I have been thinking about money a lot lately. Not how to make it, how to spend it or even how much I have... With 2 of our daughters in or approaching their college years, spending it is not a problem right now. :-) What I have been pondering is how different people:
- perceive money / wealth / assets
- make saving, investing and spending choices
- balance labor / effort vs spending
Now you must remember that my rural Grand Parents, Uncles and Aunts pretty much saved and invested every penny that ever came their way. (other than charitable giving...) And working seemed to be their passion. In fact when my Great Uncle Ike died in ~1979, he still had a hand pump in his kitchen for water, an outhouse out back and his car was a 1962 Impala that seemed to double as his farm vehicle.
I was conditioned pretty good into this life style, at least with regard to working, doing my own home renovations, saving, investing and giving to charity. However after my anxiety attack in 2004, I had to really stop and reconsider this "all work, few toys and little play" lifestyle. I had learned that it was just UNHEALTHY... From then on I bought more big toys and our family went on more vacations.
As part of my pondering, I created the following jar of beads. I liked beads because they are very scaleable... Each bead can equal $1, $100, $1,000, etc. And I believe that money can easily change forms. One hundred $100 beads can be a car, a boat, savings, stocks, bonds, a home improvement, etc. Please note that vacations and that coffee are not wealth exchanges, they are spending for joy, experiences, etc...
Warning: this exercise will not work well for people who have not saved and/or invested.... One does need an income and some savings to play effectively.
- The blue beads represent the part of one's net worth that is made up of property that one owns and plans to hold for a long time. This could be your home, business, land, etc. These are your fixed assets, therefore at the bottom.
- The pink beads represent the part of one's wealth that is made up of savings accounts, 401Ks, stocks, bonds, boats, motorcycles, cabin, etc. Some of these hopefully are pretty well "fixed", where as some of them are what I call toys and tools. The top beads can easily be exchanged for green beads if one wishes.
- The green beads represent income, capital gains, etc. Money that you choose how to spend, save, invest, etc.
It is the green beads and the top of the pink beads that fascinate me the most. I know people who:
- Find a way to spend every green bead instead of ever converting them into pink beads. They are great people who seem to just need that new motorcycle, that exciting vacation, Starbucks coffee, etc. They may be having a "great time now", unfortunately they incur a lot of financial stress and will be very unprepared for retirement.
- Do a good job of balancing the desires of today while investing for college expenses, future big purchases, retirement, etc. They seem to be able understand that experiences today are important, as is having wealth for the future.
- Are simply resistant to spending, they seem to have spent so much of their lives scrimping, saving and investing, that it is really hard for them to spend money just to make their lives easier. (ie Uncle Ike) These also are great people who's favorite words are "we really don't NEED that". My concern is that these folks are missing the best of what life can offer because they are working too hard and/or avoiding the cost of great vacations.
So what do beads mean to you?
- Are more beads better? Do those who die with the most beads win? (what?)
- Is making your life simpler more important than beads? (ie hiring things done, buying better equipment, etc)
- Are beads a waste to you? You want to live for now?
Thoughts?