The financial firm UBS publishes a quarterly report called Investor Watch that analyzes investor behavior. One of these reports has remained on my mind since publication in 2015. The report is called When is enough… enough – Why the wealthy can’t get off the treadmill.
The premise is that more than half (52%) of millionaires surveyed for the report feel like they’re stuck on a treadmill and can’t get off without giving up their family’s lifestyle.
Ambition, keeping up with the Joneses, and the desire to send their kids to the best colleges all add to the anxiety.
63% of survey respondents said that one major setback (job loss, market crash etc.) would significantly impact their lifestyle.
When success and income increases, people tend to increase their spending and consumption. This is often referred to as lifestyle creep in money blogging parlance. Fancier new car. More frequent visits to the city’s top restaurants. A bigger house. Country club membership. Diamond necklace etc.
Avoiding lifestyle creep is one of the most important factors when chasing financial independence.
Do You Feel Like You’re on a Treadmill?
Sometimes I feel as though we’re on a treadmill. More accurately, when we moved to the suburbs to start a family it’s like we sort of inadvertently stumbled onto it. But we didn’t realize it until we were on a level-5 incline living on one income.
Most other times I know the well-lit path is clear right in front of me. We’re taking productive strides every day up the steep path to financial freedom.
After navigating all the above expenses and more, we still manage to save about 40-50% of our income every month (after we changed shit up). That doesn’t come easy. We make sacrifices every day.
Knowing about financial independence and being financially literate are important life skills I probably take for granted. For many, not knowing the basics about finance is a recipe for perpetual money mediocrity.
Mediocrity with money is normal.
The Hedonic Treadmill
Not mentioned in the article is the hedonic treadmill, also called hedonic adaptation. The Wikipedia entry defines it succinctly:
The observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes. According to this theory, as a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness.
Life’s ups and downs will lift and punch your spirit, but most humans remain at a consistent level of happiness.
So even as Mom receives promotion after promotion and eventually becomes a SVP, she’s likely no happier than she was as a lowly associate. Her family has a pair of luxury European cars now and the kids love the new private school. Her two karat diamond stud earings are beautiful, and the house is finally spacious enough to contain all the stuff they’ve accumulated over the past decade.
But Mom is still working and it all goes away if she stops. Maybe she loves the work.
The UBS survey also asks the same millionaires what they would do differently if they only had five more years to live. 87% said they would change things. Which presumably means only 13% would continue to work.
Here’s what they’d do differently:
- Travel more 64%
- Spend more time with family 61%
- Retire 44%
- Be a better person 37% (my favorite)
- Enjoy the finer things in life 28%
- Spend more time on passions 36%
- Work harder to provide for my family 3%
Perhaps a shortened life span directs our attention to what is most important.
The hedonic treadmill theory tells us is that we should be pursuing what makes us happy which is a different end goal than money and success.
Pursue what Makes You Happy
Writing about money and investing on the internet doesn’t make me an expert. I’m far from perfect, having made plenty of financial mistakes over the years (and probably making some in the present).
I often feel conflicted about needs vs. wants and the desire for nicer stuff, a bigger home, and more frequent meals at the top restaurants in D.C.
But even with an occasional splurge on lunch or a decent vacation, we can still achieve our financial independence and early retirement goals. We’re on the right path despite having more mouths to feed and living in the suburbs surrounded by the temptations of luxury cars, private educations for our kids, and world-class dining.
As we pursue early retirement, the key is to stay away from the same treadmill millionaires find themselves stuck on by keeping our lifestyle in check and investing spare cash instead of spending it.
Become The Millionaire Next Door,if you will.
Then eliminate what makes us unhappy (i.e. full-time work, commuting, toxic people) and pursue what makes us ultra-happy… and do more of that.
For the millionaires in the survey, it’s never too late. But the deeper entrenched in their lifestyle, the greater the pressure to “maintain the high standard of living they have established for their families, whom they value above all else.”
Without a drastic lifestyle change, the treadmill millionaires will end up working to age 65 and beyond.
Step off the Damn Treadmill
The secret of happiness, you see, is not found in seeking more, but in developing the capacity to enjoy less. – Socrates
Maybe you’re not a millionaire yet. But if you read enough about investing and early retirement, and you’re persistent, there’s a good chance you will be some day (inflation should help too).
Beware of the treadmill. Especially in the critical stages of your life such as marriage, having kids, and in your peak earning years. It sneaks up on you disguised as the American Dream.
If one day you wake up and realize you’re stuck, step off. Step off spectacularly by moving, selling your cars, and dropping the golf club membership right away. A total 180.
Or, step off more gradually. Start by identifying the pressure points in your life that make you unhappy and eliminate them as soon as possible. Then, instead of spending your hard-earned money on short-term shopping highs and 5-star hotels, keep your money and invest it. Picture what would make you supremely happy in five or ten years and redirect your attention toward that. Make sacrifices today to achieve that vision.
Do you feel like you’re on a treadmill?
Photo credit: profivideos via Pixabay.
Craig is a former IT professional who left his 20-year career to be a full-time finance writer. A DIY investor since 1995, he started Retire Before Dad in 2013 as a creative outlet to share his investment portfolios. Craig studied Finance at Michigan State University and lives in Northern Virginia with his wife and three children. Read more.
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