Money matters, but only to a point.

The research is clear that above $75,000 USD in household income, the marginal value of additional dollars diminishes quickly.

The $75K income threshold will be more or less correct depending on family size and where you live of course. A family of five residing in San Francisco could probably make good use of a few more bucks than a single person living in rural Pennsylvania.

The overall point remains sound, however. You can be plenty happy with less income than you think.

Daniel Kahneman and Angus Deaton Think A $75K Makes You Happy

Why then do so many driven professionals pursue money as the end goal in life, working in jobs they hate (or are merely tolerating) for an outsized paycheck?

My belief is that this happens when people don’t stop to think what wealth is, and don’t redefine it to match their internal values.

Beyond finances, wealth has other components to consider. For me, I think about wealth as a relates to three specific qualities.

Money + Time + Freedom = Wealth

Money

Money is critical. It lets me buy high-quality organic produce, live in a small but comfortable house (which I’m renting now), pay for healthcare, buy my ski pass and running gear, and get the random Amazon Prime delivery without worrying about the funds in my bank account.

Money also lets me support social causes I believe in, travel when I need to and buy books when I can’t find something interesting at our local library. Oh yeah, then there is that topic of savings!

These are all great things. Being wealthy means having enough money. No doubt about it. The question is, “How much is enough?”

Everyone has their personal answer to this issue. If you have never thought about how much money you need to live a high-quality life, you should.

Time

What would you give to have an extra 2–3 hours today?

Probably a lot.

Your time is worth is a lot more than your hourly rate of pay. At certain times in life, you would probably pay a massive premium to extend your experience with added free time – just think about moments when you were on an epic vacation, having a great conversation with friends or relaxing on a lazy weekend.

How much would it have been worth to extend those experiences without interrupting any other part of your life (or getting in the way of work)?

Then there is the question of which hours are “free” vs. “occupied”.

A job paying $200,000 requiring 80 hours of weekly work and a job paying $100,000 requiring 40 hours of weekly work pay the same on an hourly basis. However, if the $200K job comes with added stress and many of those 80 hours falling at unpredictable and inconvenient times – interrupting your vacations, sleep, meals, exercise – the actual “wealth” gained from that $200K job might be far less than the $100K job.

If you have no time to spend doing things you enjoy as a result of working a crazy job, is that your definition of wealth?

Worse, if you earn a boatload of cash but have no time to spend it, do you consider yourself wealthy?

I’m now earning far less as an entrepreneur building my new business than I did working my crazy corporate job, but find myself much more prosperous. Not just due to fewer working hours, but that I can choose when those working moments happen. This gets to the final part of my wealth equation, freedom.

Freedom

The last component of my wealth equation is freedom. Freedom is the ability to enjoy the luxury of moving around without needing to be in a fixed location for any prolonged period.

You might want to hunker down in a particular spot, and there is absolutely nothing wrong with that. The quality of freedom is all about it being your choice.

If you are working a job that requires “face time” where you need to be in the office all the time no matter what, that creates a low freedom lifestyle. A job that has mandatory travel 50% of the time also creates a very low freedom lifestyle.

If you have a job that encourages quality work, regardless of location, so long as you stay in touch with your team (e.g. flex work), that enables more freedom.

Of course, working for yourself in a service capacity (e.g. as a freelancer working wherever you have an internet connection) creates maximum freedom. Even some larger companies have these types of roles (e.g. remote workers).

Some people push freedom to the maximum, by creating streams of passive income early in their lives (e.g. rental properties, investments, online course or other side businesses) that one can manage from anywhere with a light touch or a few virtual team members.

For me, I define wealth as a mix of these three variables.

Money + Time + Freedom = Wealth

To be truly wealthy I need sufficient funding to pay for a simple lifestyle focused on the experiences I most enjoy, the free time to do what I want, and the freedom to be mobile and make the most of the best parts of the day while traveling as I need to.

When I look at wealth with this definition, I can make smart decisions to increase my wealth that align with my values and create a more enjoyable and enriching life.

I also increasingly notice many – though definitely not all – of my former peers in the corporate arena continue to chase a very different version of wealth predicated on “prestige and salary.” There is nothing inherently wrong with that pursuit, so long as this is a voluntary choice!

Now I have some questions for you:

How do you define freedom? How does your current level of wealth stack up when measured using the Money + Time + Freedom equation?

Leave a note in the comments and let me know what you think.