1.4 – Wealth

Wealth is key to personal liberty, which is key to genuine life satisfaction. This chapter of Supermorming discusses various ways to accumulate tangible and intangible assets, and deploying these assets towards the achievement and responsible application of personal liberty.

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Recap: Managing Wealth and Liberty

Wealth – be it tangible assets, intangible assets or personal liberty – is an awesome thing to have. But it doesn’t automatically make life all sunshine and roses.

One of the biggest challenges with wealth is effectively managing all the attractive options it puts at your disposal. Laying out these options was the focus of this week’s posts.

Let’s dive straight into the summary:

The checklist

  1. Carefully prioritize your investments.
    • There are many investment options in terms of tangible assets, intangible assets and personal liberty.
    • It pays to make clear priorities and first invest in those that will best enable others. 
  2. Buy your own time and energy.
    • One of the best things to do with any surplus income is to buy more of your own time and direct it towards your purpose. 
    • Willingly taking a pay-cut in exchange for greater freedom sounds crazy, but it really is awesome 🙂 
  3. Buy other peoples’ time and energy.
    • Any worthwhile purpose will require more skills, time and energy than you can ever have. 
    • There are several interesting ways to set up win-win collaborations for pursuing your purpose. 
  4. Enjoy sharing your wealth.
    • Giving from a position of abundance is one of the best win-win actions out there. 
    • However, you must first attain the position of abundance, otherwise giving can easily backfire. 

So, there you have it. In my experience, these are the best ways to manage wealth for the good of yourself, your loved ones and your society. 

It’s only been about one year since I started putting these ideas into practice. But so far, it’s been an awesome journey 🙂

I’m looking forward to experimenting further over the coming year and delivering deeper insights in next year’s edition of Supermorning Wealth! 

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The Freedom to Help Others

The ability to improve other people’s lives is one of the top perks of being wealthy, whether in terms of tangible assets, intangible assets, personal liberty, or, preferably, all of the above.

As the old saying goes: you cannot help others before you help yourself. 

While one can always find exceptions, I think we can all agree that helping others gets much easier if you get yourself to a good place first.  

Let’s look at some of the best ways wealthy individuals can help other people. 

Money

There are many worthwhile causes out there. In my humble opinion, two of the best are:

People reading this have most likely won big at the lottery of birth. It’s only right to support those who were not so lucky by fighting the vicious cycle of poverty and climate injustice. 

Skills

Freely applying your intangible assets to worthwhile causes is another great way to give back. 

The ideal is if this application of your skills to a truly worthwhile cause turns into your purpose. 

This will often blend with your payed occupation, but there are ways to offer your services to a truly worthwhile cause for a lower price. My sustainability research falls in this category. 

Time

Once you attain true personal liberty, you’ll likely find that you become busier than ever before. But the big difference is that you control your own deadlines. 

In other words, you have the freedom to prioritize other people whenever it’s really needed. 

Of course, you can also dedicate your time to worthwhile causes by volunteering. It helps to give your time to causes where your skills can really make a difference. 

Win-win

Humans have evolved a strong need to help each other. Without this instinct, our species would have died out many millennia ago. 

Building the wealth needed to fulfill this instinctive drive to help others is an excellent avenue to long-term life satisfaction. 

This makes generosity a true win-win. The recipients of your generosity obviously win, and you get rewarded with plenty of feel-good hormones. 

However, this awesome win-win scenario requires you to give from a position of abundance.

If your giving puts you under great pressure or strain, generosity can easily backfire. And this will slow or even reverse your progress towards abundance.

Thus, be sure to patiently build up your personal wealth to a comfortable level, and only then start to share it. 

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Buy Other People’s Time and Energy

Any ambitious purpose in life will require many different skill sets and much more than just your own time and energy. 

Hence, we need to find ways to involve other people with complementary skills in the pursuit of our purpose. 

Today’s post looks at some ways to get this done. 

Always ensure win-win collaboration

Before we get started, I must restate the fundamental ground-rule of any good collaboration: both parties must see a clear benefit. 

If this simple rule is not met, the collaboration will most likely fail. 

Hence, always have this at the very front of your mind when considering purchasing the time and energy of others. 

Spending money on your purpose

The simplest way to buy other peoples’ time is of course simply to pay them for doing something you need done. But this requires you to have the excess income with which to fund such investments. 

Buying other people’s time should simply be viewed as yet another potential avenue for investment.

For instance, if you’re lucky enough to already enjoy almost every aspect of your job, it can be better to use your surplus income to purchase other peoples’ time rather than your own. 

Paying with intangible assets

For those who have diligently invested in intangible assets, it’s possible to exchange things like skills, track record and contacts for valuable services.  

In research circles, for example, you can get students to work on problems of your choosing if they (or rather their supervisors) believe they will learn valuable skills from you. 

It’s also possible to leverage your track record to influence the scope of proposed projects to get funding for others to do work aligned with your purpose. 

I’m sure that similar opportunities are available in other professions. You just need to look for them 🙂

Sharing the rewards

Another great way to gain access to other people’s time is to ensure that they will also benefit greatly from the value you will create together. 

I’ve found this to be a particularly powerful mechanism in academic circles where people have some freedom to pursue common interests. 

Capitalizing on this mechanism requires good knowledge of what others are interested in. Sometimes it also needs a little compromise to sweeten the deal for them. 

The skill of collaboration

Whichever option you choose, the skill of getting others to enthusiastically work towards your purpose is a valuable intangible asset by itself. 

Make sure that your collaborators always win out of any joint venture you propose, preferably even more than yourself.

If they do, they’ll be happy to do it again. And again. And again…

Yep, assembling a team of willing and able collaborators is one of the best investments out there 🙂 

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Buy Your Own Time and Energy

One of the best things about personal liberty is the amount of control it gives you over our most precious resource: time. 

The freedom to proactively direct your own time and energy to a purpose you truly believe in is immensely satisfying. 

Today’s post discusses the practical steps to setting this up. 

How to buy your own time

As discussed at the start this chapter, any good investor will make sure they always have surplus income to invest. Putting this surplus income into tangible assets is the default choice. 

However, you can also choose to buy your own time with your surplus income. 

In practice, this means reducing your responsibilities at work in exchange for a lower salary. 

What, willingly take a pay cut!? Sacrilege!

Yep, for those stuck on the hedonic treadmill, this is a totally ridiculous thought. But there is method behind the madness 😉

Financing your own inspiration

When you put money into the stock market, you’re essentially financing other people to follow their inspiration and purpose. 

Buying your own time simply means that you’re redirecting this money to your own inspiration and purpose. 

If you trust in your purpose to create value for society, this move should make you much more valuable in the long run, increasing your earning capacity. 

And a greater earning capacity allows you to buy more of your own time, creating a beautiful virtuous cycle. 

A life satisfaction bonus

When you buy your own time by giving up some salary in exchange for reduced responsibility, you’ll certainly have some say in which responsibilities you give up. 

This gives you the opportunity to exchange your most unpleasant responsibilities for some additional time of total freedom. 

Such an exchange is guaranteed to strongly increase life satisfaction. 

Earn your freedom

To be safe, I would recommend such a move only after you have accumulated 1-2 years of financial resilience (see previous post). 

And when you reach that goal, only use your excess income to finance your freedom. In other words, don’t go down in salary beyond the point where your reduced salary can still support your lifestyle. 

Then set about proving that you’re a good investment 🙂

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Prioritizing Investments

Following last week’s discussion on the link between wealth and liberty, this week will focus on ways to direct this liberty towards an inspirational purpose. 

Taken together, liberty and purpose may just be the biggest win for yourself and your planet. 

But personal liberty comes with an important challenge: it opens up many more attractive options than you can realistically pursue.

Hence, we’ll start with a post on prioritization.

Enabling investments

The most valuable investments are those that open up other investment channels. 

For example, you’ll need high life efficiency and/or valuable skills to achieve the sizable surplus income needed for serious investments in tangible assets. 

Permanent improvements in health and inspiration offer the most direct route to the long-term productivity needed to build a good track record. 

Sometimes, it’s wise to direct most of your tangible asset investments towards important short-term financial goals that boost your productivity before shifting the balance to long-term financial freedom.

The most lucrative investments at any given moment will change from person to person.

It can therefore pay off to spend some quality time identifying the tangible and/or intangible assets that will give your life the biggest boost. 

Don’t spread yourself too thin

This is the single biggest challenge I’ve encountered in managing my personal liberty.

There’s just so many exciting options, and I instinctively want to pursue all of them. But when I do, progress becomes frustratingly slow, stress increases, and costly mistakes start creeping in. 

A game of chess

Since life is so interesting and complex, the best next investment of your time and resources will always be a moving target. 

Proactively keep your aim on this moving target instead of just getting bounced around by circumstances. 

But there is also a next level: a place where you, like a good chess player, are always thinking several moves ahead. 

Which series of enabling investments will best accelerate progress towards your purpose? In what order should they be made? 

Some regular structured thinking along these lines can give you a lot more return for the amount of effort you put in. 

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Recap: Wealth and Liberty

This week was all about the link between wealth and personal liberty. Understanding this link is key to deriving genuine life satisfaction from your wealth-building efforts. 

Let’s take a look:

The checklist

  1. Why bother building wealth? 
    • Wealth gives you genuine control over your own time and enables the faster realization of your initiatives.
    • Both tangible and intangible assets contribute to this wealth. 
  2. Building personal wealth makes the world a better place. 
    • People who build wealth automatically reduce their environmental footprint and direct more capital to the solution of major global problems. 
    • Financially secure employees cannot be exploited by capital owners. 
  3. Financial resilience is the best measure of the personal liberty afforded by your wealth. 
    • Financial resilience is the number of years your wealth can sustain your lifestyle. 
    • The amount of financial resilience required for personal liberty differs from case to case.
  4. The transition to liberty should be done responsibly.
    • A gradual transition from a strong base of valuable intangible assets can greatly reduce risk.
    • In this case, 1-2 years of financial resilience is enough to start the gradual transition. 

Wealth gives you freedom.

Most people instinctively want wealth to claim the freedom to consume whatever they want. But lasting happiness actually comes from the freedom to create what you want. 

This is what is meant by personal liberty: complete freedom to direct your own time and resources toward the realization of your inspirational dreams. 

You’d be hard pressed to find a more attractive goal to strive for. 

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Setting Wealth Targets

Yesterday’s post introduced the concept of financial resilience: the number of years your current wealth can sustain your lifestyle. 

We ended with an important question:

How many years of financial resilience do you need to safely initiate the active pursuit of liberty and purpose?

Today’s post will attempt to answer this question. 

“Active pursuit of liberty”

By “active pursuit”, I mean that you start to actively mold or change you primary occupation to increase your freedom to pursue your purpose. 

This is inherently risky because it will often clash with what other people want you to do. We therefore need to be careful. 

However, pursuing liberty and purpose in your free time can be started from day one.

Specifically, gradual free time investments in life efficiency and other intangible assets (e.g. skills and contacts) that align with your purpose is a great idea. 

When to start the active pursuit

I waited until my financial resilience reached a full 25 years before really starting to claim my personal liberty. But when I look back now, that was way too conservative. 

It pains me to think of all the progress I could have made and the stress I could have saved if I was brave enough to start earlier… 

If I could do it all over again, I would probably have started very early in my career when my financial resilience was less than 4 years.

Risk mitigation

There are two main ways to minimize risk in the transition to liberty: 

  1. Take it nice and slow, making gradual changes over a couple of years without ruffling unnecessary feathers.
  2. Only start once you have accumulated plenty of leverage from developing your intangible assets.

With both these elements in place, I think it’s reasonable to start the transition after as little as 1-2 years of financial resilience (depending on the value of your intangible assets). 

Without these elements, 5 years sounds more reasonable. But that will take a long time to achieve for most, so shifting the timeline forward through these risk mitigation strategies is a smart move.   

Other constraints

Two other important things to think about: 

First, make sure that about half of your financial resilience is liquid (e.g. stocks, bonds and cash). 

If your entire net worth is locked up in your house and/or pension, it’s of little use as an insurance policy on your quest for liberty.

Second, make sure to account for any large increases in expenditures over the next five years when calculating financial resilience. 

Perhaps you want to start a family, buy a larger house (with greater interest expenses), or move to a more expensive country within the next 5 years. In this case, your financial resilience should be adjusted downwards. 

Save with a purpose

Most people will advise you to save for a financially secure retirement.

While this is important, it’s not particularly inspiring, especially if retirement is still several decades away. 

My advice is to save for personal liberty.

If you do it well, you could reach 1-2 years of financial resilience quite early in your career, allowing you to officially start your journey to liberty and purpose with most of your life still ahead of you. 

In my view, this is a much more inspirational reason to invest, both in tangible and intangible assets.

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Financial Resilience

Many people instinctively think of wealth as a dollar figure in your bank account. Others at least also include all other assets and liabilities. 

But, for the purpose of achieving lasting life satisfaction through personal liberty, accumulated wealth is just one part of the picture.

Completing this picture is the topic of today’s post. 

What is financial resilience?

Simply put, your financial resilience is the number of years your wealth can sustain your current lifestyle.

Specifically, you take all your assets (cash, property, stocks), subtract all your liabilities (loans and other debt), and then divide the total by your total annual living expenses. 

Financial resilience is an excellent quantification of your personal liberty.

If your financial resilience is close to zero, you must do whatever your boss tells you because you cannot afford to lose even a fraction of your income. But as your financial resilience grows, you earn the right to claim gradually increasing amounts of personal liberty. 

The importance of life efficiency

Building financial resilience obviously requires you to earn a reasonable income. But the more important part of financial resilience is actually the ability to derive more happiness from less consumption.

Lower expenses not only leaves more of your income for saving, but also allows your current wealth to sustain your lifestyle for longer. 

This ability to live lightly is nothing other than the incredibly valuable intangible asset of life efficiency discussed last week. Like any good asset, it takes time to build and gives increasing returns over time.  

If you think about it, building your life efficiency is a real no-brainer. 

As we discussed earlier, most people reading this are at the point where added material consumption will bring little or no lasting life satisfaction. In contrast, the personal liberty needed to find and pursue your purpose makes life a whole lot more exciting and inspiring. 

The liberty threshold

So, how many years financial resilience do you need before starting to claim increasing levels of personal liberty?

This liberty threshold depends largely on your accumulated intangible assets. 

If you have accumulated valuable skills and contacts, built several productive habits and healthy environments, and achieved high life efficiency, your liberty threshold can actually be quite low.

But we must be aware that pursuing personal liberty too early and too aggressively can backfire.  

We’ll dissect this important topic in more detail tomorrow…

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Build Wealth to Make the World a Better Place

Yesterday’s post explained why building wealth is so important for your life satisfaction.

But the good reasons for wealth building don’t stop there. 

The bigger picture

When embarking on the long journey of building wealth, it’s helpful to keep a bigger meaning in mind.

For wealth, the bigger meaning is the tremendous positive impact that a culture of personal liberty can have on the world. 

We recently looked at the good, the bad and the ugly of capitalism. Even though capitalism continues to lift millions out of poverty, it also leads to tremendous environmental destruction and social injustice.

Let’s see how building personal wealth can solve these massive global problems. 

Building a sustainable world

We already have all the know-how required to bring everyone to decent living standards without destroying the planet. And this expertise will only keep improving over coming years.

There’s just one issue: getting capital to flow into the widespread deployment of this know-how. 

When people build wealth, it means that they defer consumption in favor of investment. From an environmental standpoint, that leads to less environmental destruction from consumerism and more capital available for the huge investments required to build a truly sustainable society. 

Thus, a greater emphasis on building individual wealth simultaneously reduces the problem and promotes the solution to our great 21st century sustainability challenge. 

Building a just world

Capitalism gives capital owners an unhealthy degree of power over the working classes and incentivizes them to pay workers as little as possible. But this power can only hold as long as workers have little or no wealth (in other words, no options).

The more tangible and intangible assets an employee has, the more leverage he gains to influence his working conditions. 

If the pursuit of personal liberty could become the norm, capitalism would suddenly become a much more just system with a healthy balance of power between employers and employees. 

A noble cause

Anyone can build the wealth required for such a sustainable world of true social justice.

The problem is just that our consumerist culture falsely promises us happiness if we immediately spend everything we earn. Ironically, this very culture keeps the majority from ever experiencing the personal liberty required for genuine life satisfaction. 

Every person breaking free from this mindless consumer culture contributes not only to the happiness of himself and his family, but also to global happiness and sustainability. 

Join us! Every person counts 🙂

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The Importance of Wealth

Over the past two weeks, we’ve discussed the art of building wealth in the form of tangible and intangible assets.

The next two weeks will share some ideas on how to use this wealth to maximize life satisfaction.  

Otherwise, why bother accumulating wealth in the first place?    

Wealth = liberty

Wealth can actually bring happiness, just not in the way we’ve been taught by our consumerist society. 

Specifically, wealth is the most direct route to genuine personal liberty. 

In my view, personal liberty (control over your own time and initiative) is one half of the key to long-term life satisfaction. The other half is purpose, which also depends on liberty in several ways. 

The simplest way to get your hands on this key is to build a certain degree of personal wealth. 

The greater your wealth, the greater your freedom to find and pursue your purpose. On the other hand, if you have no wealth, your options are limited and your time and initiative belong to other people. 

Tangible and intangible

The past two weeks have taken a look at both tangible and intangible assets. It’s important to understand that both of these asset classes can contribute to personal liberty.  

A balanced portfolio will invest in a healthy mix of different tangible and intangible assets, starting with those that can most rapidly increase your capacity to invest more. 

Anyone can build wealth

If you’re lucky enough to be in the top 20% of global citizens (with a lifestyle consuming more than $30/day), you can afford to put away a little money.

In the long run, the amount of investment you start with matters much less than forming that precious investment mindset and habit. 

And even if you temporarily have no income to invest, you can still invest in vital intangible assets. For that, you only need time and mindfulness. 

So, just get started! Every bit of personal wealth makes the world a better place.

But that’s tomorrow’s topic…

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