How to Measure Wealth Accumulation (and Why It Impacts Your Happiness)

The only meaningful way to measure wealth is via your own standards and not someone else’s. Here’s how you can attain the wealth you seek by paying attention to these three things.

What does it mean to be wealthy? To have S$1 million in the bank? S$10 million? A billion? Of course, the number in your bank account isn’t the sole (or even the most important) determinant of how good you feel.

While wealth denotes ease, comfort and luxury, wealth alone by no way guarantees happiness, passion, purpose or even contentment.

We’ve become accustomed to looking upon money as a shortcut to solving our problems. But perhaps we would all be better off if we realise that wealth is not the end goal, but simply a tool to help us get there.

What do you really want out of your life?

Instead of focusing on money, let’s ask ourselves a simple but important question: What do you really want out of your life?

To move into the swankiest condominium in the neighbourhood? To take four, week-long overseas trips every year? To send your kids to the best schools in the world? To retire rich? To have every meal in a restaurant?

Or maybe you just want to be able to take care of your retired parents? Help see your younger siblings through school? Pay a portion of the household bills? Save up enough money to upgrade your 5-year-old laptop so you can play Diablo IV with your friends?

As an elder sibling, you want to help your younger brothers and sisters get what they need. As a child, you want to take care of your parents when they can no longer do so themselves. As an individual you want to enjoy the things you like, and express yourself in your own unique ways.

No matter what we individually want, we all are united by the desire to live life in a way that holds meaning and makes sense to us.

Therefore, could it be that wealth is less about having money, and more about being able to live life in a fulfilling and meaningful way?

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A different definition of “wealthy”

This opens us up to a different definition of “wealthy” – perhaps a better one.

Instead of chasing an arbitrary figure, truly being wealthy is the ability to fulfil the goals that matter to you.

Realising this is the key to stopping the never-ending cycle of shifting goal posts that ensure when we blindly chase money for money’s sake.

Upgrading to a bigger home. Buying a flashier car. Filling your wardrobe with more haute couture and bling. Eating at more expensive restaurants. Adding yet another zero to your bank balance… where does it end?

Waking up to the real purpose of money gives meaning to our toil – we transform from yet another faceless participant in the endless rat race that passes for a career, to a person now moving with direction and purpose.

Crucially, it gives us permission to set our own terms and targets, and gives us the ability to say “what’s enough for me”.

This can be an enormously freeing realisation, as you no longer have to hold yourself to someone else’s standards.

Joining the millionaire club no longer becomes a requirement to be happy or successful; relieved of this arbitrary, meaningless pursuit, you clear the way for true contentment to take root and blossom in your life.

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How to create wealth on your own terms

Let’s take a look at some concrete steps you can take as you build your own definition of “wealthy”.

Start by finding out what’s enough

The first step is to take stock of your goals and needs. This means listing down the things that matter to you, and how much you need or want to put towards those items.

You’ll likely find a mismatch between your list and your current financial abilities, but don’t be discouraged. The whole point of doing this is so we can get clear about what the shortfall is, so we can take action to address it.

Next, sort out your options

There are likely many things you need to do, both immediately and in the long run, to properly grow your wealth. To prevent yourself from getting overwhelmed or distracted, here’s a useful way to sort them out.

Simply put, there are three factors when it comes to wealth – how much you spend, how much you earn, and what you do with the difference (aka saving and/or investing).

We can also line them up as short-, medium- and long-term tasks, as in:

How much you spend

Chances are, there are some adjustments you can make to your budget, starting right now.

Any reductions you make in your spending will put you in a better financial position, so if you’re looking for something you can do immediately or in the short term, this is it.

How much you earn

Cutting down your spending will only bring you so far. For a real difference, you will need to work on increasing your income.

Yes, this is easier said than done, but you also don’t have to go to extremes. Start with a small, comfortable target (maybe earning S$200 extra every month), and work your way up.

Also, be flexible and creative about how you increase your income – side hustles are trendy, but it’s not for everyone.

How about learning more marketable skills so you can grow into a larger role in your company? Or if you already enjoy a hobby, is there a way you can share your love for it while getting paid as a coach or trainer?

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What you do with the difference (saving and/or investing) 

Here lies the crux of the matter: How you save and/or invest your money will determine how successful you are in attaining the wealth you want.

This is where educating yourself counts. Learn proper budgeting, how (and why) to set up an emergency fund, and crucially, the various ways you can invest your money.

While you’re at it, learn about using insurance as a safeguard against any curve balls thrown your way. Term life insurance is affordable but doesn't help you save up in the long term. Whole life insurance costs more, but provides a pot of funds at the end. Decide which of these works better for you.

Set up your wealth portfolio

Once you’ve worked out how much wealth you want to achieve (and why), and how you can go about it, it’s time to put your money to work for you.

Setting up a wealth portfolio simply means taking steps to start investing and purchasing the life insurance policies you want to have. That’s the easy part.

The harder part is keeping up with your investments and your premium payments.

Think of your portfolio as a steam-engine train. In order for it to go the distance, you need to keep feeding it the fuel to keep going.

But if you set things up right, you can let your portfolio coast along during appropriate times, and even withdraw some of your returns to spend on other goals along the way.

Thus, you’ll want to look into a variety of different investments and insurance policies so you can meet different needs. This will also help you diversify your portfolio and better hedge against macroeconomic risks and and market downturns.

For instance, you can put a part of your investments in bonds and dividend funds to generate passive income that you can use to pay for your year-end holidays, while putting the rest in growth stocks for long-term capital appreciation.

Another idea is to voluntarily top up your CPF accounts to enjoy guaranteed returns, and increase your CPF Life payouts during retirement.

Getting your own home is another way to build up your wealth. As you pay down your mortgage, you are building up equity in your property, which you can monetise down the road when you rent out or sell off your property.

As you can see, there are many ways you can increase your wealth – but you won’t know what to do, or how to do it unless you take the effort to educate yourself.

Review and adjust as you go

It’s important to realise that building wealth takes time, patience and discipline. Getting your investment portfolio set up is simply the beginning, you’ll need to track and review your results regularly (once a year is good) and make adjustments as you go along.

Just as life has its ups and downs, your wealth-building journey will also have its highs and lows. Also, as you age and mature, your priorities, tastes and preferences will change. Don’t give up when you encounter setbacks, just keep going as best you can.

When you find yourself losing your way, go back to the three basic factors: what you spend, what you earn, and what you do with the difference.

Once you have sorted that out, you’ll be able to quickly get back on track towards being wealthy in the way you want.

Read these next:

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More Than Just Savings — Five Tips for Proper Wealth Planning