What is wealthy?

What makes someone wealthy?  It is a question that I thought I knew the answer to until my trip to Australia.  The experiences we had out there have shown me that my ideas of what constituted wealthy were somewhat under whelming. 

We’ve all heard of the vast fortunes of Gates, Bezos, and Musk, but that’s not what this post is about.  This is about the wealthy people hiding in plain sight.  The people that run companies, own businesses, and generally don’t want people to know how much they have.

We had the pleasure of being invited to Ms Wealthster’s sister’s in-law’s place for a few days.  Of course, I jumped at the chance.  I have known their son for a couple of years now since he started dating Ms Wealthster’s sister, and we get on well.  Also, the family love Ms Wealthster’s sister so assumed they’d get on with us too despite having not met us before. 

We stayed in the family’s beach home on the Great Ocean Road in Victoria.  It was spectacular and we had a very relaxing and pleasant holiday with the family.  I was told (not by them might I add) they paid $4million (AUD) for it, or £2.1m.

The home is part of a large portfolio of two holiday homes, two mansions, several apartments, and homes for all their three children.  I also know that they own three planes, one of them a small jet.  It’s safe to say they are extremely rich to a level I had never directly encountered. 

My idea of wealthy

Since discovering FIRE I’ve spent a great deal of time thinking about what my idea of wealthy is.  The adage that you need 25 times your monthly expenses in a brokerage account, and you’d be good is the basis that I have been aiming for to achieve financial independence.  For me based on my roughly £25k expenses that is approximately £625k, however, I thought that ridiculously low so made it £750k (£30k annually).  £30k incidentally is what I spend in 2021 so maybe it is about right.

Financial independence is great, but after doing this for a while I realised it certainly does not make you rich.  If you’d told me before I’d heard of FIRE that if I were to have £750k in assets and would I consider that rich then I would have said yes of course I would be rich.  However, knowing that it will only give me an income of around £30k annually should it really be classed as being rich?  I would be time rich but not financially rich and I would have to continue living a modest lifestyle.

I could of course take it to the next level of Fat FIRE, which is where people continue working past their normal FIRE number and let compounding take over to give several million pounds of assets.  If I wanted an income of £100k annually, I would need 25 times that which would be £2.5million in assets.  Now this is a level that I think I would be very comfortable with.  In fact, its 4 times more than what I spend now, but I would like to have nice things at some point.  The whole point is forgoing now to have later.  I guess in my mind, I would be aiming for that level of assets before pulling the plug.  According to my spreadsheet I will reach that in my late 50s.  Even if I stop working at 52, I will reach it in my early 60s.

Unfortunately, that seems like a long way off.  Maybe I would trade the time off for the extra money.  I don’t know at this point.

Also, at that level of investments, the compounding alone would let me retire much earlier.  

That’s all fine and dandy until you come across somebody like we did. 

Properly wealthy

As the CEO of a global company, he is earning upwards of £3m per year salary (I found this on Google) and I would imagine he probably gets stock options and bonuses too.  We had a good chat and he was talking about getting a new car. They had a Land Cruiser ($140k AUD new) and it occurred to me that at his income level he would probably just buy a brand new one in cash. You’ll be pleased to know that he also invested in low cost index trackers.

It wasn’t always this way. He worked his way up from the bottom over the past 30 years. But he earns more annually what my entire life’s work will be in my 60s. 

For some reason this troubled me.  It made me think maybe I can do better than what I’m doing now.  I don’t deny I’m doing ok but is this FIRE goal somehow inhibiting me from getting extremely wealthy?  Maybe I’m missing opportunities because I’m becoming content with letting things take their course.  I’m becoming a slave to my spreadsheet “oracle”.

Of course, being the CEO of a company is not for everyone.  I don’t truly believe it is for me either.  I once did and worked at a large company where I saw the senior leadership make fortunes but also completely dedicate their lives to the company.  I would find it difficult to care that much about a corporation.  That seemed to be the case here as even on holiday he was doing zoom meetings at 11pm and working on his laptop during the day. (He did have time to cook us all a BBQ)

I’ve always thought I’d like to have my own business.   If it were mine that may cure the caring problem and I might be motivated to progress and develop the business.  I think after 3 years of paying down debts and investing myself into a very comfortable position, I can now realistically think about taking risks without my life collapsing should things go wrong.

I did think about going for the less risky partnership option which would mean continuing what I am doing now and joining the company as a partner.  However, since we were bought out by a bigger corporate, I think that ship has sailed at this firm.  And couple that to the fact I am getting frustrated at the (deliberately) slow rate that the new company’s annual review and promotion process operates at, I am beginning to think I could take a risk and do much better. 

This is all talk of course.  I need to translate that into action and do something. Let’s see. 

In conclusion, there is a huge amount of money out there to be made.  It appears that the best way to make it is through entrepreneurship or business.  I need to dramatically increase my income in the next few years so will have to think how to achieve this. 

I should probably stick to something that I know already.  I know construction and project management.  I also have legal knowledge.  Perhaps I shouldn’t overthink this and do something in those fields.  This is very much a work in progress so I will continue to ponder this further over the next few months. 

In the short term, I decided that if I failed to get promoted this time, I would leave this company and work somewhere else.  Maybe further opportunities will come up but I really want to own some equity in a business.  Let’s see, one step at a time.

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