How Do You Measure Wealth?

How Do You Measure Wealth?

“I will be rich if I strike the top prize in this week lottery!” That sounds familiar. 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 luxury house with a swimming pool, big BMW car, expensive jewellery 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 forward if you stop working today”. It is not measured in dollars and cents, but by the number of days which you can afford to not 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, ie, expenses. The number of days we can survive if we do not work is dependent on the amount of money we have and the amount of money that we expense.

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

You live in the luxury house with swimming pool, drive a big BMW car, dine in posh restaurants and spent lavishly on designer’s fashion wear and jewelleries. Basically, you are living a lifestyle of the rich and famous and your monthly expenses totalled about $10K. With $1 Million, this kind of lifestyle can only last you 100 months.

Compare with if you live a reasonable house, drive a reasonable car, do not splurge on expensive items, which Robert Kiyosaki called doodads, and your total monthly expenses is $5K. You will be able to last twice longer with this lifestyle.

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 term, 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 income generation assets, to help in achieving your financial freedom.

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

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