For several posts lately I’ve been writing about the idea that too much of a good thing is a bad thing. There’s an Inverted-U relationship between the amount of good we get out of life and the quantity of things that contribute to the good. Here’s the Inverted-U graph:
Take vacationing as an example. Vacation time is good. But too much leisure and we lose our sense of purpose. A 2014 study in Psychological Science claims that people who retire, or who spend too much time in leisure, die sooner and struggle with all sorts of mental health issues. They prove the adage true: A life without purpose is no life at all.
The Inverted-U idea applies to a thousand things in life. Water on plants is good. Too much water is bad. Fertilizer on those same plants is good. Too much is bad. Food is good. Too much is bad. Work is good. Too much work is bad. Eating out is good. Too much eating out is bad. On and on we go.
But is this Inverted-U idea true of money? Is it possible to have too much money? American humorist Will Rogers said it this way:
What’s considered enough money? Just a little bit more.
But I say, it depends on the reason we’re making money and spending money. What’s our purpose? When we understand our purpose, we can see where we hit the peak of the U, that place of maximum good where more money isn’t better but worse.
Purpose #1: Take Care of Self
Let’s start with the purpose of taking care of ourselves. We wonder, How much money will make us happy? We write up a rough budget of, say, $10,000 a month, giving us a nice house, a couple cars, and enough money to take two vacations a year and take care of our two children.
There’s something called the marginal utility of wealth. It’s just fancy economist talk for the idea that past a certain point, more money isn’t that useful to us. If our budget is $10,000 a month, will bumping that to $110,000 a month make us ten times happier? The experts say no, because we don’t have as much meaningful use for the extra hundred grand. It’s not as useful to us as the first $10,000.
But keep in mind that’s only true of we’re thinking of ourselves. If our own personal needs are the central reason for making money, then the satisfaction of our own personal needs sets the point at the peak of the U.
Purpose #2: Make a Difference
What if we got beyond ourselves and used our money to help others? Let’s say we found a way to loan small amounts of money to rural East African women. They could start businesses milking goats or making baskets or a dozen other things. We see how transforming this is, and how the women use the money to pay for school for their children, or to get vital healthcare and nutrition, then pay it back faithfully so others can do the same (lenders say the actual payback rate is 98.9 percent). We see that we can make a difference loaning $200 at a time.
How many women would we like to empower? How many loans might we want to make?
Imagine Elizabeth gets a vision for this. She’s making $10,000 a month at work, so she’s got all her needs covered. But she inherits a $10 million real estate portfolio from her grandmother which pays her an extra $100,000 every month. So she’s set for life financially.
This is where purpose kicks in. If Elizabeth’s only interest is in serving herself, there’s not much need for the extra money. I don’t need any more money, thank you. She prides herself in how little she cares about money. She scoffs at people who talk so much about money. I have all that I need, so money isn’t important.
Notice the problem here. What seems like satisfaction is pure selfishness. Her only concern is her own needs. Her only purpose is to serve herself. If her only concern is self, she just lets it accumulate and lives as lavishly as she can without feeling guilty.
But if Elizabeth’s interest is in making a difference in the world, and she gets a vision for these East African women, she starts using that extra money to empower five hundred women a month. Within a year, she’s helped six thousand women, and the number of women helped starts to compound because they’re paying back the loans. Within eight years Elizabeth has $10 million invested into the microloan initiative. She’s personally empowering one hundred thousand women a year, and so far has helped over half a million women. She’s making a huge difference, and starts speaking to groups of wealthy people about the opportunity to do the same. Finally she leaves her $10,000 a month job because she sees more value in inspiring others to build microloan portfolios like she has done.
How much money is enough for Elizabeth? I’d say she could use a lot more than she currently has. That’s why she’s out speaking right now: to get more money. Right now about 125 million people worldwide receive loans every year and there are hundreds of millions of good candidates who haven’t yet gotten loans.
So, how much money is enough?
That all depends on the purpose. If our purpose is to serve ourselves, we quickly reach the peak of the U. But when we get past ourselves and focus on serving the needs of others, the peak of the U is harder to reach.
That’s just for the spending side of money. Tomorrow we’ll talk about the making side of the money issue.