The definition of wealthy

So… now you are motivated to do something with your life.  What now?  There are several areas in life that everyone needs to work on.  Those are, in no specific order…

1)      Financial

2)      Health

3)      Spiritual

4)      Family

5)      Personal

Now, let’s look at the financial part.  I start with that one, because all of these have to be done every single day.  This is not something you can work on step by step, process by process.  It has to be done all at the same time.

Anyways, in order to be “wealthy”, one must first define “wealth”.  The dictionary says wealth is “an abundance of valuable possessions or money.”  Which is a really worthless definition.  Buckminster Fuller provided a better definition.  He said wealth is a measure of how long you could live if you quit working tomorrow.  A person is “wealthy” when the income produced comes from efforts that are not their job.  That’s a big can of worms…  so let’s make this simple. 

1^st example.

Let’s say you have $1,000 in expenses every month.  Your investments and other income aside from your job equates to $100 a month.  Your wealth could now be defined as 1/10^th of a month. 

2^nd example

If you have $2000 in savings, $1,000 per month in expenses, and $100 per month in  income.  Then your wealth is now…  

First month…  $1000 expenses, minus $100 in income.  Leaves $900, so take that out of savings.   So you now have $1,100 in savings. 

Second month.  $1000 in expenses minus $100 in income.  Leaves $900.  Take that amount out of savings.  Leaves $200 in savings. 

Third month.  $1000 in expenses minus $100 in income.  Leaves $900.  Minus $200 from savings.   Leaves you with a $700 deficit.  Your wealth has lasted you 2 3/10ths of a month. 

3^rd example.   You have $2,000 in expenses per month.   Your income from investments and other (non-work) methods is $2,100. 

So long as this person continues to live within their means, then this person would be considered wealthy, because that person can live effectively forever without ever working again. 

So, that’s my definition of being wealthy.   Now that we have that part considered, let’s look at what we can do.   Your best bet is to follow the Dave Ramsey plan.

1)      $1,000 cash in the bank.

2)      Get rid of all debt except your house.

3)      3-6 months expenses in the bank.

4)      Save for retirement

5)      Save for kids college.

6)      Pay off the house early

7)      Build wealth, and give a bunch of it away.

IN THAT ORDER.

Why do you want to do this?  Remember our 2^nd example.  The person with savings lasted much longer without a job than the person without savings.  The next part, elimination of debt, is to decrease our expenses so we can become wealthy faster.   It’s a lot easier to get $1,000 per month in income you don’t work for than it is to get $5,000 a month.   In my case, I only need about $1,500 a month to reach the definition of wealthy.  At that point, I could quit my job and survive indefinitely without ever getting another job.  

All making sense?  I hope so.  This is the easy part.