Thinking magically that the renewed virtue of saving alone will protect your lifestyle is short-sighted. Of course, there is no doubt that it fosters a smarter strategy than rampant consumption and its partner, debt accumulation, the demons of our past.
Delayed gratification that was so quaint and boring last year takes on new life. Even imprudence is so yesterday in this seismic shift toward saving. And that’s a good thing.
There is another element to all of this that saving cannot address. Because we require the physical and psychological necessities of life we cannot abstain from spending. There is no cold turkey cure to our spending addiction. No demons implied.
What you identify as a need versus something you want is an individual thing. No two people see this the same way. This means we continue to spend. How to make this vice a virtue is the crux of the matter.
Hollow spending on more stuff, fleeting satisfaction, and unhealthy habits that pervade your lifestyle is a vice. It lacks the long term benefits that give your income its power of leverage. While you may be impatient with building your lifestyle in longer term installments this approach does offer a security and sustainability that ‘wanting it all and wanting it now’ fail to provide.
The need to self-regulate your drift toward more and more of the ‘want to haves’ is insurance that, should the economy also drift from bad to worse, you are at least in a position to protect what you have and maintain today’s quality of life. It may not be all you want but it is surely better than the ruinous path of the alternative.
Spending on purpose is a virtue. Understanding what is important and truly valuable makes it work. And it should be affordable to minimize any further debt and its cost.
Copyright 2009 William M. MacKay
[ add comment ] ( 6 views ) | permalink |
( 3 / 147 )Tagging an American President with a line from the late and renowned Russian Count Leo Tolstoy is fitting.
Both are part of the ruling elite; Tolstoy in literature, and Obama in politics (with a minor in government until proven otherwise).
Harm reduction, the conceptual notion of risk avoidance, has never been the American way of life. The ‘winner take all’ rules of the game preclude it.
Witness the most recent financial crisis with the populist rage over executive excess and the generational lapse and outright opposition toward a universal health care system.
If Obama was just one ‘of the people’ I have no doubt he would have the best interests of his country in mind and would support the full slate of human rights ‘for the people’.
It’s the government ‘by the people’ principle where Obama will be skewered. Tolstoy would not be surprised given his views of the State.
Enter the ruling elites. If they are ‘masters of the universe’ of anything it is their own harm reduction. Need I cite their whiz-kid creativity with debt instruments designed to reduce their risk, their lobbying prowess (war chests), and their innovative compensation packages unhinged from any performance failures?
Obama strikes me as a man who would rail at falsity and injustice. Yet, what is going on with the banking industry and the governance of the bailout efforts lacks transparency.
Acknowledging that greed is not an aberration among the financial elite’s demands that these same banks do not become the gate keepers for the taxpayer’s money.
The roles Obama has given to the favored banks in managing what started out as way to cure the toxic asset crisis they helped create appears (from what is very difficult to make any sense of) at odds in establishing the conditions necessary and sufficient to save the taxpayer from harm. The people are in for a good screwing.
The quantity of Obama’s communication about the multiple acronym- labelled survival plans is modest at best. The quality is lacking. Isn’t there an unequal access to knowledge here when the experts and surely the people cannot figure out (with the information given) how these programs will run their course to a successful resolution? Can truth and justice be served without transparency?
I get a clear message that non-government experts are struggling to grasp the side-effects of the remedy and are worried about the outcomes.
Harm, whether it be to this generation of taxpayers or the next, seems a given under these conditions and this governance 'by the few'.
While Americans and the world have a selfish motive to believe Obama when he pronounces that the economy is being righted and is improving, it looks to me like just another agreeable delusion.
The current slithering around the government trough to get a piece of the bailout action looks like it’s business as usual, Wall Street style.
Copyright 2009 William M. MacKay
[ add comment ] ( 4 views ) | permalink |
( 2.9 / 133 )I don’t mean the latest hi-tech wizardry of the movie industry. But the other big ‘Ds” you also pay for that have no entertainment value unless you are really weird. I offer these up as a reminder to get on with living well and taking pleasure from the little things.
1. DEBT
Debt lies at the core of our recent fears. No special glasses needed to see this monster. If you were highly leveraged it took on a life of its own. Without any special effects it grew dramatically out of proportion to your income as the poverty effect kicked in; stomach-dropping house values, confidence –shattering stock market declines, shaky job prospects, and, even worse, unemployment.
Where the greed factor once reigned supreme the fear factor took over as a consequence of that behavior. Now, consumer confidence is on the rise again. The 30% plus gains in the stock market have helped to reverse the negative sentiment. But the rationale for this turnaround has many questioning our logic. I seriously doubt this recession is ending.
As the government continues to print money inflation surely is close behind. That’s great news for the heavily indebted that could eventually pay their debts with cheaper money. This should help to relieve the chronic anxiety of those in this predicament.
2. DIVORCE
I’m no expert on this one but I have lived through the trials of many family members and friends who have paid the price. The latest figure I saw was that 46% of first time marriages fail. I’m told the numbers for second marriages are even higher.
When the US median household income is $46,326 there is not a lot available to support two separate households and maintain two cars, the kid’s after-school programs, and nights-out with the guys/girls.
Women in low income households unfairly bear the burden of this big ’D’ especially when their education and training do not equip them to seek better paying employment.
Expect the number of divorces to moderate as the cost of this option exceeds many couples ability to pay for it.
3. DEATH
No surprise here. The final big “D” is the ultimate asset-liquidating event. For anyone without health insurance, debt often precedes your final departure and may actually hasten it. Not much may be available to leave a legacy. While the concept of dying broke used to be a novel idea, there is some reality-creep that makes this look probable.
WHAT TO DO?
For us mere mortals and the middle class, take a deep breath and begin to think about your wealth in terms other than financial. And laugh more. This will be a liberating first step.
Copyright 2009 William M. MacKay
[ add comment ] ( 4 views ) | permalink |
( 2.9 / 141 )It seems to depend a lot on your attitude.
Many would envy the millionaires among us but even they are not feeling wealthy. While surveys of poor people have predictable answers, the Fidelity Investments Survey of self-described millionaires offers a surprise.
To feel wealthy, they would want to have about US $1.8 million in investable assets.
In a similar survey by the Spectrum Group, the millionaires not feeling wealthy needed US $7.5 million in investable assets to feel like their old selves again.
With so many unemployed and more losing their jobs as this recession continues it is impossible to feel any sympathy for the depreciated circumstances of the rich.
The $10 and $20 million pay days for departing CEOs of so many failed public companies has soured us toward this privileged crowd.
Even union employees of the big three automakers are not exempt from disparaging remarks about their fat pay packets and benefits. While the criticism is muted, non-union wage slaves have every reason to be envious of the good life so many others have enjoyed.
However you cut it, we are at a crossroads in our perception of wealth. How much is enough to make it to rich? Will our physical and emotional health ever become an integral part of the wealth equation? Will you feel like a rich man or woman when you can follow your dream, not counting the financial consequence, when success is measured in net worth, not self-worth?
During the early days of the Swine Flu outbreak I had been through the Dallas/Ft. Worth Airport. Several days after arriving home I was clobbered with the flu. It became the worst I had experienced. And, to my relief, it was only Type A.
Did I feel rich the first day I felt like my old self? You have been there I’m sure. Against your worst fears of never feeling better again, the relief is tangible.
I felt like 1.8 million bucks. Yet, no amount of money ever buys that moment.
Copyright 2009 William M. MacKay
[ add comment ] ( 6 views ) | permalink |
( 3 / 144 )As the saying goes, “Why aren’t you rich?”
Well, it seems you have a tendency to rate your financial literacy higher than your abilities. As you think so you act. Think jumbo mortgages. Credit card debt.
Researchers at Dartmouth and Harvard found that more than half of the people they surveyed rated themselves 5 or 6 on a scale of 7, the most financially literate.
On the downside, The 2009 Consumer Financial Literacy Survey shows 41% of Adult Americans gave themselves a grade of C, D, or F on their knowledge of personal finance.
Although spending is down for 67% of consumers, 45% of those would return to previous spending levels if their financial situation improved. Proof that old habits die hard.
I guess Shakespeare’s The Tempest, nailed it for my way of thinking when he had Prospero say that “We are such stuff dreams are made on.”
Home ownership, the cornerstone of the dominant financial dream of being rich, fits for the many who were rated by others as subprime borrowers (lousy risks). These folks owe much.
Surely there is a link between financial illiteracy and the current mess. So I’ll side with Shakespeare on this one for the simple reason that it is our dreams that propel us to part with our money on those things that bring them into reality.
But what drives us to spend on all the other crap that gets us into trouble, too? The long answer; read my book. In brief, it is your expenditures on comforts that consume, by my estimate, about 50% of your income.
Most of the satisfaction from these is very short-lived and further expenditures must rise to a higher level of expectation. This generates a vicious circle of further spending.
Of course, you can rationalize all the stuff you buy. However, the debate about what’s a need and what’s a want takes on epic proportions when you discuss this with your partner or credit counselor. I’m not sure who is the toughest task-master on this one?
Still, some analysts point to a shift going on as consumers exit the realm of instant gratification and begin to postpone their indulgences. This is good because most fail to set us free to enjoy the good life. (Many, in fact, create the bondage that chains us to debt.)
It will be even better when a greater percentage of your income is spent on what truly makes a contribution, a lasting contribution that is, to your long term happiness.
Copyright 2009 William M. MacKay
[ add comment ] ( 5 views ) | permalink |
( 3 / 122 )
Calendar
