Last month, 15 friends and I hiked from town to town across the Tuscan countryside from Florence to Rome along the Via Francigena, an ancient pilgrimage route.
We had fine weather, gorgeous views, incredible food and wine, and no shortage of interesting conversations.
Along the way, a fellow hiker said, “You know, I read all this stuff about how to asset allocate, diversify my portfolio, select stocks, cut costs and minimize taxes. But nobody ever writes about the most important question of all: What do you do with all your money once you’ve made it?”
It’s a fascinating question but for a fairly small audience.
Tens of millions of Americans struggle to make ends meet. Others are doing better but living paycheck to paycheck. Still others are doing well but striving to hit important financial goals in the hazy distance.
However, some have been smart and disciplined for a long time – and are ready to reap the rewards.
These folks have lived within their means, saved regularly, invested wisely and compounded their money for years… or even decades.
They’ve reached financial independence. But this presents a new set of challenges.
How much do you spend? How much do you give away? And how much do you leave alone to continue compounding?
There is no one-size-fits-all answer.
In a moment, I’ll ask readers to submit their own answers to the question: You’ve made it. Now what?
However, I’m happy to share my own thoughts and experiences on the subject.
Let’s start with work versus retirement (once you’re affluent enough to choose).
When I was young and worked a series of dull or stressful jobs, I fantasized about not having to work.
How great it must be, I imagined, to get up in the morning and do whatever you want. Or nothing at all.
Now that I’m considerably older – and could have retired decades ago – I realize that this was a perfect example of what Harvard psychologist Daniel Gilbert calls “miswanting.”
If I go to a resort in the Caribbean for a week, I’ll spend the first day with my toes in the sand and my hand on a frozen margarita.
But by the next morning, I’m antsy. I’m looking around, going, “Alright, what are we gonna do now?”
I get bored quickly. Without challenging work, I’d be an even bigger pain in the neck to everyone around me, I’m sure.
Aside from the decision to work or retire, how do you spend down that (fluctuating) lump sum you’ve accumulated?
That’s easier for some to decide than others.
Some people know just what they want and get busy enjoying it.
But I’ve known plenty of successful men and women who – after years of working hard and living frugally – have a difficult time spending their wealth.
They succeeded by never touching principal and by reinvesting capital gains, dividends and interest.
When it comes to spending down that fortune, they have a genuinely hard time doing it.
For some, it actually feels wrong. (The spendthrifts in the audience are now shaking their heads in disbelief.)
Others find it hard to spend their fortunes because – no matter how much they have – they’re afraid of running out of money.
(It’s called longevity risk. And with people living longer than ever, it’s why you should own high-quality stocks well into retirement.)
Others have fairly simple tastes. I tend to fall into this group.
I’m not interested in yachting or collecting vintage sports cars. My two biggest extravagances are books and music, two things I’ve collected my whole life.
I also collect a bit of art. But only things I love and never for investment purposes.
Some “experts” recommend spending on experiences rather than material things. They insist it brings more lasting enjoyment.
That’s probably true. Making memories is generally better than accumulating more things that need to be maintained, repaired, insured and stored.
In the end, of course, only you can determine how high you want to live and how much you want to spend – and on what. (I’m looking forward to hearing readers’ thoughts on the subject.)
As for how much to give away and to whom, that’s a deeply personal question.
We all have our favorite people and organizations.
Most of us are naturally inclined to leave a big chunk to our kids and grandkids. Although I think it’s a mistake to leave them too much, especially if they’re young.
You don’t want to create entitled monsters everyone finds annoying.
I generally agree with Berkshire Hathaway Chairman Warren Buffett that you should leave your kids enough money that they can do what they want… but not enough that they can do nothing.
Of course, there are people and organizations worthy of our money right now, not just when we’re pushing up daisies.
Glen, a retired friend who was on the trip through Tuscany, told me about an unusual and unexpected way he found to indulge his philanthropic streak.
It was his habit to visit a local coffee shop each morning with The Wall Street Journal. A poster on the wall said “Wanted: Part-Time Dishwasher.”
When no one had applied for the job after several weeks, Glen inquired about it, only to be laughingly told that he was the most overqualified job applicant in the history of the company.
Yet he took the position because he had the time, enjoyed staying busy, and liked the young and energetic crew that worked there.
In the midst of the pandemic, however, several of his co-workers took a serious hit to their household incomes.
Glen decided to subsidize them, not with loans but with gifts.
He told his employer he had just one request: All donations must remain anonymous. (The recipients didn’t even know they were from a fellow employee, which would have been obvious.)
I was moved by Glen’s story and asked what motivated him.
“It wasn’t hard,” he said. “I have more than I need. They had less. And it felt good.”
Henry David Thoreau said that true wealth is “not possession but enjoyment.”
And the contented look on Glen’s face made it clear that he couldn’t have received more satisfaction any other way.