Wealth, in fact, is what you don’t see. It’s the cars not purchased. The diamonds not bought. The renovations postponed, the clothes forgone and the first-class upgrade declined. It’s assets in the bank that haven’t yet been converted into the stuff you see. – Morgan Housel
Growing up, I used to think wealth was the big house, the Land Rover in the garage, the holiday home in Goa / Alibaug. I thought that’s why people worked hard, to buy those things.
The monetary definition of wealth, is the maxed out PPF / EPF / NPS. It is repairing your car, instead of trading it in for a brand new vehicle. It’s the mutual fund that pays you dividends while you’re watching the latest Bollywood blockbuster. It’s the rental real estate that gives you returns when you’re visiting your Aunt Asha in Bhopal.
Contrary to widely held notions, the things that many people attribute to defining wealth, are really just things that were purchased that actually brought people further away from wealth.
It’s a lot easier of a concept to visualize the type of wealth that is defined by things you can see and touch – like a fancy car or a big house. It’s much harder for someone to understand that the truly wealthy neighbor is the elderly couple two floors down, with the 15 year old Marutis, and the same row house in Lonavla they bought 30 years ago. Most would think they live like that because they have to, and not that it was a conscious choice. Perhaps they never had debt besides the home loan, and were free to pursue careers of their choosing. It enabled one spouse to stay home with the kids. They were also free to help with their kids’ and grandkids’ college funds. They were free to take that trip to Europe for two months because they didn’t have the burden of things holding them back. They didn’t have the house in Amby Valley that needed to be painted, mowed, and watched over.
As Morgan Housel writes, when you meet someone who owns a $100,000 car, you only know one thing about their wealth: That they have $100,000 less in the bank, or $100,000 more in debt, than they did before they bought the car. That’s the only information you have.
We rarely think of it that way. So much of our perception of wealth is driven by what we see other people buying. Since we can’t see their bank accounts, that’s all we have to go on. But it gives us a distorted view of wealth. Some people we think are wealthy really aren’t; they just spend most of their income. Others we think of as less well-off are actually the rich ones. They’re rich not despite driving an old car, but because of it.
Financial wealth isn’t what you see. It’s what you don’t see.
The only way to be rich is to not spend money you have. That’s the only way to accumulate wealth.
The reason most of us don’t ever get rich is because we have conflicting desires: We want to be rich and spend a lot of money, without realizing that the latter makes the former difficult to achieve.