“Spending money to show people how much money you have is the fastest way to have less money.” ~ Morgan Housel, The Psychology of Money
The definition of wealth, in its simplest form, is the total value of assets that are owned by an individual. Wealth is also defined as a person’s Net Worth. This is calculated by adding up all the assets and subtracting all the liabilities.
Wealth means different things to different people. The first and most obvious definition of wealth is owning appreciable and income producing assets. On the other hand, wealth can mean to some people the ability to travel wherever you want, and to do things on your own schedule. But chances are, everybody has a completely different definition of wealth.
Wealth is what you don’t see.
Being wealthy means that you have assets that generate you income as well as a store of wealth. A wealthy person is typically invested in real estate, the stock market, and might own a business or two. These individuals have assets that can be passed down generation to generation and don’t waste time keeping up with the Joneses. They focus on amassing assets and wealth.
“Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see,” explains Morgan Housel, author of The Psychology of Money.
“That’s not how we think about wealth, because you can’t contextualize what you can’t see.
When most people say they want to be a millionaire, what they might actually mean is ‘I’d like to spend a million dollars.’ And that is literally the opposite of being a millionaire.”
Wealth defined
In their groundbreaking book, The Millionaire Next Door, authors Thomas J. Stanley, Ph.D, and William D. Danko, Ph.D, do not define wealthy, affluent, or rich in terms of material possessions. They opined that many people who display a high-consumption lifestyle have little or no investments, appreciable assets, income-producing assets, common stocks, bonds, private businesses, oil/gas rights, or timber land.
Conversely, those people whom they define as being wealthy get much more pleasure from owning substantial amounts of appreciable assets than from displaying a high-consumption lifestyle.
Bottomline, the most important parts of wealth and personal finance are how you behave with it and your related habits.
Wealth gives you freedom
Wealth give you time to do what you want and give you Freedom. When you are wealthy, you don’t have to sell hours of your day working. You can instead choose to spend your day doing the things you love and enjoy it.
And, freedom is defined as “the power or right to act, speak, or think as one wants without hindrance or restraint.” When you have wealth, you have the freedom to do things that you have always wanted to do, with minimal hindrances.
References:
- https://retirementfieldguide.com/wealth-is-what-you-dont-see/
- https://themillionairenextdoor.com/publications/the-millionaire-next-door/
- https://www.msn.com/en-us/money/personalfinance/definition-of-wealth-what-does-being-wealthy-mean/ar-AAWpqRq
Discipline and Patience are two great personal superpowers.