Can wealth provide us with a better life? We know that being rich means owning a lot of stuff. But I would like to propose that real wealth is the absence of stress more than it is the presence of material things.
A Million Dollars Of Stuff
Why do you want to be a millionaire? Some people just want to be millionaires so that they can spend a million dollars. Imagine the ‘stuff’ you could buy with a million dollars? But is that really what wealth is all about? Well not really, according to the author of “The Psychology of Money”, Morgan Housel.
Being rich may be different to being wealthy. Being rich means living a certain quality of life and being able to pay your bills. This is how Morgan Housel defines rich. But he defines wealth as being something else. He says that ‘wealth is the money that you don’t spend’.
So imagine that you did get that million dollars and spent it all. You buy a house, a car, some nice clothes, a new laptop and a smartphone and you take a holiday. You can also manage to pay your bills on time. Are you rich? Are you wealthy? Housel would probably say that you are rich but not necessarily wealthy. To be wealthy, you should still have that million dollars in the bank. Or maybe you’ve invested it for your future. It’s the money that you don’t spend that counts the most.
Absence Of Stress
I recently needed to send some money back to my home country for a loan repayment. The repayment needed to come from my Australian bank account so I used my usual money transfer provider to send money to that account. The same one that I have used every month for two years. Without fail (at least until this month) the transfer to my Australian account takes 1-2 days. This convenient service allows me to make my money work for me, stress-free.
But this month there was a problem. In the end, it took an astonishingly slow 13 days. I still haven’t received an explanation for this. But for 11 days I was stressed. I was stressed because the only account that mattered at this time didn’t have enough money to do what I wanted my money to do. I really needed money to be sitting in an account just waiting to be useful.
As I was stressed, I was also grumpy. I was not enjoying a normally restful time of the year for me. If only that account had more wealth. If only it had more of the unspent money that Housel references. I had the money. It was just in the wrong place. The money itself didn’t really matter. It was how I was feeling that really mattered. On day 14, the money arrived just in time to make the loan payment.
Suddenly life was good again. All because of some numbers appearing on my banking app. When the money was gone, having done its job, I was no longer stressed. I didn’t care about the money anymore. I just didn’t want the stress.
Facing Emergencies
It’s the same when an emergency occurs and you don’t have money to solve the problem. Or when somebody you care about needs your help. You can’t help them with the money that you’ve spent. A designer handbag does little to ease someone’s pain.
You can only help with the money that you haven’t spent. It’s why an emergency fund is a better sign of wealth than a nice car. Many people sacrifice the emergency fund for nice things. But these nice things don’t remove stress.
Happiness is indeed more possible with the absence of stress.
The more I think of my relationship with money, the more I realise that I only want money to ease my stress. I stress about the future just like most people. In the short term, the lack of money means stress. And it does the same in the long term.
Some people have short-term money stress when they worry about paying the rent, and electricity bills, buying food and taking your child to the dentist.
In the long term, I worry about whether or not I have enough money to retire. Or if my emergency fund will cover all possible scenarios that could arise. It is the money that I don’t spend that becomes my wealth and it is this wealth that eases my stress.
Saving To Remove The Stress
The point is that having a high income does not necessarily mean that a person is wealthy. A high income can easily be spent. Spent money does not contribute to wealth and spent money does nothing to ease stress or make us happy.
How much would you spend if you knew that it would remove all stress? Unfortunately, there is no amount that can do this.
Maybe we need to just change the question a little. How much would you ‘not spend’ to remove all stress? It is true that wealth can help to remove some stress. Real wealth is the absence of stress. If so, it is the money that we don’t spend that really makes our lives better. It’s this true wealth that makes us happy.
