I know everyone wants to be rich but quite honestly, what is rich? If you're going to tell me a sum of money, especially some ridiculous sum of money, then you are almost certainly doomed to being poor because rich or poor is a state of mind not a state of your bank balance.
Look no further than the hordes of rich but miserable celebrities and Lotto winners. Money does not guarantee happiness, and I cannot believe anyone is genuinely happy because they spent twice as much on a kitchen bench top. So what is "rich"?
![Charles Dickens' Ebenezer Scrooge (played here by Jim Carrey) is the fictional archetype of the miserable rich person.](/web/20161225202448im_/http://www.theage.com.au/content/dam/images/g/t/a/x/k/x/image.related.articleLeadwide.620x349.gtaxcz.png/1481859309836.jpg)
It may be different for you but for me, at this stage of life and parenthood, rich is an income that allows me to deliver to my wife and family's expectations with a little extra for toys. (I like motorbikes). On that basis we as a family are already "rich" because we are delivering income to expectation.
And that's all it takes to be rich, a state of mind not a sum of money. You cannot tell from the fact that we are still busting our arses every day, or from the fact we don't travel as much as some of those much richer people on Facebook, but we are, by our own definition, "rich".
So are you "rich"? If not then maybe you have unrealistic expectations and maybe that's all that needs to change, not your bank balance. "Rich" is not a relative ranking as most people think, it's not an us and them, a "have" and a "have not", it is an inner satisfaction that is available to you right now with just a little bit of thought.
All you have to do is stop reading and start thinking. Redefine rich in your head from something unachievable to something achieved. A happy family perhaps. Presents under the Christmas tree. There it is, you're rich and you didn't even know it.
But rich for a 54-year-old doesn't stop there unfortunately. If rich is having an income that meets my family's expectations then to remain rich I need to build enough capital to replace my working life income with a passive income.
It will probably be less but that doesn't matter, that passive income just has to continue to meet our expectations and we'll stay rich. And now you understand why investment might play a part in your life, because unless you intend to work forever you need a passive income and there are two elements to that: build capital and maximise returns on that capital.
At that point, "rich" takes on a dollar value. It is not about spending money but about ring-fenced capital. I have written before about targeting "X". "X" is the amount of money that allows you to earn a passive income that is enough to meet your expectations. If you can earn higher returns then "X" is smaller but if you are going to give in to average returns and take the ups and downs of the markets without reacting, then "X" needs to be larger to be safe. Again, rich is not about "X", it's about the income and your expectations, or more simply, a passive income that meets your expectations.
Of course, building capital is not easy when four kids are bleeding you so, for now, "rich" for us is being happy for everything to just stand still and being happy about that. When your house goes up in price, or you make money unexpectedly or you don't spend money and "X" comes a bit closer, you need to celebrate that and feel good about that, otherwise what's the point?
Of course, if you work this through you will realise that the key to happiness is having low expectations. Guaranteed happiness is having no expectations, because from there it's all upside.
And if you're still finding it hard to feel rich, let me give you this little story of a rich man I know who complained to me about his inability to generate passion and how, despite his millions, he now envied those with debt, responsibilities and desire, because they had a reason to get out of bed, a reason to excel, while he rolled out of bed bored with his own existence.
That doesn't sound very rich to me. Rich in the bank account, poor in life. We want to be rich in life, and the good news is, the more we load ourselves up with liabilities, the more we get out of life; and the more we get out of life, the richer we are. If that's the thinking of a rich man, then Merry Christmas, there's hope for us all yet.
Marcus Padley is a director of financial services company MTIS Pty Ltd and the author of stock market newsletter Marcus Today. For a free trial please go to marcustoday.com.au.