Lately, I’ve been thinking about the definition of wealth.
What makes us wealthy? How do we – and others – know we have “made it”? And, does being wealthy even matter?
The answer depends a lot on our upbringing – the community, personal, and family values ingrained in us from an early age.
But consider this – how we define wealth (and whether it is important to us) dictates how we manage our finances and how we teach our kids to be financially successful.
What is your definition of wealth?
If you google the “definition of wealth in America” you get a myriad of answers.
- Webster’s dictionary defines “wealthy” as people who have an abundance of material possessions.
- Wikipedia discusses wealth in the United States as a measurement of net worth, which is the sum of all assets, including the market value of real estate, like a home, minus all liabilities.
- Similarly, in the book The Millionaire Next Door, authors Stanley and Danko define wealth as having a net worth of $1 million or more. Based on this definition, only 3.5 million (3.5 percent) of the 100 million households in America are considered wealthy. About 95 percent of millionaires in America have a net worth of between $1 million and $10 million.
- According to Slate and the World Top Incomes Database, a household income of about $113,000 lands you at the top 10th, while $394,000 makes you a bona fide member of the 1 percent – surely signs of wealth by today’s standards.
These three definitions seem representative about the attitudes and definitions around wealth: material possessions, net worth, or annual income.
How do you define it? Is net worth your ultimate goal, or are material possessions or annual income your pie in the sky? And…
Is being wealthy even important?
(Think about it for a minute, I’ll wait.)
If you answered yes, why?
Is it important to show your circle of influence you can afford life’s luxuries?
Or, like many in the financial independence community, is it important to accumulate enough net worth to be financially independent?
For our family, wealth is important not because it will afford us the fancy cars, ginormous houses, lavish vacations, and name brand clothes, but because wealth achieves us financial freedom.
And yet, material possessions are a sign of wealth in our society
Don’t believe me? How many times do we ooh and ahh over a friend’s luxurious brand new car or heart a post on Facebook about a lavish spending spree? I know, I know. Judgy McJudgison over here.
The truth is I am totally guilty of this, too… I’ve been one to flash pictures on social media about our new house or a pile of crap (I mean toys) our kids got for Christmas. But, as our family shifted our mentality on spending and saving, I am realizing that true wealth (money in the bank) is much more important to us than material wealth. Yes, the “stuff” is fun, but it often takes away from our big goal of financial independence.
The point here is we all have different definitions of wealth and how you define it for yourself is a powerful tool for managing spending and financial decisions.
Take the time to define what wealth means to you. It will guide your financial path.
Whether we like it or not, being wealthy is a coveted social status. For some, it signals we’ve made it – that we are successful. For others – including many in the financial independence community – wealth means financial freedom.
Our definition of wealth is largely based on how you grew up – your community, your background, and your personal and family values. It is also a concept ingrained in us from a very early age.
But remember, we all have the power to shape (and reshape) what wealth means to us and how we teach our kids what it really means to be rich.
What is your definition of wealthy? Join the discussion below.
Like what you’ve read? Join our community on Facebook!
Image source: Pixabay