Both rich people and wealthy people have a lot of money. Rich people spend their money differently and earn it differently. Having truck loads of money doesn’t necessarily make you wealthy if you have a lot of financial obligations and little freedom. Wealthy people have money and financial freedom with few obligations.

Let’s talk about a stereotypical rich person. We’ll call him Rich. Rich is a surgeon, which is great because he makes a TON of money. About $300,000 per year or more. Rich has a huge house, a fast car, few investments, and lots of debt. Rich hangs out with his surgeon friends and other rich people he met at the local country club. Rich makes so much money that he hasn’t bothered paying off his student loans, has bought a house that’s much too big for his family, and hasn’t seriously considered retirement. With the debt he’s acquired for the house, car, and private school for his kids, he has to keep working at the same earning level for many years to come. If Rich loses his job, he may have to live with the pain of giving up his huge house and his fast car. His children don’t know how to handle money because they’ve always had it handed to them. This is why we hear the word “filthy” in front of the word “rich” sometimes.

Let’s call our stereotypical wealthy person Bill. Bill is a computer programmer who makes $70,000 per year, but he lives as if he made $30,000 per year, splurging on eating out and having a drink with his friends every once in a while. He drives a 6 year old car (when he has to) and he prefers taking his bike. He brings his lunch to work every day because it tastes better and it’s healthier. He sends his children to public school and knows they’ll still get a good education because of his parenting. Bill gets the most out of life by appreciating its simple pleasures. Bill uses his extra earnings to pay off his debts and invest in real estate and the stock market. After 15 years of investing $40,000 (over 50% of his income) regularly, Bill has enough money to retire.

Bill is smart. Be like Bill.