How rich are you? Most people are reluctant to answer, because there are only 1% of the population are rich!
Anyway, if you are to answer such a question honestly, what would it be? Would you answer “I have 2 houses, 3 cars, a few FD etc”, or “I am worth RM300,000”, or “I earn RM20,000 a month” etc.

There are many ways to state our wealth. In fact, wealth is more appropriate to be stated by “time”, not the amount of “asset” we have.
This is the formula:

Wealth = How long we can continue and maintain our lifestyle without working?

According to the above formula, this is how we should state our wealth:
I can continue and maintain my current lifestyle for 10 years without working.

How long would it be for you? How wealthy are you? 3 months? 1 year?
There are 3 elements that determine how wealthy we are:
1. Expenses – the lower the wealthier we are
2. Passive income – the higher the wealthier we are
3. Saving – the higher the wealthier we are


KCLau
KCLau

Personal finance author and trainer

    5 replies to "How rich are you?"

    • michelle

      There is a formula on the calculation on “How rich are you?” right? Something like ,Total Asset – Total liability =$$$.

      do you have that document?

      • KCLau

        Michelle,

        Total Assets – Total Liabilities = Net Worth
        This is the formula of calculating a person’s wealth in monetary and accounting term. You are right.

    • […] of cash flow and asset vs. liability. Learn to hack the charts and you will be on your way to the road to riches. These charts are discussed and elaborated insightfully in the book Rich Dad, Poor Dad: What the […]

    • kclau

      When we move from a place to another, we already sacrifice part of our lifestyle. It might be the same in term of material aspect, but there is no old friend, no relatives, no favourite food/store/places and everything will be a brand new start. Which I think this is something of a compromise.

      Wealth = How long we can continue and maintain our lifestyle without working?

      A person can still be considered wealth anyway if he choose to sell off his car, home, and live frugally on a few dollars a day. But do you want that?

    • Relax

      I think it would be interesting if you throw in purchasing power factor into the game.

      For example a Norwegian who bring his wealth along with him to live in Afrika might be very very rich.

      But a Malaysian who lives in Tokyo is very very poor.

      That sounds like cheating 😛

      Maybe it is a good idea to work oversea until I retire and come back to Malaysia 😛

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