Wealth Is What You Don’t Spend
Morgan Housel has another fantastic post on financial wellbeing today.
Notes:
Financial wellbeing can’t be measured by merely looking at how much you earn. The gap between what you earn and how much you avoid offsetting those earnings is the figure that matters most.
Spending more when your income rises is as tempting as eating more after you exercise. It feels earned and justified. This is doubly true for spending because people’s lifestyle expectations are driven by their peers. When everyone spends more, you feel entitled to spend more.
Wealth, at every income level, has less to do with your gains and more to do with your ability to leave gains alone without cashing them in.
Learning to contently live with less has the same effect as growing your income, but it’s often easier and more in your control. This is an opportunity for financial advisors to add value, though it has more to do with psychology than finance.
Money is often a negative art. It has a lot to do with the actions you don’t take and things you avoid.
Everything has a price, and prices aren’t always clear. The price of exercise isn’t just the workout; it’s avoiding the post-workout appetite. Same in finance. The price of building wealth isn’t just the trouble of earning money; it’s avoiding the post-earnings urge to spend what you’ve accumulated.