The Separation Between Assets And Liquidity
Here's part of an article I wrote on this subject. You can read the whole article by going here: The Separation Between Assets And Liquidity
I'm posting this because some of you may be millionaires or close to it and don't even know it.
I'm posting this because some of you may be millionaires or close to it and don't even know it.
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I think its about time we've cleared up the mass confusion between liquid wealth and assets. Usually, when I hear people discuss the wealth of someone else, they tend to believe that a person's net worth is the amount of money they have readily available. For instance, if a person is discussing a billionaire, they think being a billionaire means that person has a billion dollars in the bank. But that's not hoe that works. With that being said, I'm gonna attempt to make the distinction between liquid wealth and hard assets. A few months ago, I read this book titled "How To Get Rich" by Felix Dennis. Mr. Dennis is a magazine publishing Magnate worth anywhere between $400-$900 Million Dollars (According to Mr. Dennis, he doesn't know his net worth down to the penny because after you reach a certain level of wealth, its nearly impossible to keep track of it all. Billionaire J. Paul Getty said the same thing). In Mr. Dennis' book, he presented wealth scales. In one scale, he measured a person's level of wealth by the amount of cash they had on hand (or their ability to quickly raise that amount of cash). In the second scale, he measured a person's wealth by the amount of assets they own. By assets (both tangible and intangible), we're talking stocks/equity in a company (your own company or someone else's), securities of any type, real estate, land, precious metals, royalties, etc. Presented below are both tables. Figure 1: Wealth Measured By Cash-in-Hand or Quickly Realizable Assets $100,000-$400,000: The comfortable poor $400,000-$1,000,000: The comfortably off $1,000,000-$2 million: The comfortably wealthy $2 million-$10 million: The lesser rich $10 million-$30 million: The comfortably rich $30 million-$70 million: The rich $70 million-$100 million: The seriously rich $100 million-$200 million: The truly rich Over $200 million: The filthy rich and the super rich Figure 2: Wealth Measured By Total Assets (True Net Worth) $2-4 million: The comfortable poor $4-10 million: The comfortably off $10-30 million: The comfortably wealthy $30-80 million: The lesser rich $80-150 million: The comfortably rich $150-200 million: The rich $200-400 million: The seriously rich $400-800 million: The truly rich $800 million - $1.998 million: The filthy rich $1.998 million and Above: The super rich According to this table, a person who can touch between $100,000-$400,000 is technically a millionaire, which I have to agree with. The reasoning behind that is two-fold. On one hand, if a person has $100k liquid, if they were to leverage that $100k, their spending power would be in the millions of dollars. In our credit run society, a person with $100k cash can control assets in the millions. |