MY FATHER was age 19 and my mother was 11 when the Great Depression started. They were married in 1942 and I was born in late 1943. Their view of money matters was surely tempered by their life experience.
They had no investments to speak of and always kept what little money they had in a checking account. They would never borrow and didn’t know what a credit card was.
Many years ago, I convinced my mother to buy 75 shares of the company I worked for—a large utility. The investment at the time was less than $2,000. But I could never convince her to enroll in the dividend reinvestment plan. She wanted her cash each quarter. When she died at age 87, I inherited those 75 shares and promptly added them to my dividend reinvestment plan. My parents’ sole income in retirement was Social Security. They had what they needed, but not much more.
Witnessing their experience could impact a child in one of two ways, I suspect: Repeat their mistakes or head in the opposite direction. I chose the latter route.
In the late 1970s, when I was around 35, my wife and I went to a financial planner, who turned out to be more of a salesman. He asked me my financial goals. I told him I wanted a vacation home on Cape Cod and to pay for my four children’s college. He thought for a moment and didn’t say much, but his manner and the look on his face made it clear he was tempted to laugh in my face. It seemed I couldn’t afford anything, except to die. That ticked me off and, as you now know, I never forgot that meeting.
The motivation from that meeting, a company where I worked for 49 years, a pension and later a 401(k), coupled with a frugal financial attitude, allowed me to meet all my goals over the years. I even saved for 20 years in a special account to buy the car that I promised my father—who was a car salesman—I would someday buy. I was 71 when I purchased it for cash. Talk about delayed gratification.
Today’s workers don’t have it as good. The days of pensions and decades with one employer are long gone. But that doesn’t mean the ability to balance needs and wants, save diligently, avoid unnecessary debt and invest systematically are also gone.
I contend that virtually everyone, except the chronically poor, can find money to save and, equally important, to invest. For most, it’s a matter of setting priorities, accepting a reasonable standard of living, and applying discipline to saving and spending, even with the small things. Most Americans simply have too much stuff and may be more focused on the Joneses than their own future. If the only way you can have that upscale vehicle you really, really want is to lease it, you can’t afford it.
For most, the formula is simple: Save and invest at least 10% of pretax income and set your standard of living on what’s left. If that doesn’t make you happy, find a way to supplement your income. I had two jobs of one kind or another from age 13 until I retired at age 67. Even now, I earn small amounts each month—by blogging.
And by the way, saving and investing are not the same thing. It takes considerable ongoing effort to invest. You must set goals, be comfortable with a risk level, learn about different types of investments, set a long-term strategy and more. You can’t simply let your contributions be defaulted into your 401(k) plan’s money market fund or throw darts at the menu of investment options, and then walk away.
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous blogs include Benefits Lost, Double Life and Wait, There’s More. Follow Dick on Twitter @QuinnsComments.