are you affluent or effluent?

Do you consider yourself affluent? What does it mean to be affluent?

I came across this definition of affluent at Free Money Finance:

Simply stated, your net worth [augmented -- assets minus liabilities] should equal 10 percent of your age times your annual realized household income (0.10 x age x income = expected net worth.) If your actual net worth is above this expected figure, I consider you affluent, given your age and income characteristics.

Try this exercise for yourself. You can find out how to work out your net worth here. I’m assuming that the annual realised income is your net income for the household and that it is a combined household income.

For example, Joe is 28 years old and earns $38,000 after tax. His “affluence factor” would be 0.10 x 28 x $38,000, which would equal $106,400. If his net worth was more than this, he would be considered affluent by the above definition.

Now, despite the fact that I like formulas and numbers, there is a big problem with this kind of definition of affluent. In the very least, it assumes that you can define affluence with a dollar amount.

When I calculated my ‘affluence factor’ according to this formula, I failed dismally. Despite the fact that we live in a comfortable home that we own (ok, that the bank owns) that we have a house full of possessions, savings in the bank, an abundance of readily available quality food, we are healthy and have access to good healthcare, education, parks, emergency services, and have the ability to earn an income in the future… by the definition above, we are not affluent. Maybe it’s a matter of attitude. Maybe we need to be more thankful for what we have and less mindful of what we don’t have. I can tell you though, the more I think about it, the more I feel very affluent.

If you’re not convinced, try this little exercise instead.

Find your place on the global rich list. Go to the Global Rich List website and enter your yearly income (you will have to convert it into US dollars or English pounds) to find out where you are placed. Below is a picture of where we appear on the global rich list. Despite the fact that we earn well below the average Australian wage, and in western standards we are not ‘rich’, we are in the top 3.5% of the worlds richest people.

Top 3.5% seems pretty affluent to me.

Not happy with how we define affluence, I dug a little deeper into the word’s meaning. Which brings me to the title of this post. Isn’t it interesting that the spelling of affluent and effluent are quite similar? The linguist in me spent some time researching the origins of the words and I found that they are related.

The word ‘fluent’ has Latin origins and means to flow or flowing. The ‘a’ prefix that makes the word affluent means ‘into’ or ‘towards’. The ‘e’ prefix that makes the word effluent means out.

So affluent literally means inflow and effluent means outflow.

Logically, what flows in must flow out. The more affluent we are, the more effluence we produce. The more we consume, the more we waste. The wealth of our society is based on a constant flow of crap.

Just saying.

I’m thinking our definition of affluence needs to be re-evaluated. Maybe just as economists are redefining the GDP, we need to rethink affluence not as a measure of material possessions, but as a measure of ‘enoughness’.

So are you affluent? What does it mean to be affluent?