A self-made millionaire who retired early at 37 says there's a difference between 'living rich' and 'being rich'

Courtesy of Chris ReiningChris Reining knows a thing or two about money.
  • Chris Reining retired early at age 37 as a self-made millionaire.
  • Reining believes there is a difference between “living rich” and “being rich.”
  • Rich isn’t about earning a big paycheck, he says. It’s about having assets that generate an income and living below your means.

You could say that Chris Reining is well-versed in the semantics of money. He did, after all, retire at age 37 as a self-made millionaire by spending less than he earned and investing the difference. It’s a milestone he leverages to run a blog on financial independence.

With experience like that, we’re quick to consider Reining’s musings on money. Like this Tweet he recently posted:

“Living rich: Make $US500k, spend $US500k, don’t have two nickels to rub together,” he wrote. “Being rich: Make $US100k, spend $US40k, have $US1 million in the bank.”

Of course, there are different metrics – and plenty of opinions – for what defines someone as “rich,” but they’re usually based on a specific income or social class. Reining’s Tweet shows that he measures wealth beyond figures or material means; he defines rich from a behavioural standpoint.

“When people say they want to be rich, what they’re saying is they want to spend like a rich person. They’re focusing on earning a big paycheck,” Reining told Business Insider. “But that’s not the definition of being rich. The definition of being rich is having assets generating income that exceed your standard of living.”

He continued: “Someone earning $US50,000 a year while they sleep from dividends and investment gains and spending $US40,000 a year – they’re rich. I have friends earning half a million, and with private schools, second homes, and expensive lifestyles, they have nothing in their bank account – they’re poor. That’s why ‘rich’ has little to do with how big the paycheck is.”

Financial independence ‘isn’t about how much money you have’ – it’s what you spend it on

Reining himself is a prime example of the difference between “living rich” and “being rich.” In a previous post he wrote for Business Insider, he explained that becoming financially independent depends on the “4% rule,” meaning you can comfortably withdraw 4% from your investment accounts each year, while adjusting for inflation and without running out of money.

Despite this rule, he retired early when he could withdraw 3% from his investment accounts a year. After year two in retirement, he was withdrawing just 2%.

Why? Because he was living below his means.

“Becoming financially independent isn’t about how much money you have, it’s about how much you spend, because how much you spend determines how much you need,” he wrote.

He added that when people say they need $US1 million or $US2 million, they’re really saying they have an expensive lifestyle. That resonates with a point he made previously to Business Insider: “The funny thing about money is you always feel like you need more – even when you have enough, you never have enough.”

While Reining thinks an expensive lifestyle is fine, he realised that if he spent less, he’d have more to save.

As he told Business Insider, “Getting rich, and staying rich, is overwhelmingly a game of living below your means. If you can do that you’ll enjoy a freedom that people living rich will never experience.”

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