There’s a saying that goes something like this: To feel rich, take whatever you earn and triple it. Once you get there, triple it again, and again, and again. In other words, due to hedonic adaptation, it’s impossible to ever feel rich!
But I’ve noticed on my path to financial freedom that there were several times when I felt incredibly rich. The Dow reaching 20,000 wasn’t one of them by the way. Perhaps you can share when you finally felt rich as well.
When I Finally Felt Rich
1) When I went back to Malaysia. I used to live in Malaysia from 5th grade to 8th grade in the early 1990s. At the time, the exchange rate was ~2.3 Ringgit to 1 USD. When I finally paid a visit more than 20 years later, the Ringgit had depreciated to 3.7:1. One Ringgit bought the equivalent of $1 worth of stuff in the States. Therefore, I suddenly had almost 4X the amount of purchasing power during my week-long stay. So perhaps making 3X more doesn’t really make you feel rich, but making 4X more does!
In addition to the increased purchasing power aspect, it felt particularly moving to visit my old house and to realize I didn’t fall through the cracks. I was an undisciplined kid who got into way too much trouble. If I was my own father, I’d have considered sending myself to military school.
2) When I finally hit my passive income target. It took 17 years to achieve my passive income target, but when I finally got there, I felt rich because there was no more fear of running out of money anymore. Growing up in developing countries and experiencing many boom bust cycles working in finance always keeps me a little paranoid about losing everything.
Passive income feels like free money because you’re not doing much to earn it. You almost feel guilty collecting a rent check or dividend payment, which is why I have no problems paying a management fee or going to a rental property to fix a problem.
The amount of passive income generated is less important than whether or not it can cover all of your living expenses plus a nice cushion. In my case, that cushion allows me to save at least 30% of my passive income because I’m a savings addict. Every dollar you after achieving your passive income target feels like you’re playing with the houses money.
3) When a new income stream comes out of nowhere. I firmly believe none of us are maximizing our income potential. I’m going to guess that if we could make a maximum of $100 a month, most of us are really making only between $10 – $30. It’s kind of like how none of us utilize more than 20% of our brains. If we did, perhaps we’d find a cure for cancer.
During one business offsite in 2Q2016, my team worked on how we could optimize our existing platform. We discovered that roughly 30% of our posts had zero advertising partnerships. They were just making money through these generic click and banner ads that don’t pay much. As a result, we decided to reach out to a couple new companies we liked to see if we could strike a deal. We did, and a new revenue stream was created from existing inventory.
One of my biggest problems running a website is not caring 100% about maximum revenue generation because I already have my passive income. I’m not constantly hustling to find new business deals or writing about lucrative credit card offers. If something doesn’t interest me, I just don’t write about it no matter how much money is involved because everything already feels like gravy. The best entrepreneur or financial independence seeker is someone who has everything to prove and nothing to lose. Therefore, if you’re in the early stages of your journey, cherish your motivation!
4) When you didn’t sell something that ended up being worth a lot more. Back in 2012, I listed my San Francisco single family house for $1,700,000. I didn’t get any official offers, only whispers from a couple real estate agents saying their clients were willing to pay closer to $1.5 – $1.6M. I refused and took it off the market until I had an opportunity to re-list the home again in May 2017. My tenants had given me their 30 day notice and I figured I might as well test the market for both rent and sale again. My hope was to get at least $2,300,000 or $8,800/month, the same rent as my previous tenant.
Instead of getting $8,800/month, the best I could get was $7,500/month, a big 15% decline. At the same time, my realtor found a prospective buyer off market who offered $2,600,000! After much back and forth, I was able to get them up to $2,740,000, a full $1,040,000 more than I would have sold it for just five years ago. He had to take out a $2,000,000 mortgage plus another $300,000 bridge loan to buy my house.
If I had sold my house in 2012, I would have forever kicked myself for selling at the wrong time. What’s more, I was able to leverage up and buy another single family home in the Golden Gate Heights district of San Francisco, which was named by Redfin as the #2 hottest real estate market in the entire country for 2H2017. Prices have risen by ~40% since 2012, meaning I was able to double benefit from the real estate boom and finally cash out on one while still having a primary residence.
Common Underlying Theme To Feeling Rich
Why do some billionaires cheat and steal? If you’re worth $1.5 billion, like Galleon hedge fund manager Raj Rajaratnam was before he went to jail for insider trading, it’s illogical to risk going to jail and losing everything for a mere couple million dollars in illicit profits.
Why is it that even if you’re financially independent, it’s still so hard to resist a free lunch? It doesn’t make sense to stuff your face at the buffet line when you know overeating will cause you to die early. Further, you can easily afford the rubber chicken sandwich any time.
The common theme to feeling rich is when you feel like you’re GETTING SOMETHING FOR NOTHING – that feeling like you’re winning.
In Malaysia, I was getting something for nothing due to a strong USD. All I did was fly to Kuala Lumpur to see my childhood friends. I didn’t work hard to be able to afford 4X as much as a local Malaysian. Being American made me rich by global standards.
When I achieved my passive income target after 17 years, it finally felt like I was living for free because my passive income covered all my living expenses by 160%+. I don’t actively recall all the sacrifice required to amass such a financial nut. All I experience is the present. Not remembering the pain of hard work is exactly why you should work hard now.
When a new business opportunity arose in 2016 after some thinking on a floaty in the ocean, it felt amazing because I couldn’t forecast its rise. Brainstorming in Hawaii about how to optimize my existing platform and having lunch with management from a new corporate partnership for a couple hours doesn’t feel like enough sacrifice to suddenly generate an extra five figures a month. If I wrote another 200 posts, then I’d feel worthy. But I haven’t.
It’s true that if you focus on an absolute dollar amount, you’ll never truly feel rich. What’s also interesting is that even after leaving Corporate America in 2012 to experience absolute freedom, I didn’t feel rich. I felt more nervous excitement about the future than feeling like I had finally made it.
The key to constantly feeling rich is to constantly feel like you’re winning. If you can combine being content with what you already have with the occassional good deal, I dare say you’ll feel rich for the rest of your life!
Some Other Examples Of When You Might Feel Rich
* If you walked away from a car accident unscathed.
* If you find a $100 bill on the ground with nobody else in sight.
* If both of your parents live to hold their grand children.
* If you were diagnosed with a terminal disease and are still living past your due date.
* If you found the love of your life before all your friends.
* If your job is something you’d happily do for free.
* If you’re making a difference in other people’s lives and also getting paid.
* If you were a C student and now live an A lifestyle.
* When your investments make more for you than all your income combined.
* Seeing the JOY on my kids facing when they beat a rival 5-2 after last year’s 3-4 defeat was priceless. For those who don’t know, I’m now coaching a high school tennis team.
Stay On Top Of Your Finances: One of the best ways to feel rich is to track your net worth. I’ve been using Personal Capital’s free financial tools and app to optimize my wealth since 2012. It’s the best free money management tool on the web. Just link up all your financial accounts to measure your cash flow, x-ray your portfolio for excessive fees, calculate your retirement income, and more. Once you have a tool that helps track your finances, you’ll be free to do more of what you really want to do. There’s no rewind button in life. Therefore, you need to do your best to optimize the wealth you have now.