I spend a lot of time working on business process re-engineering (famously promoted in Keith Ferrazi’s “Never Eat Alone,” a great book), or business process management, or whatever you want to call it these days. If you aren’t familiar with it, I’ll define it this way: you take a company organized along function lines – accounting, sales, distribution, and so on. You take that company and reorganize it by process: the process of selling, accounting for and distributing a particular product is studied and roadblocks to efficiency are removed. So instead of spending management time worrying about the accounting department’s systems, you spend management time making sure a product “moves” through the process of production, sales and accounting to a customer. To me, it’s like organizing all of the food you need to make a meal so that you can prepare it quickly and well, rather than buying a new stove to cook it faster.
Most people think of their lives as independent little blocks: health, money, career, family, kids, friends, fun, etc. We try to focus on one area. Let’s think about some of the written-in-stone truisms of personal finance:
- I need to save for retirement!
- I need to be more frugal to save more money!
- I need to invest in the market because people who stay out of the market are missing out on the 7% returns we know as gospel, because the market always does well!
A lot of time is spent on the function of making money. Save. Be frugal. Invest. All good ideas, but let’s face it: if you save money and you’re frugal and you’re investing, you may increase your net worth a bit, but to what end? You have increased your personal system’s ability to put money in your pocket, but the process of making money can still be broken. Why save? Why be frugal? You may bake your own bread, for example, but why? Financial freedom? I thought I wanted that for a long time, but as time has gone by and I’ve thought more about money, I’ve realized that wanting financial freedom is somewhat meaningless. You have to think more about how you make money (or manage your health, or career, and so on) in relation to your whole life. Or, to put it more simply, freedom from what?
Why save for retirement? Should you save money on food, or medical care or on things that make life more enjoyable (and less stressful) to ‘save for retirement?’ Which one of those three jumped out? Saving money on medical care can make sense to a certain extent but you don’t want to economize in that area if you want your retirement to be enjoyable. I’d rather work a little longer and have extra money for dental care, or routine exams. Think about the process: living a happy healthy life until you are old involves more than just accumulating money.
These days I’m trying to think more and more about how to spend money in meaningful ways, and how to make my career meet my goals instead of trying to make my goals fit my already-developed career. You want free time? Don’t be an employee or a small business owner: those are time suck careers. Be a consultant or an entrepreneur with a franchise-model system (read the E-Myth Revisited if you don’t know what I mean). Want to retire early? Answer two questions first: (1) is it really necessary to achieve what you want, and (2) is it just the work you hate or are you hoping for a different life in retirement? Are you hoping free time gives you the answers? It won’t.
If you pick up a financial magazine, they’ll tell you whether to get a Roth or a traditional IRA, and they’ll tell you why you need $1.8 mil socked away by age 56 to retire early. What they won’t tell you is that – if you look deep inside yourself – your idea of sailing the world might actually bore you to death when you do it at age 57, and maybe you would have enjoyed fishing with your kids a few weekends and working until 62 instead. Focusing on the end game all the time can be frustrating, demoralizing and ultimately self-defeating. Learning to enjoy the process is a better way to spend your money, time and effort.