HiI think that wealth and standard of living are very much...

Hi

I think that wealth and standard of living are very much linked.

I get what you are saying in that an 'asset ' that drains funds from you actually redirects funds that could otherwise be consumed in living expenses.

I would suggest that a person owning (no debt) their own home worth say, $1.5m in an area that they enjoy living in would be considered relatively wealthy in that they have a significant asset of value. Owning that home also contributes to their standard of living in that no funds are required to rent a property to live in, hence they have more funds to consume if desired.

An investment property can initially redirect funds away from consumption through excess of expenses over rental income and, of course, the repayments of capital that may also be made over the years. Notwithstanding, the capital gains that could be made of the life of the asset could over compensate for earlier year outgoings and be a store of wealth. In the early years our Sydney investment property ran at a loss but is now cash flow positive. However, the we still pay down the loan balance regularly which diverts funds away from consumption. However, the equity in that property is multiples of what has been redirected from consumption, resulting in significant wealth in relative terms.

I would imagine that most people determine what standard of living they want and then invest the excess for the future whether that be in shares, bonds, cash or property.

Of course, we all don't liquidate our assets and consume every last dollar until death, the assets we accumulate go to increase the wealth and quality of life of our children.

Owning our home has been a great investment both in terms of overall wealth and our standard of living.

I am of the view that owning your own home is the cornerstone of wealth.