How to Be Rich: It’s Knowing When to Stop
My father often echoed the saying, “I’ve been rich and I’ve been poor, and I like rich better.” Sounds simple. But how do you get rich in the first place? What is rich?
Believing my father, I thought I’d know rich when I got there. I don’t. The longer I help people with retirement, investments, future planning and the like, the more I realize “rich” has no easy definition.
One man’s riches are another man’s definition of poor, or at least financially unacceptable. My firm tries to aid in the achievement of specific financial goals and objectives rather than attempt to make a client rich.
Years ago I knew someone I considered, at the time, a very wealthy man, Malibu Colony-estate wealthy. (In fact, his estate was the largest home in tony, beachfront Malibu Colony, west of Los Angeles.) Let’s call him Stanley.
Stanley enjoyed every trapping of wealth you can imagine, including a few Bentley automobiles and quite a collection of other cars. He still worked, however, and at a very demanding position.
“Stanley,” I asked him, “why do you do it? You certainly no longer work for the money.” He replied that he worked so hard for money because money, or in his case income, was “the only way I can keep score.”
How’s this game scored? Who are the competitors? Is the game a contemporary variety of keeping up with the Joneses?
Or is the game a spin on conspicuous consumption, a term Norwegian-American economist and sociologist Thorstein Veblen introduced more than a century ago? It refers to consumers who buy expensive items to show off wealth and income rather than to cover basic needs. A conspicuous consumer uses such flashy behavior to maintain or gain higher social status.
I took a while to realize that money – or the pursuit of money – primarily motivated Stanley. Maybe he competed against his peers; the very wealthy have peers, too.
No, more than that. I watched a few episodes of “The Real Housewives of Beverly Hills” and “The Real Housewives of Orange County” (OK, I admit it). In these television shows, husbands or male significant others seem to possess almost no real talent; even the men who are doctors seem incompetent.
Why do these TV couples spend time together in the first place? Maybe because they get paid to do so?
If a new planning client chases money without a thought to real needs, I sometimes discover that he or she also makes poor long-term relationships and are just too difficult to deal with. Such a person also doesn’t see reasonable gain in a portfolio as paramount. What seems more important: ranking among peers regarding short-term investment returns.
Our firm’s emphasis on longer-term returns, asset allocation, and goal attainment sometimes strains the relationship. I point out that putting all eggs in one basket – or having only a leaky basket – can seem appealing. In the longer term, though, you often just wind up with scrambled eggs.
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Written by Phillip Q. Shrotman,founder and president of Principal Planning Service, Inc. in Long Beach, Calif. He was a professor in the Business Division at Long Beach City College for over 29 years, where he held the position as Coordinator for Financial Planning and Insurance for the college. He holds a Community College Instructors Credential from the University of California at Los Angeles and a master’s from the University of San Francisco. He also holds the profession designations of General Securities Principal of the Financial Industry Regulatory Authority (FINRA), Series 7 and 24. He has appeared as a guest on KABC Talk Radio and various television and radio programs.
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