Financial planning is not just boring. It is also painful. It’s not that you don’t have options; you just don’t typically have good ones. By good, I mean you don’t have options where you can eat your cake and have it later as well.
Every two weeks or so, you get a pay stub telling you how much you have at your discretion. You then have a list of tasks that require most or all of that income to then outgo. Here’s a proximate list of these pernicious outgoes.
1) Necessities – Food, Shelter, Fuel, Utilities.
2) Risk Hedging – Health Insurance, Car Insurance, Property Insurance, et al.
3) Social Promotion – Forced socializing, family engagements, property beatification, unenjoyable public activities, and the like.
4) Fun – I’ve been accused of not really knowing what this category entails.
5) Future and Family Self-Preservation – Retirement savings, kids’ college, investments, self-sufficiency, and (if you are good and lucky) viable passive income streams.
I’m not putting this on the Internet to pass the virtual cap around via GoFundMyUselessButt.com. It’s just a statement of what people are in charge of when they take charge of themselves and start a family. Everyone will take care of category 1 except for a distinct, yet existing minority of Amerikans who truly can be happy living under a freeway overpass. Most of us take care at least about number 2. It can be a non-trivial challenge to figure all of that category out, but all but the substance abusers will typically make a go of it somehow.
Most people are therefore trading off Social Promotion, Fun, and the future. An individual has to see over personal time-preference to start even caring about number 5. Some people will ditch a lot of number three and be somewhat misanthropic beyond a small circle of acquaintances. This has it’s drawbacks if you are a natural extrovert, but isn’t the worst way to fit your life under a tight salary cap.
Ditching number 4 comes naturally to many on the Right. I’ve committed the personal sin of bragging about it. I don’t need no stinkin’ fun. I gots work to do. This can be fairly criticized as a sub-optimal and unimaginative life. It can also keep the disciplined practitioner out of bankruptcy and divorce courts. Maybe the practitioner, rather than the practitioner’s progeny of ungrateful offspring, pick which home they go into towards the end of life.
Maybe this person even leaves the offspring a positive bank balance instead of an angry hoard of debt-collectors. The good a man does is oft interred with his bones. His unpaid credit balances are still there. The lien-holders will be as well. They will be around and in no mood to mess around once the lawyers wind up the estate of the deceased.
What a lot of people do is to ditch number 5 because they are too solipsistic and foolish to get that it even exists. It’s a challenge to get someone who isn’t really sure what they plan on doing three months from now to focus hard on what they will live off of when they are thirty years older. I’ll withhold from criticizing this as long as these people then suck it up and deal when being 64 isn’t particularly fun or pleasant. Unfortunately most of them do not. They whine about how their bad choices are an example of your unfairness….
According to government estimates, only about 40% of Americans have access to a workplace retirement savings plan. And, an estimated 27% of current or recently unemployed workers who have savings through a 401(k), IRA or other retirement account have already tapped, or plan to use these savings as a source of immediate income during the crisis. As the pandemic has raged on and emergency aid has started to dry up, this number could rise even higher.
If you sunburn as easily as your humble author, it’s also !WHITE PRIVALEGE!
Even more troubling is the outsized impact on non-White Americans, women and those with lower earnings who work for small businesses. Roughly one out of every five non-White older workers had lost their job by June. Even before Covid-19, women were 80% more likely to be impoverished at age 65 and older than men. Additionally, the Economic Policy Institute estimated that just 41% of Black families and 35% of Hispanic families had retirement savings as of 2016.
The BS Flag now flies onto the field. There are two factors at work here that the authors of the CNN piece I just referenced are trying really hard to ignore.
1) You determine a lot of how much income you acquire. Maybe you can’t help it if your parents are unrestricted losers, but you can do the best you have with what you’ve been dealt. People who make themselves useful to others and/or self-sufficient enough not to need others around do better. People who are reliable and pleasant get paid more to stick around.
2) You decide where you spend what you have. Can’t afford an army of kids? Then stop at a Battalion instead. Can’t afford the insurance on a 2000 SUX, I’d recommend a Toyota Corolla instead. That golf club membership may look impressive. Are you unable to get your children out of a crappy public school system because your money went there instead?
The overarching point of this is that life is consequentialist. When people’s intents and efforts vary, so to will their results. You get out of whatever system a proportion of what you put into it. That’s just how it is. In a world full of Sugar Plum Fairies, we could all retire billionaires. We don’t live there. Therefore, some of us have a retirement crisis.
Some of us do not have a retirement crisis. Some of us put a lot of what we could be spending today in investments. Some of us are working very hard at putting our children in a position to be a heck of a lot smarter, wealthier, and better looking than we ourselves currently manage to be. It would be nice to have the pretty things now. It’s a whole lot wiser to postpone some of that gratification until you can no longer hunt and forage.
Those who don’t put off the next dopamine fix have a retirement crisis. I don’t believe I will be one of them. That isn’t about me. It is instead, about what I choose to do with myself. It’s about what the people with retirement crisis problems should do more of with themselves. Remember, there are no good options. There are options. Pick the least unwise of these options and the retirement crisis is not your circus. Someone should tell the media socialists at CNN that idiots who ate their own seed corn are not our monkeys either.