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| Thursday, June 18, 2009 |
| Here's What Works in Any Economy |
Ben Stein's Yahoo Finance article: Here's What Works in Any Economy advocates the basic principal of spending less than you earn and saving and investing the rest. He uses his Father's financial life as an example:That had become a habit with him and stayed a habit even when he was a well-heeled guy in his latter years. After he reached retirement age, he still lived modestly. In fact, he often lamented that he lived too modestly and should have had better homes and more of them. (If you can read this, Pop, I have made up for it and then some.) But in 1979, he and my mother left their home in Charlottesville, Virginia, and moved into their modest pied-a-terre at The Watergate. Then they bought their last car, a Chevy. And they really did not spend any more money other than to give it to charities and to my sister and me.
They had savings, and my father once estimated that he and my mother lived on 20 per cent of their unearned income. That is, the sums coming in from dividends, interest, variable annuities (their most successful investment), social security, and pensions was roughly five times what they spent.
I would suggest that, even if there had been a Great Recession in their latter years, my parents would have breezed through it. It is this attitude that we know works. We know that modest desires are the foundation of economic security on a personal basis. There is no catastrophe worse than lavish desires, as a famous man once said. Our great president, Mr. Obama, cannot provide the rock of prudence upon which to build the cathedral of your security. But you can -- if you learn from my father and yours. Basic good sense means not spending more than you can afford and always realizing that calamity can lie ahead; these principles are your lifeboats in any flood. Yes, it is true that spending less than you earn is a founding principal of basic financial security. However, I am not sure Ben Stein's family is really a very good example. This was a family which made a LOT of money. It is much easier to live beneath your means when your means are so vast. Making that kind of money also helps ensure that you can build up enough wealth to live on just 20% of your retirement earnings.
I struggle with building such a secure retirement while earning a comparatively modest paycheck. I also have to assume that my salary will vary over the years - and not always in a good way. Just saving and investing enough to someday have my retirement income cover my retirement years expenses is goal enough for me. Whether I can achieve that goal is the question. |
| posted by Boston Gal @ 11:50 AM *
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| 6 Comments: |
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I've lost my well paid job here in CA, also in the housing industry. It won't be back since my former employer is practically bankrupt. Now I'm working 5 or so hours a week as an independent contractor for my former employer, which is at least more than unemployment. I'm grateful for my savings so I can consider what to do next.
Sometimes I wonder if retirement was a gift to one or two generations. The way of work has changed so much in this country. There is rarely a promise of a pension and 401ks can be easily lost or halved. Many people are now working for far less money than before. The chance of making it like Ben Stein's parents is really getting away.
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sorry, I couldn't get past the "modest pied-a-terre at The Watergate." comment. Helloooo! Not exactly middle-class. Boston Gal is spot on. Classic rich person congratulating themselves for being "good with money" when they were really born with a lot of things already in place. Kind of like what Ann Richards used to say about GW Bush--he was born on 3rd base but thought he'd hit a triple. Very appropriate here for the arch-conservative Ben Stein, who used to work in the Nixon administration!
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Here's a thought Ben - if your Father was so good with his money, why was he accepting social security? How about not taking the government money since you have done so well and will be leaving your family such a large sum of money?
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Ben Stein makes my head hurt. In his May 4 column, he talks about being an extravagant spender but wishes someone had stopped him. The irony of someone who trumpets personal reponsibility wishing that he had a financial planner to slow him down is simply too much.
He obviously didn't follow his father's example.
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Yeah, um, Ben's one of those people who were born on third base but think they hit a home run.
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Ben Stein's parents' example could be summed up as: once you've become wealthy enough to live off your investments, do your best to make sure that you'll be able to *keep* living off of them by spending less than your investments earn.
Which is good advice, particularly since the greatest gift of being rich is having time to do what you want, not necessarily the ability to buy everything you want.
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I've lost my well paid job here in CA, also in the housing industry. It won't be back since my former employer is practically bankrupt. Now I'm working 5 or so hours a week as an independent contractor for my former employer, which is at least more than unemployment. I'm grateful for my savings so I can consider what to do next.
Sometimes I wonder if retirement was a gift to one or two generations. The way of work has changed so much in this country. There is rarely a promise of a pension and 401ks can be easily lost or halved. Many people are now working for far less money than before. The chance of making it like Ben Stein's parents is really getting away.