My Wealth Target


photo credit: Dvorscak

When defining how much wealth you want it is important to first define what wealth is. It can’t simply be income because I think most people would agree that the person who earns $100,000 a year and spends $60,000 is better off (wealthier) than the person who earns $1,000,000 and spends $1,060,000. (Amazingly Congress does not believe this.) A few years ago I stated it this way:

Wealth is not about cash, it is about cash flow – to be wealthy all you really need to do is flow less cash out than in.

While I still believe that statement to be true, I consider it to be an incomplete definition of what it means to be wealthy. If you have more cash flowing in than flowing out then I think it is safe to say that you appear to be heading toward being wealthy as opposed to heading towards poverty but there must be a reason for keeping that extra cash flowing in which gets to the heart of what it means to be wealthy.

As Ebenezer Scrooge came to realize in A Christmas Carol, dying with a lot of material possessions to call your own is not a fulfilling purpose. The reason to have more cash flowing in than out is to eventually get to where you feel safe making decisions independent of their cash flow implications. In other words, to have reserves in place should you need or want to be able to spend more than you earn (making no distinction between whether this is a result of increased spending or of decreased earning).

Having concluded that the definition of wealth is, in a way, inversely related to dependence on cash flow makes me rethink my wealth target because it caused me to ask this question: who is better off in a crisis, the man with savings of $1 Billion or the man who owns his home, has enough food and fuel to last a year, and has the skills and resources to continue producing everything he needs?

Of course the billion dollar figure is extreme but even at that extreme the are situations where that $1 Billion of savings could fail to provide what the rich man needed, just as the life skills could provide little help against severe injury or adverse weather conditions which might impede the implementation of those skills.

My wealth target is a hybrid of those two extremes. I want to fully free myself from debt so that I own all my property outright (thus lowering my cost of living significantly) and have sufficient stores of goods to live cash free for an extended period of time should the need arise. On top of that my goal is to get enough capital built up that I can pay for all my basic necessities on an ongoing basis without relying on steady gainful employment.

Aside from paying the house off and having the capital base to live off of, this target should be reachable before any of my kids get into Junior High School. It excites me to think that I could be debt-free aside from the mortgage and have ample food storage for any emergency within the next few years.

About David

David is the father of 8 extremely organized children (4 girls / 4 boys) who is constantly seeking answers to tough questions related to parenting, education and politics while moonlighting for 40 hours each week as a technology professional. He also enjoys cooking, gardening, and sports.
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