How do you define and measure wealth for yourselves and for others? Is it merely through the number of dollars that we’ve accumulated throughout our lifetimes? Does it have anything to do with the number of possessions we have the size of our house or how prestigious our cars are? Or do we measure wealth through some other means entirely? In today’s article, I’m going to be going over three common ways that I see wealth defined, as well as how I personally choose to define it for myself.
How do you define and measure wealth? So the three most common ways that I see wealth define that I’m going to be talking about today is wealth as measured by dollar value or whatever currency you happen to use. Wealth is measured by the duration of which you can sustain your lifestyle without continuing to earn an income and wealth is measured through wealth.
Trinity as discussed in MJ DeMarco’s book, The Millionaire Fastlane. So the first way that we often define wealth is through sheer raw numbers. If you have $10 million in your bank account, we could pretty safely assume you would be considered wealthy by a large portion of the population, but with only $10 to your name, maybe not so much. For the longest time having a net worth of $1 million was considered to be the gold standard to be wealthy, and for many, it was and still is a goal to strive for. However, the downside to viewing wealth purely through the lens of raw dollar values is that depending on the lifestyle of the individual in question, $1 million may be an extraordinary amount of money that can fund their lifestyle, and then some for many, many years to come. But for others, it may not be able to last them a decade under their current lifestyle.
The second way that we often define wealth is by figuring out how long that money can last a person if they weren’t able or chose not to continue generating an income. This is often the approach you see when retired people or their early retiree counterparts are discussing how they managed to retire in their 30s or 40s. They figured out that they would be able to live off their savings for however many years they figured they needed in the case of the retired person and this approach of basically asking yourself how many days forward can I expect to live this lifestyle on this amount of money solves the primary issue I was mentioning with the broad dollar value approach because it allows us to adjust for differing levels of lifestyle and come to a more uniform number. But I personally feel that a person’s wealth incorporates more than just the amount of green pieces of paper they have, or even how long they can make those green pieces of paper last. While that is an important part of the equation. It isn’t the entire equation.
How we measured not necessarily by how much money they have, at least not directly, but by how strong their relationships are with friends, family, and community how healthy and vibrant they are as an individual and how much freedom they have in their life. In the book, when I look back at the richest moments of my life, the memories and moments that I will cherish forever. None of them have that much to do with money again, not directly at least First, they usually have to do with late-game nights at a friend’s house, or those rare trips with my family growing up or going out west and visiting a bunch of national parks for the first time in my life. Now, certainly, I couldn’t have done much of that stuff without money, since at the very least food, gas and some form of lodging would have been needed. But my life wouldn’t have been as Rich and I wouldn’t have been as wealthy had I just left all that money in my bank account.
Now, that’s not to say that saving money isn’t a good idea or that it’s unimportant, or that we should spend everything we make because we’re going to die anyway. No, it’s very important to say, just not for the mere sake of saving and watching the numbers go up. Even though I understand for some people that can be entertaining as well. But I think it’s important so that you can develop a passive cash flow that gives you the freedom to choose what you want to do with your life. It gives you the choice to be able to retire or maybe go part-time, if you don’t want to retire fully say if you’re following the coasting financial independence path to retirement, it gives you the choice to maybe take some extra days off beyond the vacation that your company may give you so that you can go on an extended vacation with your friends and family.
That’s why savings is important. It gives you that freedom of choice to fill in the blank here. And it’s those freedoms of choice time and location that when used properly, allow you to best strengthen those other aspects of the wealth, Trinity, and become a truly wealthy person, both with money and beyond it. I think that’s a much more comprehensive and accurate definition of wealth. And it’s the one that I use, at least until I find a better one to replace it with.
This leads me to my last question today., How do you define wealth? I know there are dozens of definitions out there that I didn’t cover in this article. And I know it’s entirely possible that one of those definitions is maybe even better than any of these I’ve laid out today. So let me know in the comment section below. I’m really interested to see how others view this question. But that’ll do it for me today. If you have a friend that would be interested in this kind of content, be sure to share it with them. Let’s really get this information out there and start our own financial revolution.