The Secret to Wealth and Happiness
Sorry, I don’t really have the answer to this question, but it’s something we all think about. As often is the case, a recent article in the Wall Street Journal (by Jonathan Clements) got me thinking about the topic. It his article, he claims “wealth is the means, not the end.”
What is Wealth?
As many of us do, Clements asks the question, what is wealth? Rather than being a particular sum of money, wealth is the freedom to spend your life doing things you are passionate about and think are important. If you’re lucky enough to do a job you continue to love, and are covering living expenses, you are wealthy. Work until the day you die!
Are You Burnt Out?
Many of us, however, get to a point where they lose that enthusiasm. Like me, they get burnt out of practicing optometry and running a small business, and decide to sell the practice to which they’ve devoted their whole life, and are ready for new challenges. Whether it is working part-time in optometry, or beginning a whole new career, they are looking to regain the passion they once had for their job.
Living Within Your Means
In Charles Dickens’ David Copperfield, character Wilkins Micawber says it all in a nutshell: “Annual income twenty pounds, annual expenditure nineteen pounds, nineteen shillings, and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Living Within Your Means: Having a fat portfolio certainly offers huge advantages. Starting early to build a retirement fund is the key. And having the money to divert to your retirement requires us to follow Charles Dickens’ advice, and spend less than you earn. Boy it sounds so easy, doesn’t it? (Kind of like a diet – just burn more calories than you eat – what’s the big deal?!). And starting with a frugal lifestyle early in your career makes it much easier to adapt to retirement, which often means less income.
Three Magic Steps To Wealth
There’s no instant magic, but Clements gives us three “magic” steps to guide us:
1. Take monthly expenses and categorize them as either fixed or discretionary. Fixed expenses include regular bills for mortgage, rent, utilities, groceries, insurance policies, etc. Discretionary expenses include vacations, eating out, or clothes you don’t really need.
2. Look for ways to trim fixed expenses. Examples: increase deductibles on insurance policies, or scaling back on your cable package.
3. Cut out discretionary spending where the dollars aren’t buying happiness. That doesn’t mean you can’t have discretionary spending, but prioritize the expenses. – which money spent brought you the most memories and enjoyment? If the restaurant meals are more important than all the new shoes you bought, then reduce the clothing expense.
Lower costs mean it is easier to save money. You’ll be in better shape to handle emergencies, and require a smaller nest egg when it is time to retire. Continue living beyond your means most likely keeps you locked into that job you that you no longer enjoy.
Good luck in building your wealth and happiness.
If you want some advice about building your wealth, please schedule a call.