By Seth Streeter, Published in the Montecito Messenger’s
“Montecito Money” column on May 25, 2012
It’s easy to lose perspective when it comes to money. This is true even for people who have received confirmation from experts that they have more than enough to sustain their lifestyle to age 100. A common belief is that having more money would feel that much better.
Is this perception reality? Let’s consider a hypothetical 64 year old retired executive who is living in Montecito. If he were to magically see his investment portfolio boosted from $5 million to $8 million, would it be the end of his financial worries? Would he become permanently 60% happier? Likely not. When the asset boost first occurred he’d likely be elated, but once this number became his norm he might then become fixated on hitting the $10 million mark so he could rest easier being in the 8 digit range versus merely the 7 digit range. These are all just numbers that are constantly changing, but people place a perceived sense of security based on certain milestone numbers above what they currently have. A common plight for humans is that no matter what we have, we want to have more.
Let’s use an extreme example to illustrate how this drive for more is often not out of financial necessity but from personal emotive factors. Let’s look at the wealthiest people on the planet – the billionaires. Do you think many people at this level of wealth still strive for more? Absolutely! They hit their first billion and then become focused on making their second billion, always striving to rise in rank on the annual Forbes list. To give some perspective to how much money a billion dollars is, consider the following reference points:
A billion seconds ago it was 1959.
A billion minutes ago Jesus was alive.
A billion hours ago our ancestors were living in the Stone Age.
A billion days ago no one walked on the earth on two feet.
Yet it’s not uncommon for a person with a billion dollars to feel as though they need and want more. This highlights how ridiculous it is to keep score of whether you are financially secure or not based on the number of zeros you have accumulated in your balance sheet. These numbers have no meaning unless they are translated into funding your personal desires and needs in a quantifiable way. This is the essence of financial planning; where the science of financial projections meets the art of internal peace of mind.
To enjoy a feeling of financial self-sufficiency, you need to do five things:
- Clarify your goals – be honest with yourself and identify what is most important to you. Are you satisfied in your current home or would you be happier if you made improvements to it or bought a different home? Do you know how much money you are accustomed to spending? Have you thought about what type of legacy you’d like to leave for your family and favorite charities?
- Project forward – with the help of an expert or sophisticated software, take a forward look at your current assets and income sources to see if they are sufficient to fund your above goals. If they aren’t, then goals, savings levels and investment risk assumptions need to be reevaluated.
- Stay focused – on your personal aims versus those of others around you, including the media. You know what pleases you, so don’t be swayed by others who might tease with the merits of bigger homes, fancier cars or more luxurious travel. Stay true to you!
- Get tune ups – from your financial, tax and legal advisory team to ensure you remain on track with your plans given changes in your life, the economy and the tax code.
- Focus on giving rather than getting – find abundance through helping others less fortunate than you. By making a difference in their lives through your donation of time, talent and treasure, you will feel more grateful and satisfied with what you do have.
By investing energy and attention in these five steps we can let go of our endless pursuit for the next magical higher net worth number. This will result in a shift of perspective from self-insufficiency to sufficiency and from fears of asset depletion to a mindset of abundance.
It is important to keep perspectives in check, through periodic reviews with objective and knowledgeable friends or advisors. By keeping focused on your personal objectives, with quantified projections to what is realistic with the resources you have, you can live your life with a purpose beyond yourself and with less worry.
Authors’ Note: Seth Streeter, MS, CFP® and Brad Stark, MS, CFP® are Co-Founders of Mission Wealth Management, LLC (MWM), a Registered Investment Advisor. Seth has been recognized by Worth magazine as one of the nation’s top wealth advisors and Brad is listed in the top 100 Independent B/D Advisors . Brad is also an adjunct professor of finance for California State University CI Campus, MVS School of Business and Economics. The information contained in this article is general in nature and should not be construed as comprehensive financial, tax, or legal advice. As with any financial or legal matter, consult your qualified securities, tax, or legal representative before taking action. Advisory services offered through MWM. Securities offered through National Planning Corporation, Member FINRA/SIPC. NPC and MWM are separate and unrelated entities. Certain statements contained within may be forward-looking statements, including but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties; all statements are subject to change without notice. Also, historical performance cannot predict future results. The authors can be reached at info@missionwealth.com.