True Wealth

The following is an excerpt from Your Money: The Missing Manual, an excellent book written by JD Roth from Get Rich Slowly. Copyright 2010 O'Reilly Media, Inc. All rights reserved. Used with permission. 

It's easy to believe that having more money is the key to a better life—but it's not. The key to a better life is increased happiness.

Wealth and happiness aren't mutually exclusive, of course. In his final column for the Wall Street Journal, Jonathan Clements wrote that financial stability improves well-being in three ways:

• If you have money, you don't have to worry about it. By living below your means, you get a degree of financial control—even if you aren't rich. Avoiding debt gives you options.

• Money can give you the freedom to pursue your passions. What do you want out of life? What gives you a sense of purpose? These are the sorts of things you'll want to pursue in retirement. Better yet, structure your career so you can do the things you love now.

• Money can buy you time with family and friends. In fact, Clements says, true wealth comes from relationships, not from dollars and cents. In other words, social capital is worth more than financial capital.

Money is a tool. As with any tool, a skilled craftsman can use it to build something amazing: a meaningful life filled with family and friends. But if you're not careful and don't have a plan, the life you construct with your money can be fragile—even dangerous.

Really, there's only one way to ever be satisfied with the money you have: knowing how much is Enough (see Section 1.1.3). True happiness comes when you learn to be content with what you have. If you never take the time to figure out what Enough means to you, you'll always be unhappy with your financial situation.

Enough is different for each of us. It's not just different amounts of money, but different types of wealth. For me, Enough is having my home paid off and cash set aside to let me buy comic books and go out to dinner with my wife once in a while. For you, Enough may mean renting a small apartment but owning a boat and having the freedom to go sailing for months at a time.

To find Enough, you've got to set goals and look inside to find your core values. It can take months or years to get clear on what makes life meaningful for you, but once you've done this, you can make choices that reflect your priorities.

After all, that's why you're doing this. You're not building wealth so you can bathe in buckets of gold; you're doing it so you don't have to worry about money, so you can pursue your passions and spend time with your family and friends.

Remember: True wealth isn't about money—it's about relationships, good health, and ongoing self-improvement. True wealth is about happiness. Ultimately, it's more important to be happy than to be rich.

Comments

[Old Limey]

"Remember: True wealth isn't about money—it's about relationships, good health, and ongoing self-improvement. True wealth is about happiness. Ultimately, it's more important to be happy than to be rich."

I agree with the conclusion that true wealth is about happiness, however my experience as a 75 year old wealthy person is that it also takes money these days to enjoy a happy life.

1) You need to be loved and cared for by someone and to love and care for that same someone - that does NOT require money.
2) You need to have high quality healthcare at your disposal for whenever it is needed - requires money.
3) You need to live a stress free life to stay healthy, that includes being free from money worries - requires money.
4) You need to have very nice comfortable and safe living conditions - requires money.
5) You need a large pool of available investments that can be used for unforseeable emergencies - requires money.
6) You need to retire in a mild, low altitude, climate away from snow, ice, hurricanes, floods & tornados - requires money.
7) You need to be able to afford nice leisure and recreational activities - requires money.
8) In your retirement years it's nice to be able to live in a city that offers nearby health, fitness, and educational programs for seniors - requires money.
9) The future of social security and medicare is uncertain, you need a backup plan - requires money.
10) Finally in your latter years you may need to be able to move into an assisted living development -requires money.

My formula - #1 Get your relationship right the first time - #2 Get your career right - #3 Get your finances right - Final result should help you to become healthy, wealthy, and wise.

[Budgeting in the Fun Stuff]

Our financial life is simply the way we fund our true passions. Socializing is my thing. Curling and gaming are my husband's favorites. Being able to live while doing what makes you happy requires money, but I wouldn't drive myself nuts over it or anything...

[Darren]

I agree that with the things that you're passionate about, you should pursue them now, rather than wait for retirement.

And I think it's so true that great friends and relationships are way better than great amounts of money.

I'm currently trying to figure out exactly how much is enough for me. Then I can be in a state of contentment. Thanks for the post!

[LotharBot]

There's no such thing as "enough." (Note the placement of the period.)

There's only a such thing as "enough for ..."

The key is to figure out what goes where the ... is. It's in figuring out how to "set goals [and] make choices that reflect your priorities". Know what it is that you want to accomplish with money, and then make the choices you need to make in order to reach those goals. These goals can be short-term or long-term, and they may require tradeoffs with each other.

Some common and important goals:
- create and maintain an adequate buffer and emergency fund so that "day-to-day" money and minor emergencies don't cause financial stress
- be adequately insured so that more severe emergencies don't cause financial stress, either
- position yourself to be able to retire or pursue passions that may not pay very well, by saving and maintaining a lifestyle that's not too expensive.
- create a safe, inviting, comfortable home environment. It's up to you to decide whether this means having a new plasma TV, or a quiet living room with no TV at all.
- nurture relationships with family and friends. This might mean spending money on trips or eating out, or it might mean spending just a few bucks on a webcam and talking to relatives on skype.