Different types of wealth

[emon87]

After reading a couple of personal finance books (the Millionaire Next Door and Richest Man in Babylon), I have been doing a lot of thinking about what constitutes "wealth" and what is the best type of wealth. For those that don't know, these personal finance books basically advocate not spending much money, particularly on luxury items or services, in order to become wealthy. They are definitely worth reading, but, IMO, leave out different measures of wealth. Here are the three types of wealth as I see them:

1. Traditional wealth - having a lot of cash and appreciating assets. You own a business, stocks, bonds, real estate, etc. that all generates more money via passive streams for you. This is the type of wealth that the books advocate.

2. Possession wealth - having a lot of stuff. You spend most of your income on stuff - nice cars, fancy dinners, massages, designer clothes, fun toys, new electronics, etc. You may not have a lot of savings, but you do live very comfortably and don't get inconvenienced often. You live a life of luxury.

3. Experience wealth - having a lot of memories. You may not even earn a very high income, but most of what you do earn goes towards doing things you enjoy. This could mean traveling the world, building model planes, visiting family, giving all your money to charity and living in a box on the street, etc. You don't save money, but you live life to the fullest and have fun as much of the time as you can.

There are obvious trade-offs to each of the types of wealth.

In the first, you basically have no financial worries in life. If you are suddenly fired/your business collapses/a medical emergency occurs, you have enough money to continue your current standard of living for years. However, you don't get all of the comforts or experiences that money can bring - basically, you have tons of money but don't get to enjoy it.

In the second, you live insulated from the world as long as you can keep working. But if something happens, you tend to have little saved up. You certainly can't keep up your standard of living.

And in the third, you will always have your memories, and most people agree that doing what you want is pretty much the best part of life. However, when you aren't traveling/hobbying/whatever, you live poor and STILL don't have financial "freedom" - you must keep working to keep doing what you want.


Thoughts? What type of wealth do you prefer? Obviously you can mix them, what blends would you prefer? I will post my personal goals later in the thread so as not to bias them. Do you think that there are more types of wealth?