Accumulating Wealth – Finding a Balance

The following quote from Charlie Munger has always stuck with me: “If all you succeed in doing in life is getting rich by buying little pieces of paper, it’s a failed life. Life is more than being shrewd in wealth accumulation.”

For those of you who don’t know who Charlie Munger is. He’s the Vice Chairman of Berkshire Hathaway, the company which Warren Buffett is CEO and Chairman of. Munger is Buffett’s right hand man and closest confidante. Buffett of course is the world’s third richest man. Munger is rich in his own right as he is a billionaire.

So why does Munger’s quote resonate with me? Because it’s all about finding a balance between trying to achieve financial freedom and all of the other important things in life. Finding the balance is the hardest part.

Why is achieving financial freedom important?

  • The most important reason is that it buys you time. Money buys you time. Time is the most precious commodity in the world. Unless we figure out how to extend human lifetimes substantially, our time in this world decreases with every passing day. Having enough money allows us to do whatever we want with our time without having to answer to anyone (other than our spouses). We can choose to continue to work, open a business, vacation, do volunteer work, spend more time with our kids or grand-kids, get in shape, and so on.
  • The second most important reason is that it alleviates stress and lets you focus on the rest of your life. Money problems is one of the biggest reasons why relationships breakdown. This can be because both spouses do not share the same vision of financial freedom or because of excessive debt. Money problems can impact other aspects of your life. It may become harder to concentrate at work because you’re worried about paying down debt. You may end up paying spousal and/or child support payments because of divorce. Money problems usually lead to stress. Stress is one of the biggest killers in North America. Stress can lead to issues such as high blood pressure, heart disease, obesity and diabetes. It is essentially a silent killer.

Why is it important to find a balance?

Yes, achieving financial freedom is important. But you cannot let the accumulation of wealth consume you. It can’t be the only thing in life. I think you end up alienating those around you if you let it be the only thing in your life. It’s important to get out of the debt, maintain a budget, invest your money, and so on. But I think life is more enjoyable when you balance these desires with other aspects of your life. For example:

  • I try to spend Christmas and the Holidays around home each year. Why? Because most of my family and friends live near where I do. So I always end up going out with friends, attend family dinners, attend gift exchanges, etc… during December. Friends and family time is precious. This is time you won’t get back. No one is going to remember you because of the money you made. Rather, the people who will remember you are the friends and family who you listened to and helped. There will also be the random people you helped with acts of generosity. This doesn’t mean I splurge on friends and family but I usually spend a little more in December on things like gifts, groceries, and restaurants. It’s hard to put a price on these things when you’re doing them for the benefit of others.
  • My work is seasonal so after my busy season, I always plan a vacation. This gives me something to look forward to. I go on vacation from time to time during the rest of the year but the vacation after my busy season is always the biggest. I don’t mind spending a bit more on this vacation because I know it pushes me harder during the busiest time of the year when I’m actually earning money. It’s good to do some of these things when you’re young because you’ll only be young once. I don’t break the bank on my big vacations though. I start planning them six months in advance and book slowly during those six months so I manage my cash flow. I also look for all the deals that I can find on flights, hotels, transportation, and food.
  • I do other little things to motivate me to save money. I’ll eat home cooked breakfast, lunch, and dinner during the week and on the weekend have a few meals outside. This makes those meals on the weekend more rewarding. It also helps me save money on food. I try to exercise 3-4x a week because it saves money in the long-run. Why? Because of fewer medical bills down the road. The focus should be on preventing health problems – not dealing with them when they develop. Prevention is much cheaper than treatment. I don’t have a gym membership though. I run outside and use weights and other exercise machines at home that I purchased for cheap. I play team sports or pick up games which are subsidized or free – these allow me to stay in shape while at the same time allow me to socialize.
  • I’m not big on material things. The things I like most are books. So I usually set out a number of books that I want to buy in advance. This way I have a budget range for the year. I buy things like clothes, shoes, and accessories only when I need them.

So the key lesson is to keep focus on achieving financial freedom but balance this with time with friends and family, vacationing, exercising regularly, and enjoying great restaurants once in a while.

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