Which Guy is Richer

[StevenR]

Here is the question, which of these guys do you consider "richer" guy A or guy B?-
Guy A makes $16,000 a month

Guy B makes $6,000 a month

Guy A has a net worth of $750,000

Guy B has a net worth of $650,000

Guy A lives in a modest condo, pays $800 a month in mortgage

Guy B Guy B live in a 1.2 million dollar house, and has a $600,000 vacation home, and pays a mortgage on each of these

Guy A drives a 3 year old Ford Ranger pickup truck, fully paid for

Guy B has a nice SUV and a sports car sitting in his garage, as well as a Lexus for everyday use


Guy A gets his income from working in a high ranking management position at a major corporation

Guy B is currently unemployed, in fact he is going to school full time to get a masters degree, all his income he makes is passive from investments and intellectual property, he would continue making roughly $6,000 a month even if he was laid up in the hospital.

Guy A All of his net worth is tied up in his 1.2 million dollar house and vacation home, and he is leveraged to the hilt with mortgage and credit card dept to pay for all of his nice things like his cars and his $25,000 watch, He does have some stock options he exercised but the vast majority of his money is tied up in his house and vacation home.

Guy B His net worth is in income producing investments and intellectual property that he has built up over the years to maximize his passive income. The only debt he has is leveraged in some income property he owns, which makes him a steady stream of income each month. He avoids personal debt if at all possible and lives modestly within his means.


Guy A He typically works 60-80 hours a week because there is never enough time to do everything. After all, he has to please his superiors, who have to please the shareholders and show a profit each quarter. If his division doesn't maintain profitability, he risks losing his wonderful position next time the company downsizes, and that would dash all his hopes of ever becoming CEO sometime in the indefinite future.

Guy B He is free to go travel whenever he wants, and he loves to visit far off exotic lands and has been to over 50 different countries. He does not have to work if he doesn't want to, and can go back to school and pay for it as he goes. He is getting his MFA and plans to become an artist, which is something he always had a passion for.

So, which guy is is really "richer"?

 

[bigjohnson]

Guy A has a net worth of $750,000

Guy B has a net worth of $650,000

So, which guy is is really "richer"?

Everything else is lifestyle choices.

 

[Dilberto]

You just answered your own question....are you trying to insult our intellect?

 

[StevenR]

Insult your intellect? Some people are smarter than others. I think in reality more people fall into the "guy a" category then the "guy b" category. Why is that? How about which guy do you think people, especially women, would perceive as being richer? Which one would be treated with more "respect" in society? Which of the two guys will be a target for all the prospecting women out there?

 

[Francisco d'Anconia]

Insult your intellect? Some people are smarter than others. I think in reality more people fall into the "guy a" category then the "guy b" category. Why is that? How about which guy do you think people, especially women, would perceive as being richer? Which one would be treated with more "respect" in society? Which of the two guys will be a target for all the prospecting women out there?

Are these the reasons why people become rich, for the sake of what other people think? I guess it does show the distinction between being rich and being wealthy.

 

[bigjohnson]

Guy A has more money. It's simple math. If he wanted to he could liquidate his assets, pay his debts, invest just like guy B (except he'd have $100K more to invest) and then he would be making about $7000 a month on his investments. Independent of that he could then decide what to do professionally, where he would STILL be making $16K a month.

That's what ... $23K versus $6K income and $750K invested versus $650K?

Guy A is absolutely richer hands down no question.

If you want to know how people would judge his life, that's something else.

If you want to know who is likely to be happier, that's something else again.

 

[StevenR]

Are these the reasons why people become rich, for the sake of what other people think?

For me there seems to be two reasons why people desire to be wealthy, one is for status, and the other is for freedom. Of course it would be nice to have both. Guy A chose to make lots of money so he could have status and power, but at the expense of freedom, Guy B wanted freedom and is willing to put off all the trappings of wealth for the time being so he can become truly financially independent.

Of course it is not that clear cut, Guy A, if he was smart, could use his high income and re-invest his assets(possibly) to make himself more financially independent as guy B, but he would have to sacrifice many of the nice things that give him the superficial appearance of wealth. Even though he could still live comfortably, it may be psychologically difficult for him to give up his status symbols to do this.

IMO, if Guy A was smart, he would have used his high income from the start to invest to generate more wealth and financial independence. However, I think in our society there are a fair number of people like him that have not chosen to do this, and they have the superficial appearance of wealth but it is really just a house of cards that could collapse at any misfortune. Then there are others who don't spend their wealth on status symbols and in the long run become truly financially independent and wealthy. Then some people strike it rich with the lottery or a tech IPO and have their cake and eat it too. This, however, is not most people.

 

[Francisco d'Anconia]

I know quite a few rich people who are always worrying about what they have as compared to someone else be it money, friends, status or whatever else which is perceived measurable. These people spend countless time and energy worrying about what they have and how to get more.

My wealthy friends are much more laid back even though in many instances they have at least as much if not more money than my rich friends. The quality of their friends are much more solid and there is hardly any competition between them. They exist in the world which they have created for themselves without worrying about status or prestige, it's not what makes them happy. I guess that's another way to differentiate between those that are rich (or aspire to be) and those who are wealthy.

 

[bigjohnson]

Where did the $650K that guy B has come from? Tooth fairy?

 

[StevenR]

he could have started investing when he was young, perhaps he started a business and sold it at a profit, or maybe he collects royalties from intellectual property and that makes up part of his passive income, any number of things really. Even a trust fund from his rich dead Grandma or something.

Forgot to ask, Francisco, what do you define as the difference between rich and wealthy? I think I have a pretty good idea what you mean but I am curious what you have to say.

 

[Ever onward]

I've always disliked word problems

 

[Francisco d'Anconia]

he could have started investing when he was young, perhaps he started a business and sold it at a profit, or maybe he collects royalties from intellectual property and that makes up part of his passive income, any number of things really. Even a trust fund from his rich dead Grandma or something.

Forgot to ask, Francisco, what do you define as the difference between rich and wealthy? I think I have a pretty good idea what you mean but I am curious what you have to say.

The difference between the two is that one is based on quality while the other is quantity.