Mo’ Money, Mo’ Problems

IMG_4394It seems these days many people’s problems revolve around money, particularly around not having enough of it. We have all daydreamed about what it would be like if a million dollars fell into our lap, or if we had only picked that chart breaking stock a few months back. All your problems would just melt away, wouldn’t they?

We are looking at our money problems from the wrong perspective as a country. The problem is not that we don’t have enough money, but rather that we have too much money. By having an embarrassing surplus of cash, the culture in the Unites States has become outlandishly luxurious. This is great and all, but when you are used to everything being perfect and comfy, this standard of living becomes average. You see, happiness is relative, if you have more money than you need and are used to spending it all, you would be led to believe that spending any less would mean making sacrifices.

Sacrifices are tough, they involving giving up things we hold positive emotional bonds with. The good thing is, spending less is NOT about making sacrifices. It is about realizing that the good life is lived by acquiring skills. Skills to have great relationships, to keep your mind engaged in your passions, and skills that you can give back to the world you learned them from. Spending less is about knowing that your happiness and level of spending are not related, no matter how much your social circle believes otherwise.

So if you find yourself with more money than what you need, what do you do with it? If you wish to use money as a tool for buying freedom, you will get the bulk of it the hell away from your checking account. Here your dollar employees are lazy and do not accomplish much work for you.

People have a tendency to learn to live off what they have. We are surprisingly quick to adapt to a change in socioeconomic status. If you don’t believe me, think of recent college grads who land high paying jobs straight out of school. Students who where perfectly happy living on a $20/week food and beer budget soon feel the need to finance $15,000+ cars, eat fancy restaurant meals and have $70 bar hopping nights. All the while working 40 hours at their novel and exciting jobs. They join the rest of the pack and life is grand, lets just hope they are enjoying that job just as much 40 years down the line.

When you set yourself up for maintaining a more rational lifestyle, paid employment quickly becomes optional. When you set aside only what you need in the short run into your bank account (say 2-3 months) you automatically learn to live with what you have, much like when you where in college and learned to have fun and novel experiences with friends all on the meager budget from your summer job. While continuing to learn how to live a happy efficient life, your surplus cash rolls into investments and becomes a landslide of retirement income in no time.

Cash in hand may be on of the worst ways to hold your money. Because people learn to live off what they have, it is good for your savings rate to have a low bank account balance. Yet another great reason to not leave your money earning essentially none percent in the bank.

And finally, coming across extra money is not a reason to expand the house, get lawn care services, or put spinning rims on the Ford F-150. If you really think about it, many of the things people fantasize about when they come into money are things they can remember being perfectly happy without before they received the windfall. Unexpected cash may feel like a prize and that it is something to be enjoyed, this is correct. Windfalls allow you the opportunity to decrease your mandatory working years all without any extra effort on your part. Sounds like a grand prize to me.