The Definition of Wealth
I have heard the definition of wealth stated in many different ways. I wrote this as an essay for college and thought it would be worth sharing with you as well.
A lot of people define wealth by the amount of money we have to our name. Wealth is a relative term with many definitions, and today we are going to discuss a few of them. The first theory is that of Robert Kiyosaki, author of the book Rich Dad, Poor Dad. The second theory is that the definition of wealth is relative to an individuals situation. The third theory that will be discussed is the theory that wealth is the number of assets divided by liabilities owned.
Robert Kiyosaki’s Definition of Wealth
The first theory about the definition of wealth is that of author Robert Kiyosaki. Robert believes that “The definition of wealth is the number of days you can survive without physically working (or anyone in your household physically working) and still maintain your standard of living.
For example, if your monthly expenses are $5,000 and you have $20,000 in savings, your wealth is approximately four months or 120 days. Robert measures wealth in time, not dollars. (Kiyosaki, 2013)” As you can tell this is not what the average person thinks of as the definition of wealth, and yet this might be a much more useful definition of wealth than Websters.
Wealth is a Relative Term
The second theory is that wealth is a relative term. An example of this is illustrated by Morgan Housel: “Andrew Schiff, brother of investor Peter Schiff, is the director of marketing at broker-dealer Europe Pacific Capital, and earns $350,000 a year — about seven times what the average American household earns.”
But in Schiff’s world, it just doesn’t cut it. “I feel stuck,” he told Bloomberg earlier this year. “The New York that I wanted to have is still just beyond my reach.” Earning over $1,000 per day doesn’t cover private school tuition for his children, rent on his three-month summer vacation rental, and the home of his dreams. “All I want is the stuff that I always thought, growing up, that successful parents had,” Schiff said. (Housel 2012)”
This clearly illustrates that Schiff considers himself to lack wealth, despite being in the richest one percent of the nation. Schiff defines wealth as being driven by what a dream lifestyle looks like, and this definition is a perfect example of relativity. The other 99% of the world would consider an annual salary of $350,000 to be massively wealthy!
The Government’s Definition of Wealth
The third theory about wealth definitions is the legal definition used by the Code of Maryland: “Wealth means the sum of net taxable income and adjusted assessed valuation of real property. (Code of Maryland 2014)” As you can tell this definition is more in line with the traditional interpretation of wealth. It does differ slightly as a lot of people assume that a good salary automatically means great wealth.
I have found this to be untrue a lot of times. Unfortunately, people have a tendency to increase their expenses every time their income increases. If an individual earns twenty thousand dollars annually, and spends every penny of it wastefully, that person would have the same net worth at the end of each year as somebody who earns two-hundred thousand dollars annually but also spends every penny wastefully. This theory is how banks define wealth and would be necessary to understand when attempting to procure financing.
I have discussed three very different definitions of wealth described throughout this essay. Each of these definitions has followers that believe in its validity. The trick is to discover which definition to set goals based on, and then to follow these goals in order to attain a sense of accomplishment for achieving those goals.
I won’t allow myself to be influenced by other definitions of the term wealth. If I did, my goals would fluctuate throughout life, and I would never truly achieve wealth by any definition. There are many other ways to interpret great wealth, but these are the most unique, and simple to explain.
Now it is time to choose which mantra will become a credo for you in life in order to begin building your wealth.
Kiyosaki, Robert. “The Definition of Wealth.” http://www.richdad.com/Resources/Rich-Dad-Financial-Education-Blog/May-2013/the-definition-of-wealth.aspx, 2013
Housel, Morgan. “Putting Money in Perspective.” https://www.fool.com/investing/general/2013/08/23/carl-icahn-and-apple-a-twitter.aspx, 2012
The State of Maryland. “Code of Maryland.” https://definedterm.com/wealth, 2014