How To Measure Wealth?

by Guest on August 15, 2009

“I will be rich if I strike the top prize in this week’s lottery!” That seems to be the most usual exclamation from fellow workers looking for a quick way to escape the rat race.

Thinking back, is wealth really measured by how much money you have in the bank?

A lot of us usually think that wealth is signified by the possession of a lot of money or owning a lot of luxurious items. We have often associated wealthy people with the luxurious house, big car, expensive jewelry they owned or the posh restaurant, which they dine in, etc.

For Robert Kiyosaki however, the concept of wealth is defined simply as “The number of days you can survive going forward if you stop working today”. It is not measured in dollars and cents, but by the number of days, which you do not have to work! It is not your conventional definition, which you might have expected but I must say that this is very logical and common sense!

Based on my understanding of Robert Kiyosaki’s definition of wealth and the concept of income and expenses, I see the amount of money one has, formed just part of the wealth equation. We also need to look at the other part of the equation, which is the outflow of money, i.e., expenses. The number of days we can survive if we don’t work is dependent on the amount of money we have and the amount we spend.

Take a simple example, you have accumulated $1 Million in the bank and you stop working.

You live in the luxury house, drive a big car, dine in posh restaurants and spend lavishly on designer’s fashion wear and jewelry. Basically, you are living a lifestyle of the rich and famous and your monthly expenses totaled $10K. This can only last you 100 months.

However, if you live in a reasonable house, drive a reasonable car, do not splurge on expensive items, which Robert Kiyosaki called doodads, then your total monthly expenses might be $5K. Your money will last twice as long

By Robert Kiyosaki’s wealth definition, you are twice as wealthy in the second scenario than in the first.

Our goal of financial freedom is therefore to ensure that we can survive as long as possible without working. Financial freedom is not just about what amount of money we have accumulated now. In simple layman’s terms, it is about your means and ability to fund the kind of lifestyle you have or wish to have, when you stop working.

Besides using accumulated wealth to fund your lifestyle, you should also look into creating income-generating instruments, or what Robert Kiyosaki called assets, to help in achieving your financial freedom.

It is essential to understand Robert Kiyosaki’s concept of wealth to able to achieve as well as to sustain your finance freedom!

 

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