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When we consider a person successful, we think of economic success. However, if we define success as achieving a sense of happiness, many economically successful people are not successful. Economic success often generates more needs than resources. We have named this dilemma The Success ParadoxSM.
There are four forces brought by wealth that impede successful living: economics, complexity, pressure and constraint. These forces create problems that draw many smart and capable people into The Success ParadoxSM.

Economics
Financially successful persons have significant income or wealth. Surprisingly, there are two dynamics that cause high income to create an impediment to success. There is a mathematical challenge and a social diversion which create a dilemma for high-income Americans.

The mathematical challenge occurs because increasing income is usually accompanied by increasing spending, which translates to more wealth required for financial independence. This can be problematic for someone who was saving a percentage of a smaller income and working toward a goal of achieving financial independence based on lower spending.

The rule of thumb savings rate of 10 percent is for a normal wage earner experiencing typical wage growth and saving for retirement at age 65. A person who enjoys rapidly rising income and who continues to follow the 10 percent savings rule will not have enough to retire at age 65 because the early savings that is crucial for accumulating wealth will have been low relative to the higher spending created by higher income.

Social pressures exacerbate this impediment. At the time the savings rate must accelerate, high-income earners are drawn to posh neighborhoods and feel obligated to send their children to exclusive schools. A $5,000 monthly mortgage payment, two $800 per month automobile lease payments, $30,000 a year for education, a $1,000 monthly country club bill and a 35 percent marginal tax rate can mean a requirement of $200,000 in income just to cover overhead! After paying for food, clothing and the monthly credit card bill, there is little left for saving and charity.

Complexity
The complexity that financial success brings is easy to see. Extensive investments, complicated benefits, and lifestyle issues are numerous for the wealthy.

Every spring, modest income Americans take several documents to a tax-preparer and their returns are prepared quickly with minimal effort. Wealthy Americans often have domestic employees for whom they must file quarterly wage reports and prepare W-2s by January 31. They may have partnerships that produce K-1s, often after April 15. Their tax returns are complicated and expensive.

Wealthy Americans arrive home after a long day to face a pile of bills. A fundraiser call will often interrupt dinner. Economic success often precludes a moment’s peace.

Pressure
Pressure builds from many sources. At work, there is pressure to continue to earn a high income. Lucrative careers carry pressure to perform. Leaders and achievers face social pressure to give to charities and volunteer their time.
The most destructive pressure may be the pressure they put on themselves to be happy. No one has sympathy for someone in the top 1 percent of financial earnings who struggles to find happiness! And the affluent often feel failure for not finding happiness in a life as wonderful as theirs. They feel they are doing well enough to retire at 55 and yet they are often behind schedule for retirement at 65. Their failure to be happy becomes a source of more pressure.

Constraint
Finally, financial success often comes with constraint. A person who earns $30,000 a year can find $30,000-a-year jobs for qualified people; but a $300,000-a-year employee has no such luxury. Jobs that yield $300,000 a year in income are rare. However, because of overhead, a lower paying job is not an option. When frustration and pressure build, the feeling of constraint can be overwhelming.

We need only consider the tragic lives of numerous athletes and celebrities to see this impact. Combine the toll exacted by complexity with the pressure of a lucrative career; add the frustration of failure to save enough and create an inescapable constraint. You then have a formula for misery.

Is Financial Success a Recipe for Unhappiness?
It comes as no surprise that wealth is not a prerequisite for happiness, but it is shocking that wealth can create unhappiness. It does not have to be so. Well-managed financial success will enhance happiness. Being trapped by The Success ParadoxSM is the result of being led by life rather than leading life. Escaping from The Success ParadoxSM requires taking control. Find out more in our next article: Escape from the Success ParadoxSM.

Michael H. Davis, JD, LLM, CFP®, is the founder and CEO of Resource Consulting Group, a fee-only financial planning and investment management firm located in Orlando, Fla.


July 2007

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