Enough is enough, but how much is enough?

2015-05-29 10:06

How much is enough, specifically in terms of money?

Here’s where the trouble begins.

The mode of thinking is traditional: “Work throughout your life to make enough money to retire in a comfortable environment”. And because people are generally financially clueless, they just don’t know how much money is enough, so the inevitable solution to the unanswerable question is to just make as much money as you possibly can for as long as you can and hope that you’ll have enough when you can no longer earn money.

How much better would life be if you KNEW how much money you needed to live the life you want?

Which one is in charge?

The above was the question posed in response to a discussion we were having at WellSpent.co.za which charged people with confronting their own relationship with money. The article was appropriately called ‘Your Money or Your Life’.

The gist of it was that over time, economic writers and financial pundits have leaned toward the metrics of ‘income’ and ‘economic growth’ to measure the standards of living of people all over the world. It also, step-by-step, became the way in which we defined words like “Prosperity”, “Wealth” and even “Happiness”.

Subscribing to this line of thinking can have its potential costs, including the 'nine-to-five-until-retirement' proposition, or working multiple jobs to survive. An alternative that is suggested is to take a more pragmatic, considered approach to what would actually make your life better.

Essentially, the challenge is to shift from comparing ourselves to others and rather consider our real needs and desires.

This crossroad in the search for prosperity or wealth generally manifests into two rival viewpoints in personal finance literature.

The “Squirrel-it-away” option.

The first is that to increase savings and generate wealth, you need to spend less than you earn. Through engineering your finances into an outcome resulting in a regular surplus, you are able to save. Saving leads to accumulation, and wealth is accomplished over time. This is largely an exercise in mathematics and presupposes that wealth is defined or measured in monetary terms.

The “You-are-not-a-squirrel” option.

The alternative is to establish new levels of consciousness around money; to learn how to distinguish between the essentials and excess in all areas of your life and how to unburden yourself from these old road-maps of money. In so doing you may realise that wealth is better approached from a more philosophical point of view, with it perhaps best left for you to define.

Are you making a living or are you making a dying?

While this article is not a book review, this second option above is very well discussed in a book titled ‘Your Money or Your Life’. It challenges you to discover your new relationship with money. You are called to examine those basic assumptions about money that you might have unconsciously adopted over the years, such as spending more than you earn, needing two salaries to make ends meet and being so confused about money that you hire experts to handle it for you.

You are challenged to reach a state of financial independence; independence from self-defeating financial beliefs and debt, and attain a level of financial independence that is 'enough' for you.

By becoming financially independent, you’ll also achieve a level of freedom at a psychological level, having to no longer buy your way through life.

How we store work and spend fun.

The title of the book really begins to makes sense when you’re asked to put paid employment into perspective. Given our finite allotment of time on earth, choosing to work 'nine to five' is a trade we make; a portion of our time on earth traded for money. This step aids you in appreciating that money is something that we choose to trade our life for when we engage with employment in the traditional sense.

Take a moment to think about that one. Money is something you choose to trade a portion of your time on earth for.

Figure out how to save more money, or figure out how to use it better.

Engaging in the pure mathematical approach to building wealth may not always be under your control. You may have limited means to reduce spending, and likely less chance to increase your income in the short term. Considering a more thoughtful approach to wealth and your relationship with money is, however, always available to you and does not cost a thing.

How you choose to approach your connection with money is ultimately up to you, but you would be naïve to think that you haven’t and won’t continue to be influenced by external factors; conscious or unconscious.

Maybe money is a source of security for you, or a testament to your power; real or perceived. Depending on our communities and upbringing, you may see money as a form of social acceptance - that old adage of having to keep up with the Joneses.

To truly make the best decisions with your money, you should do so with full information, which can only be achieved by investigating just how unhealthy your relationship with money might have become.

The destination is more important than the journey.

There are plenty of ways to create wealth and value, and all of the ethical and legal ones are valid. You can generate wealth at any pace and in any way; as long as you create enough for you to live the life you really want.

You don’t have to become a financial analyst, and you don’t want to be a squirrel, working constantly to bury acorns for winter, but then forgetting where half of them are.

You will probably be best served by finding a comfortable middle-ground, where you now make educated and researched decisions about where you invest your money, and also recognise the need for a store of monetary value for your future needs.

At the same time you should consider and redefine what it is that you really need.

So what’s the alternative to financial enlightenment?

A drawn-out battle to make ends meet every month, which upon reflection seems to have lasted for as long as you’ve earned a salary?

What about a mountain of debt accumulated over the years, having bought items that you had hoped would bring a sense of fulfillment but never did, and are now likely worth a lot less than what you paid for them?

In the July 2014 results of the Old Mutual Savings and Investment Monitor, approximately 74% of South African households maintain that they will avoid debt whenever they can, yet the study shows that 56% of respondents say that they have no choice but to go into debt. Does this then mean that as South Africans we feel compelled to go into debt to get by?

Given that for many South Africans every day is a desperate struggle for survival, these study results make sense. It is easy to talk about abstaining from potentially financially destructive behaviour when one has disposable income and the luxury of having choices to make.

When used wisely, money is a tool that enables you to buy time or convenience, or a tool that can be applied towards one’s goals, something that I’ll touch on in future articles. For times when there is no immediate need for convenience to be acquired or for goals to be worked towards, money acts as a great store of future consumption. Money stored now allows you to not have to work in the future, and rather use stored effort of today, to pay for the convenience or a service later on.

Start at the beginning. Right at the beginning.

Starting on your journey to get your financial house in order can best be achieved with a solid foundation. Knowing what money means to you gives all your future finance actions purpose and you’ll find greater motivation in the choices you make. You may not initially be able to arrive at a solid answer for this introspection, but by igniting this consciousness and asking these questions of yourself, you’re choosing to learn more, which is already a move to a more conscious place.

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