Financial Satisfaction - How much is enough?

Our culture has at its core the idea that more is better. Many of us design our lives around this belief. And yet the underlying qualities that truly affect happiness are not advanced one whit by having more material things. More peace of mind is gained by allowing ourselves to be satisfied with what we already have. More joy is not bought; it is found in our hearts.

- Karen Ramsey

Today we live in a global culture and the aspirational levels of majority of Indians are no less than our counterparts across the world.

What is Financial Satisfaction?

Satisfaction describes a feeling of fulfilment or contentment.  It is a very subjective and a relative term.  In our society we tend to equate financial satisfaction with having lot of money.  Recently, I did a lit bit of experiment on the word �Financial Satisfaction�.  I randomly asked some of my friends �What does financial satisfaction mean to you�?  Paul said �I should have enough money that I don�t need to work for any one.  By investing prudently the corpus, the earnings from that should support my family for the rest of our lives. I probed further and asked, �How much would you need to do that�?  He wasn�t sure. Another friend Ram said, �If I had Rs. 2 crores, I would retire now. Put that in a bank deposit and that should take care of our family�s post -retirement expenses�.   Ashwini says, �If I have Rs. 1 crore, I would retire now.   That should take care of my post-retirement expenses.  And Ranjan said, �I want to become like Ambani.  Once I have thousands of crores, then I would be satisfied. I am sure all of you must have heard these statements before. Just the numbers and people change.

As you can see, each one�s definition of financial satisfaction is different, based on what they �feel� is satisfying and they justify these numbers based on their �needs, wants and their life styles�. As one friend puts it, �You cannot down trade your life style after you have moved up in the society�. Classic example for this statement would be to buy every time a bigger and better car rather than a smaller car even though you know it makes sense to have a small car. What with the fuel prices rising alarmingly every year!

I remember some of my friends who went to the United States and mentioned that they would be back in say 5 or 10 years.  They never came back.  They still feel that whatever they have saved is not sufficient enough for them to come back to India.  Another favourite answer by most of them is �Better quality of life�. But the moment they are about to lose their jobs, they want to return to India!

Those who are dissatisfied with their financial lives are often unsure of the source of their feelings.  An individual can intellectually know that they are financially independent but not feel financially secure at an emotional level. Others can strive for and achieve wealth and yet not feel any gratification from this accomplishment.  Why? Because human tendency is that the moment we are about to reach our financial goal, we have raised the bar for the goal. Or we are onto something new.  Rs.1 crore would change to Rs.2 crore, Rs. 2 crore would change to Rs. 4 crore and so on...

Remember Rajat Gupta, the former Managing Director of Mckinsey & Co.  A classic example of financial dissatisfaction.

So, how much is enough?

The first step towards  finding out  is �awareness� � the enlightenment that comes from first assessing our individual levels of financial satisfaction; and then recognizing the unique and personal circumstances, behaviours and  attitudes that hinder our sense of financial satisfaction.

Next step is to find out what are our 'Values�.  Values reflect what matters the most to us. When thinking about values we often think in terms of �principles� or �standards� we consider most important such as �honesty�, �loyalty� or �altruism�. We also tend to think of values in terms of what we hold most dear as �my family�, �my faith�, �my health� etc.  Our values are those intangibles that keep us motivated. Motivators vary from person to person but examples could include �wealth�, �recognition�, �achievement� and so on.

In addition, values provide both the purpose for our activities and the criteria for how we allocate our personal resources of time, energy, skills, and money. When there is contradiction between our values and the way we spend those resources, inner conflict or dissatisfaction will result.

Francine Jay, author of critically acclaimed book �The Joy of Less� in a recent interview [by Manisha Thakor, a well- known personal financial  coach and writer] was asked on what is the most common mistake people make with their money and she says, � ..valuing consumer goods over financial freedom. Chasing trends, status symbols, and the �latest and greatest� technology is a losing proposition; the satisfaction we derive from most such items is short-lived at best. When a newer model comes out, or a �must-have� goes out of style, we�re right back where we started � and with less money [or more debt] to boot... Financial security creates more long term happiness and well-being than any consumer item."

Once we are aware and know our values and what gives us true happiness, we have taken the first step towards financial satisfaction and financial freedom.  Our sense of financial satisfaction will multiply when we clarify our priorities and make financial decisions that align with our life goals. That�s when we also discover �How much is enough�?

As author Karen Ramsey wrote in his book � Everything You Know About Money is Wrong�,
�In personal financial management, the place to begin is to adopt a realistic perspective. Money will only improve the quality of your life when it is used with clarity. Only when you learn to spend money in concert with your underlying values, the things that you most deeply care about, will it become a tool for creating a more fulfilling life�.

 

Disclaimer : The names of friends have been changed for confidentiality purpose.

 

-Partha Iyengar
The author is the founder and CEO of Accretus Solutions India LLP and can be reached at partha.iyengar@accretus.in