Rich or Wealthy? The overly simplistic, completely made up heuristic.
Let’s compare two people in an overly simplistic, completely made up example. Paul plays professional ping pong and makes $13 million per year. Ed is an electrician and makes $96k per year. Who is richer? First blush, the answer is, of course, Paul.
Digging Deeper
But the real answer is… it depends. In this completely made up scenario, Paul is a baller and spends $12 million a year. Private jet. Super yacht. Adventure trips to Antartica. Heli skiing Alaska. Parking spots in Manhattan. Classic Ferraris and Yeezys* in every single color. You get the picture.
Ed spends $48,000 per year. Local ski pass. High end coffee brewed at home. Beat up Honda accord van. Resole-able leather boots. Used steel bike. Beach vacation once every year.
Doing the math
How long could Paul and Ed live if they lost their income**? Mathematically, every year, Paul spends 92% of his income and Ed spends 50% of his income. How long can each continue their lifestyle (this is starting to sound like a word problem)?
| Income | How much spent over a year | Left Over | Spend Rate per Month | How long can they sustain lifestyle? | |
| Paul | $13 million | $12 million | $1 million | 92% | 1 month |
| Ed | $96k | $48k | $48k | 50% | 1 year |
Answer: Paul could continue his luxurious lifestyle for just over 1 month while Ed could continue his way of life for an entire year.
So… who is more wealthy? The answer… you guessed it, Ed.
And that, my friends, is the point of this overly-simplistic-completely-made-up-example… this heuristic merely serves as a way to help you think about money in a new way. The relationship between income, savings, spending, and investing (which we didn’t talk about in this post) determines your Unconventional Wealth Mindset... where you are free, self-sustaining, and able to use your powers for good.
*Super fancy tennis shoes that look … amazingly (insert your own adjective)??
**For you common-sense-mathematical-wizards-who-want-to-call-me-out on this example, lets assume Mike and Joe get paid their entire paycheck on Jan 1 of every year, and the only thing they do with their unspent portion is hide it in their mattress for a rainy day…
Yeezy Picture from: https://www.ebay.com/itm/133733321330?chn=ps&norover=1&mkevt=1&mkrid=711-222657-2056-0&mkcid=2&itemid=133733321330&targetid=1317598957567&device=c&mktype=&googleloc=9010330&poi=&campaignid=12416669403&mkgroupid=119934615764&rlsatarget=pla-1317598957567&abcId=9300507&merchantid=6296724&gclid=CjwKCAjwjJmIBhA4EiwAQdCbxhmKbvCb08gwoVTK4PCBYAm49FTCN_ndJRmwnml3wVcdjcD7zznyrxoC0RYQAvD_BwE