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Financial products and education, as they are delivered today, give the impression that you can, and should, reduce your life to a math equation. Compounding money over time is touted as the eighth wonder of the world. What is left out, is how your life fits into these formulas. The subtle, or maybe not so subtle, implication is that more is more. That making and accumulating the most money possible is the goal. Life, however, is about trade offs. We are always making trade offs. Trading things that aren’t easily reduced to a number or that fit neatly into an equation.
Is accumulation the goal?
When accumulation is the goal, and more is the end point, there really is no end. When the math equation is applied, compounding will always get you to more. But where do you go from more? For there to be an end, there has to be a point of enough. That is the part that has been left out of the equation……or assumed that we will just know when we have enough. But you have probably heard the expression, you can never be too skinny or too rich. The expression assumes that more is always better. The idea is pervasive.
Fear of not having enough
The two emotions that fuel the financial industry are fear and greed. Fear of not having enough drives the accumulation mindset. This fear is leveraged by marketers because it works. Fear of running out of money has become one of the biggest fears of retirees. Have I accumulated enough? Can I afford to spend my money? How do you unwind the accumulation?
Defining enough
The only way that I have found to define enough starts with the question “why does money matter to me?”. We have been told that money is the goal and more is the amount we should seek. Why? Why does it matter? We have to define what we are currently trading of value for that additional amount of money. The big realization for me was how much of my time I was trading for money. Time is the one resource that is limited. We all have the same amount. There isn’t any way to get more. Why don’t we treat this as our most precious resource? And the biggest question I had….How much of my precious time should I devote to pursuing money if what I really wanted was life satisfaction?
He who is contented is rich. – Lao-Tsu
The real goal is life satisfaction
Money certainly plays a role in life satisfaction. It is difficult to be satisfied if you are living in poverty. However, it isn’t a given that money, especially the pursuit of more money creates satisfaction. Money is just a tool. In and of itself, it is neutral. It is how we use that tool that determines our level of satisfaction. The aimless pursuit of more will leave you dissatisfied.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. – Ayn Rand
The aimlessness is the problem, not the pursuit
Since money itself isn’t the goal, if we don’t have another purpose to pursue money, it will leave us empty. It isn’t the pursuit that is the problem though. It is that we don’t have a real reason to pursue it, and we are trading other things of value for nothing specific. When you think of money as a tool to create the things you want in your life it is easier to understand. Accumulating tools without knowing what it is that you are trying to create leaves us lost. Once you have clarified what is really meaningful to you to have in your life, you know what tools you need and why you are accumulating them.
How does money promote well-being in your life?
The “why” and “what” are the starting point. Why does money matter to you? What actually matters to you? What are you willing to trade your life energy for? What really adds meaning to your life? When you are clear with what you want, you can pursuit with vigor. You know what will be “worth it” to you.
Everybody starts at the beginning
Practicality matters. Keeping a roof over your head and food on the table need to be taken care of first. If you are in this starting place, sometimes you just have to suck it up and do what needs to be done. This isn’t selling out, it is being totally practical. This is where things get murky though. How do you define the basics? Much of what we spend our money on is really optional. That means that you have a choice. It may not be a choice that you want to make, but it is important that you recognize that it is a choice.
The most important part of recognizing that you do have choices in most of your spending, is that is how you identify why money is important to you. You have a certain lifestyle that you want to live. But it is a lifestyle choice. You can always make another choice. The lifestyle you choose is supported by how you are choosing to make your money.
Leveling up from the basics
Many of us start out our life pursuing things that we have been told are worth pursuing. Societal standards and marketing tell you those things that you “should” desire. The problem is that these are external standards. As you gain more self-awareness and experience, you may recognize that much of this just isn’t that important to you. You develop your own internal standards that may or may not align. Leveling up is defining how you make and spend your money according to your own internal standards. Clarifying your trade offs and identifying what really is worth pursuing.
He is well paid that is well satisfied. – William Shakespeare
The ultimate level
For me the ultimate goal is having you and your money in a virtuous cycle promoting your well-being. The way that you make it and spend it contribute to your thriving and flourishing……..however you define it. How do you put that into a math equation? Sure, not spending more than you make can be a simple math formula. Compounding earnings over time does have value. But a life well lived is more nuanced than that. Investing in yourself, having meaningful work, meaningful relationships, a reason to get up every morning, achieving goals, happiness and engagement in life are some of the most important and most difficult to quantify factors.
Life can’t be reduced to a math equation. More isn’t always more. Life is a value exchange. The market decides what it is willing to pay for services, goods, talents, etc. But only you can determine the value of your time and energy. It is up to you to make a good trade.
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