The Algebra of Wealth

The Algebra of Wealth is a college professor and serial entrepreneur’s personal formula for achieving financial freedom based on focus, Stoicism, time, and diversification, which will help you eliminate economic anxiety through a combination of well-paid work, diversified investments, and good financial habits.

Professor Galloway hates skiing but goes every year. It’s an excuse to spend time with his family. One night, his 11-year-old  son walked in, crying. “I lost a glove. Mommy just bought me these. They cost 80 €. That’s a lot of money.”

Trying to console him, Galloway found himself looking for a glove in the freezing cold — and remembered when he was 9 in the early 1970s. “After my folks separated, economic stress turned to economic anxiety. Anxiety gnawed at my mom and me, whispering in our ears that we weren’t valid, that we’d failed.”

When he lost not one but two jackets in a row one winter, the young Scott was devastated, knowing how much financial strain he had caused. “Economic anxiety is high blood pressure,” he writes, “always there, waiting to turn a minor ailment into a life-threatening disease.”

Galloway eventually made it to the point where he could comfortably afford not just to replace a pair of gloves but even to take care of his mother at home when she got cancer. However, his poverty-stricken childhood left him with a healthy perspective on money: “Wealth is a means to an end: economic security. Put another way, wealth is the absence of economic anxiety. Freed of the pressure to earn, we can choose how we live.”

That’s what wealth is truly about. Anything more is a bonus — like finding your kid’s lost skiing glove, which, thankfully, Scott and his son also did that night.

Galloway’s “algebra of wealth,” as he calls his formula, is a simple, 4-part equation: Wealth = Focus + (Stoicism x Time x Diversification). Focus is “primarily about earning an income — and you’re going to need a decent amount of it,” Galloway writes. You should follow your talent more so than your passion and increase your earning potential where you can. Stoicism is ” about living an intentional, temperate life in and out of work.” Saving money is important, yes, but it’s also about being part of a community and strengthening your character. Time is “the real currency, the one asset we’re all given at birth.” Remember that now is the time to start acting. Today is the youngest you’ll ever be, and compounding takes time. Every extra day counts. Diversification is about knowing the markets, the basics of investing, and then making a few sound choices consistently. In a nutshell, Galloway’s formula suggests that whatever money you…