Posted by Tim Stobbs on August 6, 2009
I was recently at a family event where I found out a distant relative of mine actually retired in their late forties. It was amusing to watch the response from some of my family. One of them in particular instantly said “Oh, they must have won some money or something. They must be rich to retire that early.”
I tried to point out they might have just lived below their means for a while and saved it up, but that family member won’t have any of it. It was like they couldn’t conceive of the idea that if you save for a long period of time and don’t spend like mad that it is entirely possible to retire just before 50. The person in question suffers from the “You must be rich” theory.
For people caught in the trap of that theory they really honestly don’t get it. They can’t conceive that is it is possible to not spend a good chunk of your income and instead save it. Or perhaps they don’t understand the miracle of compound interest. Or perhaps they lack the idea you can live off less than $30,000 a year and be happy. Something is lacking in their mind to understand that just about everyone can become rich slowly. Not by winning the money, but investing slowly over decades until you no longer need to work. Honestly I’ve never sure which concept is missing from their understanding. In any case those are the people that will work until they are 65 or later because they assume they need to.
People like this often don’t understand money and don’t want to understand it. As such they are often doomed to lose it to good advertising or salespeople pushing high fee investments. Then they wonder why they don’t have any money to save when they are literally bleeding cash from a thousand small places.
What frustrates me the most the “you must be rich” theory is the label is often wrong. Some people aren’t rich with huge sums of money to their name who leave work a bit early. Instead they often live modestly because they have modest income from investments and/or pensions. It also frustrates me that I won’t be able to share my good fortune later on in life with people that this. They won’t understand it, so why bother telling them. Instead I’ll just say I changed careers, which will be true. I just might not get paid for my next one after I retire.
So have you seen a suffer of “you must be rich” theory? If so have you ever seen one see the light and get past it?
Posted by Tim Stobbs on August 5, 2009
It’s the destroyer of budgets, killer of savings and bane of those trying to crawl out of debt: the impluse buy. It’s so innocent that you often don’t realize you did it at first. You walk past the chocolate bar display and pick one up. Then you stop in the next display and go “I could use that” and before you know it you have a $40 bill at the till when all you needed was $4 of milk.
The problem with trying to control your impluse buying is it just keeps coming back. You just get the thing under control and suddenly you are back doing it again. I’m fairly good at controling the bigger purchases by waiting and making sure I need something before I buy it. It’s the little things that end up consuming my spending cash that I still struggle with now and again.
In my case I tend to buy because I want a quick pick me up. It’s not even like I’m sad or anything. Often I’m just a littled tired or stressed and I end up buying something. In reality I don’t need the item in question at all, but at that moment in time I do want it. Some days I win and keep walking past and other times I lose and buy it.
I’ve yet to figure out a way to control the little spending other than having a short term goal to have something else I want to spend my money on more. Often its a movie I want to see in the cheap theatures or a new DVD that I use as a short term goal. That way I can ask myself, do I want the little impluse item or the thing I really want. I’ve yet to take this concept and exapand it to my retirement savings. Something in my head resists savings for that long of a period for a reward despite the fact it sort of makes sense.
So how do you control that little spending on impulse items? If you got an idea I would love to hear it.
Posted by Tim Stobbs on August 4, 2009
On a big picture basis I have to admit I am confused by recessions. It seems to me that all this obsession with growing our/their economies really isn’t getting much done. We grow for a while, then some one some where does something breath-takingly dumb. Then the growth goes negative and we enter a recession. People lose their jobs, everyone gets worried and generally things go to hell for a while. Then depending on the damage done it takes people a decade to regain the wealth they had prior to the recession.
Perhaps we should cut short this entire process of bubbles rising and falling and just accept lower growth. We could all give up buying crap we don’t really want or need, live in smaller houses and cut back the work week to 32 hours. Then we could all get more focused on building a better civilization rather than just an economy.
I suppose that is why I like the idea of the GPI (Genuie Progress Indicator), which is sort of like the GDP, but it also takes items off that impact of reduction of water quality, the cost of family breakdowns and the cost crime. Unlike the GDP where you get robbed and it is a good thing (they have to replace your stuff) or if you dump chemicals and kill fish in a river it is a good thing (the costs of the clean up). The GPI has some feedback to realize no one wants to be robbed or kill off entire rivers. According to the GPI metric the US as a civilization peaked in approximately 1973 and has been going downhill since then. No wonder if things feel like they are getting worse, they are.
I was a little suprised to find that this has been looked at in Canada. Back in 2003 NRTEE wrote a report on developing a new set of indicators. Yet like many other good ideas I don’t believe this one went anywhere as I have yet to find a nice summary number like the GPI from the Government of Canada.
Yet despite the the sense of the idea, it won’t go anywhere for now. We are a little focused on getting people back to work to worry about how to measure things despite the fact in the long run it might be more useful. So what do you think of using the GPI?
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