The Wealth Game: Your Lifetime Needs 💰

Extract from The Wealth Game – An Ordinary Person’s Companion - By Peter Alcaraz

Needs make up the liability side of the equation. They erode your net worth, so every pound reduction in your needs adds to your net worth. Think about this for a minute.

A need is something that you must have to function and live. You can’t survive without it. A want, on the other hand, is something you’d like but isn’t absolutely necessary. Economists often assume that our wants are limitless. In reality, what you want is a personal choice.

Your task in the game is to identify your needs and decide on a range of wants that satisfy you as well as allow you to reach O as quickly as possible. Only include those that cost money, and ignore all others, even if they take up time in which you could be earning. Too expensive a package will hold you back for years and may halt your progress. This is a challenge that I explore in detail later.

➡️ Design your own package

 Here, you become the architect of your needs instead of letting others define them.

Lifestyle is sold to us by those who wish to profit. Businesses want our money; media want our attention; the government wants our vote and our cash, through taxes; and religious institutions want our patronage. We are the prize at the centre of a gigantic bun-fight between contenders rooted in self-interest and a powerful will to survive. Our collective behaviours determine whether they live or die, and they fight hard to influence them.

These peddlers and purveyors combine to service our lifestyle and needs. Between them, they cover the subject; in fact, they create and define the subject before giving us their solutions. Like a vast auto-enrolling outsourcing machine, they take over this department of our lives and run it for us: what to wear, eat, drink, read, watch, listen to, learn, drive, believe, think, and care about; where to live, work, holiday, invest our money; how to be healthy and safe; and who to respect, disrespect, value, emulate, like, dislike, love, hate, reward, and pity.

➡️ From the industry corner, here are some examples of the guidance directing us to never knowingly underspend:

🔴  “Because you’re worth it”—You deserve it and owe it to yourself. It’s your right to buy this treat. Don’t compromise. After all, you are precious and valuable, rare and unique. You’ve worked hard. It’s just a little something to reward yourself. What harm could there be in that? In fact, what reasonable and loving person in their right mind would deny you that small pleasure?

 

🔴  “Because your husband or wife is worth it”—For all his or her unstinting efforts, the hardships he or she puts up with, and the sacrifices he or she makes for the good of the relationship and family, it’s the least you can do. Build that pedestal high, and polish it.

 

🔴 “Because your children are worth it”—After all, they are the most beautiful, wonderful offspring on the planet, are young for such a short time, and deserve your generosity before facing the hard world out there. The best parties, party bags, Christmas and birthday presents, foreign holidays, clothes, games, and gadgets are surely not too much to ask.

 

🔴 “Retail therapy”—Yes, it is actually good for you, physically and mentally, to go out or online and buy things. It’s stimulating and fun and takes your mind off difficulties and worries.

 

🔴 “Live the dream”—No matter that the last one never quite lived up to the brochure; this time it’ll be different, and your dreams will become reality with this simple purchase.

 

🔴 “Life’s too short; live for today” or “YOLO: you only live once”—Spend it while you can, because you may not be around tomorrow, and if you are, tough luck, because the money will have run out.

 

🔴 “You can’t take it with you when you go”—On that basis, why bother about anything?

 

🔴 “Cash-rich, time-poor”—You’d better spend your money to equalize matters.

 

🔴 “The latest version”—It’s better than before. It’s smarter and more functional and will please you more. Who wants to be seen with an old version?

 

🔴 “Petrolhead”—Wear this badge of honour proudly, drive fast and large, and look down on all beneath or behind.

 

🔴 “It’s sale time”—Buy three for the price of two, even though you only want one. Spend to save, and grab a bargain.

 

🔴 “Only the best/you get what you pay for”—Under this snob’s charter, it really is better quality, even if you wouldn’t know it on a blind test.

 

🔴 “Brands are best”—Pay a lot of money for our product, and then advertise it for us by wearing the label on the outside. It’s really cool and just proves your good taste and affluence.

 

🔴 “Dress to impress”—As a “manic impressive,” you will garner more lovers, better jobs, and greater status, and people really will like you more.

 

🔴 “Learn to be a collector”—Become a “connoisseur,” an expert in your field, and an authority on the subject, and perfect the art of buying.

 

🔴“Out with the old; in with the new”—Spring-clean your life, make a new beginning, and start all over again with some new purchases, this time getting it right.

 

🔴 “Don’t let the side down”—Avoid the humiliation and embarrassment of being the shabbiest on the street, being the tattiest at the school gate, or having dull holidays at home, so-called “staycations.” Think of your family, neighbours, and friends. And worst of all, don’t let yourself down with poor standards. Where’s your self-respect? Take a leaf out of Hyacinth Bucket’s book.

 

🔴 “You can afford it”—Of all people, you shouldn’t be holding back!

 

🔴 “Do your bit to help the economy”—Everyone knows that recessions are caused, or at least prolonged, by demand drying up. Spend, spend, and spend some more to do your bit to lift us all out of this mess.

 

🔴 “Fairtrade”—Help poor people by buying this product.

➡️ Who are these pushers, and how can we opt out of auto-enrolment in their messages?

As to who they are, look around and in the mirror. What are you selling? Can you think of anyone who isn’t selling something? This is no “us and them” situation. It’s a human condition; we’re hardwired to act at least partly out of self-interest. Whatever you think about the messages and methods of other sellers, blaming them for your own or society’s problems is misguided and pointless. It’s like blaming the rain for making you wet. The answer to this fact of life is in your hands—stay out of it or take an umbrella.

Opting out of being led to spend in the wealth game is surprisingly easy, as long as you can disconnect. Choose what to listen to and when, and to those who do manage to reach you, just listen politely and say no thank you. Design your own lifestyle and needs from scratch instead of using default options. The information, transparency, and connectedness delivered by the Internet make it a buyers’ market. You design, specify, research, select, and purchase on your own terms.

A tendency towards willful and independent thought and a certain two-fingers-up attitude to what others think is essential. Instead of “because I’m worth it,” try “because I’m worth more.” And as for “live for today, not tomorrow,” how about “live today and provide for tomorrow”? The joy of slogans is that they are so versatile.

✅ Learn more on The Wealth Game 😊: CLICK HERE 

To complete the wealth game fast, concentrate on your needs above all else. Yes, you must generate wealth, but decouple it from your needs. Treat the two as separate exercises and distinct entities. Build one large, but design and manage the other small. Why should what you have influenced what you need in the slightest? It is a cardinal mistake to allow net worth to contaminate needs. By doing this, you will lose sight of the ground.

Untrained needs multiply like an interconnected root system, spreading and sucking more water and nutrients from the soil. Rarely do they stand alone. One luxury, treat or upgrade leads to another across every department until anything simple and basic looks out of place, whether it is fit for purpose or not. Foods, clothes, furnishings, cars, houses, gadgets, gardens, personal fitness and beauty, leisure, hobbies, and holidays all demand to be made over once the money supply is switched on. Children catch on fast and join the queue. Rampant materialism not only directly erodes your wealth but also saps your energy and, as we’ll see later, in many cases promotes unnecessary suffering. It is an obstacle to your reaching O—probably the biggest of all. As you earn money and build wealth, do not succumb to this trap, however much your own cravings and the pressures from others push you towards it.

➡️ Big life or small life

 A big life suggests that everything is large: house, car, family, social network, and spending style. At one level, this is true. At another, it is false.

There is an inverse relationship between the scale of your lifestyle infrastructure and your ability to pursue activities and interests outside of it. The potentially immense time and cost spent providing for, managing, and tending to a large house, family, pets, cars, and other appendages directly reduces the time and money you have to do other things, perhaps with the same family. A big infrastructure, pleasurable to a point, can inhibit and stifle, constantly forcing you to look inward. Rather than a big life, you have a high-maintenance, small one.

🔴 If you adhere to the notion that what you do is more important than what you have, this is relevant.

On the other hand, a small lifestyle infrastructure enables a large and outward-facing existence—a big life. Instead of devoting your time and energy to feeding a large, hungry beast, you can lock up and leave, travel, learn, pursue your interests and passions, and spend valuable time with those you love. You can travel light.

The choice is entirely yours. It is easier if you start and stay small, but if you find yourself servicing a big lifestyle and yearning for a more outward-facing life, make the change!

In early blue-collar outsourcing contracts—for example, cleaning and buildings or grounds maintenance—the performance measures were input types. For example, x number of tasks, y number of people for each task, z number of visits to the site, and so on. Suppliers soon worked this out and convinced their customers that such prescriptive arrangements denied them any real opportunity to improve the service, create efficiencies, and drive the costs down. Tenders began to focus on performance and specific outcomes. New style contracts rewarded or penalized workers depending on whether the buildings were kept clean and safe, grounds were usable and neat, or infrastructure and machinery were functional. Contractors were free to manage themselves and their tasks in any way they liked. The smart ones completely re-engineered the way services were delivered, made better profits, and pleased their customers.

The big-lifestyle infrastructure never suited us, although I was a slow learner. Having ticked the box and enjoyed the pleasure and pain for a few years, we sought simplicity and a connected base from which enterprise and endeavour could flourish separately from the homestead. We realized how narrow, yet demanding, our life had become. There was simply too much else to do other than carry on supporting this edifice. Taking a knife to the structure was a pleasure.

We listed our priorities and needs and constructed a new life that was fit for purpose. We found a school that felt right and a functional, undemanding home in Portsmouth, a city brimming with amenities and spirit, right next to the sea and my beloved Isle of Wight. Yes, there was more upheaval and hard work, but I had never seen Jessie happier; a bright horizon beckoned. The reengineering took six years in total, by which time I was through O and had stopped paid employment. It was completely worthwhile, but six years is a long time. Dismantling a big-lifestyle infrastructure is quite a job, and ours wasn’t even that big by many people’s standards.

You will have read of hugely successful investors and entrepreneurs who stay rooted, perhaps living in their childhood home; driving a twenty-year-old car; and dressing, socializing, and living like an ordinary person. Warren Buffett is one. Challenge and test your needs independently of what you earn or have accumulated. Keep the pursuit of wealth in its box as a limited objective, rather than the main event. Shift all emphasis to self-management of needs, and turn the telescope around the other way. Instead of being magnified to match your wealth, your needs are tiny. Once this fact is firmly lodged in the system, throw away the telescope altogether.

✅ Learn more on The Wealth Game 😊: CLICK HERE

➡️ How Does Cash Fit In?

🔴 The Problem

Many people mistake cash flow for wealth and confuse the two. They think that having cash makes them wealthy, and they behave accordingly.

The problem is that when they spend their cash, it is swapped for something else. If they buy an appreciator, wealth is preserved and should grow, but if they opt for a depreciator, the value will waste away over time, and for a consumable, value is lost immediately. You might think it self-evident that spending choices affect wealth, but this simple truism is widely overlooked or forgotten, as you can see from consumer debt, which continues to balloon.

Plenty of ordinary people have a high net cash flow for a phase of their lives. They can live well, consuming and pleasing themselves without financial care in the world. This cash may be a new experience, novel and exciting, and perhaps follows years of doing without. They may treat being asset-light as a virtue and enjoy freedom from responsibility. This is no way to prosper in the wealth game. Pleasure, such as it may be, is sustained only by the cash fuelling it, and at some point, for the ordinary person, this cash flow will stop; the job or career will end. Without the porridge pot of wealth, the only course is to downscale and live simply on whatever money can be eked out from earnings or state benefits. This may be exactly what the player always wanted and foresaw, but on the other hand, it may not. The point is they won’t have any choice in the matter.

At the same time, some people have wealth but struggle to manage, because they are short of cash. This situation is often mistakenly used to justify the superiority of cash relative to wealth.

Imagine a large country house owned by the latest impoverished member of a long family line or the beneficiary of a will or perhaps the sole survivor of a hard-working marriage. The house, beautiful and substantial though it is, needs a major overhaul on the roof, brickwork, window frames, joists, ancient electrics, and a heating system that requires several trees or a private oil well to fire up. The kitchen garden has gone to seed, and the remaining grounds are returning to nature, while the perimeter fencing slowly disintegrates. The art and antique collection are largely sold, and visitor and event days are just about keeping the place going. In short, it’s a pretty sorry state of affairs.

The estate, however, is situated in the prime English countryside, untroubled by neighbours, roads, or any blights, and it offers a tantalizing dream home for many an aspirational family. It’s worth well over a million pounds and is mortgage free. The owner is “wealthy” but ageing at twice the normal rate.

The solution is straightforward—sell the house, buy or rent something smaller, and live off the proceeds. Only when all this wealth is gone will this person be in the same financial position as the newly impoverished cash-flow hedonist. And depending on how old this person is and how well he or she manages money and spending, this situation may not arise during his or her lifetime.

➡️ The Way Forward

 You should be clear as to the nature of cash flow. It is like the element of water, fluid and moving. It is the fuel for wealth creation, since, without it, you cannot buy or develop assets. At the first sight of it, you should put as much of it to work as you can.

Second, it is a by-product of wealth, because assets, whether productive appreciators or productive depreciators, generate income, and all assets deliver cash on sale.

Cash flow is not wealth itself but a measure of solvency, and it is not the same as cash, the asset that can be exchanged for something else. It is measured over a period of time, rather than at a moment in time, like net worth. A person’s net cash flow is £x over a week, £y over a month, and £z over a year. Measured weekly or monthly, it may dip into negative territory, as the timing of income receipts and payments vary, but over a period of time, it should be positive. A negative cash flow is unsustainable and, if uncorrected, leads to insolvency.

It follows that to succeed in the game, you need to keep a close grip on cash flow and take care not to trade wealth for a short-term lifestyle.

✅ Learn more on The Wealth Game 😊: CLICK HERE