Over the last 10 years, I’ve been in a fortunate position to have thousands of conversations about money. Doing so, I have heard and seen many things that most people don’t have the opportunity to see or hear.
Unfortunately, people don’t talk about how money connects to life. They don’t openly talk about how they are supporting a struggling child. They don’t tell their friends what it’s like caring for a parent. They don’t share that they feel behind planning for retirement because they have a child with special needs. There is no mention of the uncomfortable feelings around an inheritance. They may talk about how they don’t know what to do with stock options, but they may not share more details because they are making millions of dollars a year and feel paralyzed by this new reality.
Although I came from a position of giving advice, I’ve always considered my role as one of learning. I was in a unique position to listen and learn about how each person approaches money.
Today, I’m reflecting back on what I’ve learned about money. This isn’t a technical article. This is the softer side of money. It’s a reflection of how to live and enjoy money without feeling like it controls you.
Money Has Little Significance Without Health and Time
I want more money. You probably do, too.
Do you know what someone with Parkinson’s, ALS, or a terminal illness wants?
Better health. Quality time with loved ones. A chance to enjoy life as fully as possible.
Yes, more money helps if you have a debilitating or terminal illness, but it’s not going to solve the root problem. It won’t cure them. It won’t make their pain go away. It won’t prevent them from dying. It can prolong life, but they are still dying.
Many people in their 20s and 30s rarely sit down with someone in their 70s, 80s, or 90s and listen. Try it some time. Really listen to how they talk about life, where they light up, and what they appreciate.
One of the most common things I hear is something along the lines of “Don’t get old” or “Getting old sucks.”
It’s usually in relation to a health problem – recovering from knee surgery, forgetting things more, or just moving a little more slowly.
And yet, at the same time, there is something wonderful and beautiful about aging. I’ve noticed people slow down, forced or not by their bodies, to appreciate more in life.
They spend less time running around and less time “being busy.” Instead, they enjoy the smaller moments, engage in more conversations, and are less worried about what the world thinks of them.
Most of us spend far too much time chasing more money than we need, to then spend that money to try to buy back our time and improve our health.
As you go about your day and this next week, ask yourself, “How is my health? What would life be like with all the money in the world and the poorest health?” Then, flip it, “What would life be like with no money and the best of health?”
There is an elusive balance there somewhere.
Life’s Better with Family
Family does not need to be blood. Family can include blood, but it can also be friends, elders, and the community you create.
I can’t recall meeting someone who was wealthy and alone, who was also happy. In fact, some of the loneliest, most miserable people I’ve ever met have been incredibly wealthy, but had no loving person to share it with or a caring community around them.
Money can buy every little thing your heart desires, and it can numb the pain to help cover up what you don’t have, but it can’t buy a supporting partner, friends who will drop everything to help you, or family that supports you no matter the situation.
People who have sacrificed friendships and family for money usually regret it. If you have the choice between extra money or family, choose wisely.
Remember, people like to help others. They want to feel needed.
I routinely need to remind myself of that fact when I need help with something. It’s easy when you are on the receiving end. If someone asks you for help, you are likely delighted to help! Think for a moment about the last time someone asked for your advice or needed your help moving something. There is a good chance you felt honored they would ask. Why is it different when you ask them?
This doesn’t mean family is easy to create. Family takes work. There is strife. There are problems; however, those experiences create new bonds and memories. If you are always too busy making money, you lose those opportunities. As I said earlier, you have limited time and good health for those opportunities. You can’t buy them back.
Most of Us Will Always Think We Will Feel More Comfortable with More Money
…and the problem is, I’ve never met anybody who has. The goal post is always moving. Name your income goal. Tell me your net worth target. It doesn’t matter how you want to measure it, once you get there, almost nobody feels more comfortable.
I once asked someone, “How would life change for you if you had $4,000,000 instead of $2,000,000?” They couldn’t answer the question. Nothing would have changed for them. They had more than they would ever need. But, they still wanted it.
When you feel like you will be happier with just a little bit more, try to remember you may temporarily, but it will quickly fade. If you can define what is enough and come back to it regularly, you may combat the rat race better than most.
One exercise you can do is to write down exactly how much you want to make and your net worth goal for every year in the next ten years. Then, each year, write down your actual income and net worth and write how you feel. Are you happier? Are you less stressed? What does life look like? Is it better? How are your relationships? Hold yourself accountable with a journal.
Speaking from first-hand experience, I achieved most of my income goals up until the point where I quit my last job, even though I had higher income goals in mind. I can confidently say one of the happiest, most carefree times was my first big raise after working for a year or two. It was enough to stop worrying about day-to-day stuff, save more for the future, and still enjoy the present moment.
Was making more money nice? Of course, I didn’t need to worry about how I spent money because my desires never got to a point where they were greater than my paycheck. By the end, I was saving more per year than my first-year salary out of college. It was a great feeling, but it didn’t drastically improve life. It made spending decisions easy, but it did not make life better.
The stress and lack of time to enjoy life outweighed the benefit of the additional income.
More money can make you more comfortable, but after a certain point, there are diminishing returns. You can climb on a teeter-totter to get taller, but if you climb too far, it will bring you back down again.
Everybody Likes Debt on The Way Up. When Things Blow Up, Debt Can Wreck a Life.
People rarely go broke using debt responsibly. People can look like geniuses with a ton of debt until the slightest thing goes wrong. Then, it can be game over.
Debt can take many shapes: credit cards, mortgages, car loans, margin, or personal lines of credit. I’m not here to shame you for taking on debt. Debt can be a good thing.
How does the saying go? Too much of a good thing can be a bad thing.
Let me illustrate how debt can be helpful. Then, I’ll explain how it can wreck a life.
Say you want to buy a $500,000 house and put $100,000 as a down payment to get to 20% to avoid private mortgage insurance. You’ve invested $100,000, but get an asset worth $500,000 because you are paying the bank monthly mortgage payment. You get to participate and keep 100% of the growth of that asset, despite only investing 20% into it.
You buy the home and a year passes. You got lucky and homes appreciated 20% because of a pandemic and limited supply. Great news! Your home is now worth $600,000. It increased in value $100,000.
Your mortgage started at $400,000 and is a little less, but for simplicity, let’s assume it’s the same value. You own a $600,000 house with a $400,000 mortgage, meaning you have $200,000 of equity.
You had $100,000 of equity you put into the house and doubled your money in a year.
Instead, if you had to buy the house outright, you would have paid $500,000 a year ago and had a home worth $600,000 today. That’s only a return of 20%, which was the actual appreciation of your home over the past year.
Instead of 20%, your mortgage allowed you to earn 100%.
That’s the power of debt.
Everybody likes debt on the way up, but what happens on the way down?
Instead of homes appreciating 20%, say this is The Great Recession in 2009 and the following years where homes dropped 20% in value.
Your $500,000 home is now worth $400,000. Your mortgage is also about $400,000. Your $100,000 of equity disappeared. Instead of a 20% drop in value, you’ve lost 100% of your equity if you sold at this point.
I use the home example because it’s a debt many people take on in their life. On a national average over time, homes normally appreciate slightly above the rate of inflation, so debt is less of a concern for homes, but it can be catastrophic for rental properties, margin loans, credit card debt, and any other form of debt.
How many times have you heard people tout the benefits of real estate investing? It can be great, but it can be risky. Many people found this out the hard way after 2009.
If you were stretched thin prior to a recession paying for your mortgage, a pay cut or loss of a job could mean the difference between making the payment and not.
If you have mortgages on multiple properties and suddenly lose your job or your tenants stop paying, you now have monthly obligations with no income. This is how foreclosures and bankruptcy can happen.
The same can be said for margin loans, where people borrow against their investment portfolio. Borrowing costs are very cheap right now with interest rates low. It can feel like a wise decision, but what happens if you have an aggressive or concentrated stock portfolio and it declines 50%? Depending on how much you borrowed, you may face a margin call and need to deposit additional money into your brokerage account.
Debt can be helpful, but remember, debt in good times may feel fine. It’s not until something changes, usually rapidly and drastically, where everything can go wrong. Many people felt like the good times would continue to roll until the Global Financial Crisis or the COVID-19 Pandemic. Suddenly, millions lost their homes and many were hit with margin calls.
If You Don’t Ask, You Likely Won’t Get It
Want a pay raise? Ask.
Want an upgrade? Ask.
Want more time off? Ask.
Do you get the picture?
Rarely does it hurt to ask. There are books, courses, and great articles about how to negotiate. Learn how to do it because the smallest asks can turn into the biggest gains compounded over many decades.
There Are Only a Few Ways to Become Wealthy
There are only a few ways to become wealthy. You can:
- Choose a high-paying career
- Build a business
- Take a risk joining a startup and earn equity
- Choose an average-paying career and save really well
- Get lucky with an investment
- Inherit or marry rich
That’s it. Nearly everybody I’ve met or read about falls into one of these categories. Those are the options – choose wisely.
It should also be noted that you need to spend less than you make. I know it seems obvious, but lifestyle creep can erode even the highest salaries. People tend to forget that as they earn more.
People dream of becoming wealthy, but rarely take the time to be intentional about how to do it. I’ve known people who join a new startup every few years hoping one will hit it big. I’ve known others who had no interest in a high-paying career, but were phenomenal savers and investors. I’ve also met people who married rich.
There are many routes to wealth, but most fall into one of these six ways.
Summary – Final Thoughts
I love working around money. I love talking about it, planning how to use it wisely, and helping people feel comfortable with their relationship to money.
If there was one takeaway from the past 10 years, it is that health and time are two of the most important aspects of life. People who are in poor health stop caring as much about money. They are trying to make the most of the time they have left on this earth.
On your quest for more money, don’t forget to enjoy life along the way. More isn’t always better. Use debt responsibly. Don’t be afraid to ask for what you are worth, and if you are afraid, ask anyway.
You deserve it.