I thought I would begin the year by applying classic philosophy to our financial well-being and by trying my best not to regurgitate the same list of "top ten financial tips" that is repeated every year that we try for 15 days in January then revert to our regular existence. Rather than ask, "am I better off now than I was in 2006" why don't we find out if we are better off as a nation than we were 50 years ago? Of course, I will end with some financial philosophy to get us all back on course for a meaningful existence...
Our nation's core behaviors, for better or worse, have generally shifted over the last fifty years from values-driven to materialistic in nature. This shift in cultural values is most apparent in America's consumer habits: Our houses are bigger, cars are bigger, and our meal portions are bigger. Is bigger better? Have we become a "super-size me" society? Let's analyze a typical American scenario (aka the "American Dream"): An individual becomes successful as a result of hard work and good decisions and now wants to spend their hard-earned dollars on a bigger home, a bigger car, and a bigger pile of "stuff." What's wrong with that? After all, in America, we have the right to the "pursuit of happiness." The only aspect of our scenario that could make it "wrong" is if all of that hard work and spending does not make us happy and we realize that we are only one of 300 million rodents running in "the rat race."
According to last week's The Economist, happiness, as measured by national surveys, has hardly changed over 50 years. Furthermore, the rich are generally happier than the poor, but rich countries do not get happier as they get richer.
If our country is richer and we citizens have bigger houses, bigger cars, and more stuff to make us happy, then why are we not happier than we were 50 years ago when everything was smaller and we had less stuff? How on earth did our parents survive with only one bathroom, one car, and one television?
I believe American consumers are constantly chasing the proverbial carrot that they will never capture. Happiness is never defined. We do not say, "I have enough." We continuously change the meaning of "rich." Shouldn't we define rich as "having more than we need to live day to day?" As we achieve a better standard of living, we become accustomed to its pleasures, then we seek a higher standard of living and "the carrot" constantly remains out of reach.
I know we can not change our "wiring" as humans but we can use our God-given ability to reason. Now that we know more about who we are, let's use our reasoning skills by applying some classic philosophy to the tired and repeated New Year's resolutions -- "Losing weight," "getting organized" and "putting our financial house in order."
We'll take a slightly different angle by offering these financially healthy "exercises" that will make you financially fit and ready for a new life in 2007 and beyond...
"First say to yourself what you would be; and then do what you have to do." -- Epictetus, c.55-c.135 BC
- To see where you are going, you must first have a road map. The first step in this exercise is to create a "mission statement." This statement encapsulates your core values and basically says what you are trying to ultimately achieve in your life. Some people may really have to dig deep here. If your mission is to simply "have more money" then this exercise will not work. If your mission is to "have more money so I can help others" then you are on the right path. For help in creating your mission statement, take a look at my "Chasing Money" posts in November and/or go to the Covey-Franklin site for more specific guidance.
- Never underestimate the American consumer. Take advantage of this by investing in stocks. The silver lining to the American consumer's voracious appetite for "stuff" bodes well for corporate profits and returns on stocks for long-term investors. One caveat: proceed with caution! Check out my "Where to Invest 2007" posts or keep things simple by looking at "life-cycle" funds.
"All children are artists. The only problem is how to remain an artist once he grows up." -- Picasso, 1881-1973
- You can "remain an artist" by investing in yourself: Start your own business. Go back to school. Education never ends.
"Have more than thou showest, speak less than thou knowest." -- William Shakespeare, 1564-1616
- Stop spending more than you make! This may be the most simple of my exercises yet it is likely the most difficult for the average American. Just like diets, financial "budgets" almost always fail. Try a financial "diet" that will prevent you from spending more than you make. Contribute more to your 401(k) plan or start a systematic withdrawal plan that invests in a life-cycle mutual fund. This "automatic diet" will do the discipline for you. What's left in your pocket is for spending! Once you step out of the rate race, this becomes easy. If you are motivated by money and "bigger" stuff, that's OK. Just be sure money is not your highest priority otherwise you'll jeopardize the success of your mission. Once again, if more money is your mission, none of these exercises will work.
"The value of a man resides in what he gives and not in what he is capable of receiving." -- Albert Einstein , 1879-1955
Give money. Giving money has a way of making winners out of all that are involved. From a philosophical view, you must first give before you receive. The simple exercise of deciding where and how to give some of your money and time will force your mind off of the selfish motivation of making more money. The vast majority of successful entrepreneurs will say that their businesses hit new levels of success after giving money and time to local and regional charities. You will also raise your profile in the community, which fulfills the circle of giving that you created. This is when you "receive by giving."
"Know thyself." -- Socrates, c.470-399 BC
- People still like to think they are the best stewards of their finances. An investor's greatest enemy is likely to be him or her self. If you know this about yourself, hire a "fee only" financial planner that can give you unbiased, broad, and expert investment advice and financial guidance. That way, you will be able to focus on your highest priorities with little or no distractions!
"Time is a created thing. To say 'I don't have time' is like saying 'I don't want to.'" -- Lau-tzu, c.600BC - ?
- This ancient philosopher lived over 2500 years ago yet the logic rings true today. Just do it!
I wish you the best of success in all areas of finance as well as other aspects of your life in 2007 and I look forward to sharing with my readers any information that I find valuable in this new year...
Kent Thune is the President and Owner of Atlantic Capital Investments, LLC (ACI), a fee-only, registered investment adviser based in Mount Pleasant, SC, near Charleston. ACI specializes in retirement, investments, and comprehensive financial planning.
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