The fastest path to riches is to want less
We better set up children for financial success if we instill in them a proper understanding of “riches.”
First off, what is “rich” to you? And I’m talking about money. What does it mean to be “financially” rich to you?
I think you’d agree you’re rich once you’ve accumulated enough money for all the things you need and want for the rest of your life. That’s rich.
This means, when your net worth is forever greater than the sum of all your needs and wants, you’re rich.
It follows that the fastest way to reach riches is to want less because it’s fully in your control. It doesn’t depend on external factors as you’re the one to decide, and no one else, if you want less.
And the wants are what usually hold you back from being rich because they cost a lot of money.
So just pretend you want less. What would your life be like? Can you see a path towards riches and freedom by wanting less things? And as you ask yourself these questions, remember:
Being rich is relative. And it’s not relative to other people. It’s relative to you and the price tag of your needs and your wants — particularly your wants.
For instance:
- If you don’t have enough money for a yacht but you never ever want a yacht, then you’re still in the running to be rich because wanting a yacht isn’t part of your existence.
- If you’re not a millionaire but the sum of all your needs and wants is below a million dollars, you might very well be rich.
- If you live in Bogotá, Colombia and spend $10,000 dollars yearly on everything you could possibly need and want and your net worth is $250,000, then you’re rich because you can effectively retire forever according to the [4% Rule of Thumb]
You’d be understood if, when you think of being rich, images of Vanderbilt and Rockefeller and Lamborghinis and Aspen and seaside mansions and the Waldorf Astoria and Donald Trump come to mind. Because this is the image of riches we have been fed all our lives. At no fault of your own, it’s possible you just might not have considered this isn’t an accurate portrayal of being rich.
And so I invite you to consider an alternative view of being rich — one that gives young ones more control over their paths to Financial Freedom — which is these images simply mean costly wants, not necessarily riches. And it’s fine to want costly wants. It’s just that to be rich means having enough money to cover all your needs and all your wants for the rest of your life. You might not want to ski in Aspen or drive a Lamborghini or live in a seaside mansion. You, from the bottom of your heart, might not want these things. Which means, the amount of money you need to reach riches is much lower.
Another way to think about this is the following:
Case 1
Meet Mr. Million and Mr. Fifty Thousand. Mr. Million earns $1 million dollars per year and Mr. Fifty Thousand earns $50,000 per year. While this is a big difference in earnings, you can’t say off the bat Mr. Million is richer than Mr. Fifty Thousand because what if Mr. Million needs and wants $1 million dollars worth of things per year? And Mr. Fifty Thousand needs and wants $25,000 worth of things? In this case, Mr. Fifty Thousand flat out has more cash money after the year than Mr. Million.
Case 2
Or suppose Mr. Million “only” needs and wants $500k worth of things per year, so he has $500k in savings at year’s end. And Mr. Fifty Thousand still only needs and wants $25,000 worth of things per year, leaving him with $25k in savings.
You might be inclined to think Mr. Million is “richer” in this case because he has more in savings. But you’d be mistaken.
Indeed, Mr. Million has more money than Mr. Fifty Thousand. But remember being rich isn’t a function of how much money you have relative to others. It’s a function of how much money you have relative to your needs and your wants.
Thus, in Case 2, Mr. Fifty Thousand is just as rich as Mr. Million even though Mr. Million has $500k in savings and Mr. Fifty Thousand has $25k. They are equally rich because they have both met all their needs and all their wants. The fact that Mr. Million met his with more money is irrelevant, and doesn’t make him any richer.
At this point, you might be thinking: “Sure, anyone can become ‘rich’ through deprivation. But I’m not going to teach deprivation to my child? What good is that if it makes her unhappy?”
My response is, yes, you can become (financially) rich by depriving yourself. But I agree with you that this could lead to unhappiness. And is a poor personal finance strategy to teach kids.
The thing is I’m not talking about deprivation. I’m talking about wanting less. There’s a great difference.
For example, to deprive yourself of peanut butter means you still want the peanut butter. You’ve just decided to refrain from eating it, yet the want remains. You’re depriving yourself.
On the other hand, to not want peanut butter means you don’t want peanut butter. Literally. You don’t want peanut butter. Just like you don’t want a banker to steal your money.
The difference between deprivation and wanting less lies in the fact that you can train your mind and body to rid yourself of the want emotionally and physically and mentally and spiritually — at which point you’re not engaged in deprivation. You’re engaged in the practice of wanting less. A practice that can lead to freedom, riches, and happiness.
And with that, how might you go about teaching young ones that riches and Financial Freedom are about wanting less things as opposed to accumulating more money?
If you have questions, tweet at me. I’m @gilbertginsberg on Twitter. And I write regularly about personal finance and Financial Freedom at Gilbert Index.
