Category Archives: Money Matters

The New Necessities

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I’m now officially on the bandwagon of people writing about people’s struggles with debt.  One straight shooting commentator recently summarized the problem this way: We’re buying things we can’t afford.  But that insight begs the question why?  Here are the most commonly offered answers:

• credit is too widely available 

• financial illiteracy

• ubiquitous internet access makes on-line shopping a continuous temptation 

• a lack of personal discipline more generally

Here are a few additional reasons that are not an important enough part of the debt discussion:

• a lack of meaningful community and an associated spiritual longing 

• partners with different spending habits and different levels of commitment to saving and investing

• increasing expectations that things like a high speed internet connection, eating out weekly, a cell phone, and cable television are necessities of middle class life

In what follows, I zero in on the last two bulleted points.  

No matter how large my blog readership grows, I will not considerable myself successful until I get my wife to read it more regularly.  Maybe the next sentence will help.

I probably don’t tell her it enough, but for a lot of reasons, I love L.  

Like every married couple, we have our issues and our moments. Vague enough? Issues and moments are inevitable when two imperfect people pursue intimacy. Nonetheless, there are some things we’re amazingly in sync about.  For example, our parenting instincts are extremely similar.  We explicitly respect and trust one another’s parenting.  We also share a deep desire to live more simply which a story from last week illustrates.

Last week A and J were camping with friends so we had fun spoiling Marley and practicing being emptynesters.  Thursday night’s plan was to go out to dinner. But after going out to lunch with a colleague at work and then attending an afternoon meeting that was catered, I didn’t feel like going to another restaurant.  Most women (or men) anticipating a nice dinner out would not switch gears too gracefully.  

So it was with some trepidation I suggested an alternative, “Instead of going out to eat, do you want to throw a simple picnic together and bike to Priest Point Park?” Not only did she say “sure” but she meant it.  No big deal.  What a blessing.  After cutting some honeydew, tossing some tortilla chips and sandwiches into a backpack, we were off.  We washed it down with. . . water in water bottles.  

It wasn’t fine dining, but it was a nice experience.  We got a little exercise in and we had an uninterrupted conversation surrounded by towering pines and the Puget Sound.  

The vast majority of personal finance discussions revolve around increasing one’s income and far fewer challenge people to reduce their monthly expenses.  Overtime, the middle class has grown accustomed to eating out and to high speed internet at home, cell phones, and cable television among other things.    

It’s interesting to run the numbers for just those items.  Weekly dinner out for a family of four at an inexpensive restaurant with water, $60 x 4 =$240/month; high speed internet at home, $45/month; family cell phone plan, $100/month?; cable television, $45/month.  That’s approximately $330/month  or $3,960/year and then let’s round up since we’ll need at least $40 to drive to dinner 52 times.  So every household needs approximately $4,000 for what might be referred to as new necessities.    

We are products of our environments.  No man or woman is an island unto themselves, meaning we tend to follow examples set by our family, neighbors, and friends.  It’s difficult to swim upstream and live simply and save when there’s so much momentum for mindless consumption and spending.  

I feel very fortunate to still be swimming upstream with the person I fell in love with 23 years ago.

Taxes and Tenure Tempo Run

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Early Wednesday morning, before TP (Training Partner) and I had left the hood on our tempo run, the talk turned to new taxes, economic growth, Governor Christine Gregoire, inflation, and tenure.  Tenure? 

TP doesn’t think I understand the negative consequences of tax increases on people like him.  More than that, he thinks I’m incapable of understanding the negative consequences because my paycheck isn’t contingent on how many students I recruit and retain.  His annual salary is based in part on bonuses that are based upon steadily increasing sales.  Steadily decreasing sales means he’s looking for work.

I counter that lower taxes don’t always lead to increased economic growth (see 2005-2008).  And economic analysts agree that both JM’s and BO’s economic plans will add to the deficit which of course has negative medium and long-term economic consequences.  Rather than simply repeating that we need lower taxes, we need to discuss national, state, and local priorities and how we’re going to pay for any tax cuts. 

Ultimately, TP and I disagree about the role of the government; consequently, we usually finish our runs/debates agreeing to disagree.

Intellectually at least, I understand that people will purchase fewer of TP’s products since they’ll have less disposable income.  But what TP was trying to communicate is that I can’t truly empathize with him.  And I admit I don’t understand his day-to-day work experience in a “deep down in the gut” sense.

I think his frustration is I can’t fully appreciate how stressful his work world is and I wouldn’t be quite so liberal if I had to walk in his work shoes.

In my early twenties, I decided socially redeeming work and meaningful interpersonal relations were more important than making lots of money.  By the time I received tenure seven/eight years ago, I had developed a sense of professionalism that hasn’t changed since receiving tenure.  In TP’s thinking, employees are motivated almost exclusively by economic incentives.  As a result, he struggles to understand what motivates educators like me to continue trying to improve.

Just like me, TP tends to generalize from his own experience; nonetheless, I don’t want to say he’s incapable of understanding what motivates me because that’s a conversation stopper.  When he pulls out the “free market business” card and says I can’t understand the impact of higher taxes, it’s a conversation stopper.  Instead, I want to be a good friend and listen and learn by saying, “Teach me. What’s it like to get increasingly more difficult sales targets? What’s it like to feel like your customers won’t be able to afford your product? What’s it like to feel you can’t take an afternoon off without fear of falling behind your targets?  Are the rewards worth it?  Why or why not?”

TP and I have a unique friendship.  We often get into passionate disagreements that we’ve learned to quickly put behind us.  I may never understand the world of a salesperson as deeply as he would like, but as a result of our long running friendship (pun intended) I have a little better feel for life outside the Ivory Tower.  And for that, I’m thankful.

   

Wise Shopping

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Positive psychology, a relatively new academic sub-discipline, intrigues me.  Founded by psychologists who felt their field had become too focused on dysfunction, positive psychologists study “the strengths and virtues that enable individuals and communities to thrive.” 

In 2006, Dan Gilbert, a positive psych prof at Harvard, published a bestseller titled “Stumbling on Happiness.”  Referred to by some as Doctor Happiness, he was interviewed by a New York Times journalist recently.  Here’s an excerpt:

Q. As the author of a best seller about happiness, do you have any advice on how people can achieve it?

A. I’m not Dr. Phil.  We know that the best predictor of human happiness is human relationships and the amount of time that people spend with family and friends.  We know that it’s significantly more important than money and somewhat more important than health. That’s what the data shows. The interesting thing is that people will sacrifice social relationships to get other things that won’t make them as happy—money. That’s what I mean when I say people should do “wise shopping” for happiness.  Another thing we know from studies is that people tend to take more pleasure in experiences than in things. So if you have “x” amount of dollars to spend on a vacation or a good meal or movies, it will get you more happiness than a durable good or an object. One reason for this is that experiences tend to be shared with other people and objects usually aren’t.

Q. Have you just expressed a very anti-American idea?

A. Oh, you can spend lots of money on experiences. People think a car will last and that’s why it will bring you happiness. But it doesn’t. It gets old and decays. But experiences don’t. You’ll “always have Paris” — and that’s exactly what Bogart meant when he said it to Ingrid Bergman. But will you always have a washing machine? No. Today, I’m going to Dallas to meet my wife and I’m flying first class, which is ridiculously expensive. But the experience will be far more delightful than a new suit. Another way I follow what I’ve learned from data is that I don’t chase dollars now that I have enough of them, because I know that it will take a very large amount of money to increase my happiness by a small amount.  You couldn’t pay me $100,000 to miss a play date with my granddaughters. And that’s not because I’m rich. That’s because I know that a hundred grand won’t make me as happy as nurturing my relationship with my granddaughters will.

Q. So you hold with the notion that “money can’t buy you happiness”?

A. I wouldn’t say that. The data says that with the poor, a little money can buy a lot of happiness. If you’re rich, a lot of money can buy you a little more happiness. But in both cases, money does it.

Gilbert’s responses interest me on several levels.  I haven’t done the scientific research he has, but my life experience tells me the same thing—friendship and community consistently prove more gratifying than money and material goods.  One would think money would free people up to spend more time with friends and family, but Gilbert points out Americans tend to sacrifice social relations to get money.

Americans’ tendency to sacrifice social relations to get money brings to mind a unique feature of Norway’s social welfare system.  In Norway (top income tax rate of 45%), each June, the government gives every taxpayer 12.5% of their salary from the previous calendar year for a July or August vacation. 

If your government did that, what would you do with your 12.5% vacation bonus?  Nearly all Norwegians use their vacation bonus to take extended vacations.  Major businesses completely shut down for up to three weeks.  Even the court system closes and all cases are postponed. 

In the United States, some of my friends say they can’t take even weeklong vacations because they would be buried under voice-mails and emails when they return and they’ve convinced themselves they can’t afford to make less money.  It would be naïve of me to think I’m unaffected by my friends’ choices and actions.  Hypothetically, no matter how high a priority friendship and community are to me, if all of my friends work all of the time, my friendship/community potential will be severely limited.  

Why are Americans prone to sacrifice social relations to get money?  Are we products of an advertising industry and national culture that makes happiness more elusive?

Gilbert’s point that experiences contribute more to happiness than durable goods also intrigues me.  Intellectually, I understand his argument, but I think about that continuum differently.  With his Harvard salary and book royalties, he’s probably far wealthier than me, but even compensating for that, I can’t quite wrap my head around his “flying first class” example.  I think it’s a stretch to compare flying first class with a week in Paris.  My question is why pay four times a regular ticket price for two to four of hours of relative comfort and service when no one says weeks, months, or years later, “Remember how comfortable and pleasant that Boston-Dallas flight was back in 08?”  Just like the hotel rooms we stay in for one night, we tend to forget both good and bad flights.  Is a $500 hotel room five times as nice as a $100 one?

And if for the poor, “a little money can buy a lot of happiness,” shouldn’t increased philanthropy factor into the “first class” decision-making process?  Don’t Gilbert and others, who are happy, like myself, have a moral responsibility to help the poor experience more security and happiness in their lives?

Related to that, I don’t accept Gilbert’s expensive suit argument because the suit shouldn’t get old and decay.  It might fall out of style, but setting that aside, I would think the suit would be a more lasting and gratifying purchase than a first class ticket, especially if it’s worn to social gatherings.  My personal “durable good philosophy” is the more I use the good, the more I’m willing to pay for it.  Therefore, I have no problem paying a premium for an Apple laptop, a nice mattress, and a quality road bike. 

Despite those differences, a closer reading of Gilbert’s second answer helps me better understand his argument and makes me think he has a better grip on this subject than me.  In my mind, the most profound thing he says is, “I don’t chase dollars now that I have enough of them.”  I wonder, why do so many wealthy people continue to chase dollars when positive psychologists suggest it takes very large amounts of it to increase happiness by small amounts?  Why do we sacrifice social relations for money?  Is it because we’re irrational?

Even though you shouldn’t waste your time looking for me in first class and you shouldn’t offer me $100k to miss a family function without having the suitcase of cash in hand, I aspire to be more like Gilbert.  I want to avoid mindlessly chasing dollars and instead embrace being a husband, father, educator, and friend. 

Pedaling Downhill with the Wind II

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Reasonable people can and do disagree about class privilege and the degree to which we are an equal opportunity-based meritocracy.  I clearly stated my opinion in the previous post, but I want to remain open to differing perspectives that might deepen my thinking. 

The following examples of how the wealthy enjoy relative advantage range from lower-level subtle privileges to more dramatic obvious ones.  In and of themselves, the first handful of lower-level examples don’t provide much of an advantage, but they probably do in combination.

• Wealthy people can buy consumer goods in the “off season” on sale.

• Wealthy people can pay more to purchase higher quality goods that last longer even when adjusting for the higher original price.

• Wealthy people can buy consumer goods in bulk when they are on sale.

• Wealthy people can select higher health and auto insurance deductibles and thereby pay lower insurance premiums.

• Wealthy people can pay more in the short-term for “star-related” energy efficient appliances in order to save money in the long-run.

• Similarly, wealthy people can pay more in the short-term for a hybrid vehicle to save money in the long-run.

• Convenience credit card users, often receive money back on their purchases, thereby reducing their expenses (As a convenience credit card user, I receive 1.4% back on every purchase and therefore pay 98.6% of what most people do).

• Convenience credit card users avoid paying exorbitant interest fees.

• When purchasing a home, wealthy people can pay at least 20% of the total cost, and thereby avoid mortgage loan insurance.

• Wealthy people can afford the best accountants and thereby pay less in taxes.

• As noted in a previous comment by CK, wealthy parents can enroll their children in college admission test preparation courses.  Also, they can hire academic tutors, athletic coaches, and music instructors to help their children excel and get into the most selective colleges.

• Wealthy people sometimes receive annual financial gifts from other wealthy family or friends.

• People with wealthy parents don’t need to help out their elderly parents financially in their final years. 

• Wealthy people tend to benefit more from networks of other wealthy people.  Put differently, they have greater social capital.

• People with wealthy parents often receive large inheritances upon the death of their parents.

• The wealthy sometimes pay for their homes entirely and avoid mortgage interest altogether.

• The superwealthy, with substantial assets, earn considerable investment income, which they refer to as “multiple revenue streams”.

What’s my point of detailing these advantages all my multimillionaire readers want to know.  Am I simply fueling the flames of class envy?  Not at all.  Maybe ignorance is bliss, but I don’t think so.  I also don’t think guilt is particularly productive.  As someone who enjoys considerable class privilege, I think about it because it reminds me that “to whom much is given, much is required.”

Others, more radical than me, would call on privileged people like me to work towards greater equality in society by consciously giving up my privilege. 

They’d see my position—that’s it’s sufficient to be socially aware of the added responsibilities that come with privilege—as woefully inadequate.  I’m cool with that.

Another idea, and maybe the most important, is that privilege tends to reproduce itself from generation to generation.  Put differently, every family has momentum, either positive or negative.  There’s no standing still. 

Some people live alone, but no one is a complete island unto himself or herself. Most of us are part of family networks.  Individual members of family networks make daily decisions—whether or not to learn, work, save, invest, take care of themselves—that when taken together, lead overtime to relative advantage or disadvantage.

I’ve benefited from positive family momentum throughout my life.  And to extend the cycling metaphor, my daughters are beginning the bike rides of their young adult lives in the considerable draft created by the positive momentum of their grandparents, their mother, and possibly even their father.

The question is, how conscious of that are they?  Will each avoid the pitfall of privilege—a sense of entitlement—and instead develop a social conscience?  And as adults, will they act on their added responsibilities by contributing to a better world by doing socially redeeming work in some small corner of it?  

Pedaling Downhill with the Wind

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US citizens like to think of the US as a meritocracy meaning people’s success is a result of their initiative, ability, and work ethic as opposed to their family background, gender, or ethnicity. According to psychologists, people that think they control their own destiny have an internal locus of control. In contrast, skeptics who believe that institutional racism, sexism, and classism make it more difficult for people of color, women, and the poor to succeed have more of an external locus of control.

The meritocracy/internal locus of control crowd believes strongly that there is equal opportunity in the US. In their thinking, all the children born today in the US start “the race of life” with similar prospects.

The external locus of control crowd is skeptical that there is equal opportunity. They argue that all the children born in the US today begin the “race of life” with a staggered start. Those children whose mothers received excellent prenatal care, those that lucked into stable, well-educated, financially secure families begin life with a clear head start. Those children whose mothers didn’t receive quality prenatal care, those born into undereducated, poor, dysfunctional situations begin life several yards behind the starting line.

These contrasting orientations are ends on a continuum and most everyone’s locus of control falls somewhere in between completely internal or external.

Twenty years ago, Peggy Mcintosh, published a widely read and discussed essay titled “White Privilege: Unpacking the Invisible Knapsack.” A feminist Woman’s Studies professor, McIntosh wrote the essay after reflecting on how different her day-to-day experiences were compared to her African-American female colleagues. The bulk of her essay is a list of the specific ways she experiences privilege in her day-to-day life as a result of being white.

I can’t speak for Mcintosh, but I’m guessing she’d acknowledge we’ve made progress in race relations in the last twenty years, but at the same time, she’d argue many of her examples, are unfortunately, still relevant.

After using Mcintosh’s essay to prompt discussion in a class lately, I began thinking about the ways wealth contributes to privilege in American society. I believe the affluent enjoy several advantages over the less well-to-do, advantages that make it relatively easier for the wealthy to increase their wealth.

I do not believe life in the US is the level playing field my Republican conservative friends would have me believe it is. Rather, to use springtime metaphors, I believe the wealthy are pedaling downhill with the wind.

Does that mean self-discipline and initiative are irrelevant? Of course not. Also, there are always examples of extraordinarily resilient people who accomplish far more than one would expect given the circumstances of their childhood. We should reflect on and learn from these anomalies, but they don’t disprove my thesis. It’s important to distinguish between patterns and themes, and occasional, individual exceptions to those aggregate totals. Put differently, it’s important to think sociologically.

In the spirit of Mcintosh’s essay, I’ve started a list of specific ways the affluent are pedaling downhill with the wind. I’ll share those sometime soon.

For now, I have to highlight one glaring example from the Wall Street Journal website from a few weeks ago. And I quote:

“It is no longer enough to be a millionaire to enjoy the best perks on Wall Street. These days, one has to have at least $10 million to afford the best that retail brokerage firms can offer to clients.

Take the case of Smith Barney, which will cut bank deposit rates to some of its wealthy customers in June when the Citigroup Inc. unit rolls out a “tiering” rate system on bank deposits. After the change, mere millionaires won’t earn as high an interest rate on their deposits as investors with accounts of $10 million and up.

Clients with $1 million or more in assets at Smith Barney currently earn the highest interest rate on deposits in the program. In the new program, the interest rate they receive will be reduced; clients will need $10 million and up in their accounts to receive the premium rate.
The move is part of most Wall Street firms’ strategy to distinguish among different client segments and focus more on the richest of the rich.

Under the program, besides tiers at $10 million in assets and $1 million, other tiers are $500,000 to less than $1 million; $250,000 to under $500,000; $50,000 to less than $250,000; and those with less than $50,000 in assets.

An illustration based on Feb. 20 interest rates circulated to Smith Barney financial advisors indicates that those with $1 million to $10 million in assets will be most adversely hit. From previously receiving yields of 3.81% on their deposits (as of Feb. 20), their annual percentage yield would drop to 2.76, a fall of 27.5%.”

There you have it, relative advantage. Smith Barney definitely has the right to run it’s business any way it likes, but stories like this one, that I doubt many equal opportunity believing, internally-oriented readers take much time to deconstruct, make the notion of meritocracy a joke.

To assist readers in reading between the lines, I’d like to see the WSJ include a truth in advertising-type disclosure at the beginning of articles like the Smith Barney one. Here’s a possibility, “The following story makes any argument that the US is a meritocracy laughable.”

Smith Barney has me fired up enough to take it a step further. I hereby enlist any of you also moved by this example to help me identify potential recipients of the inaugural 2008 MBA—Meritocracy Bullshit Award, that I will hand out once there are enough nominations to choose from. And to any graphic artists out there that want to design the award, may I suggest a person riding their bike down hill with the wind at their back.

Until you light up the comment section with your recommendations, Smith Barney will remain the 2008 MBA leader in the clubhouse.

 

School Ski Day/Stipend Stretching

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The plan this week was to dig into my fitness story a bit, but the word of the week is “spontaneity” so I’ve decided to Brett Favre (improvise) and reflect on a few recent events in Norway.  I just lost my Norwegian readers. 

I’m not as spontaneous as I could be, and probably should be, but within the first ten minutes of waking up Wednesday, I completely switched gears.  I lectured in Lillehammer on Monday and in Rena on Tuesday so I had planned on working at home on a high school curriculum unit I’m writing about Venezuela.  Seconds after waking, L asked if I wanted to go skiing with J, her, and J’s school.  School ski day, cool.  Much to my surprise, and hers, I said yes. 

I’m glad I Brett Favred because it was one of my favorite days so far.  Some kids went downhill skiing, but we went cross-country skiing with about a third of the students.  What I’ll remember from the day for a long time is not just the natural beauty, but also the cultural differences.  We skied 4.7 kilometers up to a cabin where we snacked and warmed up before reversing course.  And it was COLD, -5C, but even colder with the wind-chill.  It was so cold I had to ski away from L to get some feeling back in my fingers.  Wife. . . fingers. . .  wife. . . fingers. . . fingers!  J is a natural though and she covered nearly all of my moves. 

Compared to the type of physical activity elementary teachers might organize in the US, this was way more challenging.  In the US, some standardized test obsessed districts are shortening or eliminating recess and some “avoid all potential lawsuit” districts are even banning life-threatening activities like tag or flag-football. 

I was also struck by the trust that undergirded the whole thing.  We were the only parents that accompanied the students and the teachers pretty much left the students to their own devices.  Sometimes J and I caught up to a seven or eight year-old pipsqueak kicking and gliding for all he or she was worth with no one else within 200 meters of him or her.  All alone on a trail that wasn’t marked that well in the elements getting it done.  Most likely, elementary school teachers in the States would scale down this type of physical activity out of concern that some parents might flip if their child got too cold, too isolated, or too physically drained.

Some of the children were relatively new arrivals from Somali and other warm environs.  A couple of them struggled to keep pace so a teacher directed them to a warming hut where they hunkered down until we returned.  No big deal.

Rough transition.  I just watched a humorous BBC news segment about a text messaging crisis in London.  Recently, apparently, thousands of Britons have injured themselves by walking into street poles and other immovable objects while texting.  As a result, I kid you not, in parts of London, city officials are wrapping streetlights and related poles in what looks like white wrestling mats.  Alright, you’re wondering what kind of leap was that, from cross-country skiing in Norway to text messaging on London streets?  They let this guy teach writing?  In light of the pipsqueak skiers’ resilience, I wonder whether Americans (and Britons maybe) have become too preoccupied with eliminating every potential risk.  By attempting to eliminate every possible risk are we shortchanging our children’s development?  Discuss.

Another rough transition.  Topic two, stipend stretching.  Usually, professional travel is straightforward.  Travel within the university’s guidelines, save and submit receipts, get reimbursed.  A Fulbright grant is different in that they estimate what it should cost you to travel to your site and live there.  They don’t pay for dependents’ travel, but do kick in a bit more in living expenses for a spouse and children.  When you arrive they wire the lump sum to your US account and say “Good luck.”  No receipts, no reimbursement.  This arrangement plays to my strengths because I can reign in spending with the best of them.

We’ve explained to A and J that our plan is the same as L’s 25 years ago when she received a lump sum scholarship to spend a semester studying in Sweden.  She decided to live as simply as possible in order to travel elsewhere afterwards.  We’re traveling to Germany, Italy, and Switzerland in May, and I don’t know if you’ve noticed, but the Euro is laying in wait for us.  We figure if we’re frugal now, we’ll begin our European travels with a bit of a cushion, which should help with more high prices.

We went out for pizza last weekend, a rare, and therefore exciting event.  As we debated whether to order a 30cm or 40cm pizza, I couldn’t help but notice the couple next to us had piled their trash onto their pizza pan alongside three exquisite, untouched pieces of pizza.  With increasing conviction, I repeatedly warned the fam that I was about to rescue those pieces from their tragic fate.  In the end, I resisted which inspired A to resist my repeated dares when the same couple only ate half of their cheesecake. 

Apparently wiseacre dumpster diving sketches make an impact because a few nights later J suddenly informed us, “In school, they handout a piece of fruit every day, I could bring an extra one home.”  Stunned, L, A, and I simultaneously grimaced and wondered what had we done?  I drew on fifteen years of parenting experience to think of the perfect response.  “I don’t think one fruit a day is going to put much of a dent in our European expenses, but if you beat up a few kids each day and take their fruit, then it definitely might.”

We have two major expenses: rent and food.  Rent is a fixed expense.  Our food strategy is to buy what we need not necessarily what we want and minimize waste.  Those are not onerous tasks.  We’re probably eating even more healthily than normal, tons of fresh fruit and veggies, little meat, and very little alcohol.  Truth be told, the “we” and “we’re” in the last few sentences mostly refer to L and me.  A and J spend the bulk of their allowance on chocolate. 

Most nights are low-key.  We read, watch television, and hang out together more than at home.  We venture out a couple of nights a week.  The double x chromosomes went to a great violin concert this week and we are working our way through two “12 clip” swimming pool passes.

The tough thing about stipend stretching is acknowledging that I might want to cut back more than the other members of the team.  Leftover pizza joking aside, I’m being careful not to impose my level of asceticism on others.  I just hope by the time A and J have to see a therapist to work through this experience, they’re old enough to pay for it themselves.

I’m enjoying focusing exclusively on needs.  I don’t plan on buying a single non-food, non-essential item while I’m here.  That’s liberating.  There are a few cool outdoor stores in town, but I haven’t even been inside any of them yet.  Not only do I want to stretch the stipend, I don’t want to transport one more ounce of stuff home. 

Stepping off the consumerist treadmill has helped me better understand how time consuming “pre-consuming” activities are, desiring something, researching it, comparison shopping, ruminating over it, finding the best price, rethinking the purchase, and on and on.  Then add into that mix the time spent traveling to and from stores and the energy needed to store and maintain everything purchased.  Amazing how much time I’ve saved by opting out of shopping. 

The most positive consequence of cutting back to the bare minimum is being reminded that the most meaningful experiences—getting to know Norwegians, leisurely meals and quite evenings with the fam, writing, cross country skiing, are mostly nonmaterial.

Finally, a pearl from one of J’s classmates who I got to know while waiting for the ski busses.  As she got on the bus after downhill skiing all day, I asked, “How was your day?”  “Good,” she said, “but I broke my leg, just a little.”

Market Downturn

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I’m enjoying blogging. My readership is small (about 360 hits so far), but ticking upwards. It looks like I have a core of readers made up of family, friends, and students. My hope is if people enjoy it they’ll send the link to a friend or two.

A writer friend once told me that if your first thought when you wake up isn’t your current project, you’re subconscious isn’t working hard enough. With my self-imposed deadline, I find myself thinking about writing more than normal. As a result, I have lots of ideas for future posts.

So far I’m struck by how much thinking I’ve done over the years about parenting and family life and how much I enjoy communicating about those topics. I’ve never committed to writing a book. My doctoral dissertation, the story of an international studies magnet high school in SoCal, was well received and would have made a decent book, but in hindsight, I needed a mentor to help find a publisher. Since finishing my dissertation, I’ve never felt like I’ve needed more than 30 pages to communicate what I’ve most wanted to. I’ll know more in a year, but as a result of this process, I think a book may bubble up. If I do commit to writing a book and it starts taking the form of an insipid, run-of-the-mill self help manual, please organize an intervention and steal my laptop.

You may be relieved to learn I don’t feel a need to communicate all of my thoughts on parenting and family life in the first month or two of this year-long experiment. I should probably turn to a more masculine topic like finance. Nothing girlie about bears and bulls.

After reading my initial post, one of my sibs asked, “If you’re writing about wellness shouldn’t faith play an important part?” I was remiss in leaving spirituality out of the mix. What does spirituality have to do with finance? Far more, I believe, than is normally acknowledged.

So many people are stuck seeking fulfillment through store purchase after store purchase that materialism is our secular religion. Religion isn’t the opiate of the masses, consumerism is.

Financial planners assume that the key to financial success is understanding the technical aspects of investing—indexing, asset allocation, minimizing investment costs, dollar cost averaging, etc. But personal finance study after personal finance study demonstrates that even knowledgeable investors buy too high, sell too low, and trade too often.

In sports, athletes that melt under pressure and underachieve talk about “getting in their own way.” Golfers are a good case in point. When a golfer breaks through and wins their first tournament they often say, “I finally got out of my own way.” It’s counter-intuitive, but by relaxing and not trying as hard, we sometimes experience more success. Investors who are most materialistic are most prone to anxiety in times like this because their ability to consume is eroding. They listen intently to the financial pundits, fret over their portfolios, and tend to “get in their own way.”

In contrast, people whose fulfillment comes more from intangible things like meaningful work, intimate relationships, and service, are less likely to sell low, buy high, and trade unnecessarily. Also, these spiritually grounded investors have a tremendous advantage over the less spiritually grounded in that they can delay purchases almost indefinitely. As a result, they can time the selling of their assets only after they’ve greatly appreciated. As their portfolios dip, there’s a longer-term perspective and a calmness that enables them to either tune out the hyperbolic analysts or put their hysterics in historical perspective.

As an investor, I’ve made more good decisions than bad. I tend to “stay out of my way” but there are bogeys mixed in with the birdies. I admit to watching my portfolio more closely since New Years so the last few paragraphs are reminders to myself.

Our mutual fund company provides an unusually helpful service that helps me keep historical perspective. When I log on to its website there’s a “Portfolio Watch” that shows our asset allocation. Currently, it’s short-term reserves, 3.5%; bonds, 38%; stocks, 58.5%. Then there’s a link to “Historic Risk/Return, 1926-2006.” Average return, 8.8%. Best year, 35.7% (1933). Worst year, -25.9 (1931). And here’s the key stat for getting a hold of today’s market. Years with a loss, 19/81, 23.5%.

This won’t sell many papers or fill much time on cable television, but after an unusually strong six year run, the market is returning to the mean.

Average return, 8.8%. After adjusting for investment costs, taxes on earnings, and inflation, what, 4-5%? So the critical questions are 1) how much is invested and 2) how patient is the investor?

Shifting gears, my youngest daughter, J, learned about the stimulus bill in one of her classes recently (props to that teacher) and she was more than intrigued. “What are you going to do with your $1,200?” she wanted to know. “Save it, invest it.” She couldn’t have been more disappointed.

I haven’t given the tax rebate a lot of thought, but increasingly, money’s most important value to me is time. In all of the “What would you do with $600?” discussions going on, I haven’t heard anyone say, I’ll use it to slow down a bit, rest, reconnect with friends, think, nap, exercise, start a garden, read.

At work recently, I encouraged a close friend known as “Ichiro” to apply for an administrative position in part because I knew he’d be good at it and in part because I told him he could nearly double his salary. His response? “The more I’d make, the more we’d spend.”

Psychologists who study happiness refer to our tendency to adapt to what we have and perpetually seek more as the “hedonic treadmill.” Ichiro’s self-understanding is unique. Most of us don’t know we’re on the treadmill.

How much is enough? When does time for one’s self and one’s closest friends become valuable enough that we “buy” time? What about saving not to spend, but to slow down? What would being more spiritually grounded look and feel like?

The Bush and Obama administrations better hope my thinking doesn’t spread, because if it does, a recession is all but guaranteed.