It's Not What You Have, It's How You Live
It's somewhat normal, but in my opinion misguided, to think that financial success is best measured by the total amount of wealth one accumulates. True success is not defined by the numbers on a statement, but rather by how that wealth enhances our lives.
It’s about the quality of our experiences, the peace of mind we find in our financial choices, and the freedom we gain to pursue what makes us truly happy.
In this article, we'll explore a number of reasons and one powerful demonstration of why the amount of money in your possession is far less important than looking deeper into what it provides to the quality of your life.
The Quality of Life Over Quantity of Wealth: Being Able to Sleep at Night
Having a high net worth can be an impressive achievement, but it doesn’t automatically translate to happiness or fulfillment. Imagine accumulating a substantial amount of savings, yet feeling constantly anxious about spending it (more about this, below). This fear can overshadow the very purpose of financial success: to create a life that you love. If your wealth leads to sleepless nights filled with worry, it isn’t serving you well.
Stress about and fear of spending money can stem from various causes. It could be that you (like most people) simply don't know how long you're going to live and thus are afraid of running out. It could be that you're afraid to take investment risks that would be required to grow your money, or, conversely, it could be that you understand that your money is at risk already, and you conserve as much as possible because you're uncertain of what will happen to your future value.
Being able to sleep at night is about more than money stress and risk. Some people work longer at a job they don't want to be doing, or may even hate, due to a sense of scarcity around money and fear of not having enough (or desire to simply have "more"). Actively reducing your day-to-day quality of life, as defined by how you're able to spend your time, is not what most people think of when they consider that more money will make them better off.
The Importance of Real Liquidity and Cash Flow: What You Can Keep, and What You Can Use
Liquidity—the ease with which you can access your funds—can play a crucial role in your financial well-being. Funds tied up in investments or assets that aren’t readily accessible can create stress and limit your ability to seize opportunities or enjoy life. A well-balanced approach to finances considers not just how much you have, but how effortlessly you can use it. Having liquid assets allows you to respond swiftly to life's demands, enhancing your overall quality of life.
Closely related is the idea of cash flow - how much new liquidity is generated from work or investment income regularly that you can spend. When this number is high enough and stable, people tend to have the ability to worry less about their money, because their needs (and hopefully their wants, too) are met on a regular, recurring basis.
Taxes play a role here, too. The relevant part of cash flow to a person would exclude money that gets paid away to taxes. Considering one specific reason why a higher number on paper is not always better, $1,000,000 in a Traditional IRA or 401k may not be "better" than $900,000 in a taxable or post-tax account. Why? Because when it comes time to use IRA money, your full tax rate will come off the top before you get to use it. When Roth-style money gets used, the opposite is true, and when taxable account money is pulled, some of it is principal (which won't be taxed again) and some of it may be long-term capital gains which may be taxed at a lower rate.
Finally, liquidity has to be real in order to feel valuable. A hypothetical person with a net worth of $1 million in cash and other liquid investments, but no other income, may have "liquidity" in a sense, but they are also locked out of spending that money since it's necessary to leave the capital base / principal intact in order to generate income going forward (again, more in the demonstration below). In fact, they'll only be able to live off of a relatively small percentage each year without introducing undue risk to their future income. That's not "real" liquidity, psychologically.
The Freedom to Spend
Ultimately, the way you feel about your money is paramount. If you view your wealth as a tool for enhancing your life rather than a burden to protect, you’ll likely experience greater satisfaction. The ability to spend on experiences, education, or even simple pleasures can significantly elevate your happiness. It’s about finding a balance—ensuring that your financial resources allow you to live fully and freely.
Below is a demonstration of a number of the factors discussed here.
Source: LivingBalanceSheet from eMoney - Linear Asset Paydown Calculator. Assumptions: 35% Tax Rate, 3% Rate of Return, Returns are Taxable, Study Period 20 years.
Net Cash Flow in "Interest Only" case represents 3% return on assets invested. For "Principal & Interest Calculation:
1 Gross Cash Flow assumes full amortization for entire study period.
2 Net Cash Flow assumes full basis for all assets.
In this example, Person A, on the left, starts with more money than Person B, on the right ($5m vs just $4m). But Person B takes advantage of many of the advantages we've talked about today, and they're able to use more money every single year throughout the rest of their life. Person B can, perhaps, live in a different home, spend more on trips, dinners, their children, or charitable causes. Person B gets more from their money than Person A, despite having less.
Person A is only using the interest income, after taxes, driven by their assets. Many people live like this. The interest level is a relatively low percentage, because they now feel uncomfortable taking risk, afraid of losing or spending too much of their money. They have a high Asset Value throughout, but they are afraid to use it and jeopardize their future. Person B doesn't have these constraints.
But how does Person B feel comfortable doing this? In short, intelligent financial strategy is required to make this work. Person B needs to feel comfortable with their risk level and ability to consistently draw money out of their asset base without depleting it too rapidly. Person B is able to spend less on taxes each year, because they're strategically using already-taxed principal instead of just interest income (which is, assuming it's taxed as income, going to be less tax efficient).
Person B also needs a plan to backstop whatever assets they meant to leave behind for legacy, as they spend down this asset base. Person A does end with a greater "Legacy Value," but it's not clear that they intentionally set this level at all. Person A, as you recall, doesn't know how much of their assets they can afford to deplete and still have a secure future, so they avoid doing it at all. Did they mean to die with all of their money? Who knows; it wasn't part of their decision-making process. Person B, with a financial strategy, can set this level intentionally.
The exact financial strategy to use to become more like Person B than Person A is out-of-scope for this article, because personal strategies should be driven by specific facts and circumstances, not broad and general recommendations. But we do know what levers can be pulled, and how they can be used in tandem to target real life goals - and we're happy to discuss with you.
How Does Your Money Allow You to Live Better?
Financial success should not be solely about the figures you see when you check your bank account. It’s about how that wealth enables you to live a life filled with joy, security, and fulfillment. Focus on the quality of your experiences, prioritize liquidity, engage actively in your financial journey, and embrace the freedom to spend. After all, it’s not what you have, but how you live that truly counts.
2025-7867107.1 Exp 04/2026