All Wealth is Relative

A recent article on CNN Money cited that “a whopping 70% of those with at least $1 million in assets that are invested or available to invest, excluding home values, don’t consider themselves to be wealthy…it’s only when they hit the $5 million mark that millionaires begin to feel ‘wealthy.'”

I would submit that our feelings of wealth are far more associated with the life decisions we make and social circles we participate in, than the numbers we see on our net worth statements. Ted Roosevelt once said, “comparison is the thief of joy.” Feeling wealthy is a function of feeling that you have enough…of wanting what you have, rather than being consumed with what you want.

I was once told that if I want to feel smart, just hang out with people dumber than me. However, if I actually want to be smart, I have to surround myself with people smarter than I. The lesson within this statement is simply acknowledge who you are and you limitations. You can learn an awful lot from others if only you are willing. The problem with most folks is that they hang-out with smarter people, but instead of trying to learn from them, they spend their time and energy attempting to prove they belong.

This concept isn’t any different with money. Feelings of wealth are directly correlated to our surroundings and the proverbial Joneses in our lives. If you simply want to feel wealthy, just hang-out with people poorer than you. If you want to feel poor, keep trying to live the life of folks wealthier than you.

A lot can be learned from wealthy folks. The first challenge, however, is recognizing those that are truly wealthy versus those projecting an image of wealth. Once there, it requires you to stop trying to “show” that you belong and instead try to understand how to make money a supporting element of your life rather than the driving force.

The importance of this relationship exists whether you have a net worth of $100,000 or $10,000,000. Several years ago, I was working with a client that wanted to sell his business and received a very fair offer. The client was extremely burned out and given the line of work, lucky to receive an offer at all (rather than being forced to simply wind down his office and close). Instead of accepting that offer, however, he decided to make that the baseline in the pursuit of more.

In questioning his motive, he ultimately lamented that the people he hung around with had personal helicopters or airplanes. Because he did not have such things, he felt poor relative to them and felt a need to get as much out of the deal as he could. This transaction would have accounted for less than 5% of his net worth. Needless to say, he never found a buyer, as the initial offer was withdrawn. This client rarely traveled, did not have a pilot’s license, and had no interest in pursuing one. He could easily buy a personal plane, but to what point?

Often, the best of intentions can result in adverse consequences. Families that move from a modest neighborhood to a high-end community can find themselves going from feeling wealthy to extremely uncomfortable overnight.

The motivation to move may have been a function of getting more living space, moving to a better school district, or providing a safer neighborhood for the kids to play in. In the old neighborhood, they were able to provide their family with everything their friends and neighbors could. However, in the new neighborhood, the “extras” are now the basics. In addition, social pressures around community outings, kids’ class trips, sports and extra curricular activities have increased beyond the expectations that were set in our previous life.

Someone recently suggested to me that “happiness = reality – expecations.” If we are constantly setting unrealistic expectations for ourselves and our financial lives, we will never reach a state of true wealth.