Many years ago, during the financial crisis, I heard a heartbreaking story from a rich man. With the decline in his net worth, he told me that he would have to make some changes. Should he sell his home in Aspen or his home on the beach in California? He would definitely keep his home in Texas. And what about the jet he had to fly between the houses?
Do not laugh.
It was a serious problem. It was also a complex wealth problem, as none of the things he had to sell were likely to find generous buyers at the time. He wondered if he could get more income out of his considerable financial fortune. That way he could put off selling his expensive things.
No, I told him, he couldn’t do that without taking great new risks. There was no silver bullet, even though it was easily in the top 1%.
That was when I had an epiphany.
And the Burns family had and still has. Although our wealth and income is only a small fraction of what the man with complex wealth had, we can easily achieve our goals, give generously to charity, and help our adult children. Our income exceeds our expenses. Debt is not a problem because we no longer have any.
Do not get me wrong. This revelation was not about feeling superior or complacent. It was just a brilliant light. Wealth is not what we think. It’s not what is being advertised. It’s not the TV picture.
Simple wealth is better. It’s about lightness. It’s about comfort. And it’s about a sublime sense of trust.
Easy to reach
Equally important is that simple wealth is easier to achieve. You don’t have to be in the top 1% to have simple wealth. They can be far lower on the official wealth pyramid.
For example, if you visit the dqydj.com website, you will find that it now takes about $ 10 million in financial assets to be in the top 1% of assets. That excludes your home equity. That’s a pretty intimidating number. By definition, very few families have wealth anywhere near this value.
Complex wealth is pretty easy to spot. It is someone who has had financial success and has surrounded himself with all the things that herald success. This includes several large houses in fashionable places, an abundance of luxury cars, huge but rarely used kitchens, a boat or plane, etc. When in doubt, just check out sources like these Robb Report, City and Country, Architectural Digest, or the latest Sotheby’s luxury home catalog.
This also includes complex expenses. High complex expenses. Most likely, an abundance of debt would be appropriate. Debt is taken on because (1) the next year will get better and better and (2) complex wealth always believes that it can earn much more from its investments than it will pay in interest.
From the outside, complex assets almost always look solid and secure. But it is not. As it accumulates assets, it can accumulate debt and spend more quickly. That makes it vulnerable.
Just as millions of working families are just a paycheck away from a disaster, families with complex wealth are just weeks or months of bad financial weather away from a train wreck.
You avoid the train wreck by seeking simple wealth.
Follow these steps
How do you attain simple wealth? Here is my list of the top steps to take to get there.
- Spend less than you deserve.
- Invest your savings in assets that deserve, not personal assets or status values.
- Don’t let anyone tell you that things – any things – are an “investment.” It is not. It will be worth pennies on the dollar in resale value.
- Avoid what some call a “hedonic treadmill,” which is the constant upgrade of every possible consumer item you buy.
- Learn to enjoy having money ready, what the poet Lord Byron called “Aladdin’s Lamp”.
- Make a goal of having a generous surplus of income when you retire.
It’s easy. But difficult – and it’s worth it.
To measure your wealth
Here are some websites to help you calculate your position.
Net Worth Percentile Calculator for the United States.
Income percentile according to age calculator
Percentile calculator of household income
Income percentile by state