What Is Wealth?

 

What Is Wealth?

"A person's, community's, company's, or country's wealth is the total sum of all their valuable properties. Wealth is calculated by subtracting all debts from the overall market value of all real and intangible assets held. Wealth is essentially the accumulation of finite capital. When individuals, groups, or nations are able to acquire a large number of valuable resources or commodities, they are considered to be rich. Wealth differs from income in that it is a stock while income is a flow, and it can be measured in absolute or relative terms "

There are as many definitions of wealth as there are writers and thought leaders.

Henry David Thoreau says

 “Wealth is the ability to fully experience life.”

And Robert Kiyosaki says

"Wealth is NOT a measurement of how much money you have but how long you can live without working."

Understanding the Definition of Wealth

Wealth can be represented in a number of different ways. In a strictly material sense, wealth is defined as all of one's physical assets. In terms of money, net worth is the most common measure of wealth.

Wealth has been described and measured in various ways by different societies over time. Money is the most common way of calculating wealth in modern society.

Money's role as a unit of account can be seen in the measurement of wealth in terms of money.

The degree to which outside forces can influence the value of capital can have a significant effect on how wealth is measured in this way, but it does provide a useful common denominator for comparison.

Wheat was once used to measure wealth among the ancient Egyptians.

Sheep, horses, and cattle have long been used as wealth indicators in herding cultures.

The problem of assessing wealth in the form of various kinds of products is solved by measuring wealth in terms of money. After that, these values can be inserted (or subtracted, etc.). As a result, net worth can be used as a convenient indicator of income.

Assets minus liabilities equals net worth.

Net worth is also known as shareholders equity or book value in the corporate world. In layman's terms, net worth is described as all of one's controllable real assets, except those that ultimately belong to someone else.

Wealth is a stock variable, while income is a flow variable. Wealth is defined as the amount of valued economic resources acquired at a given point in time, while income is defined as the amount of money (or goods) earned over a given period of time. Income is the accumulation of capital over time (or subtraction, if it is negative).

A individual with a positive net income over time will become increasingly wealthy.

While it is sometimes incorrectly referred to as a measure of wealth, Gross Domestic Product (GDP) may be thought of as a measure of income (a flow variable) for countries (a stock variable).

While someone with a significant amount of net worth may be considered wealthy, most people think of the term in a more relative context.

Total wealth may differ between individuals and groups, whether calculated in terms of money and net worth, or in commodities such as wheat or sheep.

We generally refer to relative wealth differences between people when determining who is wealthy or not wealthy. People's perceptions of their own well-being and happiness are based far more on their assessments of income compared to other people than on absolute wealth, according to research.

This is also why the term "capital" is commonly applied only to scarce economic resources; goods that are plentiful and available to all offer no justification for comparing individuals' wealth.

KEY TAKEAWAYS

1. Wealth is a set of desirable economic resources that can be calculated in tangible commodities or monetary value.

2. The most common indicator of wealth is net worth.

3. The term "capital" is generally applied only to scarce economic resources; goods that are plentiful and free for all offer no basis for comparing individuals.

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