We all have our perceptions and believes about money based on how we were raised and our experiences of life. But have you ever thought of an interesting question as this? While the millionaires stand a good chance to answer this question, consider this, that if you were given two million U.S dollars by a generous Non-Governmental Organization – how would you feel? What if they promise to top up this amount for you every two years? That would mean you would have one million U.S dollars to spend every year, good or good?
Silicon Valley is America’s technology hub where the world’s finest brains in computer, internet and technology are based. These guys are part of the world’s top manufacturers of first class SUVs, motors, computers, software programs among others in billion-dollar companies. Interestingly, a great majority of these guys are below the age of thirty years and they happen to be millionaires.
Luckily for them they’ve been able to acquire for themselves at a very early stage in life what more than half of the world’s population search for all the decades of their lives – financial freedom.
But while we expect that these guys are the happiest individuals on planet earth, the paradox of the issue is that, they aren’t. In fact, it has been identified that psychologists are needed in Silicon Valley as much as lawyers and women because most of these millionaires wake up in the morning and say they do not feel good about themselves. What the heck could be wrong with them?
There are a lot of challenges people face whenever they happen to come into contact with sudden wealth that they do not expect.
Goldbat and Difuria were highly sought after physicians in Silicon Valley. They are part of the early psychologists who were able to identify these trends at their early stages when they were developing and they had hundreds of clients with emotional and psychological problems.
One thing that happens most of the time is that a great majority of individuals are chasing after wealth but very few are emotionally and psychologically prepared for the life altering effects of mega-wealth. While some never come to believe that they are rich, others believe so but simply do not know what to do with the wealth they’ve acquired. All they do is worry their heads over fallen stock prices, interest rates cuts, falling European markets and other geopolitical, economic and social events that pose threats to their wealth. They keep worrying and stressing themselves over matters they either have little or no control over – dashing themselves into depression and misery amidst their wealth.
These psychologists are able to guide most of these millionaires to come into terms with their wealth. They are also able to educate them on how to give to charity, go on holidays abroad and spend more time with their family and loved ones. These practices have proved to be a great remedy that helps wealth makers come into terms with their wealth and enjoy their lives to perfection.
Now, while economists would not disagree with the work of benevolent psychologists, we view this phenomenon quite differently and analyze it from a more different perspective. What will come into the mind of any good economist when confronted with such a case will be the concept of Diminishing Marginal Utility (DMU). Though, the concept of DMU has to do with goods, invariably, it is related to money as well.
The law of DMU states that as a person consumes more and more of a good, the additional satisfaction derived from any extra unit declines. A typical illustration of this law comes into play if for instance you find yourself very tasty on a hot sunny day and you are given five separate glasses of chilled water. Hurriedly, you will pick up the first glass and possibly finish it on the spot with a great sigh of relief – thanking God for water. But then if you are to go on and drink an additional glass of water, the second glass wouldn’t give you much relief and satisfaction as the first, and you probably wouldn’t thank God for it because you might have satisfied your thirst already. – Any other additional glass of water will therefore give you less and less satisfaction. This is the same law at work with the case of the sudden wealth syndrome.
Assuming you were owing GHS 900 as school fees and the school authorities have established that all persons owing school fees would not be allowed to WRITE the end of term examinations. Consider the joy that will fill your heart if a benevolent parent of a good friend decides to settle the fees for you? In this typical scenario, the GHS 900 could afford to ‘buy’ you a great deal of happiness. This is a good example of money ‘buying’ happiness for a person – particularly in this case where paying your school fees was all you ‘needed’ in life. This can be expressed as money ‘buying happiness’.
Going forward, let’s assume again that the benevolent parents go ahead to give you an additional GHS 2000 as pocket money for school. We can certainly know that this gesture isn’t going to yield an amount of happiness equivalent to the first GHS900 you received for your school fees.
Although this GHS2000 is bigger than the initial GHS900, it is very likely you wouldn’t be so much ‘happy’ about it compared to that of the first GHS900. Why?
Money, like all goods, faces diminishing marginal utility. As a person gets more and more of it, his level of happiness due to the money rises, attains a maximum level and begins to decline. Illustrating that MORE IS NOT ALWAYS BETTER. Extra and extra money when not handled well (for the right purposes) can fast-forward an individuals’ misery.
In sum, although money is a great asset – more of it doesn’t necessarily mean that we will be happier. Nevertheless, this does not imply that individuals shouldn’t work hard for money. What it means is that we do not have to make money our prime motive for living. Because if we do, we might be ‘disappointed’ in the end.
I hope I’ve succeeded in sharing a very important economic tip?
Author: E.O. ESSIEN
(Associate Financial Economist and Author)
Email: elijahotoo.eo@gmail.com (0240080104)
