Wealth is not absolute. Wealth is not just about money, but about a feeling of abundance. Everyone’s definition of wealth is a bit different.
Being wealthy may not be everyone’s goal in life. Some people simply don’t care, while others are obsessed with it. Where do you fall?
Consistent saving and conscientious investing inevitably leads to wealth. The goal may be financial freedom and independence, or just some extra flexibility.
What are different ways one can become wealthy?
- Create a successful business
- Develop a career with significant advancement opportunity
- Inherit a large amount of money
- Win the lottery
- Participate in illegal activities
In the context of this blog, I will only focus on the first two paths to wealth, as the other three are too difficult to control or could land you in hot water.
But what does being wealthy even mean? Here is a list of possible definitions:
- Being a millionaire
- Earning a lot more than one can spend
- Being able to pay all the bills on time
- Spending more on wants rather than needs
- Being able to stash away a certain percentage of one’s paycheck (the more the better)
- Just having “enough”
Let’s examine some more specific scenarios:
Example 1
A young family has a gross annual household income of $90,000 and expenses of $50,000. After taxes the family saves and invests $20,000 per year. After 20 years the family has a total of 1 million dollars in savings. Is that family wealthy?
Example 2
A single person earns $250,000 per year. They pay high taxes and spend the rest of the income on cars, food and expensive vacations. Is that person wealthy?
Example 3
A retired couple has Social Security and pension income that covers all their expenses. They also have $300,000 in retirement savings. Is the couple wealthy?
Example 4
A middle-aged couple works part time (60%) at minimum wage, earning about $20,000 a year. They own a simple, paid-off house in a low cost-of-living area, rent out one of their bedrooms, and lead an extremely frugal lifestyle. They manage to add about $5,000 a year to their $100,000 nest egg. Are they wealthy?
As you can see, income is not the most important factor when it comes to measuring wealth. Behavior is a huge factor. Wealth and the habits that get you there require a mindset put into action.
In the end, everyone has a different opinion on wealth and there are plenty of people that feel they never have enough even though they are not likely to ever run out of money, where others feel extremely wealthy just having a year’s worth of expenses tucked away. Some people don’t worry or care about money at all. Where do you stand?
I am often surprised how little some people are willing to talk about money. We often discuss entertainment, leisure activities, sports, gossip and politics with a passion, but yet the one thing we spend so much time and energy earning is often a taboo subject. Could it be that people are apprehensive about discussing money because they know they have poor money habits and they are afraid of being judged?
There is a lot to unpack and discuss when it comes to Health, Ability, and Wealth. I hope you will enjoy any future posts that dig more deeply into various topics around those main subjects.