Millennials aren’t running out of time to build wealth, especially if they think beyond salaries and investment account balances

On this episode of Financially Well, the finance podcast for Millennials, I’ll explain how you can build wealth in your 30s. In particular, I’ll discuss how reconsidering the definition of “wealth” can change your perspective on how you pursue this seemingly elusive goal.

The Highest Forms of Wealth

This week, I want to focus on a recent article by an author Morgan Housel, who writes at Collaborative Fund. His article, published on July 20, 2021, is called, “The Highest Forms of Wealth.” He starts his article by saying wealth is “easy to measure, but hard to value.” For most of us, when we think about how we might build “wealth,” we probably think about total dollar amounts. We think about account balances. We think about amounts saved or amounts invested.

As part of this, to get to a place where those amounts are at a level that we view as high, we think about very specific tactics. We think about investing more in a 401(k) plan or picking better investment options with lower fees. Our minds often drift toward these definitions or categories of wealth. But one thing that Morgan focuses on in his article, and often in his writing, that I think overlaps with a lot of the conversations that I have with my millennial peers, is that wealth is not just about account value. 

Wealth Means Different Things to Different People

If you get to a point in life where you’re fortunate and privileged enough to have high account values, you might indeed build wealth in the sense of those dollar amounts. But your life could be lacking in other ways based on your pursuit of those dollars. By many people’s definitions or how they view your life, you may appear less wealthy than someone with a smaller account value. So it’s very important and valuable for us when we are thinking about how we want to use our money and how we want to save. If one of our objectives is building our wealth and becoming wealthy, you have to keep in mind the nuances underlying the term “wealth.” And what that can mean to different people is very important. 

If You Build Wealth, Do You Create Happiness?

Morgan starts his article talking about the Vanderbilt family, who, in the late 1800s and early 1900s, bought the largest home in America, at 178,000 square feet. It wasn’t something that they needed. Morgan says that George Vanderbilt didn’t actually spend much time in the house. Yet, by the end of his life, that house and the costs associated with it — and probably, the lifestyle that George Vanderbilt and his family lived in general — nearly bankrupted them. So Morgan concludes this story by saying, “Money buys happiness in the same way drugs bring pleasure: incredible, if done right; dangerous, if used to mask a weakness; and disastrous when no amount is enough.”

Build Wealth in the Form of Time

He then goes on to talk about the highest forms of wealth, from his perspective. And he calls out specifically three different types. The first is, “Controlling your time, and the ability to wake up and say, I can do whatever I want today.”

This particular one resonates with me based on the conversations that I have with my millennial financial planning clients. So many people, when we get to a point in our conversations where I’m asking them, “What’s important to you? What do you value most? What do you want your life to look like in 10 or 20 years, or even sooner than that?” Frankly, people talk about wanting to travel more. They talk about wanting to spend more time with friends and family. If they have young kids, they talk about wanting to reduce their work hours so that they’re around and can truly be present for all of their kids’ most important experiences and activities.

To me, the highest form of wealth is controlling your time. Morgan writes, “Wealth can lead to time independence, but it’s never assured. It can be the opposite. As whatever created the wealth creates a claim on your time in equal proportion to its financial reward.” He talks about how a number of CEOs fall into this category. They have those really large account balances or those really large salaries that I was talking about at the outset. But they often don’t have control over their time. They’re going from meeting to meeting all day and they’re devoting a significant number of hours to work. They’re not able to build wealth in the same valuable ways as people who make a lot less money than them.

To Build Wealth Means To Minimize How Often You Think About Money

The second form of wealth that Morgan talks about is viewing money and oxygen in similar ways. He describes this as, “When money becomes like oxygen: so abundant relative to your needs, that you don’t have to think about it, despite it being a critical part of your life.” He says a high form of wealth isn’t necessarily tied to how much money you have.

Rather, it’s important to keep in mind that “desiring money beyond what you need to be happy” is, what he calls, “an accounting hobby.” He adds, “How much money people need to be happy is driven more by expectations than income.” He says he’s noticed over the years that “some of the wealthiest people think about money all the time. But it’s an important observation because most people, despite aspiring to become one of the wealthiest, actually want: something different: the ability to not have to think about money.”

Think about all those times when you’ve had to make a financial decision. And for one reason or another, either procrastination or needing more time to research, that the decision has just weighed on you for days or weeks or months. In those cases, I imagine a lot of people would really value taking that off their plate entirely and having that resolved. Or having someone they trust help them with it, so that they don’t have to spend that mental energy. They would prefer to have back that time spent thinking about money.

Building Wealth Applies to Your Career in an Unexpected Way

Finally, Morgan says that a high form of wealth is a “career that allows for intellectual honesty.” He says this means, “Being able to say, ‘I don’t know’ when you don’t know. Being able to speak a critical truth about your industry without fear of retribution. The ability to make reasonable mistakes, and be open about them without worry.” Not pretending to look busy to justify your salary.”

Many people, in order to support their lifestyles or to remain financially stable, often are forced into positions or industries where these things aren’t really applicable to them. They stick with it because they need to support their family or they need to have a paycheck they can count on. But they would often rather make some type of change in their work that allows them to spend these large portions of our days doing something that’s more consistent with who they are. They want to spend their time on what they value and how they want to express themselves.

You may not think of your work as a form of wealth in and of itself. The salary is often the focal point for many people at the end of the day. But if you get to that point, based on your skills and interests, of having the financial means to take a break, you can feel wealthier by making a career change. Many people will need to or resign themselves to putting up with those things. Others aren’t even aware that these factors are bringing down how they think about their work and go about their work on a day-to-day basis. 

Build Wealth to Build the Life You Want to Live

I would encourage people, when you think about growing your wealth in the years ahead, to not only focus on dollar figures. It’s not all about the numbers. It’s about decisions that allow you to live the life you want to live and be the person you want to be. That may include having full control over your time. Or not thinking about money on a daily basis. Or having a career where you can express your talents, thoughts, and skills to their maximum ability without having to filter that or limit that in some way.

Check out Morgan’s article at Collaborative Fund. Again, it’s called the Highest Forms of Wealth. He’s a very insightful writer. I encourage you to follow him on social media and reach out to me with any questions that this article raises for you.

[Editor’s note: this article reflects the transcript (which I’ve edited for clarity) of a recent Financially Well podcast episode.]

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About the author: Kevin Mahoney, CFP®

Hi, I’m Kevin. I’m a financial advisor in Washington, DC. I’m also the founder of Illumint, an independent financial planning company in the District that specializes in financial planning for Millennials like you. I empower our generation with the confidence to invest an inheritance, financial gift, or extra savings. If you’re new to Financially Well, welcome – you now have access to the leading finance podcast for Millennials. I encourage you to read, watch, or listen to the ideas I’ve shared about making your money work for you. And then when you’re ready, please send me your thoughts & questions!