What Does it Really Mean to be Wealthy?
The words rich and wealthy tend to be used interchangeably. But they actually mean very different things. Building true wealth requires a mindset that goes beyond just accumulating money.
For many people, wealth is about material possessions. They think that the more money they have, the more they can buy, and therefore the happier they will be.
However, true wealth is not simply about high living standards. It is rather about having the personal and financial freedom and security to live the life you want, on your own terms.
That requires being committed to living below your means, having sufficient savings set aside in case of a financial emergency, and investing in wealth-creating assets that will grow over time. But it is also about more than just your finances.
Wealth can certainly include material possessions and financial assets, but these are only a small part of the picture. Wealth also means enjoying good health, strong relationships, and a sense of purpose in life.
Research has shown that people who prioritise these non-material aspects of wealth tend to be happier and more fulfilled than those who focus solely on accumulating material possessions.
In 2019, Ashley Whillans published research in the Harvard Business Review that found that people willing to give up money to gain more free time have higher levels of life satisfaction, more fulfilling relationships and live happier lives overall.
‘Research shows that those who feel time-poor experience lower levels of happiness and higher levels of anxiety, depression, and stress, Whillans wrote. ‘They experience less joy. They laugh less. They exercise less and are less healthy. Their productivity at work is diminished. They are more likely to get divorced. And in our analysis of the Gallup survey data, my team and I even found that time stress had a stronger negative effect on happiness than being unemployed did.’
A wealthy life is therefore not solely defined by how much money you have. It is rather about how you use your money to support your wellbeing.
Having the financial security to do this could be called financial freedom. This is, however, a term that is often misunderstood.
Financial freedom can be defined as the ability to live the life you want without being constrained by financial concerns. It doesn’t necessarily mean having so much money that you don’t have to work. It is more than possible to achieve financial freedom while still working for an income, provided you are secure in the knowledge that your earnings more than cover your expenses and you have enough of an emergency savings buffer should something go terribly wrong.
Financial freedom really means not constantly worrying about money. And research has shown that this is a key factor in overall life satisfaction.
Worries and wellbeing
A study published by Princeton University psychologist Talya Miron-Shatz in 2009 found that women who spent a lot of time worrying about their finances were less likely to be happy with their lives than those that were less concerned about money. And this was even true of women who had significant incomes.
“Even if you are making a hundred grand a year, if you are constantly worried that you are going to get fired, that you are going to lose your health insurance or that you are simply not sure you are going to ‘make it,’ you are not going to be happy,” Miron-Shatz said.
On the other hand, those women in her study who didn’t fixate on their finances were more likely to be happy. What these women showed was a sense of financial stability. This didn’t correlate with how much money they had, but rather how secure they felt about their ability to keep living their current lifestyle.
Building true wealth
True wealth is therefore more about building financial security than just accumulating money. That is what leads to a sense of financial freedom and overall wellbeing. And this is within reach for any investor if they adopt a few basic principles:
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If you have any questions/thoughts in relation to this article or have a need for some advice and would like to discuss your particular situation, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.
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