The Definition of True Wealth

A wealthy definition

I was reviewing a manuscript for an author friend of mine when I came across his definition of wealth: “Your family home paid off (no debt), and $2 million in investments.”

He said that some people fool themselves into thinking they’re millionaires because of the value of their home, but he argued (quite rightly) that in order to access the money they’d have to sell up, and they’d be homeless millionaires. True.

I’ve never thought about wealth as a specific number. After all, there’s no ‘who wants to be a millionaire’ celebration when your bank account reaches a million bucks in cash (although if you borrow a million, one of the banks will assign you a private banker and give you a free polo shirt).

For me there are two factors that determine how quickly you become wealthy – and neither has anything to do with how much money you have right now, or how much you make.

  • The first factor is what your brain tells you it needs to be happy. Most of the millionaires I meet are not financially content. Most never will be. They tell themselves they’ll be happy when they have more stuff, be it a boat, a home, or a car. Then the cycle repeats.

Yet the easiest way to feel wealthy (and safe and secure) is to get rid of your debts and have some savings. Spending money on experiences (travel, nice dinners, education) will make you happy.

  • The second factor is your ability to focus. We live in a world of almost unlimited choice – which for many people translates into unlimited inertia.

If I were to boil down the wisdom of my grandfather, the wealthiest person I know (in character at least), it comes down to having a few ‘no matter whats’ in life and sticking to them through thick and thin.

Here are mine:

“No matter what, I pay my way”

A shopkeeper once told me that my grandfather was the first bloke to pay his bills – he could be counted on. That stuck with me. It was through him that I learned that being a person of your word matters a whole lot more than your bank balance.

Quite often wealth gurus contact me in search of publicity. Most follow the same story: they were bankrupt, hit a low, bounced back and struck it rich (trading, property spruiking, Amway), and they’re now on a mission to help others.

Barefoot: “That’s inspiring stuff. So now you’re rich, you obviously went back and paid all your creditors back, right?”

Guru: “Well, not exactly.”

“No matter what, I won’t have consumer credit”

The banks are much better at marketing debt than I am at managing it. They do it for a living and make billions of dollars in profits. I’m no match for their game, so after a few failed attempts I made a vow to never borrow money other than for a property – no matter what.

This week I applied for a travel money card at my local bank and was told there was a $15 ‘fee’, which could be waived if I had a gold credit card.

Barefoot: “I don’t have any credit cards.”

Banker: “Well, you could get one, and just not use it, and get the fee waived …”

Barefoot: “No way. And you’re in breach of the Consumer Credit Code” (admittedly, a total bluff).

They waived the fee.

“No matter what, I’ll keep investing”

Seemingly, there’s every reason in the world not to invest right now: the trillion Euro debt fix is quickly unravelling, commodities prices are falling because of lower growth, there are concerns that China is running out of steam, and a huge bout of inflation could whack us all between the eyes. You’d be hard pressed to find any good news about the short-term future.

But history shows this is exactly the type of market when successful investors make the most money, and when professional fund managers miss a golden opportunity.

Five years ago, when the market was 40 per cent higher than it is today, the very same professionals who are now so gloomy were buying shares with their ears pinned back. At some stage – probably when prices are much, much higher – they’ll be buying again.

Complexity Kills Contentment

If you watch too much television, or listen to the Federal Opposition, you probably think we’re living through genuinely tough times. We’re not – not even close. We’re comparatively the richest place on the planet. Even our poorest are relatively rich, as they have access to financial support and free medical care.

For all these reasons people place far too much importance on external events − what the Reserve Bank does, what political party gets elected, what the economy does next. In truth, none of that matters very much at all – though they do provide plenty of ways to procrastinate.

Thankfully there’s a simple solution – which is why it works – and why it’s stood the test of time. What are your ‘no matter whats’?

Tread Your Own Path!