$7.5 Million. According to a recent survey by Fidelity Investments that’s the number it would take to make the average American millionaire feel wealthy. Considering less than 2% of the population has even $1 million in assets, how can we feel secure when we fall short of our own expectations? The answer may be to start by creating financial maturity.
To many people, financial security is defined as freedom from worry. It’s a state of being so confident in your financial situation that you no longer worry about whether you’ll have “enough.” But psychologists tell us confidence has two elements – a mathematical element and an emotional element. Every day, financial planners across the country utilize a plethora of tools to help minimize the mathematical risks and increase our confidence that the financial plans we create will succeed.
But regardless of how high we boost the mathematical confidence, it’s the emotional element that is so often missing. Regardless of how much money we have, many of us often feel we need just a little bit more to really feel comfortable. In fact, studies show it doesn’t matter if a person has $500,000 or $5 million, the typical retiree feels they need approximately 25% – 30% more than what they currently have to really “feel” secure. It’s like the old riddle that asks if a grasshopper jumps half way to a finish line with each jump, how many jumps will it take to reach the line? The answer of course, is infinite. If he only jumps half way each time, he’ll never get there. Many of us are a lot like that grasshopper – the math can only take us so far. Eventually we need to take that last emotional leap.
What prevents us from making that final leap? For many the missing ingredient is what I call financial maturity – understanding our own attitudes and beliefs about money. Many of us are pre-set with negative attitudes or beliefs learned in childhood that we no longer even consciously recognize we continue to hold onto today. These may include attitudes of scarcity, generosity, values or self-worth that erode the confidence we feel in our financial plans.
For all of us, examining the source of our attitudes and beliefs around money allows us to discard those that no longer serve our purpose. It then allows us to create a new set of attitudes and beliefs that are aligned with our values and priorities. By aligning our attitudes, beliefs and actions around money with our personal values and priorities, we can close that emotional gap that prevents us from feeling totally secure.