Wealth is freedom, security and peace of mind. You can do what you want, help the people and causes you love, follow your dreams, and live life on your own terms. But despite the many advantages of money, there are some downsides too.
This article published with permission from InvestmentU.com.
People want to be rich for different reasons.
Some want the things money can buy. Others seek the power it bestows. Or the status it confers. Or the security it brings.
Wealth is real independence. It liberates you from want, from work that is drudgery, from relationships that confine you.
No one is truly free who is a slave to his job, his creditors, his circumstances or his overhead.
Wealth is the great equalizer. It doesn't matter if you're a man or woman, black or white, young or old, tall or short, gay or straight, educated or not. If you have money, you have power... in the best sense.
Wealth is freedom, security and peace of mind. You can do what you want, help the people and causes you love, follow your dreams, and live life on your own terms.
I know these things, in part, because I'm a member of the much-ballyhooed "1 percenters" myself. So are many of my friends, colleagues and business partners.
Most of us - all of us as far as I know - came from fairly modest circumstances. None of us inherited our money.
But despite the many advantages of money, there are some downsides too.
If you're arching an eyebrow right now, here are a few things I occasionally hear my affluent friends and colleagues grousing about:
1. They can't make themselves spend the money. Granted, this is not a problem for all of them, but it is for many. The vast majority of rich Americans didn't get that way by playing third base for the Yankees or starting a computer company in their garage. Instead, they did it the old-fashioned way: working hard, saving diligently, investing wisely and compounding patiently. This recipe is so surefire that many have trouble deviating from it even after they've built a fortune. After all, they got rich, at least in part, by keeping a sharp eye on expenses and living frugally. Now they find it hard to enjoy spending the money, even though they realize that if they don't their kids will. And that leads to problem number two.
2. They're afraid of turning their kids into entitlement monsters. We've all seen it. Men and women who become wealthy don't want to see their kids deprived the way they were whenthey were young. They don't want them to struggle. But struggle is what life is mostly about. It builds character, tests your strength and defines you as a person. Smooth the road too much and you eliminate your kids' ambition and drive. Spoiled brats can turn into snotty trust-fund adults. In my view, the right compromise is to spoil your kids with great experiences, not with a lot of "stuff." As for estate planning, Warren Buffett got it just right. Affluent parents should leave their kids enough that they can do what they want. But not enough that they can donothing.
3. They fear losing their nest egg. This one is easy to understand. They've worked hard all their lives for what they've got. They've paid taxes on it. They've saved it instead of spending it. And they're too old to make it over again. So they fret about losing it to inflation, a depression, a financial crisis or a stock market crash. They're afraid they'll do something boneheaded with the money - or suffer from some bolt out of the blue - and ultimately regret it. So they invest ultraconservatively, worry that they'll outlive their money, and often fall prey to problem No. 1 above.
4. They get hit up regularly for personal loans. This is a sticky one, especially when the intended receiver "knows" you have the money and gives his or her personal guarantee that it will be repaid quickly (and easily!). No one begrudges helping out a genuine friend in need, of course. But the question is, how close a friend, how much do they want, and what are your realistic chances of being repaid? Personally, I've batted close to zero in this area over my lifetime. Virtually none of the loans I've made to friends - some of them sizable - were ever repaid. The lesson? It's better to give than to lend. And it costs about the same.
Of course, spoiling your kids, risking your fortune and fending off loan requests (not to mention family and friends' "business opportunities") are minor issues in the great scheme of things. Not knowing how you're going to pay the rent or put sauce on your kids' spaghetti are far more pressing problems.
Any supposed burden of money is small beer compared to the real burden of not having it.
As Sophie Tucker famously said, "I've been rich and I've been poor. Rich is better."
Alexander Green is the chief investment strategist at InvestmentU.com. See more articles by Alexander here. The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.