In short, money is especially important when you don't have any. When you have gotten rich, on the other hand, money doesn't mean much to you. And as we pointed out yesterday, this could leave you feeling empty. After all, if money doesn't mean anything...what does?
Philosophers and poets have puzzled out this issue for centuries. Money represents wealth. And wealth is a form of condensed life. It measures the time and resources that have been invested, fructified and accumulated and now may be exchanged for other accumulations of time, imagination, and resources. A person may work all his life to build up some savings. Those savings are an expression of his life...at least it's net economic value. Each unit is a distillation of his hard work, self-discipline, and forbearance. When he has so much money that an extra unit no longer has any meaning or value to him, he begins to feel the ground go soft under his feet. He loses his footing...and his bearings.
"The best things in life are free," is the popular expression. As far as we can tell, it is true. A kiss...a smile...the love of family and friends...who can put a dollar figure on them? Doesn't the autumn sun fall as warmly on the face of the pauper as on the hedge fund manager? And we have yet to meet the child who checked his grandfather's portfolio before giving him a hug.
And yet, even on the best things money casts its shadow. After you have enough money for food, clothing and shelter...what is the point of the rest? Isn't it to win approval...to make yourself worthy of love and respect? Isn't that why a young man buys a fancy car, even when he can't afford it; to get the girl?
But that is also where the deception and disappointment begin. A woman -attracted to the successful, moneyed man - soon discovers that money isn't everything. And the man realizes that what he really wanted was a woman who wanted him for more than just his money! And pity the poor man who works his entire life trying to earn enough money to win his father's approval. He is likely to discover that a) he never will...or b) he had it all along!
The principle of declining marginal utility comes into play here too. A little financial success may bring love and approval. But more success doesn't necessarily bring more love and respect. And too much financial success may backfire. The financially successful man may find himself the object of envy, resentment and opportunism. His spouse is only his as long as the money holds out...his 'friends' see him as a rich mark...and his own mother looks down on him; he has become 'obsessed with money,' she says!
This phenomenon -- the declining marginal utility of money -- also works in reverse. A dollar lost brings more pain than the pleasure of another one gained. A guy with a million dollars will welcome another million. But it probably won't have much effect on his life or his well-being. Imagine instead that he loses his million dollar net worth! Now, we have material for a tragedy. He has to give up his house. He becomes depressed and impossible to live with; he wife leaves him. His car is repossessed. And he ends up sleeping in a homeless shelter.
With these thoughts in mind, let us take up the second major decision you must make in life. We've already seen how gaining wealth may make it harder for you to do what you want. Now we look at how more wealth can keep you from living where you really want to be.
We're going to begin at the end: We do not want to sleep under a bridge or in a homeless shelter. So, we want to be sure we have a Plan B that works for us in case we go broke.
We've already explained that one of our main joys in life has been building things in our spare time. Houses, barns, pigsties, the aforementioned gypsy wagon, stone walls - you name it. In particular, we enjoyed building the houses in which the family lived. This was a past-time with a rich reward...especially, early in life, when we had no choice.
Later in life, when we had the money to hire real professionals, we had to share our building projects with architects, contractors, plumbers, electricians...and even decorators. This proved to be a major disappointment; in the worst case, we paid architects and builders to remodel a house we had built ourselves. The result? We now live in a house that we did not design. We did not build it. We went along with the professionals...and now it is THEIR house, not our own.
One of the hazards of wealth that is rarely discussed is the pernicious way it draws you away from the things you really like. As in the old TV series, 'the Beverly Hillbillies' when you strike oil, 'friends say 'Jed, move away from there. They say California is the place you ought to be. So he loaded up his kin and moved to Beverly. Hills, that is."
When you come into money, you are tempted to 'trade up.' Out of the old neighborhood and into a new one. But the new one is a lot more expensive. Everything costs more. Not just the house...but the insurance, the upkeep, the furniture...heating and cooling...
The big house - which you saw as the trophy for your financial success - turns out to be the booby prize. More 'Homage to Poverty' - tomorrow...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.