Good reads from around the Web.
You might think that as an inveterate saver and blogger about investing, I find it easy to picture the grumpy old codger I am putting so much of my money aside for.
But in reality, I can’t picture myself as an old man any more than I can really remember being an 8-year old.
Saving for me is an instinct, not a vision. While other cavemen were feasting on wooly mammoths and toasting the gods and their good fortune, my ancestors were quietly hoarding discarded scraps of mammoth fur. (We made a killing in the Great Cold Snap of 12,000 B.C., I don’t mind admitting).
So I enjoyed Be Kind to An Old Person on the Psy-Fi blog this week as much as the hedonist next door would, if only he could shake off his hangover.
Author Timmar writes:
The basic appeal [of saving] is to self-interest – because we’re talking about making a sacrifice for ourselves now in order to be much better off in the future – and this has led a couple of laterally thinking researchers to wonder whether we actually think of our future selves not as ourselves but as another person.
After all, that person I’m going to be in twenty years time is pretty hard to imagine; why the heck am I going to do anything for that stranger?
Besides short changing the stranger we’ll become, we’re also bad at the maths of compound interest that make setting aside money for 2030 that bit easier, too. Our brains add up in linear terms, whereas compound interest works exponentially.
At least another ice age is off the agenda. Better start saving ice cubes to make a bundle in a few decades’ time.
From the money blogs
- Get rich with good old-fashioned honesty – Mr Money Mustache
- 5 rules for building a dividend portfolio – Clear Eyes Investing
- Big brains don’t outsmart the market – Rick Ferri
- They only get one whack each at the cat – Wade Pfau
- Towards a long-term investing strategy – Simple Living in Suffolk
- Do I provide biased information? – Oblivious Investor
- Giving up the gold vice – Investing Caffeine
- I’ve won the lottery – but I get no winnings until 2042 – Objective Wealth
- How to reclaim mis-sold payment protection insurance – Five Pence Piece
- Is pet insurance worth the money? – Totally Money
Book of the week: Sticking with the theme of growing old with enough money to behave disgracefully, a quick plug for The Age of Aging
Mainstream media money
- Fine wine investors lose millions as companies go under – BBC
- Return of the Euro crisis – The Economist
- How should governments tax capital? [Debate] – The Economist
- Scottish independence: It’ll cost you – The Economist
- Get active in your search for a passive fund – FT
- How to use the tax rules to your advantage – FT
- Does Osborne’s stamp duty hit echo Brown’s pension raid? – Telegraph
- Peer-to-peer lending shows some longevity – Independent
- Rip-off Britain: Why is everything so expensive? – The Guardian
- Random acts of corporate kindness – The Guardian
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There is quite a lot of psychological and philosophical interest in the concept of the future self. It seems to be the case that we are pretty poor at imagining our future self.
I quite enjoyed Stumbling on Happiness by Daniel Gilbert, his conclusion is that if you want to know how happy you will be in a given future situation you are better off asking someone who is there rather than trying to imagine how you would feel in that situation. I guess you might need some rich old guys and gals to guest blog about how great wealth is!
“sacrifice” is the wrong word regarding saving and investing now. Not buying useless and wasteful items is in fact no sacrifice at all! You actually-gain-(not lose) in two ways.
1. the money you don’t waste today will be there for you later in life when you really need it
2. all the time that you free up because you aren’t out shopping, for technological toys, refurbished E-type Jaguars, a curtain rail cover to match your dining room curtains, plus the time you save not having to shop for accessories for the above items, adds up to…a lot of time! This time you can spend on developing parts of the self that help you find fun, pleasure and enjoyment in life without the need to do it via shopping, stuff, junk and spending money.
Saving and investing money isn’t about becoming wealthy and worry free in some later life that you may never reach, but more about becoming happier, healthier, brighter, and a better person today and now!!
@Dean — Good points. I’ve lost track of the number of times I’ve bought things with a lot of hassle, and endured follow-up hassle afterwards. Late night taxi rides and takeaways from proven and much-loved establishments are both rare indulgences that always deliver. Almost everything else risks grief.
@Dave — I know rich young guys, too. They are about the same as the rest of us. In my experience, any extra satisfaction they have above that seems to be derived from whatever made them wealth (i.e. not inherited money).
In my case, I don’t picture the wrinkly me of the future. I just consider my verdict on the shinier me of the past. How much do I thank him for all that frippery? Which of those past times fortify, bolster and insulate me now? Verdict: could have tried a lot harder. Hopefully Future Me will rate Present Me much more highly.
@ Dean – bang on. Mrs Accumulator and I were just recently reflecting that we seemed to have to go through all that (on a much smaller scale) just to prove it was bogus. Leaving us to try frugality and a much happier outlook on life.
I’m probably closer than some of you young pups, though it is a lot more than a decade till I get my bus pass.
I think you’re all missing the point. It’s not a wrinkly old git you should be thinking of. It is the financially independent you. I had no idea three and a half years ago that financial independence was possible for an ordinary wage slave. Yes, due largely to upbringing I never collected long-term non-house-based debt, but I would never have gone for FI until I realised it was possible. And when I realised it was, it became the the most important directed goal. No more punks pushing me around or telling me what to do with my time. What’s not to like?
ERE and Mr Money Mustache show it can be done earlier than I did. You have to want financial independence hard enough to go without some shiny baubles of consumerism. Or work like mad for a few years in a harsh, girl-free zone as one young guy put it talking of Dubai in the oil industry. That works too.
After the first six months without the baubles, guess what? You may discover that the old adage is right. Many of the things that make life joyful are to do with people; who is in your life, not whether you have the latest iPad. To do those things you need time with people, to listen to them, be they your wife and kids or your wider community. Everybody’s running out of time, one day at a time.
You need to learn what enough looks like. You don’t have to get old to do that, though you probably have to reach early middle age unless you are unusually self-aware. I haven’t quite got FI yet, the main benefit I got from rebalancing was rebalancing Stuff versus Everything else.
So here’s a plea – stop picturing your future self as old and wrinkly. I’ve just looked in the bathroom mirror, I don’t even have crow’s feet and I don’t need a walking stick. I’m nearly at FI and I could have had it years earlier if I had started earlier. Picture yourself in five years, and see if you can get there. If not, try ten years out. If not, 15. Don’t fixate on 60, 65, 66 or 70. As the man said, you only get one whack at the cat. That cat is Life, not retirement 😉
@ Ermine – “You don’t have to get old to do that, though you probably have to reach early middle age unless you are unusually self-aware.”
Agree 100%. I notice just how many people as they start to get a job go straight into the consumerism idea: getting a car, an iphone, an ipad, HD TV, teleport device, etc and surround themselves with things that generate expenses and then complain that they work too hard for too little benefit. When you start out you live a very stripped down life and I do always just think to myself, I imagine if I had £20k or £30k coming in each year. To put that idea into perspective one year I earnt £3.5k in 10 weeks in the summer and since I was on a good rent at the time that paid my expenses for the year (remember us pauper’s don’t really pay income or council tax). Some will earn £50k a year and find it only pays their expenses for the year. The problem is and I wish I had a pound for every time I heard this: “I may as well, because I’ll be able to afford to do it”. The hardest challenge I’ll ever face is the moment I get a decent income and think to myself… “It would be a lot easier if I just did this, I’ve earned it”. It seems foolish to be saving when you feel so wealthy.
If we are able to put aside £10k a year for 10 years with rates at 5%, by the end of that 10 year period we’d be earning £7k a year just from our capital. Keep it up for 25 years and that’s £25,556 and enough for a quiet retirement. By the time you’ve done that you’ll have made up 15 years on most other people which I’m sure will compensate for any loss of iGadgets. I don’t know if any of you have seen Wall-E, but that’s the consumer goal and where everyone else will be heading: http://www.youtube.com/watch?v=h1BQPV-iCkU&feature=related
I agree in principle with these sentiments. Nearly 15 years ago now (eek!) I was headhunted for my first ‘proper’ job in London, with a salary about 50% higher than before. I have a stereo in my bedroom that I bought in celebration, thinking I was going to be ‘rich’. It was about the only impulse purchase that I made (and a comparatively cheap one, compared to say a car) before my first paycheque arrived, my first rental payment (in a shared house with a friend) went out and I realised I really wasn’t. Some people take years for the lightbulb to go off.
I don’t think that envisaging (or failing to envisage) yourself in 20-30 years is an uninteresting or entirely fruitless endeavour, however. For one thing, I often think how many of the ways I enjoy life cheaply are because I am still comparatively young (I have pretty good health, no dependents, most of ‘my looks’ remain intact, and I can just about hang out with an older student crowd if I wear the right t-shirt). That isn’t going to be the case at 60, and I want to have some money to make it easier then.
Obviously I fully agree it’s best to learn to enjoy life without spending much, however. I’ve saved around 20% to 50% of my net income for more than a decade.
@TheInvestor – I guess the best thing is to look out for you current, short-term future and long-term future self. Envisage what you want for the now and the long term future. As far as I can tell, that is what you are doing.
In a similar story I’m still running the Audio Research preamplifier I bought with interest free credit when I first started work in’82. It was secondhand then, but I’ve put thirty more years on it.
Very interesting. I do agree that the future self is one that is extremely hard to relate to, especially when you’re in your twenties. ‘Pensions’, for instance, sound extremely dull – they’re the preserve of your grandparents. Saving 10% of your income each month for when you’re old and wrinkly feels too abstract- all the more so when you consider the financial burdens of young people (low entry level salaries, high rent costs and student loan repayments).
We’d do well to reduce the distance between the ‘now’ self and the ‘future’ self. I think dispensing with terms like ‘making sacrifices’ or ‘taking responsibility’ would be useful – we need to make saving sound much less onerous.
I think we also need to spell out what failing to save for your future can be like. Certainly if I’d seen say YouTube clips detailing the difficulties of surviving on a state pension, for instance, I’d have started saving for my ‘future self’ the moment I entered the work place, rather than now at the age of 24.
I also agree that too few people understand how compound interest works. We need to spell out just how easily your money grows if you start saving at a younger age.
Thanks for posting and getting us all thinking.
(Oh and thanks very much for the link).