The New Rich: A moment of definition.

The New Rich: A phrase you may have heard before, but many have not. It is a phrase possibly coined by Tim Ferris in his best selling book “The 4 Hour Workweek”. If you have read the book, then you know exactly what I am referring to. If you have not read the book, let me take a minute of your time and explain the general concept.

The New Rich is a group of people that are abandoning the typical “workplace mindset”. What is the typical “workplace mindset”: working 9-5, 40ty hours a week with two weeks vacation a year. A life deferring model, existing and contributing to a plan that defers the big life affirming payout until you eventually retire at age 55 or beyond. This “workplace mindset” defines wealth by the acquisition of things and money for the sake of money and things. The people who live to this ethic tend to appreciate work for the sake of work and value those who look busy but are not necessarily productive. The New Rich define wealth as the sum of two parts: Time and Mobility. The new rich can work anywhere at anytime, mostly just needing a cell phone, laptop and internet access to carry on their “business”. They make only enough money to accomplish what is necessary to live in the moment. They look at retirement savings as an insurance policy or tax shelter to mitigate the risk of someday not being healthy enough to work.

Tim did an excellent job on the “The 4 Hour Workweek”. The principles of the new rich shook the foundation of conventional thinking about how business should and could be done. He took concepts that had been around for years and brought them into the main stream. One of things Tim principles for the New Rich is the concept of Mini-Retirement. The base concept is simple, taking many smaller breaks through out your lifetime.

Retirement versus Mini-Retirement

Most people who have the “workplace mindset” plan to work hard for 20-30 years, save enough, and retire for another 20-30 years. Some extraordinary people are able to shorten the first phase – the accumulation phase to a shorter period of time, 5-10 years. This happens a lot in the Silicon Valley, where young energetic entrepreneur starts with a wild idea. He then materializes his idea, gets millions of funding from venture capitalists, then lists his company for a public offering, finally cash out for an early retirement.

Life Phase

The New Rich have a whole new set of rules and perception around the concept of retirement.

Instead of planning your retirement, this new rich plan on having regular mini-retirement spread out throughout their lifetimes. They chop up the time line, making each phase a lot shorter and cyclical. Instead of going through 20-30 years of the accumulation phase, they cut it shorter to becoming 3-4 months, or even 3-4 days. They may even work for two days, and œretire for five in any given week. They may work eight months, and then travel for the remaining four months of a year. This is the concept of mini-retirement.

Those of the “workplace mindset” often view retirement as the end-all, be-all objective, where you realize all the dreams you have been deferring for 50ty or 60ty years. The new rich view retirement as a necessity that should be enjoyed at present, not postponed until the future. The new rich are those who abandon the deferred-life plan and create luxury lifestyles in the present using the before mentioned currency of the new rich: time and mobility.

Income Relativity

The currency of the new rich is: time and mobility. Relative income is the key to the valuation of this currency.

For example, Mr.A works 50 hours a week with a monthly salary of $5,000. Meanwhile, Mr. N works 10 hours a week but he only paid $2,000 a month. Who is making more money? If you compare only the absolute figure, Mr. A is making more money. In terms of relative income, we would need to calculate the hourly income of Mr. A is making $25/hour ($5000 / 50 hour weeks * 4 weeks in a month ), while Mr. N is $50/hour ( $2,000 / 10 hour weeks * 4 weeks in a month). Apparently, Mr. N is making more money with his time. As long as Mr. N is making enough money to sustain his lifestyle he has more time to pursue what is important to him, using the shortest amount of time to earn the income he needs.

Use the shortest time to earn the income you need

Surfing around the internet I found myself a prime example of a new rich success story. A British couple bought a sailing boat and travel around the world. They even had two children in Malaysia. How do they sustain their daily living expenses? They have a house back in England that they rent out for regular rental income . The husband does some day trading via the Internet. They all have lived for several years on the sailboat. I would say that they are technically retired. They might have a very small home (the sailboat), but a very large swimming pool (the ocean).

photo credit: ronnie44052