Are you wealthy? Or do you just have a lot of money?
If you’re a homeowner who’s ever tried to sell your house, or took the real estate course to get an agent’s license, you probably heard this: “A house is worth however much someone is willing to pay.” Now, there are many factors that affect the sale price of a house - market conditions, what shape the property is in and what upgrades have been made, and of course, location, location, location.
But if a first time buyer, or any buyer, is really in love with the house, if they consider it their dream house, they’re probably going to put in an offer that’s 10 grand above the asking price to buy their dream, and outbid whoever else is drooling over it. Why? Cause that’s the price they were willing to pay for it.
So let’s make a distinction here.
Money represents a dollar amount. Wealth means value. Money allows you to buy things in the currency of your domicile. Wealth means you don’t have to worry about having enough money to buy it. Susan Bradley, a certified financial planner and the founder of Sudden Money Institute had this to say on the subject:
“Wealth to me is a much bigger, deeper experience,” she says. “And a lot of people with money don’t have wealth.” Being wealthy means your money has bought you an “emotional sense of safety,” she says, and your general well-being is secure: “The feeling that, ‘No matter what, we’re going to be OK. No matter what, we’ll figure it out. We have the resources.’” Which leads us to the conclusion:
Wealth Is Relative.
If you’ve ever moved from a small town to a big city, you’ve probably heard this from the folks you left behind: “Why don’t you move back home? Your money goes so much further here.” What’s really irritating about this is they’re right. Well, half right at least. If you move back to the old hometown and get a job paying the average salary for your area, you’ll be just that - average.
But if you go back and score a high paying job at some big corporation a few miles away on the interstate, you’ll be relatively wealthy. Make what seems like that high paying salary in the big city, and, yep - you’re back to average income again. See how it works?
You’re sitting in your closet-sized apartment in San Francisco paying a fortune for rent cause you can’t afford to buy a house at a median price of 1.3M, and your cousins are posting pictures on Facebook of the 4000 square foot home on 3 acres they just bought in Decatur, Georgia for 200 grand. You’re still in the closet. They’re in a mansion.
The relativity of wealth and money is a concept we experience every day. It has to do with how far our money goes based on where and how we are spending it.
Wealth Means Living Below Your Means.
In Tim Ferris’s book “The 4-Hour Workweek”, he chronicles the results of a survey that was very telling about the wealthy. Ten millionaires were asked what their favorite brand of beer was. All 10 had the exact same answer: Free.
Wealthy people follow a very simple formula for holding on to their money. They don’t spend it. Not like you’d think. There was a book that came out in 1996 called “The Millionaire Next Door”.
The authors compare the behaviour of those they call "UAWs" (Under Accumulators of Wealth) and those who are "PAWs" (Prodigious Accumulators of Wealth). Their findings, that millionaires are disproportionately clustered in middle-class and blue-collar neighborhoods and not in more affluent or white-collar communities, came as a surprise.
The book explains in detail that high-income white-collar professionals are more likely to devote their income to luxury goods or status items, neglecting savings and investments. That guy in the nice suburban neighborhood with the big SUV, and the nice fishing boat attached to it is not your average rich person. Wealth doesn’t just mean you have a lot of money. It means you live a lifestyle and control you’re spending so you stay wealthy.
Think Wealthy To Be Wealthy.
The human mind is the greatest and most powerful resource for building wealth. Not a lot of money in the bank or crypto or NFTs, not or oil and gas investments or precious metals you could lose tomorrow with bad financial planning or the wrong mind set. It comes from educating yourselves on how to make money, and more importantly, how to hold on to it.
And you can take that right to the bank.