What is the money for anyway?

Early in my financial planning career, I attended a meeting with my boss and one of his clients. This client had just unexpectedly sold his share of a business for a large sum of money. The meeting was to discuss where and how to invest the money. When I asked him what the money was for, he looked at me blankly and after some hesitation said, “I don’t know, I’ve never thought about it.”

Since then, I’ve received that answer, or some form of it, from many business owners and wealth accumulators. We are often so busy working to build up a business or accumulate assets we don’t put any thought into the end result.

Getting clear on our timeline for wealth accumulation helps to determine how much money we will need and when we will need it. For example, some people in the FIRE (Financially Independent Retire Early) movement might want to retire at 40, with an investment income of $80,00. They would probably need capital of $1.6m (excluding the home they live in). The amounts and the milestones are completely personal, but they know what the money is for, and can decide on the sacrifices they will make to get it. 

Over the past two years, the book Die With Xero by Bill Perkins has been a popular read by people interested in wealth. The principle Perkin espouses is that we should spend our money doing the things we love while we still can – irrespective of age. In fact, the younger we are the more we should spend on activities that we are physical able to do. I will discuss the book more at a later date, but it does raise the question: “What is the money for anyway?”

Research suggests that when we pass the ‘happiness level’ more money does not bring more happiness. So, the pursuit of wealth for wealth’s sake usually achieves very little because of the price we must pay to ‘make it’. The time not spent with our life partner, children, family, and friends because we are busy making money.

Accumulating money, without a specific target amount, can become a habit that is hard to shake and consumes our time and focus to the exclusion of the people we claim to be doing it for. We can always get more money, but we can never get more time.

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