Are you a good financial role model?
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A reader recently got in touch with me with a problem. He knows he has far more money than he will ever need. He also feels guilty that he doesn’t give more to charitable causes. But he has a deep-seated, irrational fear of making more meaningful gifts in his lifetime.
In my experience, this feeling is not uncommon among financially successful people. In the case of my reader, I suspect it was due to him equating the wealth he had around him with feeling secure about life. Over the 25 years I was a financial planner, I had lots of clients who felt the same way.
Using very cautious assumptions, we would often demonstrate that the client had far more money than they could ever need. But many still felt unable or unwilling to make significant transfers to their heirs or to charitable causes.
The reality is that giving the money away in their lifetime wouldn’t just improve the lives of their loved ones and vulnerable members of society supported by charities. It would make the giver happier because they would be able to see the impact while they were alive.
On the basis that you can’t take your money with you when your time is up, you need to ask yourself this question. Are you making optimum use of your wealth in your life and is it a force for good for others?
We should all make the most of the time we have. According to Paul Dolan, a professor of behavioural science at the London School of Economics, people who live a life that balances purposeful and pleasurable activities are happiest.
Money and financial assets allow you to choose how you spend the most valuable asset of all — your time. In that sense, more money can certainly make you happier. But only if you align what you spend it on with those things that bring you the greatest pleasure and purpose.
These will be different for all of us, depending on our personalities, life experiences, family circumstances and preferences. But we may also need to acknowledge our personality type or inherent biases if we are to strike this balance in the most positive way.
People who have high extrinsic motivation — those who are driven by external rewards — tend to be more pleasure-seeking and want the acceptance of others. They use money and make work and financial decisions based on what other people might think of them, to achieve status and external validation.
They may often feel emotionally insecure and be less mentally resilient. For them, extrinsic motivation may mean spending money on things that don’t help them maintain or improve their financial wellbeing: expensive cars, big houses, exotic holidays, unnecessary possessions, fashionable clothes, beauty products or jewellery.
People who have high intrinsic motivation tend to be more emotionally secure and have a greater sense of connection with other people and their community. Their spending is aligned with what is important to them, rather than seeking the approval or acceptance of others.
The good news is we don’t have to remain trapped in these patterns of thinking. Understanding why you do what you do is the first step towards changing your behaviour. This will not be an overnight transformation, but with knowledge you can start to make gradual, small changes. Awareness is the first step to attaining a better balance between what is pleasurable and purposeful in our lives.
Despite winning £2.7m on the lottery in 1995, Elaine Thompson, a resident of Killingworth, north of Newcastle upon Tyne, decided to continue working part-time as a shelf stacker at Marks and Spencer. “I absolutely love my job and just because I won the lottery, this didn’t make me want to give up work. I think it is all about balance,” she told the Northeast media group Chronicle Live.
Her decision also allowed her to remain a good role model for her children. “It’s important that children see you working hard, and that we don’t get anything out of life unless you work hard for it.”
She and her husband did not deny themselves treats such as holidays to Las Vegas and elsewhere. But she has also used her wealth to help their now-adult children buy their first homes, and the ability to work part-time gave her the chance to help out at some local charities.
Being a good financial role model and sharing your family’s money-related stories should be on your 2021 self-improvement to-do list. Purpose, meaning and joy can come from passing on wealth, in a way that makes a difference to others. That means not just passing on money but also the values and principles that underpin your life.
As the end of a tumultuous year approaches, now might be a good time to reflect on what you want your legacy to be. Just make sure you don’t hide your intentions until the reading of your will. Giving more money in your lifetime should help you find more meaning, purpose — and emotional peace.
Jason Butler is an expert on financial wellbeing and presenter of the “Real Money Stories” podcast. Twitter: @jbthewealthman