A new Schwab survey shows there's a wide range in how Americans define wealth.
No matter your definition of wealth, or how much or how little money you have, to make the most of it, you have to pay attention to it.
Having a plan in writing is the key to growing your wealth—and Millennials are generally ahead of the game.
How do you define wealth? Is it merely a number—or something deeper? I've always believed that the real value of money is what it enables you to accomplish. Financial security is important because of the freedom it can give you to make choices, to use your talents and fulfill your personal goals. So I was particularly intrigued by a new Schwab survey aimed at determining how Americans today define wealth. I think the results are interesting not only in the range of definitions that were expressed but also in some practical findings that I believe can benefit everyone.
Source: Charles Schwab & Co., Inc. Schwab Asked 1,000 Americans what wealth means to them. 27% said amount saved; 24% said experiences; 22% said affording things; 19% said peace of mind; 12% said good relationships.
Wealth is money—and more
If I asked you how much money it would take for you to feel wealthy, what would you say? A million dollars? Two million? More? Numbers like that can feel astronomical and out of reach for many. But according to this new survey, a large percentage of Americans define wealth in much broader—and more philosophical—terms. For some, it's having good physical health, for others it's a sense of gratitude, still others define wealth as building community. What I feel encouraged by in seeing these results is that what many people are striving for in terms of wealth goes beyond just the zeros in their bank account. Wealth is a much bigger concept.
Stay on top of your wealth, no matter the numbers
Now let's circle back to the practical. No matter your definition of wealth, or how much or how little money you have, to make the most of it, you have to pay attention to it. Here's where the survey was particularly revealing. Because when participants were asked about the practical steps they were taking to stay on top of their wealth—things like setting goals, saving and investing, and staying on track—there was lots of room for improvement. In fact, on a scale of 1-100 in a new Modern Wealth Index, a part of the survey designed to measure how involved people are with their money, the average score was 49. Obviously, people need to improve, but how?
Having a plan is essential
To me it's all about having a plan. If you don't, it's easy to let things slide. As I've written many times, a formal financial plan is one way to go—and a wise way as your finances become more complex. But you can start by simply putting pen to paper to list your goals, determine how much you need to save for a comfortable retirement, outline your budget, create a debt repayment schedule, etc.
With these things in front of you—and in writing—you'll have a plan of action that you can follow, refine and use to monitor your progress. Need more motivation? According to a report on financial literacy and planning by Annamaria Lusardi and Olivia S. Mitchell, people who seriously plan accumulate three times more wealth than non-planners.
A tip from—and for—Millennials
Another interesting result showed that when it comes to planning, Millennials are typically ahead of older generations. Not only do they plan, they monitor their accounts regularly and stay on top of fees. That's great to hear. But where Millennials have the tendency to slip up are in everyday money habits, whether that's spending, saving or budgeting.
Here's also where they have an opportunity because time is on their side—as long as they set some priorities. Those priorities begin with saving for retirement, having an adequate emergency fund, paying down debt—and then saving some more for individual goals. Another important priority is to put those savings to work by getting started investing—the sooner the better.
Create your own definition—and make it happen
Whether you define wealth in terms of numbers or experiences, carefully managing your finances can be crucial to your success. So don't just be philosophical; take action. Start with a simple plan, but start. To help you, I'll be following up in the coming weeks with more specific guidance on planning and prioritizing. Because wealth isn't just a matter of how much money you have, it’s also how you can make the most of what you have and live the life you want. Stay tuned.
Have a personal finance question? Email us at firstname.lastname@example.org . Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.