Life is a balance of holding on and letting go.
— Rumi
As financial independence (FI) enthusiasts, we are diligently calculating and planning the dollars we need to meet our FI goals. But FI is about a lot more than just the math. While the numbers are extremely important, it’s just as critical to answer the question: Am I comfortable I have enough money? In addition to getting the math to work, you need to teach yourself to find inner peace with “enough” on an emotional and social level. Enough is true financial freedom.
More is never enough
I recently read an interview with Abigail Disney (granddaughter of Roy O. Disney, co-founder of the Walt Disney Company). In it, they reference a study performed by The Chronicle of Philanthropy which asked people who inherited money a simple question: “What amount of money would you need to feel totally secure?’” Regardless of the amount of money each had and inherited, every single person came up with an amount that was roughly twice what they inherited.
Money might not buy happiness but people expect, at a minimum, for money to get them far down the road. So how do you answer the question, “How much money is enough?’ Early in the accumulation stage, the answer is likely self-evident: ‘More than I have today.”
The fires of consumption
“More” is a lesson that we learn early on. More starts from early childhood and is one of the first math concepts understood by young children. And from a linguistics standpoint, it sure felt like my kids learned to say “more” right on the heels of learning “No!” (“Dad, can I borrow your car?” follows all too soon thereafter.)
Arguably, the desire for more is innate, but it is unquestionably clear that we as a society have stoked the fires of consumption.
Early in the 20th century, the benefits of the Second Industrial Revolution had begun to curtail the need for a seemingly endless work week and provided workers much-needed leisure time. As a result, there was considerable discussion and debate around the right balance between work and leisure.
Up until that time, individuals worked and made purchases to satisfy their basic needs. Once those needs were met, these same people could spend less time working and enjoy their new-found leisure. Businesses, however, began to worry about slowing economic growth and a national state of overproduction and saturation.
In response to the perceived threats of chronic overproduction and the declining need to work, business leaders began to refocus not on production but on consumption. They concluded that consumption (i.e., demand) could be stimulated and nurtured — with a little help from the advertising industry.
Needs and wants
Advertising agencies (think Mad Men TV show), in effect, helped usher in the concept of raising one’s standard of living by buying not only what you need, but also what you want. And rather than individuals deciding on their own what they might want, businesses and advertisers would show them the way.
In 1929, U.S. President Hebert Hoover’s Committee on Recent Economic Changes issued a report noting the following:
“The Survey has proved conclusively what has long been held theoretically to be true, that wants are almost insatiable; that one want satisfied makes way for another. The conclusion is that economically we have a boundless field before us; that there are new wants which will make way endlessly for newer wants, as fast as they are satisfied.”
Leisure time came to be seen not as a threat to working but as a compelling reason to work. People would need to work more to pay for the additional consumption of things they didn’t previously know they wanted. And not expanding the 40-hour work week was good because “it promises more leisure to use up golf balls and holiday clothes”.
The age of consumerism and the accumulation of things was upon us.
An interesting paradox
All this consumption is good for the macro-economy: people spending money on goods and services. After all, personal consumption is significant driver of large economies (e.g., personal spending is over 55% of gross domestic product in Canada, 63% in the UK, and 70% in the U.S.)
It’s just not a particularly good strategy for you as an individual on your FI wealth accumulation journey. If you spend all your earnings, you are helping to drive the economy but not growing your wealth.
What helps you is everyone else spending and driving the economy up while you save and invest in companies that benefit from that economic growth. It is an interesting paradox: personal vs. societal economics. I let one simple rule guide me through this paradox on my FI journey: spend a little, save a lot.
Is money the root of all evil?
We are currently living in a culture of more. People constantly looking for more: time, house, cars, vacations, sex, travel, and yes, money. Not that having more is bad, harmful, or immoral, but you do need to recognize that the desire to have more can be insatiable. It can become a vicious feedback loop — have some, want even more.
The Bible is often quoted as saying that money is the root of all evil. But what the Bible actually says is that “the love of money is the root of all evil” (1 Timothy 6:10). Money is not an end, in and of itself, but a tool to be used on your FI journey. We don’t covet money, per se, but rather the freedom that money can offer us.
When it comes to your FI Portfolio, if you are not comfortable with your money being enough, the default solution will always be to seek out more. So, when does it end? When you mathematically have and are emotionally comfortable with, enough. At that point, you will have reached financial freedom, or as financial author Brian Portnoy likes to call it, “funded contentment”.
Enough is both eloquent and potent
When the famed author of the bestselling World War II novel Catch-22, Joseph Heller, passed away, his contemporary and friend, Kurt Vonnegut, penned a short tribute. It recounted the tale of the two of them attending a party on Shelter Island, NY hosted by a billionaire hedge fund manager. Kurt informed Joe that their host likely made more money in one day than Joe’s book had earned in all the years since it was published. Joe responded, “I’ve got something he can never have… enough.”
When the numbers add up and you have reached the pinnacle of financial freedom, make sure your emotions and feelings about money are not playing catch-up.
COSMO DeSTEFANO is a retired CPA and tax partner based in Massachusetts. He is the author of a new book called Wealth Your Way: A Simple Path to Financial Freedom.
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