The Difference Between Wealthy and Rich

I went to see Baz Luhrmann’s Elvis last week. God it’s good.

Elvis is a good movie not only because of the subject matter (Elvis was, and still is, THE biggest selling solo recording artist of all time), but because it shed light on the unfortunately common occurrence of financial abuse in the entertainment industry.

I’m not giving anything away here, but at the time of Elvis’s death he was not a wealthy man. It’s estimated that Elvis was five million dollars in debt and owned no ongoing revenue streams (i.e., royalties) from his music. It didn’t seem like there was any way to repay that debt without Elvis around to turn on the income faucet with a performance. This left his child and former wife in a precarious financial situation.

Elvis’s lifetime earnings would have been in the billions, yet he died with nothing. How did it go so wrong?

He lived a rich life rather than a wealthy life. The two are very different.

It’s easy for people who were never educated about money to fall into the trap of living a rich rather than a wealthy life. Many celebrities and sports stars fall victim to it. A rich life is one where you earn what you spend. The more you earn, the more is available for you to spend. But once it’s spent, it’s gone. If you stop earning and continue spending at the level you’re accustomed to, your expenses will quickly spiral out of control. It’s a recipe for disaster.

A wealthy life is when your income is not dependent on your earnings. This is because you have assets like shares, property, or a business that generates its own income whether you work or not. Someone earning only $80,000 per year can still retire wealthy if they put their money to work the right way. When you retire wealthy, you build lasting financial security for years to come.

The moral of Elvis’s story is to always have a financial plan and to ensure you have control over your personal financial position. I’ve put together four reminders on how to apply this:

Step 1 – Educate Yourself

No one is taught about how to care for money or build wealth at school. We usually pick up money habits and beliefs unconsciously from our parents. If our parents were good at money, we are usually good at money too (think Gwyneth Paltrow). Unfortunately, many parents are only mediocre at money simply because of the fact that they never received a financial education of their own. And so, the cycle continues!

If you feel you don’t understand money, surround yourself with qualified ‘independent’ financial professionals who can explain it to you. Elvis’s advisor what not qualified and was definitely not independent (he took 50% of Elvis’s earnings in commissions). Seek advice only from people you know have been successful at money themselves.  

Step 2 – Plan

A rich life might look good on the outside but it doesn’t provide financial security. A rich life means your expenses and debt repayments are all dependent upon you working. If you stop working, your richness stops too. Create a financial plan to divert a portion of your income to building long term wealth. I teach this in my money courses and sessions.

Step 3 – Not All Debt is Bad

There are two different types of debt. Good debt and bad debt. Good debt is debt that is used to fund the purchase of an income producing or value adding asset like a house, higher education, or a sound business. Bad debt is debt used to fund depreciating assets that go down in value over time like a car or a holiday. People who are wealthy have good debt and avoid bad debt. Take a look at yours.

Step 4 – Control

Never hand over your decision-making power to someone else (even a finance professional). That includes control over your payments. At the end of the day, YOU are the best person to make financial decisions for yourself. Gather as much information and professional advice as you can then make your own decisions. If you don’t understand something, ask. If you don’t trust something, follow your gut. If you don’t have time to manage your finances, at least limit the power someone else has over your funds so you limit your exposure to fraud or complacency.

Remember, what you focus on grows. If you focus on building wealth, that is what you will get. Take part in the management and decision making of your finances. Get involved. Doing nothing is not a viable option – that’s what Elvis did.  

Julia Scott is an intuitive money mentor and finance professional. Working with Julia helps you to earn more, become confident investing and align with money in a whole new way. Work with Julia HERE.

Legal Note: Information provided by Love Luck Wealth is factual in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute financial advice nor financial product advice in any way. Remember, the value of any investment can go down as well as up. Before acting, you should consider seeking independent personal financial advice that is tailored to your needs from an appropriately licensed or authorised financial adviser.