What Do I Mean By Wealth?

I put up a rough outline of our project on the main page, and I used the words “fabulous wealth” as our goal. But what do I mean by wealth?

It’s one of those terms that’s relative and that has no ceiling — by U.S. standards we are middle class. By Third World standards we are already fabulously wealthy. Larry Ellison is much wealthier than we are, if not, in my opinion, more fabulous.

Dictionary definitions boil down to: “You have a lot of stuff.” And it’s true, wealth is about accumulation, but plenty of people with no money have a lot of stuff.

If you ask people who think about financial planning for a living, “wealth” usually comes down to what they call “financial independence,” or the ability to live comfortably without a salary or any income other than that generated by the return on your investments.

In other words, if you have wealth, you have the freedom to do what you want. Travel. Take an early retirement. Fund a start-up company. Pursue art. Etc.

I’m not sure at this stage, in our mid- to late- ’30s, that we would have enough time to meet that definition before retirement. (In the financial quiz I mentioned the other day, the investment category, outside of retirement savings, was N/A for us.) I’m also not sure that goal is even entirely necessary, as long as we’re doing work we enjoy.

But for me, when I talk about wealth, I’m talking about more breathing room than we have right now. More choices. The ability to make more dreams a reality.

Here’s a really useful way to think about wealth from an exceptionally useful blog. It’s an (inverted) riff on Maslow’s Hierarchy of needs pyramid:

clipped from www.mymoneyblog.com

Survival income. How much do you spend simply to survive?

What-if income. You will want to protect your life. This could mean health care costs, health insurance, and/or proper portfolio planning so you don’t outlive your money.

Freedom income. Money needed to do the things that bring joy and fulfillment to your life. Could be travel, education, or fine wine.

Gift income. Money for people and causes that deserve your help. This is the replacement for “love”.

Dream income. This is the elusive “self-actualization” level where you find true happiness and meaning.

I’m pretty sure we’re somewhere on the second rung of this pyramid, with some “freedom income” in our sights, I hope, by this time next year.

I leave you (and me) with this rousing wealth pep talk by Barbara O’Neill: “Very often, the difference between barely surviving and emerging affluence is planning and a positive attitude.”

I bet nobody ever calls her “Babs.”