How is the difference between being rich and being wealthy related to losing weight?
Subject: Rich Versus Wealthy - The Wealthy Janitor
Event: U.S. Monetary System Established, 1786
Money is a great servant but a bad master. -Francis Bacon
Today is the anniversary of the Continental Congress's establishment of the monetary system of the United States. The year was 1786, and the ordinance called for U.S. coins with the following names: mill, cent, dime, dollar, and eagle.
According to Bill Bryson in Made in America, bankers and businessmen wished to maintain the English system based on pounds and shillings, but Thomas Jefferson devised a distinctly new system based on dollars and cents.
The name dollar comes from a town in Bohemia called Joachimstal. A coin made there in the 1500s, the Joachimstaler, spread throughout Europe evolving from the taler, to the thaler, to the daler, and finally into the dollar.
The name dime comes from the French dixieme which means tenth. It was originally spelled disme and pronounced as deem.
The name cent comes from the Latin centum which means one hundred. The unofficial name penny comes from the Latin term pannus, which means "a piece of cloth"; at one time these pieces of cloth were used for money.
The name mill comes from the Latin millesimus which means thousandth. A mill would have represented 1/1000 of a dollar; however, the federal government never minted the mill coin. The lowest denomination of coin ever created was a 1/2 cent piece.
The eagle was a $10 coin.
The missing coin from the 1786 ordinance, common today, is the denomination that represents 1/20 of a dollar: the nickel, named for the metal from which it was made (nickels were never made of wood) (1).
More important than the history of dollars and cents is the need to examine the psychology of dollars and sense. One excellent place to go is to a book by Morgan Housel called The Psychology of Money (2020). In his book, Housel makes the case that in order to understand the relationship between money and happiness, we must understand the distinction between being “rich” and being “wealthy.”
To make this distinction, Housel draws on his experience in college working as a valet for a luxury hotel in Los Angeles. There he saw many “rich” people. They drove expensive Ferraris, which revealed to the world that they were rich enough to make payments on a $100,000 car. This, however, did not mean they were wealthy.
As Housel explains, rich is the money people spend on their fancy cars or expensive homes. Rich people are often working hard to keep up with the expectations of appearing to be rich by going into debt and by spending to keep up the outward appearance of being rich.
Wealth is different. It’s hidden. Wealth is taking the money you have earned and instead of spending it, using it to accumulate more wealth through earned, compounded interest.
Rich people have less control over their lives. The stress of debt and keeping up with the Joneses makes them anxious and often unhappy. Wealthy people, however, have more autonomy and control, which translates to more freedom and happiness.
To further explain the distinction, Housel provides an analogy:
Losing weight is notoriously hard, even among those putting in the work of vigorous exercise. . . . Exercise is like being rich. You think, “I did the work and I now deserve to treat myself to a big meal.” Wealth is turning down that treat meal and actually burning net calories. It’s hard, and requires self control. But it creates a gap between what you could do and what you choose to do that accrues to you over time.
To illustrate his idea of the hidden nature of wealth, Housel shares the story of Ronald James Read, who died in 2014 with a net worth of $8 million. During his life, no one knew that Read was a wealthy man, and no one would ever have given him the title of “philanthropist.” He was a high school graduate, who worked as a gas station attendant for 25 years, followed by a 17-year stint as a janitor at JCPenny.
Read’s wealth was hidden, but the strategy he used to accumulate wealth is no secret. It didn’t come from winning the lottery or an inheritance; it came from the simple act of spending less money than he earned and investing that money in blue chip stocks. Using this simple strategy and consistently saving over the decades left him with a fortune. When he died at 92, he left $2 million to his stepchildren and $6 million to his local library and hospital.
In short, Housel’s key to thinking correctly about money is to make it your servant rather than your master. To do this requires willpower. Housel suggests a simple mantra: “Less ego, more wealth.” More options in the future means controlling our desire to buy today. As Housel puts it, “No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today” (2).
Recall, Retrieve, Recite, Ruminate, Reflect, Reason: What is the difference between being rich and being wealthy?
Challenge - Money Talks: What is the best thing ever said about money. Research some quotations and select the one you like the best. Explain why you like the quotation and what insight it gives us about money.
Sources:
1-Bryson, Bill. Made in America: An Informal History of the English Language in the United States. New York: Perennial, 1994.
2-Housel, Morgan. The Psychology of Money. Harriman House, 2020.
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