What Is Wealth?
There are as many definitions of wealth as there are writers
and thought leaders.
Henry David Thoreau says
“Wealth is the ability to fully experience life.”
And Robert Kiyosaki says
"Wealth is NOT a measurement of how much money you have but how long you can live without working."
Understanding the Definition of Wealth
Wealth
can be represented in a number of different ways. In a strictly material sense,
wealth is defined as all of one's physical assets. In terms of money, net worth
is the most common measure of wealth.
Wealth
has been described and measured in various ways by different societies over
time. Money is the most common way of calculating wealth in modern society.
Money's
role as a unit of account can be seen in the measurement of wealth in terms of
money.
The
degree to which outside forces can influence the value of capital can have a
significant effect on how wealth is measured in this way, but it does provide a
useful common denominator for comparison.
Wheat was once used to measure wealth among the ancient
Egyptians.
Sheep, horses, and cattle have long been used as wealth
indicators in herding cultures.
The problem of assessing wealth in the form of various kinds
of products is solved by measuring wealth in terms of money. After that, these
values can be inserted (or subtracted, etc.). As a result, net worth can be
used as a convenient indicator of income.
Assets minus liabilities equals net worth.
Net worth is also known as shareholders equity or book value
in the corporate world. In layman's terms, net worth is described as all of
one's controllable real assets, except those that ultimately belong to someone
else.
Wealth is a stock variable, while income is a flow variable.
Wealth is defined as the amount of valued economic resources acquired at a
given point in time, while income is defined as the amount of money (or goods)
earned over a given period of time. Income is the accumulation of capital over
time (or subtraction, if it is negative).
A individual with a positive net income over time will become
increasingly wealthy.
While it is sometimes incorrectly referred to as a measure of
wealth, Gross Domestic Product (GDP) may be thought of as a measure of income
(a flow variable) for countries (a stock variable).
While someone with a significant amount of net worth may be
considered wealthy, most people think of the term in a more relative context.
Total wealth may differ between individuals and groups,
whether calculated in terms of money and net worth, or in commodities such as
wheat or sheep.
We generally refer to relative wealth differences between
people when determining who is wealthy or not wealthy. People's perceptions of
their own well-being and happiness are based far more on their assessments of
income compared to other people than on absolute wealth, according to research.
This is also why the term "capital" is commonly
applied only to scarce economic resources; goods that are plentiful and
available to all offer no justification for comparing individuals' wealth.
KEY TAKEAWAYS
1. Wealth is a set of desirable economic resources that can
be calculated in tangible commodities or monetary value.
2. The most common indicator of wealth is net worth.
3. The term "capital" is generally applied only to
scarce economic resources; goods that are plentiful and free for all offer no
basis for comparing individuals.
#wealthisearned
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