Wealth is a good thing, right? We all want it. We believe we will be happier when we have it. Our family will be so much better if we own more stuff, have swelling bank accounts, all kinds of investments, and a successful business or well-paying position in a company. Our kids and grandkids will love us more because we are able to give them everything they want and we never had.
I am guessing you are not really buying this since you have seen, heard, and maybe even had it happen in your family; that money and people are often a toxic formula that leads to greed, dissension, fractured relationships, divorce, and legal actions when an inheritance is up for grabs. If you think it won’t happen to your family, consider the historical, worldwide statistic that 70% of wealth is lost each time it passes to the next generation, and completely gone by the end of the third generation. What you created and built today, will be rubble by the time your grandchildren pass away. Trust and communication is shattered. This series of blogs is about the warning signs your family may be in danger of fulfilling this statistic.
We are never satisfied. Marketing firms rely on that discontent to sell us everything we do not need. I was once told, and I believe it is true, that a luxury once acquired becomes a necessity.
Houses and cars are meant to shelter and transport us. When I pick up a rental car for a one-day trip the representatives always try to upsell me to a larger, more-expensive model. I need the car for only about five hours to get me from the airport to my meeting and back to the airport. Sure, a fancier car is tempting, but I would be paying for something I did not need and didn’t add value to me.
Cars are a necessity in our world today, but does a $100,000 vehicle get us to our destination faster than a $25,000 one? Sure, the more expensive car has more gimmickry and comfort features and probably burns more fuel, but is that gimmickry a necessity or nicety and really worth another $75,000? I’m sure you are thinking about arguments right now about why that price tag is justifiable. But ask yourself, “Really?”
Does a 4,000- or 5,000-square-foot home provide more protection from the elements than a 2,000- or 3,000 square-foot home does? Does a sixty-inch flat screen get shows we can’t get on a thirty-seven-inch screen? I am not suggesting it is wrong to own nice things, only that we should ask ourselves why we are buying expensive examples of this or that when less-expensive alternatives exist and whether we have better uses for the money. Every expenditure should be viewed in light of the return it provides. If the return is zilch or negative, would that be a good investment? It may provide temporary pleasure, but the operative word is “temporary.” The pleasure will fade quickly while the payments and expenses continue for years.
Invest that $75,000 you save buying the less-expensive car at a 6 percent annual return and in twenty years, it would turn into $240,000. The real cost of the expensive car should include the opportunity cost, not the amount on the window sticker. Add the interest paid on a car loan or lease and the true cost of that car is even higher.
Going back to my car example, assuming you hold the $100,000 car for ten years and sell it; perhaps you would get $25,000 for it. However, investing the $75,000 you kept by buying the less-expensive car at that 6 percent annual return would have given you $134,000 in ten years. Spending $100,000 and having $25,000 at the end of ten years instead of $134,000 certainly sounds like watching wealth slip through your fingers.
Ask yourself, does life get more complex or simpler the more things I own? Do I worry more the more I own? If I have less to lose, do I worry less? Again, owning things is not bad unless they start to own you!
Question here: are you content right now with what you have and where you are in life? If not, will owning more things bring you contentment? If you answer yes to this last question, then please describe exactly what you need to own or how much more money you must have to bring you contentment and why it would do that. Finally, ask these same questions as to how you think your spouse and your children would answer them.
You can get more information about my book, You Can Have It All; Wealth, Wisdom, and Purpose-Strategies For Creating a Lasting Legacy and Strong Family by calling or emailing us.
You can visit our website at www.familywealthleadership.com to learn more about family wealth coaching and how to contact us.