Wealth

by Admin
Updated: June 6, 2018

A definition of wealth as ownership of a significant amount of convertible resources

Wealth means different things to different people. It broadly means access to an abundance of whatever makes you happy.

A useful definition of wealth for practical purposes is: Ownership of a significant amount of convertible resources.

Here it is broken down into individual concepts:

Resources

Resources in this context are anything that is valued by others.

Convertible

Convertible means it can be exchanged for something else that is desired by others. The most readily convertible resource is, of course, money.

Significant amount

An amount is significant if the people around you think it is. Your own opinion doesn’t count.

Ownership

Ownership in this context is not related to your net worth.

If you have $10 in the bank and you owe $10 on a loan, your net worth is zero and no-one will describe you as wealthy. If you have $10 million in the bank and you owe $10 million, your net worth is still zero but some people will say you’re rich.

The simplest and most useful way to use this definition is to count only currency and assets that are instantly saleable. This means add up the value of cash/bank, publicly traded shares etc. and deduct all debts (loans, credit cards etc.). Don’t include the value of any assets you can’t sell quickly such has buildings but do include what you owe on them such as mortgages. The number may very well be negative but this is about a definition that is useful, not making you feel good.

Once you have this number, calculate it the same way at the end of each month and measure the difference from the previous month.

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