A friend of mine recently (as of Apr. 2017) asked me why I want what many people consider an egregious amount of money (i.e. 8 figures in net worth). I didn’t get around to answering her that particular day, but I would like to be clear about what the point of money is for me.
Money is not meant to be acquired as an end in itself. Money must be viewed as a resource, rather than a goal; one would be wise to keep that top of mind. If we try to acquire money just for the sake of a number on a bank account statement or pay stub, we subject ourselves to running on the hedonic treadmill. Simply put, this means that as we become accustomed to bigger numbers, we adapt to them and need more and more to get the same positive feelings. Thus, money becomes our drug.
In that case, what is the point of acquiring money? Why bother at all? To paraphrase the late Gianni Versace, “money buys freedom.” For me, freedom falls into two buckets: (a) freedom from worry and (b) freedom from involuntary decision-making. Of course, those two might be sides of the same coin, but in any case, those two types of freedom are what I aspire to currently.
When I say freedom from worry, I mean that anxiety about affording my kids’ college or my monthly bills or any number of other daily minutiae fades away. With enough money, the tedious concerns of daily life cease to exist; of course, money brings with it worry of its own (e.g. worry about losing your money or worry about the performance of your investments), but I currently find investing a scintillating activity and try to do so according to my appetite for risk. By limiting the amount I can lose, I limit the amount of worry I can experience.
When I talk about freedom from involuntary decision-making, I’m referring to not having my hand forced due to lack of money. This means not feeling forced to take loans with draconian terms or making decisions that weaken my position in order to shore up my financial position short-term. When people feel desperate, they tend to make bad choices and lose sight of the long game. However, if Warren Buffett can teach us anything, it’s that patience and long-termism are powerful tools.
Tied to this is the idea of BATNA, which is the “best alternative to negotiated agreement.” In simple terms, your BATNA is your next best option if whatever deal you’re making falls through. With enough cash to both be content and free from worry, your BATNA is to simply walk away; as the principle of least interest says that the person who is least interested (i.e. can walk away) has the most power in any form of relationship.
Also published on Medium.