When I sit down with new investors I like to understand what they are trying to get out of their investing experience. Often the answer is “I want to make money”, which is ok but money is just a means of getting what we want, it is not really what we want. If we are able to clearly understand and define what we want and why we want it, it can be a significant motivating force. The book “Man’s Search for Meaning” by Viktor Frankl is a bit of a melancholic read but if you can make it through to the end it has a profound message. Viktor observed that when people face adversity it tends to only be the people who saw purpose in their actions that got through tough times. If people can clearly identify what their purpose or “meaning” is, they are able to get through amazing situations and come out successful. The book is well worth a read and the question of “what is my why?” can make the difference between giving up half way or getting what you want.
Some people would say that although they can see the up side of investing for their futures, it is too much of a sacrifice today. They can imagine their "why" but is sacrificing today worth it? Why not just enjoy today and hopefully things will work out in the future? There is a psychological experiment which has been performed many times over called "the marshmallow test". There are many different references out there to this study. The idea is that the test subject (usually a child) is left alone in a room with a big squishy marshmallow. They are told that they are allowed to eat the sugary treat now with no penalty at all. However if they choose to wait and not eat it for a little while, they can have 2 marshmallows (once the coordinator returns). It is a test of one’s ability to delay gratification. The videos of this test are hilarious as the test subjects are not aware they are being monitored. They squirm and make all kinds of funny faces at the marshmallow as heir internal angel and daemon go to battle. What the researches found is that this ability to delay gratification is one of the primary indicators of future success in a person’s life! Those people who were able to control their impulses were more likely to go on to live happy, successful lives. This is the backbone of the investor mentality, small impulse control today for a much better future.
I am not suggesting that we need to live a life free of creature comforts but I think most people will agree, there is a lot of value in making our futures better by doing a bit of extra work today. Let's get those two marshmallows.
So let's agree that we need to have a set purpose that is very clear and agree that we are willing to put in a bit of extra work today to achieve it. Having that clear image of what we want will help make the work a bit easier.
The last question I wan to raise is “How much is enough?”. This is a very personal question but one that each person should try to sit down and answer for them selves. There are several studies which have concluded that money does actually make us happier… up to a certain level. Not having enough money to meet our basic needs and feel safe can leave people quite un-happy. Once we have enough money to be above that level, these studies have shown, having more money doesn’t really add much more to our happiness. Although we don't all feel the need to be crazy rich, we do need a "reasonable" income to keep ourselves happy.
A recent survey has found that on average, around the world, 15% of people are actually happy at their jobs. This means that 85% of the world’s work place is actively dis-engaged from their jobs. 85% of the world is unhappy with what they do most of their lives! I count myself as quite lucky to be in the 15% of people who enjoy their jobs but I have a secret for you; I don’t plan on doing this job until I breath my last breath. Although I enjoy what I do, I do not want to “need” to do any job at all! It may be that I continue to do my job for years to come because I enjoy it but what is important is; I want to do my job because I want to, not because I am dependent on the income.
So how much income is enough? It would seem that the majority of people would say they want to replace the income of their day job with their investment income so they can choose to work or choose not to work. The specific number will be different for different people but if the survey on workplace happiness is correct, there are a lot of people who have some extra work to do outside of their jobs.
Take some time to make sure your “why” is very clear to you. It is, now, more important than ever to make strong, logical decisions about your investments but it is certainly not a time to sit on your hands. There is plenty of opportunity in Australia to grow your portfolio and work towards your future. Please give Meridian Australia a call or email and we can discuss if there is anything we can do to help you.