6 Essentials for a Life of Wealth

In my last column we looked at the difference between affluence and wealth. 

My simple definition of affluence is “your income relative to everyone else’s.” If you make $36,000, you qualify as an average Joe – you’re right in the middle of the income numbers for the rest of the country. 

However, someone making $36,000 back in 1960 was earning about 7x the average (or median) income! That would be like making $250,000 today. Most would consider that doing pretty well…probably even being affluent. 

Affluence is relative. It asks, “How do you stack up against others?” 

Wealth is different. To be sure, many measure wealth the same way (via comparison). But that’s not a very useful standard. By that measure only the super-rich—e.g., Internet billionaires and crypto-currency pioneers—can be considered truly wealthy. 

A better understanding of wealth is “the amount of assets one has relative to one’s lifestyle.” 

By this measure, a person with assets worth millions might be wealthy, while another (with the same assets) might not be (due to an extravagant lifestyle). 

The difference between the two isn’t the income, but the outgo.

This “assets to lifestyle” ratio is more useful to more people. That’s because many people are limited in their ability to amass assets; however, they have a great deal of control over the size of their lifestyle. By this measure, you can become “wealthier” as you grow your assets and/or moderate your lifestyle. For most, pursuing wealth involves both actions.

Here are six essentials for a life of wealth: 

  • Strategy. This one is obvious. You’re going to need a plan that combines saving, protection and growth of your assets. And you’ll eventually need a plan to convert those assets into retirement income.
  • Wisdom. Wisdom is the intersection of intelligence, experience, and responsibility. It’s not a virtue acquired quickly but one grown slowly over time. Wisdom perceives the value of balancing risk and certainty. Wisdom combines the power of thrift and the discernment necessary to see good opportunities. 
  • Energy. You can’t be passive—the journey to true wealth takes effort. That’s especially true in the early days of a plan. Plans don’t magically happen…you have to make them happen.
  • Discipline. You’ve got to spend less than you make so you’ll have something to save. That’s short-term pain for long-term gain. You also have to resist the constant temptation to use debt to “keep up with the Joneses.” That would be short-term gain for long-term pain.
  • Resilience. When you begin your journey to wealth, you’ll sail into some serious headwinds. Nearly 100% of the 3,000+ marketing messages you see and hear daily will work against your disciplined strategy. You will have to learn to say “no” a lot.
  • Time. This won’t be a fast journey. And despite all the folks that will invite you to their “get rich quick” fairyland, shortcuts are a one-way street to disappointment. Ask yourself, “Do I know one wealthy person who got wealthy this way? Even one?”

Last week I wrote that affluence tends to be temporary and wealth tends to be permanent. 

For most there will be a natural tension between the desire to live affluently (however short term that is) and the will to create long-term wealth. It’s good to understand and anticipate that struggle. It’s real. 

The question each of us must answer is, “Which do I want…the temporary or the permanent?”

Your answer will determine your path.

If you want to take the path to seeking long-term wealth creation, one place to start is by reading my free e-book “How to Put Financial Worries in Your Rear View Mirror.” You can write to me at bmoore@argentadvisors.com and request your free copy. There’s no cost or obligation. 

Argent Advisors, Inc. is an SEC-registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information here.

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