The Land Of Critical Mass…


Wealth means different to different people. To some, it is living THE life…fancy cars, gigantic homes, exotic vacations and all the other trappings associated with coming into a lot of money. To others, excessive consumerism might not hold as much sway and maybe a more spiritual existence is what defines true wealth. That’s perfectly fine but in our pseudo-capitalist, market-based system with not much of a semblance of a true financial safety net, this other extreme is not practical either. And hence some amount of balance is required between the two that we will expand on in a minute.

But is being rich the same as being wealthy? There are similarities but there are also big differences. Being rich is a state which is more current or transitory. Lottery winners, newly discovered celebrities and athletes and even folks working in high-paying professions such as medicine and law belong in the rich category. They have quite a bit of money flowing in but most of it is derived from a single source. And the rate of outflow sometimes equals or exceeds the rate of inflow. The state of being rich could happen instantly and it could also disappear at a moment’s notice.

Wealth is more permanent and comes mostly through ownership of income-producing assets…enough assets that allows for a life full of choices. And the income that these assets generate continues to grow with time and gets to a point that it replaces the income needed to support one’s day to day existence. So regardless of whether you work or not or if the skills you possess are in demand or not, your standard of living remains unaltered. If the same thing were to happen to a merely rich person, he would quickly become poor. So with wealth, you buy freedom. Enough wealth that you don’t need to rely on a paycheck, enough wealth that you can stop doing anything remotely associated with work and instead do something you always wanted to do. You want to work for a non-profit that hardly pays anything, you have the freedom to do that. That business you always had an itch to start, you can do that. Or if all you wanted is to retire, you can do that too. All of that without affecting your family’s quality of life and that is what we define as hitting critical mass.

And getting to that point is a slow and oftentimes an excruciatingly boring process. You save and then invest and then save and then invest and continue that for a decade or two and then you get to that point. Any wonder you come across many “get rich quick” schemes but not too many “get wealthy quick” schemes.

But this is not an all or nothing deal. We do not preach giving up living in the now and accumulate all these assets to only live in the future. We want you to have a balance between consumption now and consumption in the future. No point under-consuming now and leave all the consumption for the future. At the same time, don’t over-consume now and leave nothing for the future. A healthy balance between the two extremes will make sure that you live a life that is truly well-lived because, because and sorry for the revelation…You Only Live Once or what my soon to be a teenager daughter would say, YOLO. And all this is only possible with a proper, goal-based financial planning process.

On a slightly lighter note, Chris Rock nails it in explaining the difference between rich and wealthy. His language might be a bit colorful so discretion is advised.

Chris Rock “Rich vs. Wealthy”

Image credit – Fytschyphoto, Flickr