Agreed that money cannot buy you happiness, but the lack of it can buy you a lot of misery, frustration and dejection. Further agreed that, by money, you can buy books not the knowledge, buy medicine not the health, and buy tranquilizers not the sleep. You cannot buy everything by money, but you cannot have everything without it. Ever wondered how much money is too much.
Does it ever occur to you as what is money? Not a single day passes when we do not use money. So we must know what it is and how it works …do we? On the surface, money is nothing but a piece of paper. Isn’t it? You cannot eat it, drink it or even sleep on it. Yet money is also one of the most powerful things in the world, for a very simple reason, we have collectively decided to make it so. It would be a plain lie if one denies the need of money. It would, however, be equally a fallacy if one treats money everything.
Mark H. McCormack, the author of the bestselling, What they Don’t Teach You at Harvard Business School, has also aptly summarize the role and nature of money in two commandments that say “Never underestimate the importance of money” and “Don’t overestimate the value of money”. In today’s highly competitive and materialistic society, money has become a single yardstick of success. The more money you have, the more successful you will be deemed. And this is not necessarily a correct concept. In today’s world, acquisition of goods and money to buy more goods are usually considered as the ultimate aim in life. More clothes, more shoes, latest tablet, latest smart phone and latest of everything … the list is endless.
So, the question still persists as how much money is too much. Its rightful and appropriate answer can be given in the form of a question. How much money is enough money? This answer was given by none other than American industrialist and philanthropist John D. Rockefeller. “Just a little bit more” was John D. Rockefeller response to the question. At the peak of his fortune, Rockefeller had a personal net worth equivalent to one percent of total US economy. Over 90% of US oil and gas industry was owned by him. Today’s corporate honchos like Bill Gates and Warren Buffett are nothing more than paupers to Rockefeller. Yet he wanted “just a little bit more”.It is worth a careful analysis as what enough is. Needless to mention, enough is not an amount. It is an attitude. Money can be a wonderful toy. However, if let loose, it may become a ruthless tyrant. Money can serve as a medium of exchange and storehouse of wealth. Whenever one grows in life, one exchanges his work, time and knowledge with money. Unless you are born with a silver spoon in your mouth, you are destined to work. relentlessly to make ends meet for food, shelter, education and healthcare. It is hard to imagine that you can earn so much wealth that you need not worry about your present and future. In this case, you attain a “financial independence”. It is at this point of financial independence that can safely be called “enough”. It is even harder to imagine having more money than you could possibly spend it. There are countless examples in our world where one amasses unbridled wealth without having a desire to spend them. In this case, earning money is not a pleasure, it is a punishment. It is always better to let the money do its functions – be a medium of exchange and storehouse of value. It is always appropriate that you define money in terms of its functions. The moment you let money define you, you are gone. You can either let money be your servant or let money make you a servant.
Larry Swedroe and Kevin Grogan, in their new book “Reducing the Risk of Black Swans: Using the Science of Investing to Capture Returns with Less Volatility”, have tried to answer the crucial question of how much money is too much. The answer, however, varies for person to person, but it bubbles down to following three question:
At what level are your needs satisfied?
It deals with the question of how much money you need to satisfy your basic needs and maintain a decent lifestyle. It measures your appetite for taking risk. The more you turn your desires into needs, the more risk you need to take in your investment portfolio to back your lifestyle. No risks no returns. Simple.
Are you aware of Marginal Utility of Wealth? |
In the process of accumulating wealth, there comes a point when increase in your wealth does not increase your happiness or satisfaction level. At that point, it makes little sense to add to your fortune. It is always better to think in terms of marginal utility of wealth – how much incremental wealth is justified in relation to associated risk that must be accepted to achieve a higher return.
Are you taking too much risk or too little risk?
Once you have reached at the level of financial independence, your priority should be less on increasing and more on maintaining it. It is of utmost importance to minutely scrutinize how much risk you are taking. It always pays to understand that the strategies to get rich are entirely different from the strategies to stay rich. You can take risks to get rich, but to stay rich, you need to minimize or diversify the risks.
Money may bring happiness. But it is common man’s mantra. Those who are spiritually abundant always find happiness in the services of others. The happiness you feel after removing the miseries of others is beyond measurement. The American Universalist clergyman and theological writer Hosea Ballou has aptly written, “Real happiness is cheap enough, yet how dearly we pay for its counterfeit.”
