When we’re kids, “enough” isn’t in our vocabulary.
Our objective is to accumulate as much as possible, as fast as possible.
Whether it’s candy during Halloween, or additions to our Lego collection, more is unquestionably better.
As we get older, we start to discover that it is possible to have too much of a good thing.
When we eat too much candy, we get a stomachache. When our Lego collection starts overflowing, it becomes impossible to find that specific piece we’re looking for.
But even as we get wiser, there’s one thing we still believe we can’t have too much of.
Can you guess what it is?
Today, we’re going to discuss why that mindset hurts your ability to generate wealth. And then we’ll discuss how to fix it so that you can enjoy life while building the wealth you deserve.
How the Accumulation Mindset Begins
From the day we get our first few pennies of allowance, our instructions are clear: accumulate as much money as possible.
If we blow our piggy bank on Barbie Dolls or video games, we get chastised for our extravagant expenditures.
Even as we age, we’re taught that the objective in life is to earn as much as possible until we reach the ripe age of 65, at which point we can drop everything and finally start spending.
Meanwhile, an opposite but equally powerful force is at play: consumerist pressure.
Advertisers incessantly tantalize us with increasingly sophisticated and expensive goodies, from the latest technological gadgets to luxurious and exotic vacation packages.
And as far as the service providers are concerned, these indulgences aren’t optional. They are mandatory for our happiness. These companies invent problems and aspirations we never realized we had.
Of course, once these fabricated needs are brought to our attention, we’ll do anything in our power to resolve them.
In other words, according to the consumerist dogma, the more money we spend, the more delights we can treat ourselves with, and the better our life gets.
The only problem is, this consumption mindset is in direct conflict with the accumulation mindset we discussed earlier.
If we’re to satisfy both the “accumulate as much money as possible” objective and the “buy as much as we can” objective, we have but one course of action.
Earn more money.
In fact, the only way this works is if we earn so much money that we can’t reasonably spend it all, so we inadvertently end up with excess funds that for that distant dream of retirement.
Unsurprisingly, with this mentality, the acquisition of money becomes our top priority, at any cost.
We sacrifice hundreds of hours each year – thousands in our lifetime – to monotonous commutes because we find a job further away from us that pays better.
We put up with abusive bosses, humiliating performance reviews, and grueling unpaid overtime. We wear constricting clothing that we overheat in during the summer, and pay thousands of dollars to curate our professional image.
Meanwhile, we sacrifice precious time with our family, friends, and doing the things that secretly matter most to us.
All because we’ve been taught that this sacrifice is the linchpin our moral and existential obligation to earn as much money as we possibly can.
Did you get promoted? Cool, do it again. Did you get a raise? Great, get another one. Did you make it to managing director? Awesome, now set your sights on becoming partner. Did you climb your way up to the C-suite? Nice work, leverage that to find a larger company with an even better benefits package.
There’s a reason they call this a rat race.
Just like your pet gerbil, you are on an exercise wheel with no end. The wheel keeps spinning, and you keep running. Step off, and you’ve failed yourself, everyone who depends on you, and everyone who expects more of you.
I don’t know about you, but to me, something doesn’t feel right about this.
And the consequences of this mindset are nothing less than devastating.
Why the Accumulation Mindset Holds Us Back
The most destructive aspect of an unbridled accumulation mindset is that there is no finish line. There is no point where we say, that’s enough. I don’t need to accumulate anymore.
This causes us to make physically and mentally crippling decisions.
For example, in our relentless pursuit of “more”, we spend all day sitting at desks, which wrecks our posture, atrophies our core muscles, and deprives our cardiovascular system of healthy blood flow.
Several studies demonstrate how a life of chronic sitting has a mortality risk equivalent to obesity and smoking.
Our unchecked quest for accumulation also deprives us of important quality social time with our friends and family by forcing us to spend most of our waking days with people we have little or no attachment to.
Sure, we can interact with our colleagues at work, but with most colleagues we have what I’d call acquaintances of circumstance, rather than intimate, supportive, and loving relationships.
According to a longitudinal Harvard study, called the Grant Study, quality social interactions are one of the most consistent drivers of lifespan and happiness. Yet our ceaseless search of wealth deprives us of this.
When we don’t have some indication of when to stop, other than a nebulous “retirement age”, we humans have a tendency to run ourselves into the ground, without ever feeling a true sense of accomplishment.
The other less-discussed drawback of the accumulation-obsessed mindset is that it actually makes us poorer than we could be.
The reason for this is that when our sole occupation is to generate more money, we take fewer risks.
There’s no surer path to a decent living than getting a steady paying job at a large company. Work diligently, compliment the right people, and you’re pretty much guaranteed to have a regular stream of income for your entire working life. Even if you get fired, you can just apply to similar role at a similar company.
But very few people get rich with that approach.
Part of that is because they forget to save more than they spend. But the other reason is that an employee’s salary is always capped by the management of the company. And that cap is always going to be much lower than what you deserve.
Stock options help, but unless you are a senior executive or early hire at a rapidly growing company, options aren’t much more than a supplement to your income.
Taking a commission-centric job has more potential for wealth, but it also comes with greater risk. If you don’t hit your targets, you’re stuck with your lower base salary.
By contrast, the most powerful wealth generator is to own a business.
When you have a majority stake of equity in a profitable business, your pay can vastly exceed what you’d make as a typical employee. And you earn it while you sleep.
But most people will never attempt to start their own business because it’s the riskiest of all their options. If the business tanks, they’re left with nothing.
Now I strongly disagree with that type of risk assessment, but we’ll save that for a separate discussion.
The bottom line is, with the pressure to make more money, so we can spend more, and set ourselves up comfortably for retirement, we most often stick with the safest bet, which is to be an employee at an established company.
And in doing so, we inherently limit our ability to become truly wealthy. Meanwhile, we’re still stuck on the never-ending path to “more”.
How Do We Define Enough
So let’s switch gears now and talk about this concept of “more”.
The primary reason we obsess over more is because we’ve failed to define what “enough” means. In fact, the most common belief is that there is no such thing as “enough”. If you can be richer, get richer, whatever the cost.
That said, if we’re asked point blank “what does enough money mean to you”, most of us will be able to produce some vague net worth target.
Typically, that target is quite a bit more than we have at present, but it’s still conceptually achievable with hard work and dedication.
For the purposes of this discussion, let’s go with one million dollars as an aspirational target.
And let’s say that, after ten years of lucky breaks and responsible spending, you reach that million dollar milestone.
At that point, are you really going to hang up your spurs and kick your feet up in retirement?
Why is that?
Because a million dollars was just a ballpark estimate based on your cost of living and the price of things you like to buy. And it just sort-of sounds like “a lot”. It wasn’t based on any explicit calculations or carefully thought out plan.
And another weird thing happens on your journey to a million dollars.
On your steady path of promotions and raises, you start to spend a little more on the things you like.
You upgrade from cable internet to fiber optic. You swap out your Honda Fit for a Tesla. You go to your favorite restaurants a few times per week, rather than once a month. Heck, you even decide to upsize the house, which comes with a higher mortgage, taxes, and maintenance.
We call this “lifestyle inflation”.
And don’t get me wrong, I enjoy the freedom of spending more on things I love, as my disposable income grows, just as much as the next person. We’ve earned it.
But lifestyle inflation a dangerous game to play.
Soon, that million dollar target won’t cut it, because your monthly expenditures have jumped from $4k a month to $10k. And at $10k a month, a million dollars won’t last long.
So naturally, being the ambitious person you are, you bump up your target net worth from one million bucks to ten million.
The only problem is, in doing so, you’ve now signed yourself up for a whole lot more punishing desk time and social sacrifices.
To use an analogy, you found the key to your ball-and-chains, but instead of unshackling yourself, you chucked the key in the lake, and told yourself “If you want that key, you’re going to have to go and get it”.
All of us do this because we don’t spend enough time defining what “enough” means to us.
And of the rare few among us who do define enough, they inevitably redefine it once they discover new and exciting ways to deploy their growing riches.
The hardest thing to do is to choose a target and stick to it. I mean really stick to it.
Once you hit that target, my advice is to take your foot off the gas, at least for a few months. Take that opportunity to assess your situation.
Are you happy with the balance of things? Are you mentally healthy and physically fit? Are you spending enough time with your friends and family? Are you doing the things you love to do?
If the answer is “Yes” to all of those, then by all means, keep plowing forward with whatever it is you’re working on.
But if the answer is “No” to any of those questions, remind yourself that you reached your pledged definition of enough, and now it’s time to recalibrate your money-making activities so that you can incorporate a healthier balance in your life.
And of course, the secret to accelerating your path to “enough” is to set a very achievable target, ideally something you can reach within a 10-year timeframe.
That way, you aren’t locked in an endless Sisyphean struggle with no end in sight.
Now if you’re wondering how to mathematically calculate the dollar value of “enough”, well, we’re out of time here, but we’ll absolutely get to that in another session.
For now, just get comfortable with the fact that there is such a thing as “enough” money. And if you can define it, your life will get a whole lot better.
So best of luck with your wealth building goals, and remember, the happiest and healthiest people you’ll meet, are the ones who know what enough means to them.
P.S. If you want more on this topic, check out our live conversation about Why More Isn't Always Better!