Thursday, July 12, 2012
Would that we could see ahead, identify the big shifts and threats, and develop strategy and tactics to navigate around the rocks to land safely on the far shore...but only a few (like John Kenneth Galbraith) can see ahead clearly. Think of someone who chose a college major that would turn out to be in big demand exactly four or six years later: winner. Then there's someone who just followed his own drummer or was wrong in his timing or choice and was kept off life's superhighway by recession or a glut in his chosen field (sometimes it's teaching, then it's law, then it's engineering; never seems to be anything computer or healthcare-related). I faced a recession economy when I finished my Army service in mid-1973 and read much later that situation can put you behind about 10 years if you don't have a timely Plan B in place. I thought a really good military record and quality work experience would make up for being three years behind getting started, but found that was not the case -- no one was the least bit interested. My Plan B wasn't that great.
Automation and mechanization was predicted to result in more prosperity and leisure time, but that was not to be universal and automatic; you still need to think for yourself and strategize to skirt the inevitable downsides like the global arbitrage of labor -- outsourcing -- and that rising "productivity" would not equal an ongoing rise in real wages, and that the wealth derived from smaller payrolls would just go straight to the top. A machine does the work of 100 people, and those 100 are thrown out of work. Some fall through the cracks, some stagnate, and overall they spend less, save nothing and the economy gets the shakes. Old Karl Marx would say, "there's the inherent, fatal contradiction of global capitalism!"
"Primitive" nomadic societies spend less than 20 hours a week working, and don't really distinguish time between that and other things. The phrase "work-life balance" did not even appear in our society until the late 1970s. In the industrial age, work lives and hours became hellish, and even included elementary school age children in the mass workforce (right here in PA, too). My grandfather was forever grateful to Woodrow Wilson and the institution of the 40-hour week (old union slogan for a just workday: 8 for work, 8 for rest, 8 for what you will). Until then he had to labor 10 hours a day, six days a week. Immense private and corporate fortunes were made from this arrangement, and despite the Reagan delusion about it trickling down, wealth always flows upward. Now, the trick is how to fiddle with that economic plumbing so that you can benefit. Despite what we're taught, I don't think you or I are here to make the plutocrats fatter and stupider and then conveniently die, worn out, in our forties.
Most people fear freedom. We pretty much only know the orbit we're in and feel we understand, and hesitate to do any free-range thinking. After all, we see success comes in one of two standard ways: being born into it, or aping and adopting the values of those on top. And significant success leads to power which leads to wealth and the high regard of others.
What if you value autonomy, contentment and being inner-directed, and don't think much of power, excess wealth and the approbation of the those who really seem to be amoral? We didn't, by and large, take advantage of the exceptional opportunities over the past 60 years to be free; we trapped ourselves in consumerism. Look into your home, your closets, your garage: way too much. We now have three televisions, and I had to get rid of two to get down to that number. I collected books and records because they're rich in pleasure and information and are relatively compact, but at one time I collected furniture. Too much! I thought and let it go. Very nice pieces, but they had to be gone.
And there's one of the two keys to making success of your and your family's life but on your terms and according to your principles: reduce discretionary expenditures and trim your structural expenses way below what those in your class consider the norm now. But maintain just enough to stay where you're comfortable, unless you are more fearless than most. So many things are not in your power, but this technique definitely is. We had three cars in the 1990s, and despite working overtime and hauling in the money, it just flew away (partly because it put us in too high a tax bracket). I found the main problem was that the average car costs $8000 a year in depreciation, operation and maintenance, and figured that must mean earning $11,000 a year before taxes to support each. Getting rid of all but one meant an extra $16,000 to save per year or $22,000 one didn't need to earn. Previous to that, we realized our far-suburban home was eating too much in improvements, utilities and yard expenses ($300 a season on lawn mowers alone!), so we moved and downsized. Rather than semi-retire early, we decided to simultaneously save and pay off debt (all credit, then the mortgage). The amount saved on interest payments, when we no longer made any, was phenomenal. Interest received is going into the light; interest paid is falling into the dark abyss.
Simply: lower your expenses and acquisitions so you can eliminate debt and interest and then glide down into a much lower tax bracket. And get rid of stuff you should not have been accumulating anyway. Expensive toys are exciting for the first month and when the thrill is gone they become an ever-increasing burden. Everything you own owns you and demands to be fed.
The second key is one we did not, and probably could not, pursue, but it works wildly well for some. Check out the mrmoneymustache.com blog to see how a couple in their forties have already been retired for a while now, live in a beautiful home in Colorado, and easily afford a family. The short story is, he had a talent for math and earned several degrees in computer engineering, was blessed with an engaging personality and made a large amount of money in about 15 years. But he did not spend it. Early on, he decided to use a bicycle as primary transportation, eschew the luxury madness, build a house with lots of sweat equity as soon as possible, and save over 50% to invest. He found that a family can live with careful frugality on $20,000 a year, and if you're making a good deal more than that, it should all be saved so you can buy a future full of free time. (You won't go anywhere on minimum wage without crime or a windfall -- check out Nickled and Dimed by Barbara Ehrenreich. It's horrifying, and it's how millions live in our rich country.)
Years ago I found and read both of Helen and Scott Nearing's books, and sort of thought about frugality, simplicity and disengaging from the consuming/debt trap over the years without much idea of how to go about it while tied up in day-to-day reality. Then I came across Your Money or Your Life (by Joe Dominquez and Vicki Robin, 1993) in the library after seeing it recommended in a related book or article. The second, 1999, edition is probably in libraries, and you can get it on Amazon, used, for very little. It will be your best purchase this year. Mr. Dominguez was a well-paid financial analyst on Wall Street, but felt early on that he was making a bad deal trading all his "life energy" for money. He determined that if he analyzed his own expenses and trimmed them down ridiculously, he could use most of his income to purchase a variety of Treasury bonds and retire early to write, lecture and teach (he accomplished this at age 31). I sort of woke up at that, with the realization that I had no idea an individual could buy "T-bills," and why it's a better strategy than just saving in an account. Like another tremendously significant book you won't find just anywhere -- Limits to Growth, first and second editions -- this is one you should spend a little effort to find and study.
Think past the conventional, be creative, and divert some of that wealth flowing ever upward in the economic pipes toward you and yours. To develop your strategies first see through the delusions that middle-class people should live like aristocrats, that debt is O.K., and that you should kill yourself to acquire and maintain so much. There are problems along the way, of course; health problems that keep you tied to employer-provided private insurance (unlike the rest of the developed world!!), too many children too soon, a derailing mistake like getting a criminal record, or getting stuck in a high cost-of-living area. We aren't here that long; a worthy goal is to get the time to do work that seems like play.
And what is NEET? It's a government term for "not in employment, education or training." Get your "eff-you" money saved up and be one of those who can enjoy being in that category.