Morning! Today I have a guest post from Ben Carlson who blogs at A Wealth of Common Sense. Ben writes about personal finance, investments, investor psychology and using common sense to get ahead financially. You can follow him on Twitter or send your questions via email. Enjoy!
What would you do if money was no object? I don’t mean what would you spend it on or what debts you would pay off. I mean what would you actually do with your time? Would you travel the world? Live in a condo on the beach? Spend more time with friends and family? Quit your job? Volunteer and give back through charitable work?
Answering this question is not so easy. When people have the “What would you do if you won the lottery?” discussion that always comes up when the Powerball jackpot hits some huge figure, they mostly talk about what they would buy first. But the hard part would come after you buy those things that you want. How would you be happy spending your time if you actually gained financial independence?
You can use this exercise as a framework for going through the process of planning your long-term financial goals. Instead of trying to save a million dollars for retirement, ask yourself what you would do if you actually did retire. Focusing on why we are saving and investing for the future can help shape our goals, make them more realistic and keep us motivated.
Everyone’s situation will be different. Living a wealthy life has a unique meaning for everyone. Some of us want materials possessions. Some just want the freedom to make their own decisions that aren’t based on living paycheck to paycheck. Others want the ability to take a vacation or two every year without going into debt. Whatever the case may be you need to figure out what being wealthy means to you.
We all have a pretty good idea about the main tenets of personal finance (save more than you earn, invest early & often, track your spending, stay out of credit card debt, etc.). But delayed gratification is tough. Especially in the information age that makes it so easy to get everything you want right this minute. It’s much easier to buy things now on a credit card than save for a retirement that is so far off into the future that it’s hard to even imagine.
In the 1960s and 1970s Stanford conducted a series of studies to see how children would react to delayed gratification. In the follow-up years later they actually found that the children that were able to wait longer for their reward turned out to be more successful than the children that could not.
Setting long-term goals is no fun for most people. Looking out into the future to plan for retirement or your children’s college fund can be depressing because we equate these goals with getting older. So we tend to get into the habit of putting off these issues for another day.
Studies show that humans learn a great deal when they receive instant feedback, but not as much when the results take longer to process. If you can’t see the consequences of your behavior it’s really difficult to make changes.
Now, I’m not one of these personal finance people who tell you that you should never spend any money on anything and only save for the future. That’s no way to live and enjoy life. You must also have plans for your short-term and intermediate-term goals. Travel to Mexico every year if that’s what you want, but make sure you plan ahead for it by making it a goal and save in advance. You just have to prioritize.
Most of us are used to hearing specific advice when it comes to financial planning. You need to sell your stocks right now or risk massive losses. Or buy gold now because it is heading for huge gains in the coming months. But when taken out of context with your personal situation this advice means nothing for you or your long-term goals.
Going through the process of making a long-term plan will help greatly. It will force you to think about things like how much you will need to save to meet your goals. This also helps in setting your investment risk profile and time horizon. Since life happens and circumstances can and do change, take time to make periodic updates to your goals and financial plans along the way. This allows you to track your progress as you go and make any necessary changes.
Start by setting your long-term goals based on what you would like to do in the future and focus on why you want to accomplish them. Figure out where you are currently (salary, net worth, spending habits, etc.) and where you would like be (financially independent, retired, vacation, etc.). The specifics of your investment plan will be much easier to determine once you have these goals in place.
Living a wealthy life is different for everyone even when money is no object. Going through the process of creating a long-term plan can lead to a more meaningful and wealthy life once you finally reach financial independence.
So how would you spend your time if money was no object?
This post was featured on The Frugal Farmer, Canadian Budget Binder, Don’t Quit Your Day Job thank you!
I would travel a lot, spend a lot of time on my hobbies, get a maid, and get a personal trainer, try to find the time to learn how to play an instrument or be an artist. I would also live the life of a snowbird so that I would never have to experience winter again.
I would take the time sail around Australia. I have wanted to do that for as long as I can remember.
I have a fantasy about buying a decent sized sailing vessel and sailing around the Caribbean, so you dream sounds amazing. Not sure even if I had limitless money I would do this, or if I just like the idea because I listen to too much Jimmy Buffett.
We would definitely be traveling the world. I’m sure that we would also find a lot of time to volunteer.
It took me a long time to figure out what I want to be when I grow up: a writer. So I’m living the dream, writing my little late bloomer heart out. Stephen King says write 2,000 words a day and you’ll write a book in three months. My problem is getting DOWN to 2,000 words a day! 🙂
At first I just wrote because I liked it. Now I’m learning you can actually make a little money at it. How cool is that! Anybody know someone looking for a writer? 🙂
I would spend time volunteering and (assuming I had massive amounts of money available) donating to charities, as well as trying to grow my wealth through investing. For the most part, though, I would spend time with family and friends.
I’d travel, east good food, drink good wine. Have breakfast in Paris, dinner in Germany, catch my favorite band in Prague… That sort of thing. 🙂
I think there would definitely be a lot of travelling in our situation. A goal of mine is to see all seven continents and take our kids with us. I would also want to devote a good chunk of time to volunteering our time and resources to charities we care about.
I’ve been thinking about this a ton recently, since more and more, money isn’t an object. Time is really the enemy…how will I have time to do it all?
So, I’d like to focus on doing more with less. I’d like nicer, easier to find things, and less to take care of. I’d like to be able to dig deep into those things without the clutter.
Less is more is a great phrase to live by. Most people get in trouble with their finances when they make them complex. The simple solution is usually the best one for the majority of us. That’s great that you focus on that in your personal life as well.
I would travel more, but overall keep l life pretty simple and enjoy “experiences,” not “things.” Just the idea that I would never have to worry about money when it comes to emergencies, or being taken care of in my golden years would be an amazing feeling!
I think the freedom that saving and investing can bring you is one of the points that get missed by a lot of people. Having your financial house in order can reduce stress and give you the ability to not have to worry about the spending on the little things that always seem to pop up in life.
I think life would be pretty similar as long as our daughter is in school, we wouldn’t travel the world, but we would take several trips a year. I think I would also set up an eye clinic for people who couldn’t afford care. My job is lots more fun if I don’t have to worry about collecting money.
It seems like the majority of you would travel and volunteer more. If those are the ultimate goals, look at ways you can incorporate them into your current financial plans. Obviously volunteering only takes up more of your time, but travelling can be costly. Figure out ways to plan ahead for 1-2 big trips every year by establishing a vacation fund. I also love to travel and make it a point to fully fund our vacation savings and never use it for other expenses. Getting off the grid and leaving behind phone/email is a great way to recharge a few times a year if you can.
If money were no object, then I would spend more time with family and friends. I would work harder on improving myself also: travel more, learn another language, eat more healthy and workout more.
It’s great that you chose some pretty realistic goals for what you would do with your time. Going with choices that are impossible to attain is easy because we know that they most likely will not happen. Therefore we can discard them after a while. Your goals sound attainable, so you have a better shot at achieving them. Self improvement is a good one.
Great post, Ben! It is absolutely far easier to save and delay gratification when you have a goal worthy of doing so. We’re big travelers, so we would travel extensively. There are so many favorite places I’d like to revisit and other places we have yet to explore. If money was no object today – I’d still work, but in a different way. I love what I do, but would probably more focus more attention on The Heavy Purse.
Thank you. It’s funny that not many people mention that they’d still work. I love to travel, as well, but I would get bored pretty quickly if I didn’t have some sort of job to keep me busy.
I’d spend it working! Completely ignoring the financial impact, being unemployed gets really, really old after a few weeks. I like having stuff to keep me busy.
Part of me wants to say that I would travel more, specifically to be able to see my family at all of the holidays. But the reality is that money is only one of a hundred reasons why I don’t. The fact remains, I don’t like traveling, and the absolute worse time to travel is during the holidays!
I see this question posed a lot. I would spend my time by traveling and by starting by my online business that I shut down years back. I enjoyed doing it, but it was difficult to run by myself when I already worked a full time job.
I will live with the gypsies in Granada, Spain, learning to dance flamenco. In my free time (free from dancing, this is) I’ll write novels.
I’d definitely travel with my wife. All the while, I’d try to help people or develop something that could help people…
We’d have a few vacation homes and split our time between them. Not so much traveling the world per say, but I wouldn’t winter in Michigan.
Good call on staying away from Michigan winters. I’m actually from Michigan as well.
This is an ongoing thought of mine, addictive, really. Yet easy to answer: hiking, writing, composing for the guitar and traveling all while making asses of ourselves and laughing hysterically over the photo slide show at dinner – out.
If money was no object I’d certainly be investing and purchasing a home with “no neighbours’. I’d look after our families if they needed us. I’m almost certain we would travel the world and give back to other communities by volunteering our time and donating money as well. This is a hard question to answer but for the most part the above would be a start.
Currently, I would spend my time with my daughter and my wife doing whatever educational/enlightening experience I could think up for my daughter.
I’m quite easily pleased so if money were no object I’d just enjoy every minute spending time with my wife and kids. Yeah we’d have some great holidays, probably own a few getaway homes in other countries, but it’s the extra time I’d enjoy the most. Great post Ben
Thanks. Good point on time being a precious commodity. This is something a lot of people don’t think about. Having the freedom to spend more quality time with family will have a much bigger difference on people’s level of happiness vs. spending money on themselves. There are actually studies that show that happiness only increases up to about $75,000/yr. in salary and after that the extra money doesn’t mean as much.
I would definitely spend it with my daughter traveling. I would take her to all the places that are culturally historic and watch her be inquisitive and amazed.
Really making me think and question myself, Ben. That is good!
I would hike and write. That is what I know for sure. Some other ideas are floating around, but hiking and writing are always going to be my top 2! Oh, and it would be with CJ, the wildest squirrel on earth.