Rich Versus Wealthy – Knowing the Difference is Essential to Funding a Purposeful Retirement

4 minute read time. 

Would you rather be rich or wealthy? You might think they are one and the same, but they’re not. Knowing the difference between being rich and being wealthy can make all the difference when it comes to having a meaningful life, especially as we age.

That’s according to Brian Portnoy, the founder of Shaping Wealth and author of the bestselling book “The Geometry of Wealth.” He says the quest to be rich has us chasing a number that never really satisfies. In contrast, Portnoy defines true wealth as “funded contentment,” in other words, “the ability to underwrite a life that is meaningful to you.” Importantly,  Portnoy says for many, there’s one big stumbling block: focusing too much on the “funded” aspect. “First, they focus on the money without asking the important and sometimes hard questions about what’s truly meaningful.”  That’s why he focuses on the second half of the equation — contentment — off the top.

WATCH Your Money Map: Rich Versus Wealthy with Brian Portnoy

WEALTHY = DEFINING THE FOUR C’S

The guide map to figuring out what’s meaningful lies in four underlying sources of contentment, or as Portnoy calls them, the “four C’s”:

Connection: Connecting with others, and building strong relationships is at the heart of a wealthy life. “At the end of the day, what really drives a meaningful life is our sense of belonging and connection,” notes Portnoy.

Control: This is our hardwired desire for freedom and the ability to live the life we want. “When we have our liberty or freedom taken from us, we feel less than,” says Portnoy. For many, there’s a sense of freedom that comes with being in control of your money, as research has shown people who have a strong handle on their finances are happier.

Competence: One of the biggest parts of a meaningful, wealthy life is being good at something you love. “Whether it’s your job, your vocation, or your hobby, it’s being able to lean in, in your day-to-day to something that you find very valuable,” says Portnoy. Notably, this is something people struggle with in retirement.

Context: As Portnoy explains, context is the idea that you are a part of something bigger than yourself. For most, there are two sources of context: Your faith and your place. Place, Portnoy says, can be anything from patriotism to hometown pride. “I grew up in Pittsburgh, left in 1987, and have barely been back since,” says Portnoy. “But it’s still very meaningful to me. It’s in some sense home, even though I haven’t been home in 30 years. That’s a very meaningful motivator.”

FIGURING OUT HOW TO FUND YOUR “WEALTHY”

Adding up the four C’s provides us with the rubric needed to think deeply about the life we want to live, who we want to be, and ultimately, how to pay for it all. While there’s no easy formula for financially underwriting a life of funded contentment, Portnoy says it boils down to priorities.

“You as an individual, or you, in working with a financial planner, need to think through the trade-offs, because you simply can’t do it all,” he explains. “Once we have at least some momentary sense of what’s truly important to us, we can then ask: Well, how do we afford these things? How do we underwrite these things? What is the financial cost of the things that truly define a life well lived?”

As Portnoy notes, this isn’t a one-and-done process. Throughout your life, your four C’s will evolve and the weight they hold will change. For example, a person in his or her 20s might be more concerned about connections than they are about control, whereas a person in their 60s may prioritize competence.

TAKING IT TO THE NEXT LEVEL

For those who want to dig a little deeper, Portnoy says we can examine the four C’s and how they intersect with the seven dimensions of money: Earning, saving, spending, borrowing, investing, giving, and protecting.

One of the most important dimensions? Protection, which cuts across each of the 4 C’s, but is perhaps most clearly connected to “control” and managing risks that will undoubtedly come up in the future. “It’s never over because the world changes, the market changes, our lives change, health issues come up,” says Portnoy.

Two ways to achieve a higher level of control when it comes to your money are to work with a financial professional and to tap into protected income, like an annuity, that gives you certainty and peace of mind knowing you won’t outlive your savings.  New research shows knowing that your future is not only funded, but funded with income that will continue to come like a steady paycheck you can count on, gives you the freedom to spend in a retirement that could last decades.