Part 2/8:
Income vs. Assets: The Core Distinction
At the heart of the distinction between rich and wealthy lies the concept of financial management rather than merely a fixed dollar amount. Financial advisers highlight that being rich typically refers to high income—individuals who can purchase luxury items and enjoy an extravagant lifestyle. However, a high income alone does not guarantee financial security. If someone's annual expenses match or exceed their income, they may find themselves trapped in a cycle that inhibits wealth accumulation.
For instance, consider an individual earning $400,000 per year but also incurring $400,000 in expenses. This person can still be considered rich, enjoying a lavish lifestyle, yet lacks any long-term financial security or wealth.