Four Types of Wealth: Financial Wealth
READING TIME: 3 MINUTES
Most people think the word 'wealth' is related only to finance but this is only one part of what it means to be wealthy. In reality there are four different types of wealth; financial wealth, social wealth, time wealth, physical wealth. In this short series on wealth I will go through the four types of wealth.
Financial Wealth (Money, Assets)
Financial wealth is relative and varies from person to person based on what you enjoy and how you spend your money. It all boils down to financial freedom and being able to enjoy and spend however you want and when. Normally people outspend their earnings too quickly and increase their spending as they earn more money and effectively makes it more difficult to achieve financial freedom despite improving their chances of achieving it.
Majority of people have too much of the month left at the end of their money. In the US it was reported earlier this year that 78% of workers participating in a survey are living paycheck to paycheck and more than 50% said they manage to save less than $100 per month.
If you outspend your earnings you will never achieve sustainable financial freedom - financial wealth.
It's possible for anyone to achieve a basic level of financial wealth by adjusting their consumption, work on managing money going out and make educated decisions with the money you gain and assets you have.
Financial wealth consists of understanding and mastering the following fundamentals:
- Budgeting (Consciously Allocating Money) > Spending More Than You Earn
- Financial Literacy (Reading Books, Blogs, Podcasts) > Lack Financial Literacy
- Spending (Necessities vs Luxuries) > Realise That the $100 Bag is as Good as the Branded $300 Bag
- Investing (Assets vs Liabilities) > Not Investing (Including not investing in Yourself - Health, Learning)
- Successful Behavior Change > Bad Habits
- Model thinking around Long Term > Short Term
- Surround Yourself With Like Minded People > Hang Out With the Wrong Crowd
If you actively work on these fundamentals you will greatly improve your chances in achieving financial wealth - as a byproduct you are gradually making your life more secure and gradually you will achieve other types of wealth.
The Goal: Independence
The goal is to depend on nothing because you are wealthy while being able to make use of your wealth whenever it's needed.
For the wise man does not consider himself unworthy of any gifts from Fortune’s hands: he does not love wealth but he would rather have it; he does not admit into his heart but into his home; and what wealth is his he does not reject but keeps, wishing it to supply greater scope for him to practice his virtue. - Seneca
Remember financial wealth is relative to your lifestyle. There are plenty of people keeping the same lifestyle year after year even as they make huge leaps in financial gain. There are people with average wages achieving financial security and a degree of financial wealth. Anyone can try to achieve it and be better off because of it.
What these people normally have in common is that they have high integrity, realized that materialistic possession doesn't equal happiness, a plain white $14.99 t-shirt does the same job as a $39.99 branded plain white t-shirt and they are investing money (side projects, stocks, real estate and/or alternative investments) to create more freedom and time to enjoy life; cut down on the 8-to-5, travel, build a home, good food, good drinks, reading or whatever it is you truly enjoy.