From the ancient times, we are warned to ascertain what true wealth is.
If you remember the story of King Midas, he asked gods that everything he touched should turn into gold.
Gods granted his wish. His joy soon turned to horror, however, when during a sumptuous feast, every piece of food he touched - turned into gold
Is gold wealth? Certainly it's the best store of value mankind has ever found.
It protects citizens from thieving governments. It's difficult to inflate your currency, when citizens
can turn in the paper money for gold - thus governments uniformly hate to have gold based currency,
and throughout history either debased gold coins, or did away with them altogether.
Yet, as Alan Watts, in his delightful book "Does It Matter?: Essays on Man's Relation to Materiality", correctly observes,
for a shipwreck survivor, alone on an island, gold is worthless. He needs real wealth - food, shelter, clothing,
Food, shelter - this is the original definition of wealth. Through most of human history, governments, brigands,
and others of dubious moral standing extracted wealth from populations in the form of grains, pigs, wood etc.
Taxes were defined either as a percentage of crop, or as a certain weight of crop.
Today, as modern societies came to rely on paper money as a medium of exchange, we still return to basics.
Nobody really needs scraps of paper with pictures of dead presidents - but everyone knows they can
satisfy our needs - immediate, physical needs - food, shelter, clothing. They also satisfy emotional
and psychological needs - sense of security, power, need for companionship. It may be worthwhile to explore
your own meaning of "wealth". We suggest reading " Your Money or Your Life" - a book by Joe Dominguez, who left Wall Street BEFORE he made millions,
and spent rest of his life not-working.
Million dollars used to be synonymous with wealth. It satisfied all reasonable needs a man and his family could have.
Unfortunately, since our government continues to print dollars
as if they were going out of style, these days, the magic number is closer to $5 million.
But do we really need the $5 million? - or do we need the cash flow that $5 million would generate, and the security
of knowing that the cash flow will continue uninterrupted for as long as we need?
$5 million, invested at 8% would generate $400,000 per year. Unless you have some very expensive habits,
$ 400,000 per year - forever - should be sufficient.
Looking at wealth from the perspective of cash flow can be freeing. Instead of the daunting task of accumulating
5 million dollars, one can instead create multiple streams of income that together will add up to the needed cash flow.
Here "Your Money or Your Life" is particularly helpful, since it includes exercises to figure out how much
monthly cash flow one really needs to be free from the slavery of work - you may be surprised how low that figure can be.
Which brings us to perhaps best definition of wealth we found - apparently Buckminster Fuller came up with following
concept - how many months could you live your current lifestyle if you lost your job? That's how wealthy you are.
If you could live for 5 months - then you are 5 months wealthy. If you could live for a year - then you are 1 year wealthy.
What if you had enough income each month from sources other than your job to cover your living expenses each month -
then you would be wealthy forever - free to do whatever you wanted with your life. For many, this seems like an unattainable dream.
Yet consider - your two biggest expenses are taxes and debt. If you were debt free - how much less would you need each month?
If you needed less money to live on, you could earn less money - thus lowering your taxes. Just as having high debt forces you into
a vicious spiral of having to earn more, thus having to pay more taxes, thus having to earn more just to stay afloat - if you had no debt,
you would be in a virtuous spiral - needing less money, you could earn less, which in turn would lower your taxes,
which would in turn mean you could keep more of your money, while earning less. At some point, you might find that
your investments, or a small business generated enough income to be able to quit a job altogether, and regain control
over your life.