What Is Wealth?

Winning the lottery doesn't necessarily mean wealth | What are "True Riches"? | Figure Your Net Worth

Winning the lottery doesn't necessarily mean wealth

Ron Blue in his book Master Your Money tells a wonderful story about a retired pastor who made very little money throughout his life yet had plenty to take care of himself and his wife throughout retirement. The Ken Whitman family in Ohio lives in a five-bedroom house that is paid off, despite the fact that the father earns less than $40,000/year, the mother doesn't work outside the home, and they have four teenagers. They have even set money aside. What is their secret? "Income is irrelevant," Ken says. "What matters is attitude."

On the other hand, "If You Were a Rich Man," an article printed in Men's Health in March 1999 (p. 128), tells what can happen if you suddenly become rich. Les Robins, a teacher and coach in Fond du Lac, Wisconsin, loved teaching. He had a purpose and was happily carrying it out. In 1993, he won the $111.2 million Powerball jackpot. He was the biggest winner in history at that time. He and his then fiancé will each get a check for $2,781,000 each year until 2013. The story goes on to tell how the wealth affected his life, how he had to quit the job he loved, and how wealth changed his life for the worse. It's not all it's cracked up to be. From the article:

The Money Dream is about the only thing that unites Americans these days...no one, it seems, feels that he has enough.
A 1984 survey revealed that the very wealthy are, on average, only slightly happier than the rest of us. A full third of the rich are not as happy as their less wealthy countrymen. The conclusion, "Income appears to be only a minor influence on the happiness of most individuals."
According to the survey author, there is a "basic level of need satisfaction" that is necessary for happiness. In America, most people have been above that level for at least 50 years.
Although rich people don't need to work, most do anyway. Just like everyone else, they need to feel worthwhile and connected to the world. They need a sense of accomplishment. One lottery winner said, "You don't realize how much of your self-esteem comes from your job until you stop working."
There are some down sides. Everyone wants a piece of your money. Nobody buys you lunch. You're constantly at risk for being sued over nothing, so lawyers get a good piece of the money. You have to be constantly on guard. You can't trust anyone. Your kids are at risk of growing up as spoiled brats, feeling entitled and never becoming independent.
Only the money problems go away. The others become worse.
You can't talk about your problems. You're rich. You're not supposed to have any problems. You're made to feel guilty.
Spending money isn't so much fun anymore. You don't have to save or sacrifice anymore. The things you buy don't mean anything anymore.
Some wealthy people go to great lengths to pretend they're not rich and try to live as normal a life as possible.

Money reported in October of 1998 (p. 134) that 3/5 of lottery winners file bankruptcy within three years. They had more money but the same old bad habits.

What are "True Riches"?

Worldly wealth is not "true riches." The following verses make the distinction:

So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches? (Luke 16:11)
With me are riches and honor, enduring wealth and prosperity. My fruit is better than fine gold; what I yield surpasses choice silver. (Proverbs 8:18)

There's a saying, "Hold things lightly. Hold people tightly." The Bible lists the following things as "true riches":

Wisdom and understanding. (Proverbs 4:7)
Knowledge of God. (Romans 11:33)
Kingdom of Heaven. (Matthew 13:44)
Hope and the future. (Ephesians 1:18)
God's kindness, tolerance, and patience. (Romans 2:4)
God's grace. (Ephesians 1:7)
The mystery of Christ in you. (Colossians 1:27)
Enjoyment, work, the ability to work. (Ecclesiastes 5:19)
A good name. (Proverbs 22:1)

Homework: Figure Your Net Worth

This is a necessary starting point for dealing with your finances, a snapshot of where you are today. Total the financial value of all the assets you own, then subtract all your liabilities or debts. Your statement of net worth should be shared with your spouse but need not be shared with anyone else.

Be sure to list the following:

Assets

Cash on hand
Amount in checking account
Amount in savings
Amount in money market funds
Marketable securities
Life insurance cash values
Home (market value)
Land (market value)
Business valuation
Boat, camper, trailer, snowmachines, etc.
Automobiles
Furniture and valuable personal property
Coin and stamp collections, antiques
IRAs
Pension and profit sharing
Receivables from others
Limited partnerships
Real estate investments

Liabilities

Charge card debt
Auto loans
Bank loans
Life insurance
Home mortgage
Taxes owed
Anything else owed to anyone for any reason.

Then:

Total your assets.
Total your liabilities.
Subtract total liabilities from total assets.

The result is your net worth.

Next week we'll discuss ways to use this to understand your propensity to accumulate, your propensity to borrow, etc.

It's a good idea to update your net worth at least annually. This provides a record over time of changes in your long-term financial situation.