We can learn a lot about people’s value systems by how they spend their resources. If we asked 10 different people how they would use $1,000,000.00, we would probably get 10 different answers. Financially savvy people will probably answer, “I’ll save and invest the money!” The fashionable among them might say, “I’ll revamp my wardrobe.”(That’s a lot of clothes!) Parents in the group may answer, “This is going to put my kids in the best schools.” Other answers might be, “I’ll take a luxury vacation.” or, “I’ll buy a house.” There are clearly a lot of ways to spend money.
Now let’s say we were to ask ourselves, “Who has the best answer?” We would probably say the guy who invests it. Not so much because we would do the same thing (save and invest), but simply because it sounds right. It’s easy to understand why we would think investing would be correct. Objective thinking would tell us that using the money to earn more money would provide more value over the long run. But is this the right answer? Yes, it’s the right “get rich” answer (or get richer for some). But is it the right answer for your specific situation? Objective thinking is only as correct as the value-system it upholds.
In a world that values wealth and money very highly, saving and investing would be the right objective answer. (Whoever said that being objective was always better than being subjective? That’s for another post.) Now ask yourself is this the value-system you subscribe to? If not, what do you subscribe to?
It’s like a biker who couldn’t understand why anyone would spend $300 on a tennis racket, and a tennis player who mocked the biker for “splurging” on a $3000 bike. They’re never going to agree on what was a better purchase. The worst scenario would be you not knowing what you value, you’ll be caught in between the bikers and tennis players of this world, never knowing what the right buy was, and then anything and everything will be a waste.
Let’s add context to the question, what if you were 21 years old and just finished university, how would you use the money? Now let’s say you were 65 years old and retiring, would you use it the same way? Probably not. Given that basic necessities are met, a 21 year old’s needs and wants differ greatly from a 65 year old.
Before you click out, this isn’t a financial lesson. In fact, in many ways, my point counters conventional financial wisdom. So what’s the point? Figure out what’s valuable to you. Better yet, figure out what you should be valuing given your context. Because what you value you will demand, defend, and develop.