Vilifying the rich has become popular. Yet a recent survey shows that wealthy individuals don’t feel rich despite their financial standing. What drives the rich to get ever-richer, and what does it tell us about the psychology of wealth?
As drivers pay more and more at the pump, oil companies report record profits. Government-instituted austerity measures seem to hit the middle and lower classes the hardest. In times like these, it seems easy to envy the rich. Yet wealth is no guarantee of happiness or well-being. In fact, wealth brings a new and different set of problems. Understanding the psychology of wealth can not only build empathy for those we believe should have no problems, but also opens avenues for the wealthy to improve their own lives while using their wealth to create even greater security and abundance for all.
Freelance humor columnist Tom Purcell recently mentioned a Fidelity Investments survey of over 1000 people, each with at least a million US dollars of assets. Despite it all, 42 percent responded they did not feel very wealthy. When asked what they thought they would need to feel wealthy, the average answer came out to US$7.5 million.
I find it so easy to say “That’s nuts! They have no problems with money. I’ve got real money problems!” Yet the chances are, if you’re reading this blog, you have safe housing and enough food to eat. To many in the developing world, your standard of living, financial problems and all, seems just as opulent as a million dollars.
Keeping Up and Keeping Score
Wealth fails to satisfy us psychologically for a number of reasons. The first is that money is almost always viewed as a relative, not an absolute good. If you have a mediocre car and all your peers have junk cars, then you can feel good about your so-so car. But if you have a nice car and all your friends have luxury cars, then even having more by absolute standards can make you feel worse.
Lee Iacocca remarked that he realized that money stopped being about having more property and became a way of keeping score. An ever-increasing net worth started to be a proxy for self-worth. The danger was that just maintaining a level of wealth was never enough. Like those in the Fidelity Investments survey, Iacocca was driven to boost his compensation package and net worth without reference to need.
As I’ve remarked elsewhere (“8 Entries for Your Personal Balance Sheet: Count Your Inner Wealth”), wealth comes in many forms, and the most valuable ones aren’t financial or even tangible. A certain mindset is needed in order to enjoy the subjective experience of security we expect wealth to bring.
The first element is to restore a sense of perspective of how much we actually have. By considering the billions of people in the world who lack necessities we take for granted, we better comprehend our place in the economic pecking order.
Another tactic is to compare the costs of what we spend with how much enjoyment our purchases bring. All too many boats and ATVs sit unused in marinas and garages. Meanwhile, the cliché remains true: our children are often more entertained by cardboard boxes than then expensive toys they contain.
Exploring our values and placing monetary wealth in its proper perspective is another way to put finances in perspective. While money is essential for life, remembering what other values are more important can help us release from the need to hoard and earn without limit.
Healthy, Wealthy and Wise
Hopefully I’ve convinced you that riches can create as well as solve problems. Financial wealth mixed with ethical, intellectual, or spiritual poverty can be as ruinous as material poverty. Fortunately, some of the fiscal elites are demonstrating ways to use their economic power to live better lives and contribute to society.
Bill Gates, once the richest man in the world, has recognized the need not just to give to existing charitable causes, but to use wealth to identify the areas of greatest need worldwide and develop new solutions to combat them.
Warren Buffett, one of the wealthiest and most respected men on Wall Street is equally legendary for his modest lifestyle. He lives in a humble three-bedroom house in Omaha which he describes as containing everything he needs. He has committed to giving away over 99% of his wealth to charity.
In a clever inversion of the “keeping up with the Joneses” problem, Buffett and Gates have challenged other billionaires to give at least 50 percent of their wealth to charitable causes in their lifetimes. If their bid is successful, countless millions of lives could be improved by a massive wave of charitable giving. What better demonstration could there be: having money is a kind of power, but understanding the psychology of wealth is more powerful by far.
All clinical material on this site is peer reviewed by one or more clinical psychologists or other qualified mental health professionals. This specific article was originally published by Dr Greg Mulhauser, Managing Editor on .on and was last reviewed or updated by