When you meet someone who drives a RM 300,000 car, do you think this way:
That he has RM 300,000 less in the bank now (if he bought in cash)…or… more than RM 300,000 in debt, than he did before he bought the car…or… he earns at least RM 300,000 a year after tax income (it is not uncommon to drive a car that is at least a year’s worth of one’s income in Malaysia).
We seldom think of it that way. Most of our perception of wealth is shaped via material possession, especially by what we see other people have. Since we don’t have access to their net worth statement, that’s all we have to come to our own assumed conclusion.
But it gives us a distorted view of wealth. Some people we think are well-off in fact really aren’t; they just spend most of their income – either by desire or commitment.
Others we think of as less well-off are actually the rich or financially free people. They’re wealthy not despite driving an old car, but because of it.
Financial wealth isn’t what you see. It’s what you don’t see.
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Case in point…
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Warren Buffett bought his house in Omaha, Nebraska in 1958 for $31,500. The house is stucco, and has five bedrooms and 2.5 baths. Warren Buffett has called his house “the third best investment” he ever made, behind only wedding rings.
What does Warren Buffet’s house tell you about how much he’s worth?
Nothing.
Too often, people confuse the trappings of wealth with actual wealth.
Warren Buffett is now worth an estimated $68 billion. You really can’t tell how much someone is worth from his or her house or car.
Warren Buffett’s house is the same house he originally bought; but it was not a financial investment in the sense that Warren’s goal wasn’t appreciation in value. Warren bought a house he could afford, and has called it one of his best investments because, “My family and I gained 52 years of terrific memories with more to come.”
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Ponder over this:
“There is no faster way to feel rich than to spend tonnes of moolah on luxuries.
But the way to accumulate wealth is to spend money you have on the necessities, and to NOT spend money you don’t have on luxuries.
And the only way to be truly financially free is to NOT indulgently spend all the money you have.”
The reason most of us don’t ever get to a point of financial freedom we envisioned 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 near impossible to achieve. It’s a catch 22 – the chicken and egg analogy. When most people say they want to be a millionaire, what they really mean is “I want to spend a million dollars,” which is literally the opposite of being a millionaire.
At some point, you have to choose whether you want to be financially free or buy more stuff. There’s no shortcuts. The arithmetic will catch up with you in the end.
The final question to ask ourselves is –
Do your possessions bring you increasing or diminishing happiness?
Too often, a vast collection of possessions ends up possessing its owner.
As we get older, the wealth we should most value, aside from health, is long-standing family & friends.
Money is just a means to an end.