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SMALL CHANGE

What it takes to be rich

Wealth is not always about having lots of money and assets

Published on Aug 18, 2013

By Goh Eng Yeow Senior Correspondent


Recently, one friend tossed a question at me: What does it take to be wealthy?

It had me stumped. Once you would be considered rich if you had $1 million. But when even mass market condos change hands at that price or more, having $1 million does not seem like a big deal any more.

So trying to draw a line between the rich and everyone else can be unclear.

In the United States, Swiss lender UBS said the magic number is US$5 million (S$6.3 million), following a recent survey it did with its well-heeled clients there. My gut feel is that if a similar poll is held here, we will arrive at the same ballpark figure of $5 million as our benchmark for defining a rich person. This is in view of the high property prices in Singapore.

Still, what intrigues me more is the definition used by UBS to define wealth.

Now, in Singapore, most people will assume that you are rich if you have achieved the five Cs - hold a lot of cash, own a fully paid-up condo or a landed property, drive a luxury car, have membership at a prestigious country club or two, plus a high spending limit on your credit card.

But for the 4,450 high net worth clients surveyed by UBS, the perception of wealth is quite different.

Ms Emily Pachuta, head of investor insights at UBS Wealth Management Americas, said: "Investors are telling us that wealth isn't just about money. It is about having no financial constraints, holding a lot of cash, and taking care of the family."

Based on this yardstick, only 28 per cent of those respondents with assets worth between US$1 million and US$5 million believed they were wealthy. But for those with assets of US$5 million or more, 60 per cent of them thought they were rich.

Why is this so? The survey noted that people feel rich if they hold at least US$1 million - or 20 per cent of their assets - in cash.

In that sense, rich people are like the rest of us. We feel financially secure only if we have enough cash we can get our hands on. So having $1 million of cash in hand will make you feel rich. It sure turns the old definition of millionaire on its head.

The UBS survey also noted that one reason rich people hold so much cash is that many of them provide financial help to their adult children and aged parents. Like the rest of us, they are worried about the escalating cost of health care, and whether this will bankrupt them when they become old and infirm.

For me, it provokes another question not covered by the survey: Does having more money make rich people happier, since they are subject to the same financial worries as the rest of us?

My junior college principal, Mr Wee Heng Tin, who later became the Education Ministry's director-general of education, said a wise man once told him that whatever money a person has, it is still just a number. The money is not yours until you spend it.

His remark reminds me of a story told by the late economist Peter Bernstein in his 2000 bestseller, The Power Of Gold. In it, he cited a tale of a man who chose to hug his bag of gold coins closely to his chest as his ship sank. "Now, as he was sinking, had he the gold? Or had the gold him?" Mr Bernstein asked.

Sure, most of us believe that the more money we have, the happier we will be. But if we really want to have a fulfilling life, it is not the wealth we have accumulated that matters. It is how we spend it that counts.

In an earlier column "Buy happiness? Oh yes, you can", I quoted a study done by three researchers who noted that people feel significantly happier when they reflect on a particular time that they spent money helping others.

That observation was reinforced by a study by US behavioural scientists Elizabeth Dunn and Michael Norton which noted that people derive happiness from seeing their money at work in making other people happy.

Sure, you may not feel anything parting with your spare change when a stranger approaches you with a tin to donate to some unknown charity.

But you will feel elated if you know how your money is being used in helping others. That was how I felt when I found out that a donation which I made to my alma mater Temasek Junior College had been used as an award to spur its students to do sterling community work in the surrounding neighbourhood.

It explains why well-to-do people give generously to build schools and hospitals. In doing so, they feel happy as they can watch in real time their money being used to help the community they live in.

Ultimately, wealth should not just be measured in material terms. As the ancient Greek philosopher Epicurus once opined: "Wealth consists not in having great possessions, but in having few wants."

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