The Remedy for a Fulfilled Life
Do you want to live a fuller life? If your answer is yes, the key is to focus more on your priorities in life – people and experiences you love.
More Life, Less Stuff
Let’s use a little imagination and travel to the end of our life. Reflecting on the totality of your life from there, now contemplate the question: “What really mattered in my life?” Would you be proud of how much stuff you’ve been able to accumulate, or how much money you have in the bank? How about the car you have in the garage or the fancy watch/jewelry you were able to purchase? If you are like many humans before us, your worldly possessions won’t really matter all that much. You are much more likely to be proud of the people you supported and the contributions you made to your circle of influence. So to that end, can we build a life accordingly? Of course, we can.
So here is my two-pronged approach:
ONE: Spend more time with people you love and more time doing things that you love doing.
TWO: Establish your money strategy to support ONE.
Who doesn’t know that? Why do I state the obvious? Because the majority of us have it backwards in actual reality. We are busy making money – part TWO and lose sight of part ONE. Consider the following telling examples: We leave home (and our loved ones) so we can go to our work even earlier in the morning to beat the commute and traffic even if we don’t like our jobs. Because “life is tough” and we’re so busy working and doing things that we actually don’t want (being stuck in traffic every day, feeling trapped into working 8 hours a day to service our debts, spending time on efforts we’re not passionate about), we now feel the need to reward ourselves with things and stuff we don’t really need. Another latte? Another pair of shoes? The newest smart-phone? So we spend our money on things we don’t really need and we call it ‘retail therapy’. Sounds familiar?
Since money is finite, we need to keep making money to support our spending (gotta upgrade to a bigger flat-screen, faster internet, better gaming consoles, cooler sunglasses, hipper snowboard, the latest model fit-bit, fashionable dress/sneakers, and so on) . Unfortunately, it also necessitates that we keep working, keeping us from doing the things that we’d rather do and we spend less and less time with the people we love.
We must establish our lives right side up. Let’s conceive our best life first – a legacy that we will be proud of – and see what is required of us to achieve this outcome which, by the way, includes finances. Money serves our best life, not the other way around.
Money is a great servant, but a poor master. Be the master!
Generally, for most of us who aren’t endowed with wealthy families or incredible talents, there are two ways to build wealth: you can earn money through work (we all know this) and you can save/invest money (most of us know this but many of us don’t actually follow this advice), which then earns us money.
For a long time (much longer than I care to admit), We neglected taking care of the latter – having money work for us efficiently. I was pretty good at the former – working for money – and thought that was it. At some point in life, investing your money is far superior at growing your wealth than you can by just working away and trying to earn more, get promoted, negotiating a higher salary, and snap up bonuses or commissions (if your work even has such things). For me, this was a bit slow realization, especially for someone who lived and breathed numbers and analysis.
The difference between what you earn and what you spend can go into your investments for wealth-building so that one day you won’t have to work to make money. Here is the good news. By having a suitable consumption approach, your wealth-building is just as effective as earning a 6 figure income, if not better. A lot of us focus on how much money we make. “Only if I can make more money/negotiate a salary increase/get that promotion, I can finally live the life I want.” Here is yet more good news for you then: you also don’t need to earn a 6 or 7 figure salary to live a fulfilling and happy life.
Below, I make my case that your wealth-building doesn’t need to require 6-7 figure income. Neither is it a requirement for your happiness and fulfillment. In my next blog, I will share some of my strategies to build wealth.
The Simple Formula
You have earning (ER) and expenses (EX). The difference is what you have left to save and invest (SI).
The bigger ER is, the more SI you have and the smaller EX is, the more SI you have. So if you have a handle on both your income and expenses, you can be highly efficient in your wealth-building. In my view, you have the greatest control over your expenses and a little bit less control over your income. As well, there is no point in discussing how you may improve your earnings unless you become a master of your expenses. Here are two people with their incomes and expenses, which will support my point.
Steve’s net income is $10,000 per month and his lifestyle costs him $8,000. He has $2,000 left each month.
Penny’s net income is $5,000 per month and her lifestyle costs $2000. She has $3,000 left each month.
For Steve to support his lifestyle of ($8000/month), he will need a nest egg worth $2,400,000 in order to pay for his lifestyle at the 4% net return rate on his investment. (4% is a number that we choose as a conservative net return rate .) The 4% on $2.4 million gives you an $8000 per month return. Once you have your assets providing you with the return and pays fully your expenses, you no longer need to work for money. At his pace of $2000/month, it will take him around 40 years to build this rather large nest egg – again with the same assumption of the average net return of 4%.
For Penny to support her lifestyle of $2,000/month, she will need a nest egg worth about $600,000. At her pace of $3,000/month, it will take her less than 13 years before she is able to quit working for money. Are you surprised at how much faster Penny is able to reach her ‘financial independence’ than Steve who makes twice her salary? So, you can see my point here: The salary you make is not the end-all be-all of your financial success and certainly not the key to a happy and fulfilled life.
Before we continue, let me properly introduce and describe the concept of ‘Financial Independence’. Financial Independence (FI) is defined as the status of having enough income to pay one’s living expenses for the rest of one’s life without having to work for money. Generally it is achieved by having enough investments i.e. real estates, stocks or other investment options that “pay” you on an on-going basis. Steve has his FI number set at $2,400,0000 and Penny at $600,000.
Now you see that the question of financial security and FI is really about what your expenses are like, much more than how large your incomes are. Some thoughts you may have at this point could include:
“I’d rather live today and prefer Steve’s ‘jet-set’ lifestyle better than Penny who seems to be restricting her spending. “
“I don’t like to live frugally like Penny and life should be about enjoyment.” “What is the point of saving money if my life sucks while doing that?”
Let’s contemplate a few assumptions here: First, we don’t really know if Steve’s life is ‘better’ than Penny’s. If you define ‘better’ with terms like ‘happiness’ or ‘fulfillment’, you may be completely wrong. It is very possible that Steve, despite his earning, is living an unhappy, pointless existence. An $8000/month lifestyle doesn’t necessarily make one happier than the $2000/month lifestyle. If Steve has to work long hours away from his family and friends in order to achieve this income and compromising his core values too often, he may not be all that ‘happy’ about it. As well, he’ll need to continue to live his rather compromised life for another 40 years. That is a long precious time to not be living his best life!
We can safely assume that Penny is not as ‘enthusiastic’ of a spender as Steve but we don’t know if she is living frugally to a degree that it’s compromising her happiness. It is just as likely that she is actually living according to her core values and mission and she is satisfied and positive about her journey. She just doesn’t require a lot of money to live a comfortable life for her. Maybe she can quit her job after 13 years but won’t because her work is already fulfilling. Another revelation here is that the higher income doesn’t equal life fulfillment.
It is just that more money doesn’t equal more happiness or a life better lived. Håkan and I have reduced our spending significantly (about one-third) since I stepped away from my corporate career because we made some changes in order to live truer to our values of ‘sustainability’. We are not one-third less happy. In fact, we are as happy as ever, maybe even happier if that’s possible. We were already pretty happy people. : )
Happiness depends on what you expect and desire in your life. So let’s go back to our ONE & TWO of our best life strategies.
ONE: Spend more time with people you love and more time doing things that you love doing.
TWO: Establish your money strategy to support ONE – for now and for later.
With your focus on life priorities – people who you love, and values and your life mission that you live by, how much money do you need for now and for later? The answer is probably not as much as you vaguely thought before. You may think that caring for your loved ones costs money and it may of course. However not as much as you think. Instead of giving flashy gadgets to your kids or expensive wine/soaps to your parents, give them your time instead.
Spending more time with people you love won’t in fact require any money, but your prioritization and effort. Your children, partner and friends are not going to remember you and respect you for the things and stuff you bought them. They will remember you with memories of the time spent together, the ears that you lent to them when they there going through troubles and the advice and counselling that you were ready with when they were growing and expanding.
Give your loved ones the gift of your presence. The shoulder to lean on. The space for listening. The time for the laugher. You can always afford that.
Linda at Sustainable Life Design
I guarantee you that less focus on stuff will lead you to more living!! Life is short – really short! Do stuff that matters!!