Wealth as a Life Scorecard

by Krishna on April 28, 2007

How do you measure your progress in life? How do you measure the extent of what you have achieved and what still remains to be done? What are your dreams? How far are you away from reaching them? What do you do if and when you reach them? What after that?

These are very tough questions to answer. Since many of us operate on auto-pilot for the most part of our life, we never get to sit down quietly and think about these fundamentals of life. But without doing that, we face the serious risk of choosing the wrong goal and remaining unsatisfied throughout our life.

Most people consciously or subconsciously use various scorecards to measure their progress. One of the most common metrics used is wealth – how much money, possessions or income one has. Other commonly used criteria are career growth, knowledge acquisition, popularity, power, influence, godliness, etc.

In my opinion, if happiness and satisfaction are the fundamental goals, there is nothing inherently wrong in choosing any of the above criteria as scorecards. The problems happen when they are chosen for the wrong reasons and used improperly. Let us consider the wealth scorecard because it is widely used and it is simple to relate to.

In general, it is very essential to have good financial goals. A person who does not manage money well will find it more difficult to manage other aspects of life, including health, family needs, education, etc. Having money is no guarantee of happiness, but lack of enough money for various needs is sure to cause distress and worries.

Companies provide greater financial benefits to those employees who have better education, skills and/or experience. The market (generally) rewards those who show greater business acumen and work harder to build good products and services. The more achievements a person has, the easier it is to reap financial benefits by leveraging them. The money scorecard provide a simple way to track all such accomplishments.

So far, there doesn’t seem to be anything wrong with this picture. Unfortunately, there are many ways people can misuse the money scorecard.

One mistake is to use wealth as a relative measure instead of an absolute measure. By that, I mean that people start comparing their wealth with others they perceive to be peers in various respects. If their wealth is not on par with their peers, people become terribly depressed.

This sort of comparison is very self-defeating for many reasons. First of all, one’s peers are not equal in all respects and do not have the same factors for success. The peers who have the right success factors working for them will always get ahead. And always some people will go behind – it is not their fault, that is the way it works when someone succeeds.

Secondly, wealth comparisons can be very tricky. Let’s assume that A and B are co-workers with the same income. However, B falsely informs A that he earns 30% more than her and proceeds with the consumption of high profile items like cars, real estate, etc. all the while running up huge debts (invisible to everyone). A feels totally left behind by the false knowledge given by B and his behavior, without knowing that she is actually much better placed financially than B.

If there is one thing that most people, even good people, are not very truthful about, it is their wealth. Some people lie to other people’s faces. Others do it indirectly by exhibiting behavior that conveys an impression of being rich. Most people are more insecure about than thankful for the wealth they have earned.

There is another interesting phenomenon. Even if two people earn the same money, their tastes may be totally different. For example, one person’s idea of spending is buying good clothes while another person’s idea is to buy the latest gadgets. Unfortunately, each person sees the other’s consumption as a threat and tries to imitate them, even if they have no need for that product.

If you notice a group of people, you will observe this trend happening quite often. Someone buys something – the others want to get the same or better thing. Someone goes on a trip – others quickly follow. Someone starts a hobby – soon the hobby shop is busy.

Try this experiment: Ask people to write down their expected hot ticket purchases for the next 6 months and then observe what they actually do. Usually, their list will be carefully thought out and will address their needs. Their actual purchases will be rash and will address their emotions.

Lastly, people are not really satisfied even if their peers are on the same wealth level. They want to get ahead. But when they get ahead, they find they have a new set of peers with whom they have to compete. The cycle never ends. If you are in this game, don’t worry – there is always someone ahead of you.

The second mistake that people do with wealth as a scorecard is to use wrong targets – either too low or too high. If you set low financial objectives, you will not challenge yourself to learn, improve and find greater opportunities. This causes problems during economic downturns or technological advances when the person finds himself left behind and unable even to meet his originally low wealth targets.

Secondly, factors like inflation, stock/real estates crashes or stagnation, etc. can destroy or constrain growth of wealth again resulting in financial difficulties. Many blue-collar workers are victims of trying to settle for a simple life when current economic trends have no sympathy for such a lifestyle. Simple rule: Ignore market realities at your own peril.

Other people are guilty of trying to achieve too much without a realistic plan to get there. Yes, it is possible to earn $x million dollars, but will everything fall into place? What about external factors like the economy, technology, political/legal situation or sheer luck? Do you have the skills and capability to reach that level?

Another question is: are you willing to do what it takes to get there? The more difficult the financial target, the more sacrifices you have to make. For example, a startup company fighting with fierce competitors may require the founders to work like crazy for several months or even years. Forget enough sleep, timely food, family time, meaningful relationships, etc. And maybe there is only failure at the end of all that. Are you willing to live with that? If you cannot accept the process or a different possible outcome, change your expected targets and live accordingly.

Conclusion: It is important to understand that wealth and monetary considerations play a significant role in our daily lives. They can be used as one measure of progress and also as a means to avoid unnecessary hardship that prevents one from achieving other goals. However, using wealth metrics incorrectly by wrongful comparisons and inappropriate targets can also be the cause of much frustration and tension. Recognize the pitfalls, avoid them and you will be happier.

{ 2 comments }

lifestyle April 29, 2007 at 3:33 am

I think you got a great blog!! Thank you for that. I’m definitely going to add u to my favorite 🙂
I hope you can visit my blog at http://thaer.moneee.com/ – Thaer Money

Krishna Kumar April 29, 2007 at 5:46 am

@lifestyle

Thanks for stopping by and giving your comments. I like your zlifestyle blog too and am subscribing to that.

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