1. It's time to stop thinking that rescue is on the way. The government doesn't have the will to do it: our elected representatives are afraid that facing the facts would mean losing elections and losing lobbyists' dollars. The "invisible hand" of the market won't do it: the all-too-visible hand of greed is too busy sending more wealth to the already wealthy. The magic of compounding can't do it: inflation, brokers' fees, cyclical bear markets, and investor panic conspire to keep most of us from getting ahead of inflation.
2. We need to stop thinking that the last 10 years are an exception, and that happy days will soon be here again. There is little reason for optimism in a nation that is, corporately and individually, leveraged way beyond its resources, producing little in the way of hard goods, rapidly aging,and responsible for over half of the entire world's military expenditures.
3. It's important to be realistic: most of us are not going to be able to work forever, and we are probably going to have to provide for a major part of our financial needs in retirement. Use the magic of compounding interest to counteract the dark magic of inflation. Sock away as much money as you can in accounts that are likely to outpace inflation. Every year, save every dollar that the government allows you to save tax free. In 2010, you can put $16,500 in your 401(k) if you're under 50, $22,000 if you're 50 or older. If you can, add a Roth IRA for each adult, employed or not, and save another $5,000 or $6,000 apiece each year.
4. We've got to start being rigorously honest with ourselves about wants vs needs. This much saving may be impossible, and if you haven't got a ha'penny, then God bless you. But when we're looking for housing, for example, it helps to remember those two- or three-bedroom, one-bath, 1200 square foot houses of 1960. When we're looking for cars, we might remember days when one-car garages were standard and teenagers walked to school. When we're looking for higher education for our kids, we might consider community or state colleges. And on a smaller scale, we might question the wisdom of buying restaurant meals, expensive cable TV subscriptions, gym memberships, fine wines, and other luxuries unknown to our parents and grandparents.
Many years ago in a town far away, we lived two doors down from one of those modest houses. Its owners were a lovely young couple, both professors. When they discovered they were going to have a baby, they decided they needed more space. They sold their little house to another lovely young couple--with four small children. The new owners were very happy with it.
Which brings me right back to the prescription I gave several days ago: Save like hell, and figure out how to arrange your furniture attractively in a one-bedroom apartment. I think this is realistic. Is it pessimistic? Not necessarily. Money is nice, but it doesn't buy happiness. And if you end up saving more than you need, you can always endow a charitable or educational or cultural institution.
less to clean -- I'm in
ReplyDeleteLaVonne,
ReplyDeleteI agree with much of what you said. My parents bought a 1024 sf home in 1958. They had 3 kids. They added a family room addition on the back, so we later had more room. They lived in that house until 1998. While many of their peers and siblings had moved to bigger homes years before, they stayed there 40 years. They eventually bought a condo that was 1800 sf, so that was a "big jump" in space.
The small affordable home is one thing that allowed them to save for retirement. My mother passed away at a young age (63). But luckily, my father began to work only 9 months out of the year at age 54 at another job (due to GM downsizing). But they were able to do some traveling and enjoy about 8 years of semi-retirement together. They could not have done that without "saving"!
My parents were "savers" as you recommend. My mother was born in Italy and her family came to U.S. after WWII. Most Europeans are better savers than folks here in the U.S. Luckily, they passed on their wisdom of savings to my siblings and I.
The only drawback I see with many people greatly increasing their savings rate (as you recommend), is that in the short run, this will lead to continued decline in "consumption", which will mean more job losses, or will mean the recovery will be long and drawn out.
But the alternative would be worse, to keep spending like "drunken sailors".
I very much agree with all but one thing you have said- the focus on savings. If you live "by the numbers" what you say is very reasonable. But if you live "by the gospel" this focus on security simply is not founded on the rock of Christ's words.
ReplyDeleteIf you do your homework in terms of the homilies and scriptural commentary of St. Basil the Great and St. John Chrysostom (giving a vote to our spiritual forbears and escaping our cultural and historical myopia) you will know that this is true.
My wife and I do save, but not "like hell." I believe Jesus called us to "treasures in heaven," which will be lost if we simply focus on security.
"armsopenwide" has offered an important corrective to what I wrote. We should work to support ourselves, as St. Paul advised the Thessalonians, and we should realize that we may have to support ourselves long after our regular income dries up. At the same time, we should not build ever bigger barns, like the rich fool.
ReplyDeleteIf we radically pare down our wants, many of us will be able to pay our own way AND give liberally to others. I like John Wesley's advice: Gain all you can, save all you can, give all you can. Read it in context here: http://theconnexion.net/wp/?p=2873 . When Wesley says "save," he appears to mean "economize." That kind of saving is indeed saving like heaven.