Spending a million pounds and being a millionaire

Do you want to be a millionaire or to be able to spend a million?

There’s a significant difference. The two terms are commonly misused as the same thing, but in fact they are polar opposites.

Everyone talks about the national lottery and how he or she would love to be a millionaire, including me.

Yet what most of us really mean is it would be great to have a million pounds or so to go out and spend, spend, spend.

Being a millionaire is actually quite different.

With this wealth comes responsibility.

I feel these responsibilities fall under three categories.

1. Supporting Your Family.
2. Maintaining your capital.
3. Investing in the future of civilization.

1.Supporting Your Family

First and foremost is the responsibility is to use these funds to take care of your family, both now and in the future.

A person’s responsibility is not to their community or government etc., it is to themselves and their family.

It’s about ensuring they manage their finances appropriately so that themselves and their family can be supported throughout their life and hopefully after you have passed away.

Most people have difficulty achieving the first responsibility of managing their own wealth.

For those either more fortunate or more successful financially, I feel there are two further stages to the responsibility of being a millionaire.

2.Maintaining your capital

It’s vitally important to maintain your capital.

The capital needs to be maintained because it provides for our level of prosperity. Specialized manufacturing equipment and civil infrastructure (think road and train network, water and power plants etc.) are the foundation for our prosperity.

Without these things we wouldn’t be able to consume as much as we can do and we’d come pretty much close to starvation without maintaining our capital.

Unfortunately, it’s very difficult to maintain capital. Here is a quick list of the various threats to maintaining your capital:

You get the picture.

So many financial promoter’s talk about gains and return on your capital, yet when you truly understand the world we live in, and the complexities and financialization of our economy, you will understand that it is actually rather difficult to simply maintain your capital in real terms (the return OF your capital, not the return ON your capital). If that weren’t the case, then the entire world, having had thousands of years to build prosperity, would be infinitely more prosperous than it is today.

3.Investing in the future of civilization

And finally, the duty I feel you have to invest in the future by providing capital for innovation, research and helping others.

“Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” Peter Drucker

This is how we advance as a society and improve our prosperity. That increase in prosperity can be used for increased free time (my personal preference), or living in luxury and comfort, or purchasing greater quantities or goods and services).

I don’t suggest that you bet your shirt on the progress of humanity, but when you are a millionaire at least a few percent of your portfolio should be directed to biological and technological research and innovation.

You may notice that the above is very different from going out and spending a million on flashy cars and a mansion. I’m sure those things are nice (and who doesn’t drool over a Ferrari), yet they will not help your family or the world maintain and advance its prosperity.

It’s important to understand that with wealth comes responsibility and that capital is extremely valuable and shouldn’t be so readily squandered, destroyed, consumed or confiscated.