When you hear the word wealthy, what is the first thing that comes to mind? Either you start imagining having nice cars, nice holidays, a private jet, and other luxuries in life. For others, wealth just sounds like greed and selfishness. So what is the definition of wealth exactly?
Everyone has their own opinion and definition of the word. It really depends on your personal mindset and personal goals. Wealth doesn’t necessarily mean money because it can mean a lot of things to a lot of different people.
So for today, we’ll go over the exact definition of what wealth is, what wealth means to you, and how to achieve wealth
What is wealth?
In its simplest form, wealth 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.
Although this is probably the simplest definition of wealth, it’s not as easy as that.
As mentioned above, wealth means different things to different people. The first and most obvious definition of wealth is having an exorbitant amount of money. The more money in the bank, the wealthier you are.
On the other hand, wealth to other people means the ability to travel wherever you want, and to do things on your own schedule. These are just a couple of examples, but chances are, everybody has a completely different definition.
Wealth vs Rich: What’s the difference?
As much as these two words might seem similar, they are entirely different. Most people have the assumption that being rich is the same as being wealthy. Let me clarify these terms a bit and give you a clear definition of wealth, and the definition of rich.
When a person is rich, that means they have a lot of money. That also means that they probably have a lot of expenses and debts. These things might be like a very high mortgage, car payments on luxury cars, credit cards, private school tuition, etc.
When you are rich, you are most likely trying to keep up with the Joneses. You simply have a very high-paying job, but little to no actual assets, and try to portray yourself as wealthy. Once a rich person loses their high-paying job, they end up scrambling for money and falling over the financial cliff.
On the other Spectrum, being wealthy is a totally different kind of life. Not only do you have a lot of actual money, you have assets that generate you income as well as a store of wealth. This means that you don’t have much in Consumer Debt, you probably have a paid-off mortgage, and investments in various things.
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.
Most people confuse want to wealthy means with what being rich means. The majority of people would rather look rich than be actually wealthy because it probably looks good on Instagram and Facebook. Financial Independence should be the goal, and not just amassing flashy things.
Wealth gives you time
A typical day has 24 hours in it. This doesn’t matter how wealthy or poor you are, what your profession is, or what you do on your free time. Everybody has the exact same amount of time in the day. What you do with that time it’s completely up to you.
The wealthier you are, the more time you have in a day to do what you want. A typical employee has to report to work, and work a certain amount of hours in a day to get paid. They don’t have the luxury of choosing when to go to work and when they can relax at home.
When you are wealthy, you don’t have to sell hours of your day working. You can instead choose to spend half your day sleeping, working on things you love and enjoy it, or doing a hobby.
Always remember that being wealthy means that you don’t have to sell your time for money. You have enough money to do what you want with the 24 hours you have in each and every day.
Wealth gives you freedom
Similarly to how wealth can give you time to do what you want, wealth can also give you Freedom. When figuring out the definition of wealth, this is what most people envision.
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.
Thinking about sailing the world? Then you can do it. What about climbing the biggest mountains? And you can do that too. The only difference is it’s much easier to do these things when you are wealthy. You don’t have obligations like work that might stop you from doing these things whenever you desire.
It’s much easier to pack a bag and just fly somewhere when you have wealth to take care of you financially. It’s super hard to miss work for several weeks when you’re not wealthy. This will mean no paychecks coming, and makes it difficult to keep up with your daily expenses.
Wealth gives you peace of mind
Do you know what the most common reason for divorce is? Or instead, do you know what most working-class people complain about on a day-to-day basis? You got it, It’s money.
When you are wealthy, these concerns are not as prevalent. Instead of using up so much of your mental capacity contemplating and thinking about money, being wealthy gives you the freedom and peace of mind to focus on other more important things.
You won’t have to do The Daily Grind of chasing money and trying to figure out how to sustain your family. Instead, you will know that your children are financially secure, their tuition will be covered, and basic Financial Necessities are a non-issue.
Imagine waking up every day not having to worry about money. You know you are financially secure, and this gives unbelievable peace of mind.
Wealth can give you things
This one is going to be a little controversial, but definitely worth pointing out. When you are wealthy, you have the ability to attain things, but is that smart?
If we look at Warren Buffett, one of the world’s wealthiest people, you will notice that he does not Chase things. I mean, his bank balance might most likely be able to buy a whole lot of things, but that is not what he does.
Instead, he realizes the importance of investing and prioritizing the things I’ve listed above. For example, his house is worth less than 0.001% of his total net worth. He could most likely afford a house worth billions but instead opts not to chase materialistic things.
On the other hand, most people once they achieve this level of wealth, they most likely start chasing for all the material things that are only a waste of money. This is something to definitely remember when understanding what genuine wealth means.
The wealthiest people in society are quiet, collected, and don’t flaunt their wealth with material things. That’s a rich fool’s game, and money that won’t last generations.
How much money do you need to have to be wealthy?
According to a recent poll conducted by SeniorLiving.org, a person needs to have about $2.3 million to be considered wealthy.
Your number might be different, but regardless, it’s a far cry from the median household income of $60,336. That’s great and all, but how much do you need to earn to be be considered as the top 1% of earners in the United States?
The average income of the top 1% is $389,000. Do you know what your current net worth is and how you stack up? If not, then you definitely need to start keeping track of it.
I personally use Personal Capital to keep track of that. Remember, what get’s measured gets improved. Keeping track of your net worth and finances gives you a clear picture of how you are doing year over year.
Final thoughts
Now that we have a better understanding of the definition of wealth, it’s important to step back and figure out what your definition of being wealthy is.
If being wealthy to you means Financial Freedom, the ability to do what you want, and having no financial worries, then it’s important to start taking the first steps.
There is no way to become wealthy overnight, and chances are it will probably take a lifetime. Sure, they are those stories off overnight successes, but none of them happened overnight. It’s only because you don’t see all their failures, the years they took honing their craft, and the hard work it took for them to get there.
The same will apply to you, my dear reader. Start working towards amassing wealth, and not waste time trying to keep up with the Joneses. This will only slow you down, and probably make you poorer.
Hope this was helpful, leave a comment down below and let me know what your definition of wealthy is, and where you are along that Journey 🙂
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