“He who wishes to be rich in a day will be hanged in a year.”
– Leonardo Da Vinci
When reading about wealth, a variety of numbers get thrown around about when a person can be called rich. A fair average of these estimates seems to lie around 5 million U.S. Dollars in net worth. This answer does not take into account a fundamental issue with the question.
Being rich or wealthy is about possessions. It is usually quantified by the amount of money you own – whether it is tucked under your bed, invested into high dividend paying stocks or by the value of your physical assets. When I google ‘rich’ or ‘wealth’ I am bombarded by pictures of men in suits holding U.S. Dollar bills, a CEO of a big company lounging back in his chair with a cigar in his mouth or huge skyscrapers with interiors lined with gold and a big family name on the rooftop that signals “TRUMP TOWER”. There are some issues I have with this method of quantifying wealth.
Wealth is relative
When can a person be considered ‘rich’? Is the bar set at 100.000 U.S. Dollars, is it 5 million, 10 million, a trillion? What about 500 years ago, is the line in the sand – even when accounting for inflation – drawn in the same spot? Rich, in this sense, is not an absolute term, but it is relative to the wealth of others. It fully depends on what you compare yourself to.
Let’s compare the average modern western citizen to the wealthiest of the wealthiest 200 years ago; The modern citizen will look like an emperor in comparison. We now have access to countless technological advances that materially impact our lifes in amazing ways; We have a refrigerator inside our home that removes the need to visit the market every other day. We have a washing machine cleaning our dishes that provides us with valuable free time to spend as we please. We have medical care that is unrivaled throughout history. We have the internet granting us access to practically infinite knowledge to consume. The list goes on and on.
When you ask an average modern western citizen though, they do not feel rich. This is because people compare themselves to their local peers instead of comparing themselves in absolute sense. They focus on a neighbor with a nicer suit, or a friend that made a killer-app and now lives in Silicone Valley. In fact, studies has shown that people do not become happier if their country – on a per-capita basis – increases in wealth if the income equality also increases. It will actually raise unhappiness because they do not focus on the extra dollar in their pocket but they only feel envy that the local entrepreneur got two extra dollars in their pocket.
It actually ties in with a concept called the Hedonic Treadmill which states that a person will – over time – always seem to return to a baseline of happiness in their life, regardless of positive or negative effects. It works the same with money, the more money a person has, the higher up the financial ladder their comparisons will lie which consequently means that their happiness will not increase at all.
Money is worthless
Let me return to the original titular question and elaborate on what I think quantifies wealth. I have said so before and will repeat this over and over since I think it is so very fundamentally important: money by itself is worthless. The value that comes from money is the ability to exchange it for utility. It is merely a means to an end, a tool. But money alone cannot be exchanged for everything; You cannot buy health. You cannot buy family. You cannot buy true love and friendship. Yet they are all valuable possessions that add to our total wealth. Most importantly, money does not have a relation with our most valuable asset in life: TIME.
When we are born, we all are gifted with a virtual bank account filled with time. Although it is impossible to know and observe the balance of this account – how much time we have left – the fact remains that our days are numbered and as the responsible manager of your life you must manage this asset. Unfortunately, the amount of hours, minutes and seconds in our lives cannot be realistically controlled, we can spend it on things we enjoy, we can waste it on unhealthy behavior or we can – by luck – be awarded with additional time through medical scientific advancement.
What can be managed, however, is the value of our time. The time we have left can be improved or decreased by the amount of assets in our life and our perspective. Although money is part of this equation of value, an hour spent with your loved one is at least a thousand times more valuable than an hour spent arguing with your boss on whether or not you were 5 minutes late – regardless of your net worth.
Money does matter
This doesn’t mean that money does not impact the value of your time at all. I invite you to go live in a poor, rural village in Africa – where one struggles to find food and water each day and disease is commonplace – and defend the conviction that money does not impact happiness. It does.
In fact, once a person moves past the lower tiers of Maslow’s famous pyramide of needs and can provide basic needs – food, water and security – money still impacts happiness. A famous study has shown an optimal amount. An annual income of around 75.000 U.S. Dollars is enough to avoid day-to-day stress about finances – whether you are able to pay your mortgage, whether or not you can buy entertainment and go on an occasional holiday -, and more importantly it has been observed that any income above this amount has no effect on happiness.
A wealthy person maximizes the value of time
So I think an appropriate measurement to what makes a person rich is the total amount of value they insert in their time. It should be an important goal in your life to maximise the value of the time you have left. In other words, make each day count. All other possessions in life should be used as an asset to improve the value of your time. Money is one of these assets, but beyond basic needs, it’s probably not the most effective.
Time itself can be an asset used to improve the value of the remaining time in your virtual time-bank-account. Sometimes, we have to invest time in order to gain benefits that will improve the rest of our life. An example might be going through 15 horrible dates to end up finding the love of your life on the 16th date. The possibly agonizing time spent perusing romantic partners was a great investment. Investments like this do come with an opportunity cost however, so one must make sure that the time spent this way must pay itself back in value for it to have a compounding effect on your life. Time lost is lost forever, so spent is wisely.
There are people who love their business and invest 18 hours a day working on expansion of their company (and as a consequence, earn millions and millions) and are the happiest person you will ever meet. However, it’s not the money that makes them happy, it is the journey. They spent 18 hours a day doing what they love! Where on the other side of the spectrum, you might have someone who struggles through a depressive life to earn millions, only to find out at the end that the money does not generate happiness for him. He has wasted the time in his life, a terrible, terrible investment mistake. At the end of the ride he has a valuable physical bank account, but the value of his virtual-time-bank is lost. Consider carefully how to invest your time, and don’t waste it, because it is the most valuable asset you have.