What is Wealth?
I’ve always wanted to build wealth. Many people do. What is your definition of wealth? How does one go about building wealth and more importantly, how do you keep your wealth?
The first wealth is health. Anyone who has been around me knows I take this seriously. Get physical exercise nearly each day. Be strong and push yourself a little more than you did the day before. Eat healthy. Drink lots of pure water. Future poor health can drain your finances much faster than you’d accumulated them. Besides, you’ll actually enjoy your wealth if you feel good and can live out your dreams. If you can maintain your health, you can enjoy the ultimate wealth: love of life and love of those around you.
As for money, there are two types of monetary wealth: income wealth and net-worth wealth. High-income earners can enjoy a great lifestyle, but if they don’t sock away a hardy portion of their money, that lifestyle will only last as long as the high-income earner continues the grind. Conversely, net-worth wealth can be a characteristic of business owners, farmers, real-estate builders and early investors. Many times, net worth is locked up in land and buildings, assets, a business or long-term accounts. You wouldn’t pick out one of these net-worth wealthy persons by the car they drive or lifestyle they live, because oftentimes their discretionary incomes are fully funding their businesses and long-term investments, building their net-worth. The sweet-spot is having both: income-wealth and net-worth wealth. Commonly, this comes from monetizing (selling) a portion or all of a business, farm or real estate and/or pivoting your long-term investment accounts from accumulation focused investments to income focused funds, providing a reliable stream of ongoing passive revenue. Said another way, your money is now working for you so you no longer have to work for money.
Wealth is maintained by keeping your health, putting positive effort forth to build relationships, and managing your financial risk. Forming legal entities for your assets can create veils of protection should something go awry. Purchasing insurance contracts transfers financial risk from you to an insurance company. For example, a $2 million liability policy transfers the risk of losing $2 million from you to an insurance company, should you get sued and lose. A long-term care policy transfers the financial risk of needing long term care. With the insurance contract in force, the insurance company is legally obligated to pay for coverage outlined in the contract, transferring financial risk off the insured or those who are financially responsible for the insured.
One of the greatest flaws in thinking is that someone just “has” money, or any form of wealth. Wealth must be built. Wealth must be kept. This applies to all definitions of What is Wealth.
LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or louann.schulfer@lpl.com. www.SchulferAndAssociates.com
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