Different people measure wealth in a variety of ways. On one end of the spectrum, we have the purely quantitative believers who equate wealth with money and only money! On the other end of the spectrum, there are those that believe wealth is measured by your spiritual fulfillment and goodwill such that you could have a lot of money but still have no wealth!
In my opinion, true wealth is a hybrid of many things that need to be present, such as current asset size, cash flow, future earnings potential, goodwill, contribution to humanity and spiritual satisfaction. Of course, there is a lot of room for variance in the level each of these ingredients are present in the wealth mix. Thus, it is entirely possible for people to have different opinions on the wealth of a person, including themselves.
Let me explain these ingredients. Current asset size or net asset size is a rather easy concept to understand. This means putting together everything you own while taking out all your loans, debt and liabilities. This is the most visible manifestation of wealth consisting of houses, cars, jewelry, artworks and so on. Only having non-earning assets will not make you wealthy since owning these assets requires a fair amount of maintenance costs, insurance, manpower expenses, taxes and so on. This is why thieves, no matter how much they have stolen are hardly categorized as wealthy.
Having cash flow means being able to generate income from something. This could be from rental properties, investments in equities and fixed income securities, businesses, salaries and wages, and royalties. However, having cash flow is not enough to be considered wealthy. You need a cash flow of sufficient magnitude to accumulate wealth and the lifestyle that comes with it.
Future earnings potential is an essential ingredient in measuring wealth. Even when you have assets and a cash flow, the indicator of how well you will do is your future earnings potential. If you keep on investing in earning properties, chances are that your income stream will increase. On the other hand if you have been selling off your capital assets that provide cash flow, time will come that you will no longer be able to sustain your wealth.
Goodwill is being able to maintain a positive name for yourself in your community, industry and social circles. If you don’t have this due to bad business practice and wrong decisions, you are eroding your support base, potential clients and investors. Once you have destroyed your name, it is very difficult to regain the trust of people.
Contribution to humanity means doing something for the benefit of mankind or even just your local community. You don’t have to win the Nobel Prize, but having a philanthropic steak puts you at a level of recognition that boosts your image and feeling of accomplishment. Helping out other people is a good thing and being able to do that also indicates your degree or wealth. Naturally, without these resources, making a contribution to humanity will also be challenging.
Having spiritual satisfaction is probably the best measurement of wealth. Being at peace with yourself and satisfied with what you have done with your life counts a lot towards being able to sleep well at night. Ultimately, you are the best person to measure your own wealth, unless you are delusional, unfortunately we do have quite a number of those around…
(The views and comments of the author are his own and not of the newspaper or FINEX. Dr. George S. Chua was 2016 FINEX President, FPI President from 2010 to 2020, a regular member of the National Press Club, an entrepreneur with investments in Broadcast, Media, Telecommunications, Fintech and Properties, and has various positions in other companies. Comments may be sent to [email protected])