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This topic always brings me back to the same place: As a culture, when it comes to the "rich" and the "wealthy" we tend to focus almost exclusively on revenue (income) and assets (stuff). Anyone who looks at a simple income statement and balance sheet knows that there is a lot more to the equation. If someone makes $500k and spends $500k, not only is their net income $0, they have added nothing to their net worth. Conversely, someone who makes $75k and spends $30k has a positive net income of $45k and adds $45k to their net worth. However, because we don't have nearly as much insight into the income statements and balance sheets of our neighbor, we compare our "income" and "stuff" to their "income" and "stuff" (as opposed to what we really should be comparing which is net income and net worth). I'm also reminded of a great book by P.T. Barnum called The Art of Money Getting (http://manybooks.net/titles/barnumptetext05barnm10.html). It was published in 1880, but it's amazing how relevant it still is. He tells some great stories about life, money, and wealth. This is one of my favorites: "I know a gentleman of fortune who says, that when he first began to prosper, his wife would have a new and elegant sofa. "That sofa," he says, "cost me thirty thousand dollars!" When the sofa reached the house, it was found necessary to get chairs to match; then side-boards, carpets and tables "to correspond" with them, and so on through the entire stock of furniture. When at last it was found that the house itself was quite too small and old-fashioned for the furniture, and a new one was built to correspond with the new purchases; "thus," added my friend, "summing up an outlay of thirty thousand dollars, caused by that single sofa, and saddling on me, in the shape of servants, equipage, and the necessary expenses attendant upon keeping up a fine ’establishment,’ a yearly outlay of eleven thousand dollars, and a tight pinch at that: whereas, ten years ago, we lived with much more real comfort, because with much less care, on as many hundreds. The truth is," he continued, "that sofa would have brought me to inevitable bankruptcy, had not a most unexampled title to prosperity kept me above it, and had I not checked the natural desire to ’cut a dash’." |