wealth

January 25, 2013

All the money she’s saving on cream cheese, she’s blowing on haircuts.

Welcome to the latest installment in our series on how to avoid being poor – by adopting some of the easy and painless techniques we already did. Last time, we wrote about costs that provide negligible benefits, stuff like smoking and drinking. If you missed it, we said it’s dumb to ingest things that cost you money and compromise your health. Which either makes us sanctimonious, or richer than the people who think we’re sanctimonious. One, the other or both. We’re not sure, we can’t hear you over the endless cascade of silver dollars collecting on our kitchen floor (tiled with that $11-a-square-foot brown travertine medallion mosaic stuff, which can get really loud.)

Today, something additive instead of subtractive. It’s easy to tell you what not to do.

Leverage your time. If you’re going to be fanatical about anything in your financial life, let it be this.

We make fun of him weekly in this space, but that contradictory fat man Trent Hamm at The Simple Dollar deserves every last brickbat we throw his way. But he’s not the only one guilty of the practice of encouraging people to waste their precious time calculating returns that end up saving you far less than minimum wage. After hundreds of thousands of years of evolution, humans still don’t have an instinctive grasp on the idea of raw numbers being less important than those same numbers modified with respect to time.

What we mean is this: Would you like $100,000?

You’re going to answer yes, if you’re operating under the implicit assumption that we’re going to immediately hand you $100,000 in some negotiable instruments. Cash, a giant novelty check, whatever.

Okay, would you like $100,000 if you had to work for it for a year? The job is nothing awful. You’re not going to have to give foot massages to that fat actress on that TV show, or anything like that. Air-conditioned office, 9-to-5 workday, 2 weeks’ vacation, bagels in the break room every Monday, no ugly surprises.

Most of you presumably said yes, but a significant handful said no, why would I take a pay cut just to comply with the terms of Control Your Cash’s dopey hypothetical exercise?

How about $100,000 for 20 years of volunteering at a soup kitch—alright, you see where we’re going with this. Any commodity vital to existence that you take in (and in the case of money, give out) – food, water, whatever – has to be expressed in terms of time for it to have any meaning. Why? Because we’re mortal. The clock is always ticking. If you made it this far into the post you’re already that many minutes closer to death, and for what? We don’t want to waste your time, so let’s expand a little more on the importance of looking at dollars netted versus time expended.

An hour spent clipping coupons is a feel-good exercise, not a serious attempt to increase your wealth. Divide the penultimate line on your grocery bill (“You saved “$4.33 today, Smart Shopper”) by the time you spent going over your mailbox flyer with a jeweler’s loupe and an X-Acto knife, and it can be depressing. Don’t even get us started on the wisdom of receiving alerts from Gas Buddy. The reward is only worth the effort rendered if you think your time means nothing. It doesn’t. Rich people value their time. If that manifests itself as impatience on occasion, have sympathy. Those rich people have more important things to do. Warren Buffett may live in an old and modest house, but you can bet he takes a private jet everywhere. Does he do it because he wants to flaunt his wealth? Of course not. Hardly anyone can see him, and private jets don’t attract a lot of attention anyway, unless you happen to be hanging out at executive airports and general aviation facilities. Buffett flies a private jet because he doesn’t want to waste his time getting to the airport 2 hours early, taking his laptop out of its bag, or ensuring that his leave-in conditioner is in an approved bottle of less than 3 ounces.

When we say to be aware of what you’re spending your time on in lieu of spending your money, don’t go overboard. It doesn’t mean that every activity in your day has to have some economic justification. Watching TV is what you do after you’ve had a long day and just need to crash on the couch for a while. It earns you $0/hour, and that’s fine. Same goes for learning guitar, if that’s your thing, or trying to fix a leaky toilet. It’s when you’re doing a financially specious activity that you should step back and ask what it’s really costing you. For instance, cataloguing your 1000 used DVDs. Writing descriptions and taking photos of every single one so you can sell them on eBay. That’s an intensive project with miniscule rewards. Just spend 3 minutes putting them in a box, then drive them to your local library. And enjoy the time you saved.

Next up: Putting that time to worthwhile use.

“Your health is the most important thing.” Uh-huh.

July 15, 2011

Every d-bag in this picture (the "d" stands for "dirt") thinks he or she is rich.

A few weeks ago, the popular personal finance meta-blog Yakezie held a contest for students, asking them to define richness and answer related questions. Even though our studyin’ days are long in the past, we decided to write an essay anyway and modify it for you folks. If this doesn’t spur some comments, nothing G-rated will.

Do you think becoming rich is easy or hard in America? Please explain your viewpoint.  What is rich to you? Is it a dollar amount in the bank, a lifestyle, or perhaps even a state of mind?  The United States is the richest country in the world. Will there always be poverty?

In the fashion of a corporate customer service department, let’s answer these questions in the order in which they were received.

Becoming rich in America is easy – maybe not easy in absolute terms, but the qualifier “in America” implies that we’re to compare getting rich here relative to getting rich elsewhere.

In the vast majority of the world, getting “rich” means capitalizing on influence and heredity. The most motivated, diligent, dedicated Kyrgyz camel tender or Mozambican copper miner can’t get rich in any meaningful way that we in the Western world understand the term. The opportunities for entrepreneurship just don’t exist elsewhere, for the most part. The opportunities for joining the governmental apparatus and perpetuating it abound, however. (But only if you’re connected.) And while the United States still has its share of nepotism, red tape, political maneuvering and corruption, it’s nothing compared to what goes on in the rest of the world.

Your humble blogger has a slightly different perspective, having been born and raised elsewhere and only arriving in the United States at the age of 25. When I did I had no money, nor did I have any connections – unless you count the hotel waiter I’d met in Miami a couple years earlier who let me crash on his couch when I first emigrated*. My dreams were modest, but they were distinctively American: make enough to achieve financial independence, ideally on my own and without having a boss breathing down my neck.

So what is rich to us? You’re not going to hear us give some bromide about it being health and good friends, or any of that crap. This isn’t a box of Kashi cereal. If non-monetary criteria are what make people rich, then everyone’s rich, and therefore no one’s rich because “richness” loses its meaning.

“Rich” as we define it means not having to worry about worrying about money. It means having assets that routinely outpace liabilities. Beyond a certain level of subsistence, that’s all anyone can hope for. If you gross $100,000 a year, spend money on everything you could possibly want and need and have $20,000 remaining at the end of the year, and can apply that to the following year’s assets, you’re rich. If you make $5 million and have a $6 million hooker-and-heroin habit, you’re poor.

Will there always be poverty? Again, it makes all the difference in the world whether we’re talking in absolute or relative terms. Our poorest acquaintance lives far more lavishly than John D. Rockefeller ever dreamed of. She can communicate across the world instantaneously. She can control the temperature of her dwelling with the press of a button. She can travel at speeds that the richest people of previous generations couldn’t fathom. For pennies a day, she can ensure that her teeth will stay strong and not fall out of her head. She can eat thousands of calories daily without having to spend time doing the backbreaking labor of growing the food herself. Or even cooking that much of it.

So yes, there will always be “poverty” in the sense that someone will be at the bottom – even though that bottom has risen throughout the history of civilization and will continue to. Is that a bad thing? Not if the alternative to having some at the bottom is to have everyone at the bottom. It’s important to remember that everything is transitory. The vast majority of people in the lowest quintile of income don’t stay there long: it’s more a function of the point a “poor” person’s at in his or her life – just out of school for instance, or unmarried and pregnant with one’s sixth baby – rather than a permanent condition of status. Both Control Your Cash principals were poor by any modern definition at 19. And are probably rich by most people’s definition a couple of decades later. We wouldn’t have changed any of it to have lived under circumstances where the opportunity to fail and be poor wasn’t available.

*No, it wasn’t the follow-up to a torrid homosexual tryst. Just because a guy sets foot in Miami doesn’t mean he’s gay. You people are perverts.

**This article is featured in the Yakezie Carnival-Best of Yazekie this Week**

**This article is also featured in the Baby Boomers Blog Carnival One Hundred-second Edition**