These days, we are throwing the word “wealthy” around quite a bit. Someone who is “wealthy” is usually anyone who can afford lavish dinners, fancy cars, and big houses. One thing we should consider is, how do we measure wealth. Some people whom we consider wealthy are still living month to month. If those people who live month to month were to lose their job or source of income, they could become broke relatively quickly.
A true measure of wealth can be answered with a simple question: If you were to stop working today, how long could you survive?
I think we all can agree that wealth is freedom and abundance.
Right now I’m going to talk about 3 different ideas regarding wealth.
1. Having a lot of money in the bank doesn’t mean you are wealthy
Just because someone has a lot of money in the bank, doesn’t mean you are wealthy. Having money in the bank simply means that your assets are liquid. Some people might have real estate holdings, stocks, gold, or businesses that hold a considerable amount of their net worth.
You can have an abundance of money in the bank, but without income producing assets, you are slowly depleting that, day by day. In the longterm, holding on to money in the bank or cash money can be detrimental due to inflation. As goods, services, and property becomes more expensive, your money loses it’ buying power.
Part of financial freedom is having your money work for you. If you are just letting your money sit stagnant in the bank, you are denying yourself the perfect opportunity to grow your net worth and financially free yourself.
2. How much money you earn from your job is NOT a reliable indicator of your wealth.
It is usually assumed that the “wealthy” are people who are paid a large sum of money each year. When you are working a traditional 9-5 job, you are essentially, trading your time for money. Now there’s nothing wrong with this, everyone has to do this to an extent.
The issue arrises when you consider the possibility of you losing this job. If your job income is your sole source of income, you could be at risk of losing quite a bit. The reality of it might be weighing down on you at this very moment. This is financial slavery.
It’s okay to have a 9-5 job, but for you to be wealthy, you have to invest this money in income producing assets. The way to financial freedom is passive income. According to Wikipedia, passive income is either rental activity or ‘”trade or business activities in which you do not materially participate.” We are always trading our time for money. As a result of creating passive streams of income, you are receiving a lot more money for your time.
3. Your wealth isn’t just measured by your finances
Wealth isn’t just measured by your financial situation. Since wealth is synonymous with freedom, there are other factors that can allow you to experience wealth.
Being in good health is vital to experience any type of wealth, freedom, or abundance. What good is having an abundance of money, if you aren’t well enough to enjoy it? Everyone wants to be wealthy, but before you can truly experience the fruits of wealth, you must focus on your health.
You can find an abundance of wealth in the relationships you have with your family, friends, and significant other. Plus the investments you make in people pay dividends for a lifetime. You might not consider your friends and family a part of your “wealth” but they are probably the greatest form of wealth that you possess. These relationships make you who they are, they teach you about yourself, and they bring purpose to your life.
Being happy and ultimately being at peace with yourself is another great source of wealth. If you can be happy with the simple things in life, you’ll always attract great financial and personal wealth. To obtain wealth, you should start focusing on growing the wealth that you have within.
A Real Indicator to Measure Wealth
A real indicator that can be used to measure wealth: Annual income and growth from assets vs. your annual budget
Let me explain this idea to you as simply as possibly. If you were to purchase a company, what factors would you look at? I would look at how much the company is making after expenses, and the potential growth for the future. If a company brings in $200,000 a month, but needs to spend $250,000, the company isn’t going to last too long, is it?
The same concept applies to your life. If you make $100,000 a year, but you spend $100,000, you aren’t free. A big factor of building your wealth is how much you spend compared to how much you make. If you invest a majority of your money instead of spending it, you can grow your income instead of depleting it.
By having income producing assets, you can theoretically survive forever. Let’s say that your investment portfolio is making you $100,000 a year. You spend $50,000 a year on your normal month to month expenses such as rent, car insurance, food, utilities, etc… Now you take the other $50,000 and reinvest it into your portfolio. Year after year, your investment portfolio is now producing even more money because of your reinvestment.
This is the ideal situation that you want to be in. This is true wealth. You aren’t worried about being fired or being tied down to any specific job, task, or location. You are free.
By having financial freedom, good health, and quality relationships, you are truly wealthy.
Remember, what really makes us seek wealth is the idea that the wealth will free us. Freedom to do what you want to do, freedom from sickness and negativity, and freedom from the chains of debt and financial obligations that burden us everyday. That my friends, is how I measure wealth.
Please comment below and tell us what wealth means to you!