The ancient pharaoh’s of Egypt were certainly wealthy, but they are not doing too hot now. In modern times most people still want to be rich. Given that it is a pretty difficult task to go from poor to wealthy in a lifetime, we ask the question; is it something really worth pursuing? Is it okay to be poor? Or is life really better with millions or billions of dollars?
Poor and wealthy: Some Definitions
We would define poor as being able to barely afford food, shelter and other basic necessities of living, with no room for extra discretionary items. We define wealthy as enough to live a comfortable lifestyle free from having to work at all. The latter point is key. Wealthy means you are financial free. Perhaps you have $1 million invested in bonds that make you $30,000 per year, and you also work as a part time professor, or run your own online conslting company. In this situation I see this individual as wealthy. Some may say that you need to have to $10 or $100 million or more to be wealthy, but I would argue that being free from working for the remainder of your life indeed makes you wealthy.
Impact of poverty
Now that we have an idea of what makes someone poor or rich, lets examine the impact that poverty has on people. First of all, and most importantly, it is not healthy to be in poverty. For example, although President Obama enacted a healthcare bill to provide all US citizens with healthcare, it does not mean that everyone receives proper and suitable healthcare. If you are in poverty and your child needs to have a surgery that costs $30,000 and you have basic government insurance, there is small chance that you can pay for that surgery. Further, if you are in poverty, you likely cannot afford the healthiest food possible, and it is easy to fall into the trap of buying McDonalds because it is cheaper rather than healthy vegetables and fruits from the store! The right mindset here is to understand that poverty is by no means healthy or okay, and that you must work hard to get out of it!
Another impact of poverty is freedom, or lack thereof. If you are stuck working just to pay the bills years after year for your entire life, then you will be working until you are too old and sick to, and sadly this is the realty for many people as a high percentage of elders (age 65 and up) do not have more than $10,000 of savings to their name.
Education
The reason that many families in the US and globally remain in poverty is because of education. There is no forced class that teaches high school students across the country that you shouldn’t get into credit card debt, or have 7 kids without the wealth to feed them, or what makes for a successful career. Classes across the country teach students about history and art, but not how to get out of poverty, it amazes me! So we’ll see generations of a family remain poor due to lack of financial education.
Why the “Rich Get Richer”
Opposite to this, families that have historically educated their youth about investing and skills that create success have continued to preserve and grow their wealth from generation to generation.
Will Being Wealthy Make You Happier?
The big questions here is whether or not being wealthy will actually make you happier. Speaking from someone who has been both rich and poor, I would say that overall wealth will make you happier, yes. However, this is only because it allows you to live the life that you want to live, it gives you freedom. If you want to travel to Spain tomorrow, you can do that. If you want to sit on the couch and sip wine, do it. It also allows eating healthier foods and working out more often and easily.
However, If you are someone that thinks money alone will make you happy, it is not true. If you are not someone who can have the personal life that they want, such as with friends and dating, then you will not be happy. So, money is important, and should be a focus for us all, but it is not everything and will not make you happy on its own.
What most people do not realize is that if you simply start investing a small amount very young, you can retire with a great deal of wealth to pass on to your family, and they can keep growing it. For example, if you invest $250 per month into the general market (S&P 500) starting a age 15, by age 65, you will have $1.2 million (based on Bloomberg finance investment calculator). That is over the course of 45 years. If you keep doing that until age 75, you will have $2.5 million. By age 100, assuming you keep investing $250 every monthy, you will have $15 million. After 200 years, (you would be 215 years old!, so obviously your children would take over this investment) this investment would grow roughly $41 billion!!!!! Now you are seeing the impact of compounding returns.
Check it out at the US government’s website for yourself, and play around with your future net worth!
Also take a read of The Intelligent Investor
To answer the all important question of whether it is good to be wealthy, I would say that yes, it is better to wealthy rather than poor, but it will not definitely make you happier.
You may also want to read these:
- Walmart Savings Catcher
- How Much Do Youtubers Make?
