Tag Archives: happiness

Investing Starts At Home

If you have read many of my past entries, you may have gotten the impression that I am in favor of living in a hovel, huddling in the dark around a bare lightbulb for light and warmth, and eating only room-temperature ramen noodles, while saving every penny for a possible future emergency.

Even my wife would admit — reluctantly — that that’s an exaggeration. The fact is, that just wouldn’t be any fun. I am a strong believer in saving money now so you’ll have it later, and I have been since I was very small. (I remember loaning my mother money when I was nine years old, and insisting on getting interest on it. Not enough — my mother was a very poor risk — but I was young.) I also believe, however, that there is enough misery in this life without inflicting more of it on ourselves than we have to.

As it happens, we live in a nice house in a quiet suburb, have numerous computers, TVs, and other personal electronics, drive good cars, and dine out as often as is practical with a two-year old in the house. It’s not a fancy life, but it’s a comfortable one.

There are, of course, qualifiers to the above. The nice house is in a good neighborhood, but not one of the local ‘prestige’ suburbs. A similar house a few miles to the east would have cost us another $30,000. It wouldn’t have been a better house, just one with a more prestigious address.

I bought a good home theater system ten years ago and it still works great. Someday we’ll upgrade to a big flat-panel TV, but there’s no hurry.

We tend to buy new cars and keep them for a long time. Mine is ten years old now and due for replacement (As I’ve talked about before.) but my wife’s is only a few years old and good for many more. She wanted an SUV, but instead of looking at one of the big, fancy gas-guzzling ones that would have been too big for her to be comfortable driving anyway, we got a modest little Honda CR-V. It runs great, does everything we need it to, and she likes it. All for half the cost of a fancier truck.

Our biggest luxury is probably that we have someone come in every couple weeks to clean, and a crew of guys who come every couple weeks to mow the lawn. No excuses there; that’s pure laziness, paying other people to do things we don’t have time, or don’t want, to do ourselves.

If you are above the poverty line it’s almost certainly possible for you to live a comfortable lifestyle within your means. Simply don’t spend more than you make, and judge the merits of the things you purchase based on how they will serve you, not on what other people will think of them. Bragging rights are expensive and if every month finds you a little deeper in debt, you can’t afford them.

Don’t be stupid in what you spend your money on. My wife was at our bank a while back and one of the bank officers pounced on her, trying to get her to take out a home equity loan. “You own your own home? Why don’t you take out a home equity loan and go on a vacation?”

A vacation? THAT is the sort of thing people are taking out second mortgages on their houses for? No wonder foreclosures are at their highest rate since the Great Depression.

Just to be absolutely clear, borrowing to purchase necessary durable goods, like a house or a car, can be a good idea. Borrowing to finance something as transitory as a vacation is just plain stupid.

People do it, though. I heard a news story the other day claiming that in the past ten years the American consumer has spent $3 TRILLION dollars more than he has earned. The amount of debt that some people have accumulated in order to finance a lifestyle they can’t afford is staggering. Don’t be one of those people. You can only write bad checks for so long before they start coming due, and for a lot of families across the country they are coming due right now.

But, there is no need to suffer either. In THE MILLIONAIRE NEXT DOOR the authors talk about the research they did into the lifestyle of the average millionaire. They go on at great length about how these millionaires are typically working-folks who have simply accumulated a lot of money by the simple method of not spending much. They live very simply and save a great deal of their income.

What the authors don’t talk about, though, but what jumped out at me was why these people are saving. Almost all of them said that they were saving all that money so that their kids could live a more affluent lifestyle. In other words, these millionaires did not see their own frugal lifestyle as something to aspire to, but rather something to suffer through.

My wife and I have a tradition, going back about twenty years now, of going out to eat on Friday night. Sometimes we go out to a nice restaurant, sometimes we order in Chinese or pizza. Sometimes, if we’re sick or the weather is bad enough, we’ll go out for breakfast on Saturday instead. Since our son was born we’ve done more fast food than fancy dining out, but the point is we do something. It’s an expense that the truly cheap would avoid, but I consider it money well spent. Guys, your wives will put up with a lot if they know they’re going to get that night out at the end of the week. Trust me on this.

Small luxuries like our maid service and the weekly night out are important. Having some nice things in your house will make living there more enjoyable, and watching your child play with his new toys is its own reward.

Keeping your family happy is more important than adding a few dollars to the savings account. It’s not an expense; it’s an investment. The most important investment there is.

Thinking Point #7: What You Pay For Is What You Get

What we, as a society, want from our domestic security apparatus (the TSA, Homeland Security, the armed forces, etc) is for them to keep us safe, to let us feel secure.

The security apparatus, however, is rewarded when we feel unsafe and insecure. When danger is around every corner, they need bigger budgets and more power to keep us safe.

What we, as a society, want from our healthcare system is for it to keep us healthy.

The healthcare providers, however, are rewarded when we are sick. If you are healthy and never have to go to the doctor, your doctor doesn’t make any money.

See the problem? Imagine if firefighters got paid only when buildings caught on fire.

When there is a disconnect between what society at large wants from an organization, and what actually benefits the organization and its members, society is going to be poorly served by that organization.