There are so many people eager to tell us how to do it.
But how many of them are right?
I recently recently reviewed a terrific new book, by a fellow New York writer, Helaine Olen, called “Pound Foolish: The Dark Side of the Personal Finance Industry” for The New York Times; here’s my full review.
She’s largely scathing of the Big Names who make a shitload of money telling us what to do with our own — (my finger slipped and typed “yelling.” That, too!)
People like Jim Cramer, Suze Orman and Robert Kiyosaki.
In 2012, I wrote a personal finance column for five months, every week, aimed at Canadian readers. I learned that every personal finance author seems to have a different opinion:
Love ETFs! Hate ETFs! Bank six months’ savings! No, three! Mutual funds are great! No, never!
Personal finance is deeply personal, affected by family, culture, education, understanding, (two very different things!), greed, fear, hope, comfort, wishful thinking. And the larger economy. In the 1980s, I earned 18 percent on my Canada Savings Bonds. Not today!
At 19, I was handling my money alone. Like every other, it’s a skill best acquired through practice. I was living alone, earning income as a freelance writer and photographer, putting myself through university and living on a stipend of $350/month in Toronto, where my rent, for a tiny studio apartment in a lousy neighborhood, was $160 a month. That left me $190/month — or $2,280 for the year for everything else: dentist, haircuts, clothing/shoes, laundry, food, phone, answering service.
Oh, and tuition and books; University of Toronto then (mid-1970s) cost $660 a year.
My parents never helped me out financially — beyond the cost of my small, cheap first wedding. And no chance to go home and live free or cheaply for a while after the age of 19.
Here are some of the many factors affecting our ability to earn, save and invest, in bold:
One reason we’ve been able to save a decent sum for retirement is having no children, an estimated annual cost, per child, of $10,000.
I chose a profession, journalism and publishing, that often pays crap. I did expect to have a steady income, and a staff job making $60-80-100,000 a year throughout my 30s, 40s and beyond. But my first New York magazine job, in 1990, paid $40,000 — $5,000 less than I’d earned at a Montreal newspaper in 1988.
(Thank God for my pre-nuptial agreement, and alimony, both of which gave me time to get back on my feet and find a well-paid staff job.)
Yet three recessions since 1989 — with 24,000 journalists fired in 2008 — and ongoing upheaval in my industry have put paid to any notion of a steady, high income.
Once you’re earning beyond your basic needs, (and learn to keep your overhead low,) save like crazy and invest thoughtfully to keep your nest egg growing, no matter how slowly or how small.
Luckily, Jose’s staff newspaper job is steady, union-protected and a kind of work that does not damage his health or strength. Unlike many Americans, we’re extremely lucky he has a company pension to look forward to. He has also been responsible enough to make a will and designate me the beneficiary of all savings to protect me financially if he dies before I do. (I did this for him as well.) If you have assets, and dependents, protect them!
Do you play the CPW game? Cost per wearing? Better quality clothes and shoes, even pre-owned and repaired, typically last longer than cheap crap you have to keep replacing. (And earning more money to pay for!)
I bought an apartment in June 1989, a one-bedroom. I’m still here. I certainly didn’t plan that, and fear I’ll never live in a house. I’d kill for a fireplace and backyard! But that real estate decision, (a long term mortgage with a decent rate, and low maintenance costs) allowed me to do good work I enjoy, even freelance, living alone, and allowed me to save 15-20 percent of my income every year, even when it was laughably low.
Read this life-changing book, and decide what is truly worth most to you — owning even more/bigger/newer stuff or enjoying free time. You can’t ever buy more time!
We drive a used, paid-off car, with no plans to replace it any time soon. (See: low overhead.)
Managing your money intelligently and attentively is a wearying life-long game of Whack-a-Mole. Just when you think things are going smoothly, boom! The car or house needs a costly repair or your kid needs braces or you lose your job — or all three happen at once.
Here are a few tradeoffs that work for me:
I don’t write a lot of checks to charity — but donate my time and skills to several volunteer boards and organizations instead.
I chose not to continue my formal education beyond a B.A. — but I attended Canada’s top university and, ongoing, read widely, attend conferences and network assiduously to stay current in my industry. Until or unless I know the ROI on an advanced degree, I won’t assume any educational debt.
We drive a battered old car — but it takes us safely, affordably and comfortably 10 hours north to Canada to visit family and friends.
We live in a smaller space than I’d prefer, with no second bedroom for my office or a bed for guests — but it allows us the extra cash to travel, save and entertain.
Managing your money means making choices, every single day. It means determining what matters most to you, and examining — truthfully — why that choice matters right now more than anything. (Designer labels, a trip to Paris, a new pair of skis, a second bedroom, a fourth child, grad school….)
Do you manage your money well?
Where did you learn those skills?
- Weekly Personal Finance Blog RoundUp – 1/4/2013 (debtroundup.com)
- How Some Financial Experts May Be Misleading Consumers (money.usnews.com)
- Kids and Allowance: The Debate that Divides Us (business.time.com)
- Stern Advice – What’s wrong with personal finance? (uk.reuters.com)
- Calling All Personal Finance Bloggers (debtroundup.com)
- The Top 5 Personal Finance Books (apartmentguide.com)