This is a word that’s often used, but also often misunderstood. In Make Money, Live Wealthy, the entire theme of the book is: What true wealth is, and how to obtain it.
We’re not taught this in school, so most go through the struggles and figure out what the definition is on their own. I love hearing successful people’s opinion on what true wealth really is and how to obtain it, and my friend Gene Shkolnikov of RXWealth.net shared with me his view on it and I told him we had to share it with you… Enter Gene:
Definition of Wealth
First, let’s talk about what wealth is and what it means to be “wealthy.” The dictionary definition of wealth is “an abundance of valuable possessions or money” while the definition of “abundance is “a very large quantity of something.” So, putting the two together you get:
Wealth is a very large quantity of possessions or money.
But just how much is a “large quantity” and in what context?
Looking purely at income is insufficient in most cases. Case and point: Someone earning $25K may consider someone earning $250K wealthy. Heck, it’s 10 times as much as they make and seems completely out of reach. But that person earning $250K might not consider themselves wealthy (after taxes, mortgage, car payments, loan payments, day care, etc.), however they may consider someone earning $500K wealthy, and so on. So is there a magic income level? Is it $150K, $250K, $500K, $1M? For example, our government thinks that anyone earning over $400K (Individually) is wealthy and places that individual in a higher tax bracket. The point I’m trying to make here is that income alone doesn’t provide enough context. We need to look at other variables.
Looking purely at money in the bank by itself also doesn’t complete the full picture. And once again we are faced with the “how much is wealthy” question. Is it $150K, $250K, $500K, $1M?
Perhaps if we combine income and savings, then we’ll have a complete picture, and then we can put some numbers on it. But what would those number be? Is it $250K income / $500K savings, $500K/$1M, $1M/$10M? By this point most of you are probably thinking surely $1/$10M is definitely in the “wealthy” category. But what if I told you that the hypothetical person (let’s call him John Doe) is in this $1M/$10M club, however he is divorced and pays alimony to his ex-wife, he is paying off former business and personal debts, and his young new girlfriend has a taste for shiny things, lavish trips, and cosmetic surgery. Later on he also develops a gambling habit and a drug addiction. He loses his job, etc. etc. The point is – he is still working for his money, and he has huge expenses. And if his income stops coming, he will go through his savings in a blink of an eye. You get the point. [Read more…]