What is Wealth?

Wealth is something we talk about all the time. The goal for most of us is to acquire wealth. You would think that with all the talk that goes on about wealth there would be a clear definition of what it is. Unfortunately there isn’t. Wealth means different things to different people. In general wealth is an indicator of your net worth but it is also a much more subjective term. This is what makes it so hard to pin down a definition.

Basically wealth is how much stuff you have. It is really just another way of describing your net worth. Your wealth is your assets minus your liabilities. The more you have the more wealthy you are. Of course when make reference to being wealthy we are entering into a very subjective area. That is because in a lot of ways wealth is a relative term. For example a person who is poor in the United States would still likely be considered wealthy by the standards of many third world countries. Therefore you can’t really use a single definition of wealth. You will need to take a lot of factors into consideration.

In most cases wealth is going to be assessed compared to other people where you live. After all it is of little consolation for a person living in poverty in the United States to know that he would be considered wealthy in Africa. People make this kind of argument all the time and it is silly. They also say silly things like we are wealthier than people in the past were. Again this is completely irrelevant. The only thing that matters is how much wealth you have for the time and the place that you are living.

One definition of wealth is how much freedom you have. If you have the resources to allow you to quit your job and travel around the world you would probably be considered wealthy. On the other hand if you have to work two jobs just to pay your bills it is hard to say that you are wealthy no matter how much stuff you have. This is just one of many possible definitions of wealth but it is as good as any other.

It is important to remember that you need to account for debt when you are calculating your wealth. Again it is all well and good to have lots of stuff but if you owe more than the stuff is worth then you really aren’t wealthy. One of the biggest problems facing the country is that many people are living a lifestyle that exceeds their ability to pay for it. They have the appearance of being wealthy but they really aren’t since it is mainly built on debt. You can only live beyond your means for so long before it comes back to bite you. Sooner or later all that debt has to be paid back.