The Motley Fool has a great piece titled How to Get Rich, Feel Rich, and Stay Rich. The piece contrasts those who make a lot of money and are unhappy with those who make relatively little and are joyful. Here's a summary of their thinking:
Wealth is relative. Those are probably the three most important words in personal finance. Gary makes $25,000 a week and feels inadequate. Pete makes $25,000 a year and feels so rich that he retired eight years out of college. How rich you are has very little to do with how much money you have in the bank and a lot to do with your expectations of what you need that money to do for you. It's a two-part equation, and a lot of people become miserable ignoring the second part.
The article then goes on to look at various expectations-versus-reality scenarios with the conclusion being this: the higher your financial reality is above your expectations, the happier/more satisfied you are. It's a very interesting piece and one I mostly agree with.
The article spurred a couple thoughts I wanted to share with you:
- The difficulty seems to be maintaining your expectations in light of success and the success (or apparent success) of those around you. When you're starting out, you may have high hopes of making a good income, but probably not a lot of expectations as to whether or not that will actually happen. Then, as you become more successful and make more, your expectations grow, many times surpassing the rate at which your success/income grows. Pile on top of that the "success" you can see from neighbors, friends, family members, etc. (like new cars, big homes, expensive vacations, etc.) and it's easy for most people to have expectations much higher than reality, which in turn makes them unhappy.
- I think it also matters a lot what you value. Personally, I'd rather have a $1 million net worth than a big salary, a huge home, the appearance of living it up big, and so forth. Since I value the creation of wealth more than the appearance of wealth and/or "having stuff", it's much easier to accumulate wealth by doing the simple, basic, mostly unglamorous things that grow wealth. Most people seem to value possessions and their expectations are "just a bit more than I have now." But when they get there their expectations aren't satisfied, so they simply increase what they expect to surpass the new normal. And as a result, happiness is never achieved.
Let me know what you think on this subject. Should be an interesting conversation...