may squander their income on assets that depreciate in value and they may even end up broke. In fact, some even have a negative net worth as they go into debt to buy homes and cars and other liabilities that drain their funds.

Even personal finance celebrity Dave Ramsey would agree with that assessment.

“In the United States of America, cars are a status symbol,” Ramsey said during an episode of his money series, The Ramsey Show. Stretching your budget to keep a car you can’t afford is a clear sign of financial mismanagement, he added.

Earning a high income can also make someone appear rich, although the idea of what constitutes a high income varies depending on the generation.

For example, RubyHome's survey found that Gen Z perceives someone as rich once their earnings hit $394,000, while boomers believe you need to earn more than $1,019,49 to be considered rich.

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What does it mean to be wealthy?

Being wealthy, on the other hand, is about building lasting financial security.

Warren Buffett is a prime example of someone who is wealthy. The Oracle of Omaha is a billionaire, with a net worth around $145 billion, yet he famously lives in the same home he bought for $31,500 in 1958.

He's well-known for his frugality in other areas as well, including driving a used car and enjoying $4 breakfasts at McDonald's.

Wealthy people know that earning a good income doesn't improve your financial situation over the long term — unless you use that income to buy assets that grow your net worth.

Rather than spending what they have on luxury goods, wealthy people put their money to work for them so it makes them even more money in the long-run.

Wealthy people don't focus on making themselves appear "rich" to others, and tend to blend in with middle-income Americans to the point where you can’t even tell how much money they actually have.

Why it’s better to strive for wealth

When you're setting financial goals, it's always better to aim for building wealth rather than just becoming rich.

In fact, you don't actually need to be rich to become wealthy. Plenty of people who don’t earn a six-figure income or inherit a monetary windfall can achieve financial independence by saving and investing diligently throughout their lifetime.

After all, if your money isn’t being put to work while you sleep, it’s just losing value. This is why it’s essential to leverage the power of compounding as soon as possible.

Thomas J. Stanley, author of The Millionaire Next Door, found that somewhere between 80% to 86% of American millionaires are self-made — and an estimated 42% of that cohort started out with a net worth of zero.

If you want to build wealth, do it by spending less than you earn, avoiding high-interest debt, and devoting your money to investing in assets that grow over time.

Building sustainable wealth is about managing costs, saving money, and investing wisely — for example, squirreling away 20% of your take-home pay or additional money you bring in from a side hustle.

Ideally, you start wealth-building while you’re still young by setting up an emergency fund, maximizing retirement accounts, paying off high-interest debt ASAP, diversifying your investments, and considering homeownership.