In the mid 1840s, Henry David Thoreau set off to the heavily wooded area near Walden Pond in Massachusetts with few possessions and a plethora of questions.
He said, “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived.”
Upon arriving at the pond (located on a piece of land owned by his friend Ralph Waldo Emerson), Thoreau established his home in a minimalistic 10’ x 15’ cabin with little but a fireplace, table, desk, bed, and three chairs.
Over the course of the following two years, two months, and two days, Thoreau debated, dissected, and documented his observations and reflections. Amidst the ebb and flow of vigorously comparing intellectual views and the more simple state of observing natural occurrences, Thoreau crystalized a striking definition and wrote, “Wealth is the ability to fully experience life.”
This interpretation of wealth—the belief that wealth consists of something other than money—has a thread needled by some of the wisest thinkers throughout human history.
In the second century, A.D., Epictetus wrote, “Wealth consists not in having great possessions, but in having few wants.” Mahatma Gandhi said, “It is health that is real wealth and not pieces of gold and silver.”
Yet, while it’s admirable to strive for a life where wealth is solely defined as a mindset, an experience, or a certain level of health, the harsh reality remains that we need things worth monetary value in order to participate as a citizen in modern society.
Because of this need, wealth from a financial perspective is imperative.
This leads us to a core belief of Examined Wealth:
There are two types of wealth—personal wealth and financial wealth—and we should actively build both to live an authentically rich life.
What are the Different Types of Wealth?
There are two types of wealth: Personal Wealth and Financial Wealth. Personal wealth consists of things like your relationships, time, health, and experiences. Financial Wealth consists of assets with monetary value.
Both types of wealth help create a rich life, but they each obtain their own distinct value.
Personal wealth is the most important type of wealth in your life.
Personal wealth is not dependent on money, and it consists of things like your relationships, time, experiences, health, mindset, character, and more.
It’s important to note that some forms of personal wealth can be purchased with financial wealth. However, there are only a few forms of personal wealth that money can actually buy (e.g. experiences).
All other forms of personal wealth are priceless.
Jim Rohn, the renowned personal development speaker, highlighted this point when he compared time with money and said, “Time is more valuable than money. You can get more money, but you cannot get more time.”
Because of this immense and innate value, it is crucial to prioritize building your personal wealth. If you fail to build your personal wealth, no amount of financial wealth will make you feel happy, fulfilled, healthy, or content.
Financial wealth is the monetary form of wealth.
You can build financial wealth by eliminating your debt, reducing your liabilities, increasing your income, and investing in assets.
It’s important to note that your income can contribute to the amount of financial wealth you have, but financial wealth is not your income. Instead, financial wealth is determined by the monetary value of assets you possess.
You can learn more about building financial wealth here: What is the Best Way to Build Financial Wealth?
How do the Two Types of Wealth Relate to One Another?
Both types of wealth are important to build.
Personal wealth is important to build so that you feel like you are truly living. Financial wealth is important to build so that you can provide the necessities for yourself and your loved ones, and so that you have more freedom and flexibility to build your personal wealth.
The harsh reality is that without financial wealth, you will struggle to get by with your day-to-day needs such as buying groceries, paying for rent, purchasing clothing, and more. However, without personal wealth, you will feel unhappy and unfulfilled no matter how much financial wealth you accumulate.
Because of this, it is important to structure your life in a way where you can focus on building both personal wealth and financial wealth simultaneously; to develop personal finance habits that improve the way you build financial wealth, while devoting an appropriate amount of time and energy towards building your personal wealth.