Am I going to be ok?
Am I going to be ok?
This, I think, is the question. It’s the question that is behind every other question that anyone has about money. It’s ‘can I retire when I want to, and live the life I want to, and travel the world, and look after my kids, and care for my parents, and maintain my home, and buy a vacation home, and everything else’ rolled into one. It’s a question that is asked by multi-millionaires as much as by those who are just getting by.
Whoever you are, whatever situation you are in, if you could click your fingers and have someone say to you, ‘yes, you are going to be ok – go do it, go do whatever it is you want to do, take care of whoever it is that you care about’ – I think that would be one of the most valuable things anyone could ever say to you.
How do we answer that question?
Well, we have to go right back to the beginning. The problem with money is that most people start at the end.
Let’s say you have a portfolio manager (or maybe you are your own manager) and you go and see your manager and they get busy talking to you about valuations, P/E ratios, beta, alpha, sharpe ratios. They talk about owning this stock over that stock. They tell you that you own all the right investments in your portfolio; ‘we sold Facebook and bought Amazon, or we bought Netflix and sold Disney’.
But let’s think about this seriously for a moment. Does that conversation, in any way, answer your ultimate money question. ‘Am I going to be ok?’.
Of course not. It’s like deciding what mode of transport to take (car, train, ferry, plane) before you have decided where to go.
Which would be ridiculous, clearly. You have to set the journey, the destination, at least the direction, to have any comfort that you will be ok taking the car or a plane.
You have to start at the beginning.
When it comes to your money the beginning is you, not your portfolio. The beginning is asking yourself what and who is important to you? What and who is this money for? What are you actually investing in?
I want you to think about what happens if you don’t start with these questions.
Well, all you know to focus on is ‘more’. Your only goal is ‘more’. Your mindset is ‘if I just accumulate X I will be ok’. And I believe that’s a dangerous path.
As Brian Portnoy writes in his amazing book The Geometry of Wealth ‘we want to plan for something beyond just “more”’. “More” will take us somewhere; we will end up somewhere. And as Brian writes ‘we become quite good at justifying wherever we end up, but would reluctantly admit that’s not necessarily where we wanted to be’.
Another way to think about this is to realise that there is a difference between true wealth and being rich. True wealth is about having the freedom to live a life that is meaningful to you, and to be free from worry. Being rich is well, just about being rich. It’s only about having more.
Think about which way you want to go.