What is the true definition of wealth?

What is the true definition of wealth?

In my line of work, I see plenty of people one would call affluent. If you're just looking at things on the surface—someone with $15 million, a certain car, a certain house—you might assume they're wealthy. You see the make and model of the car, the size and location of the home, the lifestyle. You may think, Oh, look, they're wealthy. But I've learned that a lot of what people think is wealth is just a well-polished illusion.

The deeper question is: how do we define what wealth is?

It's not necessarily money. It could be health. I'm wealthy because I'm in good shape. Or I'm wealthy because I have a loving family. Those are true statements. In fact, there is no truer definition of wealth to me than family and health—and no sports car, vacation home, or balance sheet can compete with that. But today I'll focus on wealth in a financial context.

Speaking from this perspective, I would say that wealth is a measurement not of your capital, but of the growth of your capital. Either your capital is growing at a pace greater than that which you are withdrawing from it... or it's not. And if it's not, I don't care how shiny it looks from the outside—it's not wealth.

The Value of Sacrifice

I work with a retired couple whom I consider quite wealthy. They're in their seventies, they have nothing to worry about financially, they spend a lot less than they could, and their capital is compounding and accumulating for the benefit of future generations. While they don't have all the money in the world, they are concerned about their legacy—to leave $5 or $6 million for the next generation. I appreciate their desire to have an impact beyond their lifetime. I appreciate that they don't spend everything they can so that they can leave something for their kids and grandchildren. They are making a sacrifice.

On a personal level, I get some fulfillment from sacrifice. Part of my morning routine, every single day before my kids wake up, is to do a minimum of 50 burpees. It's hard, and it doesn't get easier. There isn't a morning that I look forward to doing them—especially knowing how I'm going to feel physically. First thing in the morning, I'm not warm, it's not the perfect condition for exercise, and it's just not enjoyable in the moment.

But I love the feeling after I've completed them—knowing what I've done before most people get out of bed.

I know this habit is making me better. It clears my mind and gives me a sense of accomplishment, even if I weren't to do anything else that day.

A Journey to True Wealth

What does this have to do with the retired husband and wife? I asked them to tell me about their road to wealth. They didn't come from wealth; everything they have was saved through hard work and sacrifice. They both worked for the same company for over three decades. They started in entry-level positions, and I don't think at any point in their careers either of them made more than $75,000 in salary.

They told me about their early years—he started as a mechanic, and she held an entry-level role. Years ago, their manager told them it was "required" that they put aside a portion of their paycheck. (It wasn't—but they believed him!) The money they could set aside went into company stock. That's how they got started. They didn't particularly like having to save, but because their boss said they had to, they did. After decades, their company went through a merger. Eventually they retired, and the "compulsory savings program" resulted in the wealth they enjoy today.

Saving was very hard to do at first. They admitted they really needed that money—they weren't making much to begin with—but they learned to spend less. They learned to sacrifice. And they kept that habit through their working life, while raising children and living modestly. Thirty years later, they retired with accounts that, as of the last market high, were worth around $6 million.

I tell this story because it's amazing how a small act can have such a huge impact. By making a sacrifice, this couple laid the foundation for the financial freedom they enjoy today. Yes, they were fortunate to work for a publicly traded company and participate in an employee stock purchase plan over a long period of time. But this is not a story about luck—it's a story about discipline. They weren't high earners, yet they built true wealth over time. Most people aren't willing to do what they did—decades of patience, sacrifice, and faith in the process.

Wealth vs. Money That Runs Out

It seems to me there are two kinds of money: there's wealth... and there's money that runs out.

At least by my definition, true wealth is capital that retains—and grows—its value over time. For this couple, their wealth continues to grow in retirement. Of course, it varies in the short term with market conditions, but if you look at their capital over their now twenty-year retirement, it has continued to grow over the long term.

Contrast that with a second example: a 60-year-old couple with $10 million in the bank earning a "great" rate of 4%. They are retired and pulling out $350,000 a year after taxes to cover expenses. Are they wealthy? By my definition, no. Their rate of consumption is greater than what their portfolio can produce, factoring in the need to keep up with inflation. At this pace, they could run out of money completely in about 25 years.

It's the same story we see in fictional form with Jordan Belfort in The Wolf of Wall Street. From the outside—yachts, sports cars, mansions—he appeared to have it all. But it was an illusion, built on unsustainable gains and reckless spending. The wealth looked infinite, but it was already on its way to collapse. The difference between that and true wealth is the difference between a bonfire and a steady flame. One dazzles briefly before burning out; the other lasts for generations.

The Framework for Lasting Wealth

Now suppose my wife and I have capital invested in a diversified portfolio of mainly equities, assuming an average annual return over the long term of about 10%, and a long-term inflation rate of 3%. When we retire, we take income from the portfolio at a rate of 4.5%, increasing withdrawals by 3% each year to offset inflation. We also maintain 18 to 24 months of living expenses in cash for times when the equity portfolio declines temporarily. That cash allows us to pause withdrawals from the portfolio when necessary.

All these assumptions are part of the Goals Planning Statement (GPS) we prepare for our clients at Beck Bode. We lay it out paragraph by paragraph, in writing. And here's the thing—most people avoid this kind of detail because it forces them to face the truth about their spending and savings habits. But if you can push through that discomfort, you can see not only what you'll need to retire comfortably, but also what you can potentially leave behind for your children or the causes important to you. By planning ahead, making sacrifices, and saving intentionally, we create the possibility of a legacy.

Wealth Is Love

What does it take to accumulate wealth? It's less about how much money you make and more about your commitment to your goals, the discipline you practice, and the sacrifices you make along the way. Are you putting your capital to work, or are you chipping away at it until it runs out?

Anyone reading or listening to this would almost certainly prefer to see themselves in the shoes of my retired couple—the ones who put their heads down and sacrificed year after year—rather than in the role of someone trapped by a lifestyle that only shows wealth. But life is hard, and bad habits are harder to break. Peel back the layers on many of those impressive lifestyles and you'll often find it's just another story of diminishing capital over time.

I would argue that true wealth—financial wealth—is capital positioned to grow well beyond your lifetime. And I believe it is available to anyone who is willing to save, sacrifice, and put health and family above all else. Nick Murray defines wealth, simply and oh so eloquently, as "love."

Wealth is love.

I could not agree more.