Wealth is independence, not money
I recently had some time to kill and flipped on a Morgan Housel podcast titled “The Highest Form of Wealth.” Like most of Morgan’s stuff, it made me rethink this topic.
Below are my takeaways from the podcast.
Financial independent means you don’t rely on anyone else for your financial needs.
You can do whatever you want, whenever you want, with whoever you want, for as long as you want.
Society may label you rich because your income is high, but if you are required to work under the direction of a boss or customers, you are dependent on them. You lack control of what you do, when you do it, who you do it with, and for how long you do it.
Financial independence is a spectrum, not a binary yes/no. The spectrum might look like the list below, from least independent to most independent.
Complete dependence on the kindness of strangers (panhandling on the street)
Dependence on people who know you and care about you (parents supporting children or vice versa)
You can cover the normal needs of life with the income from work
You can start to save for retirement and college, and avoid debt
You have enough money that you have no need to prove you have money through social status symbols (no need to flash your peacock feathers)
Note: This is driven by your unique behavior and social traits. To some, the need to perform socially is a financial liability.
Every dollar of savings you have is a piece of your future that you own. On the flipside, every dollar of debt you have is a piece of your future that somebody else owns.
Savings can buy you happiness through freedom that few luxury goods can ever compete with.
Sir Housel talks about his stint as an investment banker after college: “Going home before midnight was a luxury. There was a saying, ‘if you don’t come to work on Saturday, don’t bother coming back on Sunday.’”
Salary rich. Independence poor. The result was low happiness.
In the early to mid 1900’s, the factory was a place you physically went to. Today, the factory follows us everywhere. Laptops or phones are with us 24/7. When the factory was a place, you had more control of your time off because you could no longer be productive (for your job) when you clocked out. Today, we never leave the factory.
This leads to less control of our time. And perhaps, less happiness.
In surveys with elderly Americans, a common theme was that they all valued time with others and being a part of something bigger than themselves. None of them wished they had worked more, to get more money or buy more things. None of them!
“Controlling your time is the highest dividend that money pays.” - Morgan Housel
Link to the podcast: The Highest Form of Wealth