Financial Independence Has Nothing To Do With Being A MillionaireMauldin Economics
I am on Facebook, and there is a lot of crap on Facebook. Even the non-political crap is stuff I just do not believe in.
For example, people say that you should spend your money on experiences, not things. There is some spiritual component to this that I don’t get.
I like spending money on experiences (particularly travel), but I like spending money on things more. Clothes in particular.
You feel (and act) differently when you are wearing an expensive suit and an expensive pair of shoes. People who make $150,000 a year and still get all their clothes at Target do this not out of frugality, but low self-esteem.
It is good and right to spend money on yourself now and then.
The other crap you hear on Facebook, and pretty much everywhere else, is that money doesn’t make you happy.
Oh yes it does.
It is not going to fix broken relationships, or compensate for your bad behavior, or cure your addictions. But buying nice stuff makes you feel good, and nobody should make you feel guilty about that.
The Concept of Abundance
Let’s talk about the concept of abundance, where there is always more than enough in your life.
You have enough for the basics—food, clothes, a roof over your head. You have enough for some luxuries—a nice watch, a nice car, some toys. And you have enough that you can give lots of it away.
I’m sure you are familiar with the book The Millionaire Next Door. I hate that book.
Anyway, the book implies that everyone should aspire to be a millionaire. No—everyone should not aspire to be a millionaire. For some people, it is simply not attainable. And you are going to annoy a lot of people in the process.
Where you have more than enough for yourself, your friends, your family, and your charity—and you never have to worry about money. Abundance is a state of mind, more than anything.
The magic of abundance is that some people get there with $25,000 a year.
(For me, it took a lot more.)
This is not some hippy-dippy essay about how you can be like Gandhi and own a pair of sandals and be happy.
Lots of people who say they have enough are lying. Most people wish they had more.
Getting to a state of abundance takes a lifetime of work and effort. You have to be smart with money and think long term when making financial decisions, i.e.:
- take advantage of a tax-deferred retirement account,
- use the 30% rule when you buy a house,
- or don’t get a car loan with a 7-year maturity.
Otherwise you are probably not going to reach a state of abundance.
None of this is hard. It’s just being smart and practicing a little delayed gratification.
In other words, it’s not a skill problem; it’s a will problem. And that’s the main reason the personal finance “industry” is filled up with bloggers and influencers, even though it’s really not that hard.
In a lot of cases, abundance isn’t a revenue problem, it’s an expense problem. For many people, more money doesn’t solve the existential problem of lack of money.
Abundance doesn’t mean spending it all. It means having enough for yourself, your family, and your causes—and having plenty left over.
Saul Bloom famously quipped in Ocean’s Twelve that he wanted the last check he wrote to bounce.
Cute, but that’s not really what you want. You want to be able to leave something behind to your descendants, at least while you have the ability to do so.
In my case, there will be lots of happy cats.
Some People Never Get There
The other thing about that god-awful Millionaire Next Door book is that all the people profiled in it didn’t change their behavior once they became millionaires. They were still rabid savers.
I wrote a while ago that you want to be a saver earlier in life so you can be a High Roller later in life. Most people get it completely reversed. And that is the source of all money unhappiness.
I’m a lucky guy. Cool job, great marriage, nice house, fun hobbies—I have it all. It was a struggle in the beginning, but because of hard work and many good money decisions (and a handful of bad ones), it is no longer a struggle.
Plenty of people have more money than I do. I hear about them all the time because I have a lot of high-net-worth financial advisors as friends. You would be amazed at what’s out there.
I have abundance, which, summed up in one sentence, means:
Everything is going to be okay.
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