How Wealthy Do You Feel?
By Liz Koh
What does the word ‘wealthy’ mean to you? I was asked today by a curious reporter whether I was wealthy or not. I presume the question was prompted by the thought that only wealthy people should be giving financial advice, because after all, what would somebody who wasn’t wealthy themselves know about how to create wealth for others? It’s a fair question. My response to the reporter was to ask how he would define the term ‘wealthy’. The thing is, that wealth is very much a relative concept; that is, you can describe one person as being wealthier than another, but you can’t really say that there is a cut off point of an amount of wealth above which people are wealthy and below which they are not. It used to be that many people aspired to be millionaires, as if it meant that once their assets were worth $1million they were suddenly in a different category than the average person. Of course these days, thanks to inflation and property booms, to be a millionaire is nothing out of the ordinary.
Whether or not you consider yourself to be wealthy depends on who you compare yourself with. Quite obviously, on a global scale most people in this country would consider themselves to be wealthier than people in poverty-stricken third world countries, and poorer than people in wealthy oil-producing countries. However, most people tend to view their wealth on a local scale rather than a global one. The way we define how wealthy we are is by comparing ourselves to the people we mix with socially. This creates an interesting situation where a person who is worth several million dollars might consider themselves to be relatively poor, because they are comparing themselves to someone in their social group who is worth a billion or two. I observe this quite often, albeit at a lower level, with people I give advice to. In other words, I see some people who might have an average level of wealth in terms of the general population but consider themselves to be wealthy because they have much more than their friends or family. I also see others who are much wealthier than the average person but consider themselves to be relatively poor when compared with their peers. How wealthy you are is really defined by how wealthy you feel.
How you feel about your wealth can have a huge effect on your financial future. It is a well known fact that when people feel wealthy, they spend more or take on more debt. We’ve seen this in the last property boom where people increased their mortgages as their property values went up, presumably so they could renovate the house, buy a car, or take an overseas trip. Many such people, faced with huge interest rate increases, are now regretting that move. On the other hand, people who feel poor can sometimes fall into a mindset where they believe they can never be wealthy. That can become a self-fulfilling prophecy because they don’t even try to get ahead.
It’s important to remember that creating wealth is not something that you do for the sake of it. You are wealthy if you have enough to do the things in life that are important to you. By that definition, people who have simple needs don’t need a lot of money to be wealthy. That’s the secret to happiness. So how wealthy do you feel?
Liz Koh is no ordinary financial planner. After a successful career in management spanning more than twenty years, Liz set up her own financial planning company – Moneymax – in 1999. Since then, her mission has been not only to help people manage their money and increase their wealth but also to help people enjoy their lives – to the max! Her list of clients continues to grow through word of mouth and she is a regular contributor to several top newspapers, magazines and websites. Liz is the author of the best selling book – Your Money Personality: Unlock the Secret to a Rich and Happy Life, Awa Press, 2008, available from http://www.awapress.com.
For Liz’s best tips for financial security, visit her website http://www.moneymaxcoach.com to receive your free 8-part eCourse on “8 Steps to Financial Freedom”.