“Today well lived makes yesterday a dream of happiness and every tomorrow a vision of hope.” Kalidasa ‘Solution to the Dawn’
Does money bring happiness? This is a difficult question and one I have wrestled with since becoming obsessed with self-development and pushing for some FI (Financial Independence).
To help me answer this for myself, and anyone who is interested, I am going to go over some key points that I have taken from Brian Portnoy’s excellent book, ‘The Geometry of Wealth.’
CHAPTER 1: Alone together
Money life – earning, spending, saving and investing – is fraught with complexity. People are confronted by three challenges currently. First, the demise of classic pensions and the rise of do-it-yourself investing has put an increasing burden on individuals to control more dimensions of their money lives, despite widespread financial illiteracy. Second, the human brain is hardwired with an array of cognitive and emotional biases that impede good financial decisions. Third, a dim outlook for long term capital market returns and the rapidly changing nature of employment suggest that there is less room for error than in previous generations.
The top and bottom of it is that our generation is up against it. I see examples of financial illiteracy all the time and the majority of the people I talk to about money, have no financial plan and are taking things as they come.
I am very emotional when it comes to money and have made many poor financial decisions. To counter this, I have replaced my strategy of chasing the pot at the end of the rainbow (expecting a big football bet, premium bonds or a hot share to win me serious money) with long-term strategies. My strategies are buy and hold rentals (Property) and also a set and forget index tracker fund (Stocks and Shares).
Not to be too much of a dark cloud, but the prospect of automation and AI (artificial intelligence) is scary from an employment point of view. It seems very likely that the number of jobs will massively reduce over the next few years. So, if we want to be ok money wise, we have to be on our toes!
CHAPTER 6: Setting priorities
Our first priority is to protect ourselves from the potential of less, even catastrophe. We want to maintain a “less wrong” mindset. Second, we map what we own and what we owe. By making sure these are in balance, our money life is likely to be stable. Once achieved the final priority is to engage in more aspirational pursuits, recognizing that gratitude and generosity are proven sources of contentment.
One of my priorities is to provide security for my family and me. To get some security I have started looking at ways of getting more than one source of income. Being a contractor and relying heavily on one source of income is risky. After a few months out of work, it is squeaky bum time as us contractors start to worry about the basics like paying bills and putting food on the table.
Looking at money balance, I am drawn to Robert Kiyoasaki’s money quadrant. As long as our income exceeds our expenses we are in a good place. Looking at the bigger picture, if our assets exceed our liabilities we have stability and security.
Many contractors focus on their day rates when thinking of personal finance. It means absolutely f**k all what you are on per day as I have found out in the past. If you spend more than you earn, you will end up with sweet F**k all.
CHAPTER 7: Making decisions
The human brain is prone to making poor financial decisions, the impact of which can be very large. The classic example is when the market tanks and investors sell in a panic, locking in losses and then later missing the rebound. The second factor is the holistic shape of one’s portfolio, best expressed by being allocated to the appropriate segments of the market. The specific stocks, bonds, and funds which grabs the eye and quicken the pulse of investors are the third, and less important, drivers of financial success.
With painful experience and some self-education, my aim is to move away from poor financial decisions.
After having my ‘Life-Strategy 80/20’ fund for just less than 12 months, I have seen my fund go from +7.6% to -35%. A positive for my new outlook is that I have remained calm and have managed to keep hold of my fund. Not only that, I have also continued to invest each month to take advantage of pound cost averaging.
Due to books I have read, I have ignored the -35% and looked at it as a positive. By continuing to invest each month during a market crash, I have been able to buy shares (via my fund) for reduced prices. Sales are right up my street and 35% off is a big discount.
CHAPTER 10: You are here
The human ability to think through time via memory and imagination is one of our species most important advantages. While that ability creates enormous opportunity, it has some less desirable side effects. One of these is the difficulty to find presence (being in the now versus later or before), which is a demonstratable source of joy. In our money lives, this challenge manifests itself in the enduring tension between two distinct states of mind: desiring more versus having enough. Both are legitimate and useful motivations for human survival. But at any moment, they are incompatible. Striking an ongoing balance between more and enough – between progress and presence – sits at the deep core of enjoying a wealthy life.
Finding the balance between presence and progress is something I am currently battling with. I know that I need to be more present in the moment as I am a little bit obsessed on how I am going to get where I am going.
Although I am very grateful for what I have, I still want more. My aim is to have FI in my 40s to give financial security and stability to my family. So, that I can work at home and get to sleep in my own bed every night.
An added bonus would be having a property business that is my main source of income. This will mean I get to do something I love every day instead of a job that pays the bills.
After reading the Geometry of Wealth it is clear that money happiness is a difficult topic. There is an important distinction between being rich and being wealthy. The first being just about money and more of it, the latter is funded contentment. Personally, I will be very happy with funded contentment.
To me it is ok to have ambitious goals and to want more. The important thing is to try and be happy no matter what stage of your life. If for example, you are pushing hard for your financial goals for years and you have the mentality that you will be happy when you reach them goals, then you might waste 5,10 or even 20 years of being a misery (this is what I am in danger of if I’m being honest).
If you push hard for them same goals but you can be happy during the grind, you have the right type of mentality. Being happy when you are first starting out and haven’t got much money, during the years when you manage to accumulate more money and wherever you end up financially, you have found balance. In the language of the Geometry of Wealth, you will be wealthy and will have funded contentment.
A quick summary of what I got from this book:
- It is important to learn about money so that we can take care of our own financial lives
- Face your financial fuck ups head on and learn from them
- Focus on your net worth not how much you get in your current job
- If you are going to invest, think long-term
- Don’t panic – stick to the plan
- Be grateful for what you have
- Think about progress but not too much – try and get some balance
- Be present in the moment – this is a game changer and I have heard it over and over – choose calmness over anxiety
Back to that hard question of, does money bring happiness? Approached in the right way with some presence (being happy today), it is a contributing factor in my humble opinion.
Being too emotional with money, I have had a poor relationship with money for many years. Now that I have changed my strategies and am thinking more long-term, I am starting to get more balance and am enjoying the grind of pushing towards my FI.