Repeat after me: “I want to be wealthy, not rich.” That’s because being rich simply means having or earning a lot of money. On the other hand, being wealthy means having good financial habits and systems to ensure that you stay rich. It’s one thing to have money, and it’s another to keep it that way. Here are 15 money rules on how to build wealth that lasts.
Being rich and being wealthy are similar but not the same thing. Being rich means having a large amount of money. For example, you’d be rich after receiving an inheritance or winning the lottery.
That’s why you want to be wealthy instead. To be wealthy, you need good financial habits, like saving and investing consistently. Additionally, systems like an emergency fund and retirement accounts ensure that you’re both protecting your money and growing it. For example, an emergency fund can cover you in case of a loss of income. Similarly, a retirement account ensures that you’ll be able to enjoy your golden years.
You can be rich without being wealthy if you don’t have habits to preserve your wealth.
But you can also be wealthy without being rich. For example, if you have good financial habits like saving consistently, but the money isn’t there–or at least, not yet. But it will be if you keep up those strong money moves.
Financial goals are an essential part of your financial journey. A goal can be reaching certain milestones, like owning a car or house or hitting a certain net worth.
Goals are important because they motivate you to achieve something that will improve your life. In fact, they could be why you chose to start building your wealth in the first place. They also make it easier to make decisions as long as you’re focused on them. For example, if you want to own a car, you’ll put off certain purchases to save up for the down payment.
Rich people aim to earn money, but wealthy people know the importance of building good money habits. Instead of trying to hit $1,000,000 overnight, try to build habits that will allow you to achieve that money over time. That way, even after you achieve your goal, you have what it takes to maintain that money and go even further.
Setting money aside consistently is the key to building wealth. Even saving 10% of your monthly income is progress being made! When you’re trying to be wealthy instead of rich, the habit of saving is more important than the amount saved.
It’s hard to save consistently when your paycheck is eaten up by your expenses every couple of weeks. When you have a below-average income (below $60,000 a year), it can be harder to establish healthy wealth-building habits.
It’s not impossible per se to save consistently without a high salary, but you might be making yourself miserable. You may find yourself missing important life events because, between savings and expenses, you’re not spending on yourself. And that’s only because you’re not earning enough!
To build wealth consistently and sustainably, you’ll want to increase your income. The best way to do this, without sacrificing your free time, is to get a higher-paying position. If you want to be the dictionary definition of rich, you’d need an annual income of about $300,000. Hitting that income bracket would qualify you for the top 5% of earners.
Debt is a recurring expense that grows larger the longer you put off paying it. You’ll want to pay off debt, especially high-interest debt, as soon as possible. The sooner you’re debt-free, the sooner you’ll have access to amazing benefits, like more money to spend or invest.
A key difference between a rich person and a wealthy person is how they choose to spend money. A rich person will spend money entirely for fun. Meanwhile, a wealthy person will also spend on fun and devote some money to investments. That’s what you have to do if you want to be wealthy, not rich.
Investing can help you protect your wealth, grow your money over time, and improve your overall quality of life. The earlier you start doing it, the more time it has to grow, especially thanks to the magic of compound interest.
Investing doesn’t just mean buying stocks and putting money into funds. Investing in quality clothes, developing skills, and your personal well-being are also important. Through non-monetary investments, you could improve your overall quality of life.
Sometimes, these quality-of-life investments can even be the gateway to earning more money. A well-fitted pantsuit could be just what makes you shine when applying for a job. Alternatively, wearing a luxury watch can subtly tell your banker you know what you’re doing when it comes to money.
When investing, you don’t want to “put all your eggs in one basket.” For example, you don’t want to spend all your money on NFTs only for their value to tank over time. Instead, you want diverse investments in all kinds of markets. That way, if one investment doesn’t work out, you may still earn money elsewhere.
Chasing instant gratification is how rich people end up going broke. To preserve your wealth, you must make sacrifices. For example, you can put off the daily $5 coffee (plus tip) and make your own.
Unfortunately, sometimes your loved ones may prevent you from becoming rich. You could have relatives who constantly ask for loans that never get paid back. When you have loved ones like these, you must set financial boundaries to protect your wealth.
To protect your wealth, you’ll want to protect yourself–and that’s why you need an emergency fund. The emergency fund is a fund dedicated to preparing yourself in case of financial emergencies.
To have a comfortable emergency fund, you’ll want to save at least six months’ worth of expenses. For reference, the average American’s expenses per month are about $5,500, thus an emergency fund of about $30,000.
Once you have a fully-built emergency fund, you’ll feel rich–even if you’ve still got a long way to go. Having savings to cover yourself in case of emergency is a huge load off your shoulders.
Extra tip: you might want a separate bank account for this without a debit card. Otherwise, it might be too easy to treat it as a second savings account.
When you automate your finances, you’re freeing up valuable time and headspace. Setting up automatic bill payments and money transfers lets you use your time and energy for more important things.
By investing in retirement accounts, like the Roth IRA, you’ll be making even more gains from your investments. That’s because the gains from these accounts will be entirely tax-free.
While you won’t be able to freely withdraw from your retirement accounts, that’s beside the point. Retirement accounts guarantee you’ll have money to enjoy when you’ve reached the end of your work life.
Books have been used to learn new skills since people learned how to read. You can learn helpful money tricks and investment strategies by reading good finance books. There’s no shortage of money books that can help you throughout your financial journey.
Sometimes, you may be too busy building your wealth to do extra research on financial tips. And that’s perfectly understandable if you’re working to be wealthy, not rich.
That’s why you should join my money squad to have the tips sent straight to you! It takes a few seconds, and you’ll receive potentially life-changing financial tips every week. Sign up today!
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Dollars Makes Cents by Shaquana, Financial Coach and Wealth Expert, resources helps professional millennial women of color with the tools and skills they need to eliminate their debt, amplify their savings, and build generational wealth — without having to compromise their lifestyle.
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