Money versus Wealth

Most people equate having money with having wealth. The fact is we often use the terms interchangeably. They are connected, certainly, but are they really the same thing? What makes a person wealthy? Are there other kinds of wealth besides money? Can you improve your quality of life by recognizing the difference and cultivating true wealth? Finding answers to these questions can make your life vastly better. 

Here are a few reasons to question the real distinctions between wealth and money. First, without even knowing why, you can spend your life chasing something that has limited upside for your happiness. Second, how you and your community define “value” will have a radical impact on your health, your family life, what you believe you can afford, and even how long you live. Plus, how we define wealth in the social sphere determines whether (or not) we have things like social justice, clean drinking water and bees. 

This is the first distinction to recognize: money is a human invention. We made it up and we can reinvent it if we want! In fact, we have already reinvented it numerous times in the past, for instance, by going from gold coins to paper currency, and then by introducing the fractional reserve system and loaning money into existence. 

For now, simply remember that the dollar bills we use are just paper. They are merely symbols to represent value – they do not have value. People call dollars, pesos, Euros, etc. “fiat currencies” since they are declared to be real (i.e. legal tender) by the fiat decision of a government. 

To be useful, money needs to accomplish at least one of three things: to be a store of value, a unit of account, and/or a medium of exchange. But is fiat money “a store of value” without something real to back it? As a “unit of account,” money is often simply a way to keep track, like a ledger. Yes, we all need it for rent and food. But there are other things that can work to do the accounting and as a means of exchange such as frequent flyer miles and barter. And now crypto-currencies (Bitcoin was the first of many) are gathering increasing attention, largely because they can work just like money without needing banks. 

Perhaps the most important thing to take into account is this: money is a subset of all the wealth in our lives. While today it functions at the center of our economic universe, it does not identify, measure and distribute much of our available wealth. Consider that there are at least five ways to measure wealth – and only one of them involves money (aka “financial capital”). Here are some of the others: 

“Human capital” is largely unmeasured but immensely important as it encompasses all our human knowledge and skills as well as all of our physical, emotional, mental and spiritual health. Active community associations, skills like drawing, gardening and cooking all count. Public libraries and the internet are literally free repositories of human capital acquired over millennia. 

“Natural capital” is also largely taken for granted without being fully measured, but just consider its true value. People are beginning to quantify what it would take in dollars to do what Mother Nature gives us for “free” and it is a staggering sum -- one estimate (by the World Bank) pegs the value of natural capital to be over US$40 trillion, and that's around half the GDP for the world. Basically, the ecosystem that supports life as we know it is valuable beyond our capacity to measure. 

“Built capital” is all the stuff we have made using Human and Natural capital. It also goes largely unnoticed until an earthquake takes down a bridge or fires rip through a whole town. Infrastructure is shared wealth that we all rely on implicitly. Again, no one can adequately measure the full worth of this in its entirety -- trying to monetize full replacement cost is mind-boggling, perhaps even deceptive since there is no possible replacement for much of this. 

“Social capital” is perhaps the least tangible of all as it relates to the strength of our relationships and things like trust, neighborliness, safety and belonging. The “sharing economy” has arisen as much out of a shift in values as the desire to find cheaper options. Connection with real people actually makes life meaningful. Friends and family are priceless, of course. But we are only beginning to recognize the value of connections in our networks – something that social media is certainly picking up on. 

Wealth is like health. We don’t necessarily value it fully—or even recognize when it’s there—but we know when it is missing. Safety, open space, and community are rarely considered forms of wealth, but they are priceless in reality. Being wealthy involves so much more than having money. In fact, if all you have is money, are you ever really wealthy? We all know the story about how Midas found this out far too late. Hopefully we can learn to not make the same mistake. Isn’t it time to reinvent money that supports and enhances true wealth and well-being?