What is true wealth? As Morgan Housel says in his best selling book The Psychology of Money–
“The highest form of wealth is the ability to wake up every morning and say ‘I can do whatever I want today’.”
In essence, true wealth is control of your time. Time to spend with your family, friends, in a career you love, a hobby you enjoy. Whatever is most important to you, but your choice.
Does that resonate with you?
Most of my clients long to have the ability to choose to work so that they could instead spend their time doing something they consider more meaningful, more fulfilling. Which pretty much underscores the fact that what they are doing now is not what they’d choose to if they truly had a choice. In fact, control of our time has become more elusive now than for past generations. This lack of control over time has led to less happiness even though we are richer now than in the past.
So how do you create the financial wealth that allows you to have this control of time-to do what you want, with whom you want, when you want?
Focus on what you can control.
Personal savings, frugality, and your behavior are three critical things you can control and can be as effective in the future as they are now. Investment returns? Anyone’s guess what they’ll be. Is investing important? Absolutely! But can you predict your returns? No, no one can. Believe it or not, 40% of all companies successful enough to go public effectively lost all of their trading value over time. 40%! Trying to guess which investments will outperform is a fools’ errand, and cannot be controlled, but by focusing on these three areas you personally can control true wealth, control of your precious time, is within reach.
Savings
This part is really quite straight forward. As planners we encourage folks to save for goals that are important to them. But you can save without a specific goal and you can save more than you need for a specific goal. You can save just to save because life is uncertain and because saving more than you need gives you more options. If your goal is to contribute the maximum to your 401k every year, challenge yourself here by saving more than that. Open a non- retirement investment account and establish a monthly recurring contribution.
What can you do? Make savings intentional and automatic, and you’ll wind up with more options, that can lead to more control of your life and time.
Frugality
We all know the saying “It’s not what you spend, it’s what you save.” Nothing could be more true. Living below your means is within our power and affords us the extra money we can put towards savings. I am not advocating here that you sacrifice lifestyle now for an uncertain future, but there is a balance.
Several years ago a story hit the media about an elderly gentleman in rural Vermont who lived a simple life and worked as a janitor. Nothing was terribly remarkable about his life, but when he died it turned out his net worth was more than $8 million. People who knew him were floored. How could someone with a modest income have so much money? This man, Ronald Read, lived below his means. He saved and invested, and held his investments over time. If we want true wealth we should aspire to be a little more like Ronald Reed.
What can you do? Take a look at your monthly income and spending and decide on an amount you are willing to save, automatically, into an investment account.
Behavior
Doing well with money has little to do with how smart you are and a lot to do with how you behave. Ronald Reed exemplified this. In fact, how you behave may be more important than what you know.
If you think back to the beginning of the pandemic and March 2020, the market took a steep turn for the worst. Anxiety and uncertainty ruled. How you behaved under these circumstances made a significant difference to your financial situation just a few months later. As Housel shares, “your success as an investor will be determined by how you respond to punctuated moments of terror, not the years you spend on cruise control.”
What can you do? Having an investment plan, sticking with it, keeping emotions at bay in times of anxiety and unrest can help you achieve that true wealth.
If your goal is to have more choices of how you live your life, financial freedom is the key. These three simple steps-savings, frugality, behavior-are all within your control. It’s truly why we named our firm WealthChoice. Smart choices can provide us with true wealth, and they are often simpler than we think.
