In the hideously designed, poorly written get-rich-slow book, “Rich Dad Poor Dad” hides many valuable insights into financial matters. One that has come to mind as of late is the measurement of wealth. The author, Robert T. Kiyosaki, points out that wealth should not be a measure of money but a measure of time. Your wealth is how long you can maintain your current lifestyle if you were to cease working your paying job. I couldn’t agree with the concept more.
In the interest of your entertainment I have calculated my wealth to be: 8.11 days.
It could also be an interesting concept if you were to apply it to commercial operations.
Comments
Will - May 20, 2003 9:49 am
What formula did you use?
Dan James - May 20, 2003 10:54 am
Take the amount you have in cash (investments, bonds, etc) plus any monthly income you don't need to work for (i.e. investment returns) then divide that by your total monthly expenses (how much you pay per month for things like rent, car, etc). This gives you a percentage. Multiply that percentage by 30 to figure out how much or a month you can last. It's rough but gives you a good ballpark.
Alan - May 20, 2003 1:20 pm
Add excess credit and I at about 5 months. Otherwise about 3 months.
This formula does not include circumstancial coverage - it UIC or disability gets me 12 months more or a lifetime. Of course, I am most valuable dead at about 1.2 million which should provide an income to my wife and kids consoling themselves of their loss through a variety of cholocate coated goods.
John Hawbaker - May 20, 2003 2:30 pm
That's a very interesting way of putting it. Frightening, because of my very low number, but interesting. I definitely think that one thing the truly wealthy have that even the "millionaire next door" might not is free time in abundance. In their cases, money buys time. For the average working person, time buys money to buy back a little bit of time each week and a few years when you're old.
Dan James - May 20, 2003 3:34 pm
John, well put. This book also points out the signficance of time. "Poor Dad" was the author's biological father and "Rich Dad" was his friends father. The more successful in his job Poor Dad would get the less time he had for his son. The more successful Rich Dad became the more baseball games he could watch in the afternoon.
Alan - May 20, 2003 4:00 pm
There's a lot of income tax deduction policy involved too. Dad goes to the games but writes off the tickets as they wuold have been "originally" purchased for a business contact.
d - May 22, 2003 5:17 pm
Imagine a couple that is utterly preoccupied by the amount in their bank account. They live simply, buying in bulk and even making their own bread to save money. They do not have high revenues, but have saved 16.22 days worth of wealth according to the above definition.
Are they twice as wealthy as you?
Dan James - May 22, 2003 6:10 pm
I would have to say yes, they are.
d - May 23, 2003 12:49 am
Interesting. For me, wealth is more of a subjective thing: if I were utterly pre-occupied with money, I wouldn't think of myself as really wealthy.
Another thing makes defining wealth even more complex: most of those assets that the very rich tend to accumulate are volatile. Recession? Dot-bust? Terrorist incident? Stocks go down in price, and you're half as wealthy as before. An upswing, and you're rich all over again.
Now suppose your penny-pinchers are really, really rich, and still as concerned about not spending too much. A billionaire would have wealth for -- 1000 years? What if any is the significance of such a stock market change? There seems no practical difference between having 500 years or 1000 years of wealth - especially if you keep the same lifestyle.
Still, the measure is an interesting one. I would still rather measure my wealth through other means: the safety of having a social safety net, friends and family that can help out in times of crisis, and being able to enjoy what I have.
Charlie - May 23, 2003 6:39 pm
I like the idea that should something terrible happen and in a flash Dan's income is gone and not coming back, no survival instint kicks in...might as well have 8.11 great days rather than, say 25 so so ones...
"Super size your combo sir?"
"Hell yes!"
If the low numbers aren't making you feel bad enough about your financial position, this should do it from a completely different angle ;)
http://www.herald.ns.ca/stories/2003/05/23/f217.raw.html
Rob Paterson - June 4, 2003 9:35 pm
My father always called this his "Fuck you" Money - the power that you have to say no. Is not freedom the ability to say not?
I have found that there are two sides to the equation - having large savings - hard to get. And or having a low cost run rate - easier to achieve.
Dan James - June 4, 2003 11:30 pm
Rob, the other (third) side to the equation is having income that you need not work for. Real Estate rentals, dividends, commission agreements :-), etc.
Rob Paterson - June 10, 2003 11:00 pm
Yes Dan
Money that you can get while sleeping is the best moeny
josh - June 19, 2003 8:26 pm
I just need to point out again that Rich Dad Poor Dad is likely the most repetitive, poorly written book I have ever picked up.
There was about a page worth of interesting and valuable stuff, and the rest was a pitifully written sales pitch for his other books and conferences. I also very much doubt that 90% of those stories really happened.
Ahh, thanks, I have been wanting to get that off my chest since I read it.