Functional Wealth
I was walking through Couch Park today and on my right were a few derelicts minding their own business and on my left a couple of posh homes. Parked out front were some over the top fancy cars. When I see such display of wealth I can’t help but wonder what the person’s net worth is. Perhaps a bit voyeuristic of me but it’s also the part of me that needs to take in such information to make sense of the world.
It is so important to pay attention to this. It’s easy to get caught up and think that a person who is sporting a certain possession is wealthy enough to own it outright. One’s natural inclination is to see a Ferrari 458 Spider parked next to a Camry and assume that the owner afforded that beast of a car the same as Joe Schmo. JS walked onto the showroom floor and ordered the green Camry with the traditional 5% down and even sprung for the cargo net in the trunk for those unruly grocery bags. Mr. Balla’ probably did the same with his Ferrari… 5% down on a $300k car and about 0.015% of monthly payments ~$4,500 per month.
I’m not making a case for you to start leasing a Ferrari. Instead I want to make a point about wealth and its form vs function. What’s the purpose of wealth? To me its function is what wealth affords me which generally is time. Wealth can create passive income plus the luxury of not having to worry daily about my livelihood. Its form is irrelevant. Society has a tendency to hang on to traditional gestures and customs for centuries after they are obsolete.
The billionaire investor is now a venture capitalist wearing shorts and flip-flops. The 45-year-old woman with 2 kids owns an online temp firm hiring talent from India and Indonesia. Her company is worth $150 million and she has enough in the bank to buy a dozen McDonald’s franchises without breaking a sweat. Wearing a tie, driving a fancy car, shaking hands, meeting in person to discuss a business transaction, watching movies on DVD and owning a house with 6 bedrooms are all archaic and outdated practices.
Pay Attention to Function and Form Won’t Matter
What sounds more appealing, calling it quits with $810,000 in the bank or having $1,100,000. For some it still matters to be able to claim that you have a million in the bank. It may not even be something you are trying to brag about or advertise. After all, the latter makes you a millionaire and the former leaves you wondering when your money may compound to $1 million. In all likelihood both portfolios will result in fairly similar passive income streams. Happiness is knowing when to call it quits, when to pursue that next step, when to reach for that other goal. In order to recognize that point of transition you have to be able to separate out form from function.