Measuring True Wealth

Freedom concept. Escaping from the cage
10 Mar 2017

True Wealth is a concept that we discuss at the office periodically.  Really when it comes down to it, is one of our core philosophies as money managers.  Now I’m not talking about just having a lot of money.  This may or may not play into it, but it is really more along the lines of an overall money management philosophy.  It is very possible to have a lot of money, but not have wealth.  Conversely, it is possible to not have a lot of money, but to have wealth.  At the end of the day, it is about what inspires you to live your life on your terms.

Money is Not Wealth

Stay with me here.  Just having a lot of money doesn’t necessarily mean that someone has wealth.  There are actually several different measures that we can look at here.

The first measure we can look at and measure quantitatively is in the area of wealth vs. needed income.  It is quite possible for someone to have a lot of money, but to not necessarily be able to maintain a lifestyle that they have built up.  Look at it this way.  If you have $10,0000,000, would you consider that wealthy?  Now what if I told you that you are spending that at a rate of $300,000 per month?  At that rate, this is only just shy of 3 years of income.  This is no where near enough to be able to sustain that sort of lifestyle.

Let’s take that same $10,000,000 and apply it to someone who is only spending $30,000 per year.  I would argue that it would be relatively easy to be able to generate income at this rate to last more than one lifetime.  Indeed, this represents only a .3% distribution on the assets on an annual basis.  The question at this point then becomes, there is plenty of money and no fear of “running out,” but at what cost?  The individual in this scenario would be giving up a huge amount of potential lifestyle simply to have a lot of money in the bank.  Imagine for a moment what this would mean in terms of your own goals.  I don’t know about you, but simply scraping by with lots of money is not how I want to spend my life.  I want to be able to thrive.

What is True Wealth?

So what exactly is true wealth?  If it isn’t dictated by having a pile of money, how do we measure it?  When it comes down to it, this is something that is going to be different to each individual given their own goals.  Two people who are the same age may have similar incomes, but their goals may be totally different.  One may be interested in giving back into the local community.  The other may be passionate about building wells in Africa.  Really what True Wealth allows you to do is to live life on your own terms.

It is a measure of Financial Independence which allows you to spend your time doing what you are passionate about.  Some people are fortunate enough to have found that passion while they are earning a living.  For others, they may be just moving through the motions, dreaming of a better day when they can finally be “free.”

At the end of the day, it isn’t about how many “chips” you have accumulated.  It is about how you have spent those “chips” in order to improve your life, and the life of the ones around you.

 

Today is the day, make it count!

Casey

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Casey Mushrush

Have a question or want to see a post written about a specific subject? Send me an e-mail at casey.mushrush@premieriowa.com. I am involved in many of the educational elements of Premier Investments of Iowa, including appearances on WMT Radio, WHO Radio, KXEL Radio, and KCRG Television. In addition, I am a frequent guest host of the Premier Pulse, a personal finance education video blog. I partner with my clients to develop a specific set of financial goals based on their personal situation. We analyze their state of affairs, map out a course of action, and implement a written financial plan based on their own circumstances. We design and implement a long term investment strategy guided by the principles of asset allocation and based on personal risk tolerance. I utilize behavior coaching to help clients deal with the emotional aspects of investing and stick to their long term plan. Additionally, I am responsible for the practice management of an Office of Supervisory Jurisdiction. I aid our advisors by ensuring they are running their businesses in a compliant manner, as well as providing direction and suggestions on process improvement and implementation.