Grandma would always tell us kids to save some money for a rainy day. Grandma was wise in many matters. Money was no exception.

Essentially, Grandma referred to the three foundational behaviors to building wealth: create excess cash flow by living below your means, embrace risk and put excess cash flow to work by investing and maintain a long-term mindset rather than a get rich quick outlook. Without these three behaviors, the wealth building journey leads over a bridge to nowhere.

Of course, the wealth building journey can take many twists and turns and involve various complexities — choosing among various investment vehicles, determining the types of investment accounts to set up, strategizing the payoff of a mortgage and crafting an estate plan. But at its core, the wealth journey begins and ends with the first foundational behavior — live below your means. Like a heartbeat, this behavior is the constant rhythm pumping lifeblood throughout the wealth building journey. Living below you means embodies the mindset of continuously telling yourself you’d rather be wealthy than look rich.

I’m inspired by the teachings of Arthur Brooks, a Harvard professor and author of the book “Build the Life You Want.” Brooks has a wonderful way of explaining the science of happiness, including what he contends are the three ingredients to happiness. The first ingredient is meaning, which implies acknowledging things happen for a reason and our lives matter. We’re all alive to do something purposeful. The second ingredient is enjoyment — finding pleasure in sharing experiences with people you care about and being actively present and engaged in those experiences. The third ingredient is satisfaction, which is what I would like to address in this column. More specifically, how satisfaction relates to the all-important wealth building behavior of living below your means. 

Our brains have developed a natural evolved tendency to want to rise through the hierarchical tiers of society. This explains why all of us, me included, experience moments of consumption “flexing” when buying the fancier car or upgrading to the bigger hotel room.

Let’s apply some math to the discussion. Brooks proposes there are three formulas that explain both our impulses and the reason we can’t ever seem to achieve lasting satisfaction. The first formula: Satisfaction equals continually getting what you want. Of course, we always feel some brief moment of satisfaction when we get what we want, but the moment quickly fades. To regain satisfaction, we have to keep running and pushing to get what we want again and again and again. The second formula: Success equals continually having more than others. Yet, we realize continuously getting what we want, while providing some amount of satisfaction, doesn’t lead to success. Why? Because someone else is getting more. Our brains then derive the third formula: Failure equals having less. These three formulas adequately describe why it’s so hard to achieve lasting satisfaction.

How can we apply better math? Brooks proposes we throw out the previous three formulas and follow this one formula: Satisfaction equals what you have as a ratio of what you want. Stop and think about this and notice the difference from the previous formulas. It’s powerful to think about satisfaction as a fraction where the numerator is what you have and the denominator what you want. All of our human biology wants to focus on the numerator of our haves. However, this ignores the denominator of the equation. If we increase our haves without managing our wants, our wants will sprawl out of control and lower satisfaction. In our consumer-driven society, we’re constantly bombarded with marketing campaigns designed to make our wants explode without even realizing it.

Let’s tie this back into personal finance. Managing our wants allows us to execute successfully on the key foundational behavior of living below our means. Please understand me correctly. I believe in the importance of living life with an abundant mindset versus approaching every money decision with a miser mentality. It all comes down to having balance and working the satisfaction formula by increasing our haves while remaining mindful about managing our wants.

There are only five things we can do with our money:

Buy experiences. Spending money on a beach vacation with the family, for example.

Buy time. Pay someone to mow your lawn and devote that time to doing something more meaningful.

Give it away. Set up a scholarship fund with your alma mater, for instance.

Save and invest. Contribute the maximum amount to your 401(k).

Buy stuff. Go ahead and get that fifth Rolex.

The first four things on the list will bring satisfaction and a happier life. But our brains tell us to do the one thing on the list that won’t bring lasting satisfaction — buy stuff. Moreover, one of the biggest satisfaction generators involving money is the fourth thing on the list — save and invest. As humans, we’re designed to want to make progress. We enjoy satisfaction from making progress towards a goal versus actually acheiving the goal.

Grandma, we hear you. Controlling our wants allows us to live below our means and save and invest for a big, beautiful tomorrow. The result:  Satisfaction on our wealth journey is increased.

Christopher West is chief executive officer and principal of DWC CPAs and Advisors and DWC Wealth Advisors based in Grand Junction. He’s a certified public accountant, Personal Financial Specialist and series 65 investment advisor representative with Global Retirement Partners, LLC. Investment advisory services are offered through Global Retirement Partners, LLC (GRP) dba DWC Wealth Advisors, an SEC registered investment advisor. GRP and DWC CPAs and Advisors are separate and unaffiliated entities. For more information about DWC CPAs and Advisors or DWC Wealth Advisors, call  (970) 243-1921 or visit https://dwcadvisors.com.