Making a difference between being ‘poor’ and being ‘broke’ is well established in the personal finance literature. Lately, however, I have been asking myself some interesting questions. What is the difference between ‘poor’ and ‘broke’ beyond the customary ‘poor is forever, broke is temporary’. I have been asking myself questions about the opposite of ‘poor’ and it seemed to me that it is ‘rich’. But, again, how is this different from wealthy? And why do I feel much more comfortable telling the world that I want to be ‘wealthy’ than that I wish to be ‘rich’?
It occurred to me that to answer these questions we could think of the four notions as reflecting two dimensions of our lives: a material dimension and a mentality dimension. The five numbers I insisted everyone should know – income, expenditure , assets, liabilities and net worth - are the measure of the material dimension. The mentality dimension is not only difficult to measure, it is also hard to pinpoint. It is a combination between the beliefs we hold, our morality and our responsibility to ourselves and to humanity at large.
Here is a graph of how ‘poor’, ‘rich’, ‘broke’ and ‘wealthy’ fit at the intersection of these two dimensions:
‘Poor’ is a state of negative material positioning and negative mentality. This is why some go as far as claiming that ‘poor’ is forever. What makes the state of being ‘poor’ difficult to change is not the material side of things but the negative mentality which prevents people from looking for opportunities or stops them recognising opportunities when these arise. Yes, being ‘poor’ is exhausting but getting out of this position is possible only if and when one musters the energy to switch their mentality.
‘Rich’, on the other hand, is a position of material plenty but is similar to being ‘poor’ in that the negative mentality is still present. Simply put, ‘rich’ are people who have ‘more than enough’ materially but lack the responsibility and morality to use this to improve the world. In fact, many rich people fall in the trap of ‘having’ – they are likely to trade their Ford for a Lexus and their Lexus for a Ferrari. They may even have several Ferraris in different colours. Giving, support, building communities is rarely in their worldview.
‘Broke’ and ‘wealthy’ are the mirror image of ‘poor’ and ‘rich’ on the positive side of the mentality axis. In difference to being ‘poor’, being ‘broke’ may describe you but it never defines you. People who are ‘broke’ have positive mentality – they look for and create possibilities; they understand that their material position in the world is about the life choices they make. Being ‘wealthy’ similarly is as much about having more than enough materially, as it is about what one does with the ‘more’ part of it. ‘Wealthy’ people make supporting others, contributing to communities and creating a better world their priority. They may have a Ferrari but they know where to draw the line. Being ‘wealthy’, I believe, is an expression of financial health – it demands a fine balance between the ‘material’ and the ‘mental’. In fact, many incredibly ‘wealthy’ people are not very ‘rich’.
Where would you place yourself?