I always insist that one of your objectives be around paying your basic expenses. I insist on that because I truly believe that if you are worried about paying your rent or where you will get your next meal, it is really hard, if not impossible, to effectively pursue your other objectives. You can dramatically reduce your basic expenses by living on a friend’s couch or eating only one-dollar slices, but everyone has some kind of expenses to cover and ignoring them is irresponsible. And eventually unpaid bills have a way of catching up with us and biting us in the ass.
But that is only one side of the coin when it comes to financial objectives. I recently noticed someone created an objective: “Build Wealth.” I am all for wealth building, and I know this person chose the independent working life specifically with the goal of making more money than he could working for someone else. That said, I worry about the objective “Build Wealth” for two reasons. First of all, it shouldn’t be the ONLY financial objective. Obviously, if you are building wealth, you are probably making enough to cover your basic expenses. However, I still think that covering basic expenses should be separated out as an objective in and of itself. Covering your basic expenses aligns to the foundational level (5) of my ranking system (and Maslow’s Hierarchy), whereas building wealth would more accurately be rated a 2, an objective associated with self-esteem.
The thing about covering your monthly expenses as a goal is that you are free to exceed your goal and earn more, but realistically, you know what your bottom line is. “Building Wealth” is something you would do ON TOP of earning your monthly nut. My second issue with Building Wealth as an objective is that it is not that measurable, and with finances, when we can’t measure the goal, it often becomes elusive. So while for the purpose of this exercise, I think “Build Wealth” is probably sufficient, if it is truly your goal, I would ask you to do some soul searching and ask yourself what “wealth” looks like. Chasing money can be an endless pursuit and the more money you have, the more of it you seem to want. Right now it’s worth asking yourself what your wealth target looks like. Is it the ability to retire early? To buy a second home? To winter in the Alps and summer by the sea? Is it about leaving an inheritance for your children? Or some other legacy? My point is, how will you know when you’ve succeeded in building wealth?
Do you agree? Do you have suggestions or ideas for someone who is looking to build wealth?