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:
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.
Thoughts?
- 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.
- 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?
11 comments:
It seems you are suggesting an either/or proposition? Either you live richly now or you save for the future? I've never seen it. My folks worked like the dickens and earned little, yet retired with a very sizable nest egg, still intact while they live pretty much on Social Security alone. Yet every year we took a long vacation, often went fishing on weekends, and even had fun with "chores" like plucking chickens, working the garden, raking leaves. The saying was "if you're not having fun, you're doing it wrong."
Actually #2 is all about balance. Now if your Parent(s) had dropped dead pre-retirement... Would their decisions have seemed so wise?
And yes I grew up not knowing the difference between work and play... And in some ways the difference is only a matter of perspective.
A family can enjoy themselves out picking rocks in the hot sun... Or they can enjoy themselves playing golf in the hot sun...
And yet few normal people would consider picking rocks in the hot sun as "fun".
My Dad used to say, "I just wish somebody would point to a calendar and say, 'that day.' I would arrange to be flat broke on that day." But since he could not, he was happy leaving whatever he had to his heirs. And enjoyed every minute of it. "Both" is the answer. He would take odd jobs, moving people, and it became a "family outing." Great fun, and profitable.
He would have fit right in with some of my extended family members. :-)
And he would have enjoyed THAT, too. He spent some time as a hobo, but for all his life had a great disdain for "bums" of every kind. The difference, he said, was "a hobo will work but a bum will not."
And hobos are happier.
I am finding odd that our more Liberal contingent is staying silent with regard to the topic of earning, spending and saving.
This was timely.
CNN Money 3 Reasons to Retire Early
I keep thinking of doing this however my commitment to pay for the college education of my daughters helps keep my tied to the plow... Not to mention having 3 daughters... And likely some wedding expenses... :-)
I guess I had better keep that 17 year old Suburban running awhile longer...
Here are some different ideas for older readers who have saved and saved and now find it hard to spend.
CT New Years Resolution: Spend More
Fortune Spend More
Forbes Happy Retirement
CNN Money Learning to Spend
Psychology of Money
Bankrate Tips to stop being frugal
Saver or Miser
CNBC Now That You are Finally Retired
I was told that the decision to retire was based on three things: one) are you still enjoying what you are doing? Two)do you have enough saved to live as you want to live? Three) most importantly, do you have something else you want to do?
My father always said, "if you retire and don't have something else to do, you are a dead man." I have seen the truth of it many times over. Those who retire to the rocking chair are dead within a year. Those who say, "I am so busy I don't know when I found time to work" seem to live long and productive lives.
As for spending, it is not that complicated. You simply follow that rule about marginal utility. Would you be happy having a new boat now, or new carpet for the living room, or keeping that money in savings for your old age? Obviously the answer to that question changes as you get older, but the calculus is just the same.
My old boss spent what seemed like weeks in his office, scribbling on scratch paper and tapping a calculator. Then he announced he was retiring. He told me, "no matter how I figure it, I make more money retired than I do working, so I gotta try it." A few months later he called back and said, simply, "I was right!"
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