Lifestyle

What Is the Difference Between Rich and Wealthy?

the difference between rich and wealthy

I remember writing in my diary once at the age of 12 that I wished my family were rich so we could afford certain indulgences like a swimming pool. The 12-year-old version of me wanted so badly to have a chlorine-treated hole of water in our backyard and thought this would bring my middle-school-pre-adolescent-self happiness. I was wrong. I was also immature with little life experience. At the time, I saw rich and wealthy as the same concept, understandably so. People can see the clear difference between rich and poor but not between the two words that both seem to mean having an excessive amount of money. There are many varying opinions on these two terms, so what is the difference between rich and wealthy?

The Difference Between Rich and Wealthy

Although Merriam-Webster Dictionary lists rich and wealthy as synonymous, both have conceptually different meanings. You might be rich with a large sum of money in the bank, but it does not mean you are wealthy. However, if you are wealthy, you could also be rich. Why is this?

What It Actually Means to Be Wealthy

When you close your eyes and imagine someone who is rich, what comes to mind? Likely, you’re seeing something similar to what I see, which is a large beautiful home, a luxury vehicle (or two), a spa-like backyard, and an overall extravagant lifestyle. While this may be accurate, there is one thing we don’t know about this mystery person: their financial plan to maintain said lifestyle.

Being wealthy is more than just having a lot of money. In fact, the difference between rich and wealthy is fairly simple; it all comes down to mindset, knowledge, and resources.

Dandan Zhu, Headhunter, Career Coach, Investor, and Podcaster Daily DANDAN, explains in this May 23, 2017, Quora post that being wealthy is not about how much you make but rather the strategies you take to make more than what you spend. She states that wealthy people will fare well in the following categories:

  • Saving. It’s hard to build wealth if you spend every dime you make. Zhu uses Warren Buffet as an example, who still lives in the Omaha home he bought in 1958 for $31,500.
  • Income Generation. Never stay in place in your career if you want to be wealthy, even if you’re already making six figures. The wealthy are always looking for ways to advance and to add various sources of income to keep their finances healthy.
  • Learning. Knowledge is power, and Zhu adds that part of this is learning how to deal and handle life’s setbacks. The response to such is also part of what separates the rich from the wealthy.
  • Investing. Zhu suggests that due to inflation and taxes, making your money work for you (instead of the other way around) contributes to wealth. This does not have to be the stock market; it can be assets, real estate, retirement funds, and so on.

New York Times columnist Paul Sullivan wrote in his book, “The Thin Green Line: Money Secrets of the Super Wealthy,” that people are wealthy because they have created financial security for themselves. In other words, according to Sullivan, they are in complete control of their money.

In an interview with Jessica Khorsandi of DujourNews.com, he says, “Rich to me is a number. It’s a bank statement, a broker’s account, perhaps it’s a number associated with the value of your house or the price of your car, but it doesn’t give you any security. It doesn’t tell anymore about your level of comfort in life. As we saw in 2008-2009, those numbers weren’t always enough.”

If that’s not an eye-opener, I don’t know what is.

Conclusion

When you only focus on what you have rather than how to build stability, you’ll find you’ll lose yourself fast. Many celebrities and professional athletes, such as Allen Iverson, have made this mistake, getting caught up in the lifestyle and materialism rather than creating financial freedom for themselves. Now, instead of living the dream, these individuals are finding ways to pay for their once lavish lifestyles and debts.

Instead of trying to earn your first million, put your attention toward improving your net worth, creating multiple streams of revenue, and building strong savings for cases of emergency, other investments, and the like.

What are your thoughts? How do you define the difference between rich and wealthy? 

A FIREcalc Review: Is It Useful?

firecalc

We may all have our own interests and beliefs, but, if there is one thing we can all agree on it’s that everyone needs a retirement plan. Hiring a financial planner to help us with such a feat can be costly, though, and knowing where to start can also be a mystery. Before speaking with any retirement consultants, it may be wise to obtain an idea of what you can live off each year with your current portfolio as well as how much you might need to invest in order to live off your goal amount.  Luckily, the internet has come to the rescue with FIREcalc. But, what is it, exactly, and is it useful?

How FIREcalc Works:

FIREcalc is an online retirement and financial independence planning tool that gives you an idea of whether or not you can live off your current lifestyle with what you have in retirement. More than that, it actually compares how well your portfolio would have done throughout some of the toughest economic times in history dating back to 1887. Through this analysis, it helps to give you an idea of how well your investments will do in the future.

firecalc

To get started, you simply enter your goal annual spending amount, your current portfolio, and how many years you plan on using your retirement funds. Once applied, the FIREcalc simulation will calculate a simulation based on 30-year increments from the last 117 years. What will be produced is a color-coded graph with year-end balances. From here, FIREcalc states that you’ll be able to see the “big picture” of your current strategy.

firecalc graph

 

Pros:

The best part of FIREcalc is that it is free to use. There is absolutely no payment required nor do you even need to put a credit card on file. You’ll also not need to worry about creating an account, and you can use the retirement calculator as often or as many times as you need. You’ll be able to play out different financial scenarios with only the cost of time.

The homepage of the site provides an overview of what to expect, and, when you click on “How It Works,” you’ll find an informative FAQ that will be important to review prior to actually using the calculator. It explains the importance of evaluating the market throughout history as well as a step-by-step guide to FIRECalc.

Because this free online tool uses trends from the market since 1887, it automatically calculates the average success rate of your plan over time. The higher your success rate, the better your plan, obviously. There is no waiting for these results as they are generated as soon as you click “Submit.”

As you can see from the above results, the success rate of a $900,000 portfolio with a $40,000 annual withdraw for 40 years had a 71% success rate on average. This shows the user that changes need to be made to improve their success rate, and, because there are unlimited uses, the user can continue to crunch numbers to see what would be better for their current portfolio along with seeing how much they may need to increase it to achieve the desired yearly withdrawal amount.

Cons:

Although quick to use, the visuals of the site are a little underwhelming and overbearing with text. If you use the calculator without reading through the content you may find yourself easily confused, especially considering the historical factor FIREcalc uses to calculate results. It can also be easy to miss the calculator on the first page, as it is not visible right away, even when you click “Calculator” along the top tab.

It’s also important to note that FIREcalc is not meant to predict what will happen, but rather what will not happen. There are limitations, so even though you can incorporate your social security, you can’t tweak it to get the results you want. Part of this limitation includes not incorporating taxable versus non-taxable portfolios, leaving more room for inaccuracies.

Is It Useful?

The FIREcalc tool may not be 100% accurate, but because it is based on predictions, it can still give you an idea of how strong your portfolio is. The sooner you can start making adjustments, the better for your financial future. If nothing else, it’s another free retirement planning tool that shows you what you should consider setting aside to live the life you want. Just remember, the goal is to give you a general idea and is not an end-all solution to retirement planning.

Have you ever used FIREcalc? What are your thoughts? 

Is LASIK Worth It?

is lasik worth it

LASIK surgery took the world by storm in the early 2,000’s, giving hope to those with poor eyesight. As someone who wears contacts and glasses for nearsightedness, this procedure is something that has intrigued me as well. However, when you think of LASIK you also associate it with a hefty bill, one that may seem a bit overwhelming if it is not covered by your insurance plan. (P.S. Most do not cover unless they deem it medically necessary.) So, is LASIK worth it? Does it actually improve your sight long enough or well enough to justify the out-of-pocket cost?

LASIK Surgery: A Little History

According to Lasik.com, LASIK actually has quite the expansive history. The 1970’s introduced the invention of the excimer laser, which intrigued Columbia University researcher Stephen L. Troker, who used it to test laser eye surgery on test subjects, such as animal and human cadavers.

The first laser vision correction procedure was completed in 1988 on a 60-year-old woman with malignant melanoma, Lasik.com states. By 1991, Canada approved the excimer laser for photorefractive keratectomy (PRK) and the Federal Food and Drug Administration (FDA) in the United States jumped on board in 1995. Around the same time, two European eye doctors enhanced the procedure into what is now known as LASIK, which was allowed in the U.S. in 1999. Over the years, it has continued to evolve and improve but has always been associated with a heftier price.

The Cost of LASIK Back Then (And the Cost of LASIK Today)

When LASIK gained popularity (and FDA approval) in the late 1990s, the average cost was $2,200 per eye, Alex Tabarrok writes in a 2004 article on economics site Marginal Revolution. At the time the article was written, LASIK cost an average of $1,350 per eye, without putting into consideration inflation. Over the years, though, this number has fluctuated. In fact, according to a 2015 survey of refractive surgeons reported by Liz Segre of AllAboutVision.com, the average cost in the United States for laser eye corrective surgery was $2,077 per eye just a couple years ago, bringing us practically right back to where we started from.

However, cost does depend on location and facility. Additionally, the price may vary depending on the type of surgery, the technology used, and so on. You can opt for more sophisticated procedures, such as wavefront-guided LASIK, which corrects eyesight to result in the best vision possible, and would ultimately increase the end rate. But, overall, Lasik.com states LASIK costs can range from $1,000 to over $4,000 per eye.

Although you will often see ads for LASIK for just a couple hundred dollars per eye, you need to be wary of such deals. These often do not include follow-up appointments that are necessary for care, and so on, LASIK provider Qualsight advises.

So, with an average rate $4,000 or more for the surgery, is LASIK worth it?

Is LASIK Worth It?

Eye care can add up, especially depending on whether or not you need special lenses for astigmatism and the like. Not including your eye doctor visits, which may or may not be covered by your insurance plan depending on your policy, AllAboutVision.com estimates you may pay up to $400 a year or more for contact lenses and solution alone. Eyeglass frames plus the lenses can be an extra $200 or more, although those would be replaced much less than your yearly contacts, that is if your prescription does not change.

Even though LASIK is often not covered by insurance plans due to being considered a cosmetic surgery, Qualsight.com, who try to reduce the cost of LASIK to their patients, claims that many find the initial higher costs of the procedure to be worth it because, over time, they are saving thousands on continuously paying for their eyeglasses and contacts. Not to mention, many facilities will offer a payment plan to help alleviate the financial stress of paying out of pocket all at once. These payment plans, with no down payment of Health Savings Account assistance, can be as low as close to $90 per month for 48 months, according to Lasik.com’s LASIK calculator. Of course, you can pay more and pay the bill off sooner within 12 months.

AllAboutVision.com states that, in most cases, LASIK eye surgery is permanent. So, considering this, paying a little over roughly $1,000 a year for four years to have your eyesight corrected versus continuously paying $200 or more each year for the rest of your life to only assist your eyesight may make the case for LASIK alone and potentially save you money over time.

So, what do you think? Is LASIK worth it? Weigh in on the comments below.