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
I love this quote from Morgan. Why? Because now at 30 years old, this makes so much sense to me, but at 18 I wouldn’t have understood it.
Growing up, I used to think wealth was the big house, the Mercedes in the garage, the lake house, and the ski boat.
Wealth, and I’m speaking for the monetary definition of wealth, is the maxed out 401k, IRA, and HSA. It is the $1,200 to replace the timing belt in your car, instead of trading it in for a brand new $30,000 vehicle. It’s starting that side hustle that will bring in an extra $1,000 per month. It’s the index fund that pays you dividends while you’re playing catch with your kid in the front yard. It’s the rental real estate that gives you returns when you’re visiting your Aunt Ada in Boise.
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 houses down, with the 15 year old Toyota’s, and the same ranch house they bought 40 plus 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 mortgage, 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 lake house that needed to be painted, mowed, and watched over.
I think even if this quote was shared with me as a child or teenager, unfortunately it probably wouldn’t have changed my point of view. I think my life and experiences needed to come first for that quote to make total sense. With that being said, maybe for other children, setting this example would have clicked much earlier.
They would have had extra decades to let compounding interest work its magic. Money would have been used as a tool from the start to build wealth, instead of something that was traded for things.
The post first appeared on FerventFinance.com on July 2nd 2019