What Does Wealth Mean to You?Submitted by Moneywatch Advisors on March 29th, 2021
Two hosts of a podcast I’m listening to recently described their relationships with money after both growing up poor. Their thoughts started me thinking, again, about people’s views toward money and what affect it has on us psychologically.
- The first host earned a lot of money early in his career, made a slew of bad decisions, worked his way out of debt, then realized to his horror, in his early 30’s, that he was rich. “I hate myself.” He was horrified because “now I’m in a trap.” He was self-conscious about having money, even felt guilty about it, because he feared he’d become what he hated. He knew he would be tempted to spend more and then have to earn even more to keep up his new, lavish lifestyle. He was scared to death of the hamster wheel he was hopping on. When he didn’t have money, it didn’t bother him and he wanted to go back to not worrying about it.
- The second described how he and his wife’s vacations gradually progressed in creature comforts as their incomes rose. For instance, they started vacationing by sleeping on his grandparents’ couch, graduated to a hotel about 5 miles from the beach, then were able to afford a nice place closer to the beach, then finally to a 2-room suite where their kids had a room to themselves and all had a view of the ocean. They realized, however, that the real joy in their vacations did not come from the amenities but from the free things – beautiful sunsets and the laughter of their kids as they played in the surf.
In his book, The Psychology of Money, Morgan Housel defines the term “rich” as our current income. If someone drives a $100,000 car, they are almost certainly rich because, even if they bought the car with debt, they needed a certain level of income to qualify for the loan. While we see rich, wealth is hidden. It is literally income that is not spent. Housel says, “Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.” Unlike a Porsche SUV, though, we can’t show off our wealth and that seems to bother some people.
My view toward money and wealth has always been about security, choices, and gaining the freedom to work because I want to, not because I have to. If I’m being perfectly candid, I’ll admit that living beneath our means and saving and investing the rest was driven more by fear than any desire to accumulate possessions. The fear of not having enough money far exceeded my desire to own expensive, showy things. To me, driving a Honda Accord rather than a Mercedes E-Class wasn’t a sacrifice at all because it meant achieving our longer-term goals sooner in life.
What wealth means to each of us is very personal but is also an important topic to think through in order to help determine one’s long-term goals. Save aggressively now for your future? Save but also buy the dream house and possibly defer the long-term goal of financial independence? There is no single right answer, only the answer that is right for you. The sooner one figures this out, however, the sooner you can plan to meet all your goals.
So, what does wealth mean to you?
Steve Byars, CFP®