A 2018 research piece from Harvard involved more than 4,000 millionaires. The research asked about relative happiness and life satisfaction. The ‘price’ of basic happiness was put at $10 million. But to be 100% happy, the number would have to be 500% larger. These results appear to show that the respondents were thinking ‘vertically’ when it came to their wealth. No matter how wealthy, financially speaking, you believe yourself to be, there are always people ahead of you. And the truth is those ‘richer’ people may not have any more satisfaction than you. This is where vertical wealth and horizontal wealth aspects become obvious.
This blog explores the relationship between external wealth (vertical) and internal wealth (horizontal) and contrasts the two. No right or wrong, just different.
It is totally up to you which camp you want to be in.
The Polymath Project
Medium published a blog about Terry Pratchett in the Polymath Project (Figuring out how to live in a world we don’t understand). It wasn’t about the Discworld novels; it was from his non-fiction piece ‘A Slip of the Keyboard’.
Terry wrote about vertical and horizontal wealth, a concept unknown to many of us:
If you are vertically wealthy, you think “I am rich. So, I had better do what rich people do.” What do rich people do? Well, they find out where the hell Gstaad is, and then they go skiing there.
They buy a yacht. They may go to beaches a long way away. Well, first of all, never buy a yacht. Yachts are like tearing up hundred-pound notes while standing under a cold shower.
But horizontal wealth means not letting your increased income dictate your tastes. You like books and now you have money? Buy more books! Change those catenary (sagging) bookshelves for good hardwood ones! In my case, build a library extension to your office. And, of course, you buy what will be useful for that most wonderful of pursuits, blind research, which is research without direction for the sheer joy of it.
Horizontal or Vertical
We live in a consumer society; tap water is entirely drinkable, but just think how many types of bottled water there are.
If you are still earning and accumulating, there are two ways to look at your after-tax income.
Spend your money, pay your direct debits, have meals out, buy some new trainers. At the end of the month save some of what’s left (if there is anything left). Each month will be different. Some good and bad savings months. Who knows how much you will end up saving?
As soon as you get paid, transfer 30% of the net pay into your savings/investment account. Live on the balance. If you run out, stop spending. Every month you will save 30% of your net pay, no excuses. The same goes for a pay rise and a bonus. Over the years the 30% will accrue into a very large pile of money. And you will own less ‘stuff’. Choose the percentage level that works for you.
The flash and famous wealthy
During the course of a week, listen to the radio, scour websites, watch the news, read a newspaper or two.
For seven days there will be news or gossip about a rich and famous individual or two – getting married, getting divorced, going to court, buying a football club, or seen in the early morning with a so-called supermodel.
Figure out for yourself whether, in your opinion (you don’t know for sure) they are vertically wealthy, or one of the horizontal wealthy. It’s judgmental for sure, but over time you will learn to tell the difference.
Use it or lose it
To some wealthy people, vertical wealth can be pointless because you either have it, or don’t have it. Whereas with horizontal wealth, the fact that you once had money and used it to learn and grow and derive enjoyment from it, and not care what others thought about it, means it’s not so great a loss.
Both types of wealth have their advantages, and the less obvious horizontal wealth has its advantages as well.
Spend, spend, spend. The three words from Viv Nicholson after her husband won the football pools in 1961. By 1968, after her husband’s death, Viv was bankrupt. She had kept to her word. Vertical spending.
A common trait of many vertically-wealthy people is to over-extend themselves, believing that the good times will last forever. Whether that be fame, looks or good fortune. They spend ahead of themselves. They often acquire huge amounts of debt with the belief that Lady Luck will repay it all in multiples.
When things turn bad, they can get very bad very quickly. Banks call in loans. Property can’t be sold (at least not for the purchase price) and expensive jewellery goes for trinket prices. A career that may have taken decades to build, can be lost in months. So-called friends and hangers-on soon slink into the background.
Horizontal wealth can be fun as well
If you are really wealthy and have a passion for supercars, find a way to associate yourself with them, as opposed to owning a dozen of them. Rent them, repair them, watch them race. Don’t buy more than the one you love.
Collect beautiful sports car art and hang it on your living room walls. Become an expert enthusiast. Go horizontal.
Whatever your ‘thing’ is, like Terry Pratchett, find your equivalent of his library and put your heart into your passion. You simply don’t have to tell the world about it.
Before closing, here are three quotations from Terry.
Coming back to where you started is not the same as never leaving.
Wealth doesn’t define who we are or what we have experienced.
The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it.
An open mind is often the equivalent of an independent outlook.
Build a man a fire, and he’ll be warm for a day. Set a man on fire, and he’ll be warm for the rest of his life.
Horizontal wealth can leave a lasting impression.
If you would like to come in and discuss horizontal or vertical wealth, contact us today.