A Question of Wealth

How do we define what being rich is?

Well, there are several definitions of being rich. Many of us measure our standard of wealth by our salaries. If you are earning six figures or more per year, you are generally considered to be quite wealthy. But, would it surprise you to know that people with higher salaries can have just as many money problems?

A truer measurement of wealth is net worth. This means, your true wealth is less influenced by how much you make than it is by how much you save. Take three imaginary people.

Person A: Earns $120,000 per year and saves $100 per month.

Person B: Earns $60,000 per year and saves $200 per month.

Person C: Earns $30,000 per year and saves $300 per month.

As odd as it might seem, Person C is technically the wealthier. A person might earn a great salary and then spend it on posessions. Yes, it is possible to be rich in posessions and poor in money. Some posessions, like houses are quite valuable. Others, like home electronics, lose significant value over time.

Certainly, someone with a higher income has an easier time saving money, but that does not always mean that they do so. By watching expenses, people with low incomes can get rich too. Sadly, many of our financial role models in the media made their money through a "big score" such as a movie part, a great invention or great investments. However, all around us there exist role models of smart savers. People who have rented our spare rooms, coupon shopped, fixed things instead of buying new ones, and so much more. Search out those role models and they can help you get on a road to true wealth.

After all, while getting rich fast is certainly preferable to getting rich slow, it is also much more risky. If the safe path gets you to the same destination by retirement, then the safe path is a good one to take. Focus less on what you make and more on what you save. Making more money is always a wonderful bonus, but it does you no good in retirement if you don't save any of it.

Enjoy the journey.

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A Question of Wealth

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