When I started researching All the Money in the World, one of the first things I noticed about the shelves of personal finance books out there is that most seem concerned with getting out of debt. Dave Ramsey, in particular, has a whole program for doing a “debt snowball” to attack the smallest debts first, with “gazelle-like intensity.” The general mantra is that you pay off all your non-mortgage debts, then invest the money that would be going to debt payments in various investment vehicles. The hope is that you get double digit returns. Then, through the miracle of compound interest, you retire with $5.7 million in the bank after 40 years.
It’s all very motivational. But here’s the thing: there’s a lot of life between your last debt payment and having $5.7 million in your brokerage account. What should you do in the meantime? What other kinds of financial goals should you have? What should you do with your money to have a good life? What if you know that, finally, you do have enough? Then what?
I wrote my book to give people a framework to think about these questions. Indeed, the introduction opens with just such a scenario: a couple that had always been very frugal had suddenly become rich. What should they do with their money? So I was interested to see that, over at The Simple Dollar, Trent Hamm was blogging about this exact same subject. He came to the world of personal finance by trying to get rid of his debts. Earlier this week he posted that he and his wife had finally achieved debt freedom. They were in a good place financially. But now what? It’s easy to lose focus when you don’t have goals. But if you don’t have debts, are on track to save a lot, and own your house outright, what should those goals be?
I personally think a good goal should be having the assets — most notably, the income from said assets — to not have to work. I still think you should work, but wouldn’t it feel great to do so only because you wanted to? Another fun thought experiment is to figure out what you’d change about your life if you had all the money in the world, and then figure out how you can achieve something similar with earthbound resources. Then you can make getting those resources a top priority. For instance, if you want to travel more, you’d want to work to get to a place where you could take more time off from work — maybe something more seasonal or entrepreneurial — and then have the money for fabulous vacations.
What kinds of goals do you think people should have once they’ve paid off their debts? What if they’re already saving and giving to charity? What else should they do? A lucky problem to have, to be sure. But a fascinating one to think about, nonetheless.
(photo courtesy flickr user ajari)