Living Life Fully, Beyond the Dollars

Money has lots of definitions. To some, it is a form of currency, such as the dollar, euro, peso, or yen. This would include the coins or bills in our wallet, or the balance in our investment accounts. Money is also medium of exchange that we use to pay our bills.

Money triggers powerful emotions. For people who experienced periods with lots of money and other periods with very little money, it can incite feelings of fear, anger and insecurity. Those with lots of money may be labeled “the haves,” while poor people may be considered “the have nots.” Income inequality is a serious issue in our society.

Many people have a love-hate relationship with money. People who come into “sudden money” due to an inheritance, winning a lottery, or a court settlement often experience a variety of emotions. We hear of wealthy dictators who are not willing to share their riches with their incredibly poor countrymen. But there are also celebrities and corporate executives who are generous with their money, feeling they have a responsibility to help those less fortunate.

Money is the number-one cause of arguments among married couples and life partners. Olivia Mellan, psychotherapist and author, states “Money is tied up with our deepest emotional needs: for love, power, security, independence, control, and self-worth. And since so many of us are unaware of the emotional load that money carries, we fight about it without understanding what the battles are about or how to settle them.”

While owning a financial planning firm for over 20 years I always advised my clients to keep a healthy attitude about money. It should never be worshipped, and I love the quote by well-known investor and TV personality Louis Rukeyser, who said: “It’s just your money. It’s not your life.”

Yet, our money deserves our attention and needs to be managed wisely.

What is Financial Security?

Attaining financial security is frequently a goal, which I define as:

“The amount of money you need to feel confident that you can pay your bills, live the lifestyle you want, achieve your goals, and not run out of money before you die.”

The amount of money needed to attain financial security will be different for each person and will fluctuate throughout your life. Assets totaling $50,000, $500,000, or even $5 million will not guarantee financial security.

Saving and investing are a major component of financial security. There are four simple steps to help you accumulate the money needed, and they are near the end of this article.

Beyond the Dollars

Let’s consider a broader definition of money; the concept of “wealth.”

Wealth goes beyond the amount in your investment accounts. There are many indications of wealth – such as close relationships with family and friends, good health, a job and a community you love, the ability to support worthwhile causes, and freedom to do what you choose. Financial security can provide peace of mind, along with a sense of fulfillment and accomplishment. Many of the benefits fall under the categories of time and freedom.

Time

In our society, the saying “time is money” is more than a cliché. As our lives become more hectic and stressful, we recognize how valuable our time is. Financial security can allow you to retire at a younger age (if you choose), take a vacation with family and friends, take a month off without pay, or limit your work hours to less than full time.

Freedom

Freedom allows you to choose how to spend your money in a way that is aligned with your values and goals. Money can be used to pay for a nice house and a comfortable retirement, to put your kids or grandkids through college, to support worthy causes, or travel. It can be given to your favorite charities, or be left to younger family members after your death.

The freedom that money provides can also reduce the need to worry about the next economic crisis. Having plenty of money provides some assurance that your investment accounts and your home may decline in value during economic turmoil, but you will be just fine.

Getting Started, Staying on Track

What are the steps to financial security? The steps are much simpler than the financial industry suggests. Below are four simple steps:

1.???? Save 10 percent of your earnings beginning when you are a teenager with a part-time job. When possible, increase the savings to 15 percent or more. If you are getting a late start, start today.

2.???? Whenever you receive additional cash (a tax refund, a bonus, a gift from a relative), save 50 percent of it.

3.???? Invest your money wisely, using low-cost index funds. Use a conservative asset allocation.

4.???? Live below your means. Pay off credit card balances in full each month. Do not buy a new car unless you can afford it. Keep your car 12-15 years.

The above four steps may seem overly simplistic. But they work!

I worked with hundreds of clients over my 20+ year financial planning career. Most of them were from middle-income backgrounds and some were from low-income backgrounds. They worked, saved, and invested over many years. Very few of them received inheritances, so they were “self-made,” following the four steps above. Most became millionaires as they neared retirement, and they headed into retirement with financial security. Slow and steady wins the race!

Takeaways

1.???? Ponder your personal definition of “rich.”

2.???? What are your “feelings” about money?

3.???? What is financial security to you?

4.???? What small step can you take today to put you on track for financial security?