What exactly is wealth? Its one of those words that has no clear definition. We generally think of wealthy people as being lavished by riches beyond comprehension. An abundance of valuable material possessions in great excess generally comes to mind. It is not clear whether wealth refers to the value of ones net worth, or rather the sustainable supply of newly generated cash. However, we are definitely talking about money here; that is ultimately what wealth boils down to. Lets take a look at how InvestAssetWealth defines the word wealth.
Wealth is a successful financial position in which sustainable income generated from assets exceeds a persons expenses which are necessary to live their particular lifestyle, over any given period of time.
What we have presented here is a very dynamic definition of wealth. Depending on your level of income generated from assets, as well as your idea of a comfortable lifestyle, anybody can be wealthy. Yes, that means that any working class, average Joe / Jane can become wealthy. Whether you invest your paycheque as opposed to wasting the money will determine your financial future.
An interesting part to the definition is the word “exceeds.” This guarantees that the wealthy individual will continue to move in an upward direction as they continue to strengthen their net worth. The excess money between monthly income versus monthly expenses should ideally be used to purchase additional assets, thus further powering the cycle of wealth.
Wealth can also be seen essentially as retirement. Yet, its not exactly retirement in the classical sense. The two biggest differences is that you are not receiving a pension, and hopefully you are younger than 65. That being said, wealth will enable you to say goodbye to your day-job. You will still have to oversee your investment properties, stock portfolio, etc. but the “9 to 5″ part will be gone. To me this is freedom, and doesn’t seem like work at all.
The picture we are creating here is clearly not of riches beyond desire. To be rich means you are in possession of excessively large sums of money. So much money that, within reason, couldn’t possibly be spent during your lifetime. Again this is subject to interpretation, but being a numbers kind of guy… I would argue that for the majority of people, riches would be defined as a net worth exceeding $10,000,000 ($1,000,000 home, $500,000 cottage, two $250,000 cars in the driveway, which leaves $8,000,000 left over. AKA $100,000 to spend per year for the next 80 years…). The important distinction to make here is that riches, if not invested wisely, will eventually run dry - no matter how big the number. For example, the acquisition of $15,000,000 cash (say through a lucky inheritance) would make somebody rich overnight. However, they would have to convert that cash to income producing assets in order to be considered wealthy. Wealth is sustainable, but riches are expendable.
Now that we have a solid definition of wealth, we can begin to examine our own goals for financial freedom. If you want more money than you could possibly spend, riches will be your final destination. Continue to re-invest the difference between expenses and income and purchase new assets. On the other hand, if you are satisfy the definition of wealth and are content with your financial position, just spend the rest on the extra’s in life. The choice is yours. Either way, you will be free from the confines of your 9 to 5. Know what you want, dream about it, and go for it everyday. Wealth is attainable for all of us!
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