Sunday, December 28, 2014

Eternal Life - Eternal Money

To some folks, a big bag of money seems like an infinite amount.   Don't be one of those folks.

In  previous posting about eternal life, I posited that mankind cannot contemplate infinity, and that any large enough number, to some people, seems like an endless amount:
"To people living in olden times, when living to age 40 seemed like an impossibility, "eternal life" must have seemed like a good deal.  That would be like what, 80 years or so!   Like the robin who cannot count more than three eggs in her nest (and thus doesn't notice the fourth being stolen) primitive man could not conceive of numbers greater than 50."
In a previous posting about homelessness, I noted how when poor people are given huge sums of money (lottery winnings, or whatever) they burn through it in no time.

Is there a connection?  In short, yes.   People think a million dollars is essentially an infinite amount of money - or even $100,000.

As a kid, I thought these things, too.  A thousand - that took forever to count to! 

And yes, even as an adult, I've done this - we all do, you know.   As a self-employed person, I can go for months with not getting paid.  Then I get a check for tens of thousands of dollars.   It seems like a lot of money!

But I have learned to squirrel away money, as it is tempting, when you bank account is in the five digits, to think you are "rich" and then be tempted to spend.   The problem is, little purchases and expenses add up, and before you know it, you are broke again.

Pay your taxes - for this year, and next.  Pay off your debts.  Pay all your bills - in advance, if possible.   Spend the money on fixed expenses and put away a big chunk into savings.  When you are all done, well, you realize you really don't have that much money to spend.

Sadly, even this level of financial discipline is rare among the poor.   Like our friend given $100,000, the first thing on his agenda is to party - after all, that is "a lot of money" and he can always save tomorrow, right?   Tonight is the night to celebrate!

That, in a nutshell, is what keeps the poor, poor.   And it is what keeps the middle class, middle class and sinking slowly towards poverty.

In the not-too-distant past,  a person could go to work for a big company - IBM, GM, Xerox, or whatever.  Whether you were salaried or hourly, it didn't matter.  You got a regular paycheck, which you divided up among the monthly payments you were making on your Oldsmobile, your cracker-box tract home, your utilities, and the consumer loan for your television set.  Your health care was provided by your employer, and your pension was also fully funded by them.   Corporate Socialism, I called it, and it existed in a big way back then.

Our ancestors were not necessarily better paid or smarter than we are today, they were just controlled more and prevented from squandering their retirement on ill-advised investments and schemes.   They were not "forced" to buy health insurance through Obamacare, because their employers provided it for them.

And they had a lot less "stuff" in their lives.  One, maybe two cars, one television, one telephone (maybe one extension, if you were "rich").   No video games, computers, flat-screen televisions, snowmobiles, jet skis - at least not much of this sort of thing.   If you really wanted to save up your money, you might be able to buy a 14' "runabout" with a 35 HP Evinrude.   That would be showin!

Today, we have choices on how to spend our money and we also have far more horrific choices to make.    I keep harping on this, as it is one of those "obvious" things right out there in the open, that no one talks about.   We didn't have payday loans, title pawn loans, rent-to-own furniture, high interest rate credit cards, or toxic mortgages back in 1965.

We didn't have student loans that could not be discharged through bankruptcy.   Indeed, back then, nearly all debts were discharged through bankruptcy.  Today, they are "worked out" - even your credit card debt!

Today, we have financial instruments that are designed to ruin the consumer and the only thing protecting the consumer is their willpower to make the right choices.

The poor and the homeless are distinguished by their utter lack of willpower.    And the middle class is shrinking for the same reason.   Unfettered from the leash of Big Corporate America with its defined-benefit pensions and cradle-to-grave health care, middle-class people have to choose to save and choose to buy health care.   And surprisingly, many are choosing to do neither, even though they face fines for not doing the latter!

What is going on here?  Are people dumber than in the past?   Well, I think the answer is, NO.   It is just in the past, we coddled people by controlling their lives more.   Funny, too, because people on the Right decry "big government" and Michelle Obama "telling us what to do."

But back in the "good old days" of America, big companies did just that - told you that you were getting a pension (in lieu of more money) and health care (in lieu of more money) and people went along with that.

Of course, in some instances, the corporations failed to fund these plans properly.   Nevertheless, an entire generation retired with defined benefit pensions and never worried about health care bills.

No more.

So what does this all mean?   Well, if you want to give $100,000 to a homeless man, then blow your brains out and do it.   But don't expect him to suddenly acquire financial acumen, having that money.   Because lack of financial acumen is what got him into trouble in the first place.  Odds are, he will blow through that cash in short order, and end up homeless again.   Unless you dole out the money and control his actions, he will not stay wealthy for long.   And doling out money and controlling our actions is how Corporate America created the middle-class in the first place.

It also means that if you want to even survive in today's economy, you have to acquire some financial acumen and financial discipline in a real hurry.   Being careless with money is no longer an option in today's dog-eat-dog economy.

I get e-mails from readers now and then, and the e-mails from younger readers is interesting.   I get two types.   The first castigate me for being a moron, as they want to tell me that leasing a car is a swell deal, and that you can "make out like a bandit" with frequent flyer miles.   They also want to tell me that spending $10,000 on a hydronic heating plant for their house "makes financial sense".   These are the folks who want to spend their way to success and think that if they can score enough coupon deals and cash-back bonuses, they will be millionaires.

And I have even heard people like this decry the 401(k) plan (which some employers now make participation the default mode).   "You can invest money in other things and get a better rate of return!" they cry, but of course, the "other things" they are investing in are a new Harley or a Jet Ski.  They will do poorly in life, because they have a poor mindset toward money - as something to  be spent as fast as it is earned.

I do get occasional e-mails or meet young people who do get it.   They are starting out, at age 22, and want to save money for the future.   Some already have managed to accumulate a few thousand dollars - which is pretty amazing for that age.  They will do well, not because they picked the right investment or anything, but because they have the right mindset.   If you start saving young, you have a huge leg-up on people who try to catch up later in life.

You see, for young people today, being a Millionaire is not just some wild fantasy, but thanks to inflation, a necessity.   If you are to retire today, you'd need about $500,000 (a half-million) plus Social Security, just to get by on the median income in the USA.   Thirty years from now, that number will easily double.  A million dollars is not a lot of money anymore.   Yet many folks think it is basically an infinite amount.   Millionaires are - or will become - a dime a dozen.

As for the homeless or poor?   I am not sure there is much we can do to "help" them, as they will always squander money, if you just hand it to them, as experiments seem to show.  They have no financial skills and are not interested in acquiring any.   If you tried to teach them, they'd give you a fist in the face.  Unless you are willing to constantly intervene in their lives (which they likely would not want you to do) they will end up where they started, in short order.

The best we can do (and it is a lot) is to provide a safety net - Social Security, SSI, TANF, SNAP, Obamaphones, Section-8 and so forth.   And by worldwide standards, it is quite a safety net.   Maybe not up to Swedish standards, but far better than what you get in Africa or India these days.  This safety net dribbles out small amounts of money, over time, so people can survive.   It doesn't leave them a lot of money to squander, however.   And this is as it should be.

And yes, homeless people do qualify for food stamps - as well as other benefits.   That "poor helpless man" you give $20 to (tax free) has a benefits card, an Obamaphone, and so forth.  He ain't just living on he money he begs for or the deposit bottles he gets from dumpsters.  And if you are among the working poor you can do quite well, if you can qualify for a lot of these programs.

It is interesting to me that you see these postings online or these YouTube videos where people try to raise $100,000 for a homeless person or give them a home for free.   I guess everyone has to learn this for themselves - but when you give someone something for free, they generally don't appreciate how valuable it is.   And people have to learn for themselves that the reason why someone is living under a bridge is a lot more complicated than "they don't have money".   

It is a fine thing to be generous and empathetic and all.   Sadly, a lot of the folks doing this "I'm helping the homeless guy" routine are quite ready to trumpet to everyone how altruistic they are and thus what great human beings they are (and by extension, what heartless bastards the rest of us all are, for not doing the same).   In other words, it is just the same old status seeking thing raising its ugly head again and again.

So save the flames.   They only prove my point, in that regard.   If you really want to "help the homeless" then contribute to a homeless shelter, soup kitchen, or other organization who is more familiar with their needs and can do more with $100,000 than help one man.   Anything else is just narcissism.