Many Americans believe that they need to earn a certain amount of money to feel wealthy.
But even if you meet or exceed that goal, you can be disappointed to realize that you’re still not satisfied with your financial situation, says co-founder of the Institute for Financial Psychology and Iowa State University University professor Charles Chaffin says.
“The misconception is that there’s an actual number, and when you hit that number, people suddenly feel like they’re rich,” he told CNBC Make It. “Wealth is a subjective experience and is not just about how much money you have.”
In fact, even billionaires don’t necessarily feel financially well-off, according to recent data from Northwestern Mutual’s 2024 Planning & Progress Study. The study found that only 32% of American billionaires consider themselves wealthy.
Rising prices for everyday goods and other economic factors may be at play, but factors such as your inner beliefs about money also influence whether you’re wealthy, regardless of how much money you have in the bank. That can affect whether you feel it or not, Chaffin says.
Here’s why, according to Chaffin, and what you should focus on to feel happier with your money.
Beware of obsession with spending
People who become millionaires tend to be “cautious with money,” Chaffin said.
Money Vigilance is one of the four money scripts developed by financial psychologists Brad Klontz and Ted Klontz. People who care about money tend to constantly analyze how much money is coming in and going out of their accounts.
“They’re very watchful of their spending, and that’s been one of their big successes,” Chaffin said. “But the problem is they still don’t feel really safe.”
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Whether you’re a millionaire or not, you need to be careful with your spending to avoid living beyond your means. But “over-focusing” on your spending can distort your perception of your financial health and, if you’re not careful, can lead you to believe you’re less wealthy than you actually are, he says.
“It’s no different than someone who’s obsessed with working out and never feels like they’re in shape,” Chaffin says.
Whether your goal is to save more cash or increase your overall income, it’s important to ask yourself what you want to achieve with more money. Chaffin says. Otherwise, if you don’t change your beliefs about money, you may feel insecure about money even if you reach millionaire status.
“If someone says, ‘You’ll be rich when you hit 2.7 million,’ my next question is, ‘Now what?'” he says. “What’s going to happen? What’s going to happen the next day? How is it going to make your life better? Let’s be specific.”
Goal setting helps you achieve financial satisfaction
If you can cover your daily necessities and have a good emergency fund, you may be financially secure. But if you’re still not satisfied with your financial situation, Chaffin says it might be time to reevaluate what wealth means to you.
“You have to have enough money to be safe, but at the same time, more than that, you have to ask yourself what this money is for and what its purpose is,” he said. I say.
Setting specific goals for what you want to accomplish with your money can help you avoid the feeling of “no amount is enough,” he says.
Rather than simply aiming to become a millionaire, Chaffin says you can also set a goal of earning enough money to help your family or be able to quit your job and travel the world. . Feeling wealthy isn’t necessarily tied to a specific amount of money.
“Some of the richest people I know have very little money in their bank accounts, but they have people around them if something goes wrong,” he said. say. “That’s also an asset.”
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