Three tell-tale signs of a 'rich' mindset versus a 'wealthy' mindset

'Rich' and 'wealthy' are often used to describe someone who has a lot of money - but appearances can be deceiving.
'Rich' and 'wealthy' are often used to describe someone who has a lot of money - but appearances can be deceiving. Photo credit: Getty Images.

'Rich' and 'wealthy' are typically used to describe someone who has achieved a measure of financial success.

But true wealth is different to simply looking rich. 

Will Rainey, an actuary and former investment strategist, told Newshub it comes down to mindset.  Someone with a 'rich' mindset sees money for spending. Someone with a 'wealthy' mindset sees money as a way to make more money.

Seeing someone pull up in the latest model car, impeccably dressed with the latest smartphone, it's easy to jump to conclusions. But Rainey, who penned the book Grandpa's Fortune Fables to teach kids about money, said appearances can be deceiving.

"It’s really hard to tell who is wealthy as many of them would live below their means in order to ensure they can save and invest their money," Rainey says. 

Here's three giveaway signs someone has a rich rather than a wealthy mindset.

1. They use debt to buy the things they want - now

Confident they'll have the money in the future, someone with a rich mindset is likely to use debt to fast-track the ability to have what they want now.

"They focus on the amount of debt they have to pay back each month (e.g. the minimum repayment amount for credit cards) rather than the total amount they have to repay," Rainey said.

Although a wealthy person may enjoy spending, their goal is to save money first. 

Focusing on looking after their money long-term ultimately brings them closer to their goals.

2. They may fall for 'get rich quick' schemes

Someone with a rich mindset focuses on money in the short-term. 

They may talk (or brag) to friends about making huge gains from cryptocurrencies, investments in certain companies, or courses run by 'successful' people. 

They have yet to fully embrace the common-sense approach that if it sounds too good to be true, it probably is. 

"There might be wealthy people who invest in cryptocurrencies but they are looking at the long-term rather than making money quickly," Rainey said.

3. They constantly compare themselves to others

A rich mindset requires people to 'keep up with the Joneses'.

Rather than overextend themselves to buy a bigger and better house to show off to their friends, a wealthy person sees borrowing as a tool to help them build wealth over time.

"This could be to buy real estate which can be rented out, or to start a new business venture, both of which help them increase the amount of cashflow coming in over the long-term," Rainey says.

Rather than one big, expensive house, a wealthy person may have their money spread over multiple, more modest houses.  

"Whilst there is a risk that they might struggle to pay back the amount borrowed if they can’t rent out the [property], or the business venture isn't successful, the risk is understood and the total cost of the debt is calculated."

An illustration of the concept of 'Keeping up with the Joneses'.
An illustration of the concept of 'Keeping up with the Joneses'. Photo credit: Supplied/Will Rainey.

So how do we go about cultivating a 'wealth' mindset?

One method Rainey uses to teach kids about money is to think of money like seeds for creating their own 'financial forest' - decide how much to plant (in the form of savings and investments) and how much to give away (spend).  

"If they give all their seeds away (i.e. spend all their money), then they won’t have a forest and might even have to spend time and money trying to chop down someone else’s forest (credit card companies) before they can grow their own forest," Rainey explained.

He suggests people start early, and don't compare themselves to others.

"Whilst someone might have nice things, they might not have any trees, let alone a forest, so they might not be as rich as they appear. 

"The ability to avoid 'keeping up with the Joneses' is essential in order to build wealth," Rainey added.

Money mentalist Lynda Moore said true wealth covers more than just money. 

"A wealthy person is financially stable, but also has other aspects of wealth such as time, strong family and friendship connections, and good health," Moore said.

She refers to one of the more aspirational money personalities, described as the 'money master'. 

This is someone who is in control and doesn't let their emotions control them. They have a secure sense of self, and don't need to spend money to fit in or gain acceptance. They're content in setting and working towards their goals.

"They have found the optimum balance between mastery of money and the self-satisfaction, contentment and sense of security it creates," Moore said.

"In other words, they work hard, and enjoy to the utmost what they have achieved."