Simple Pleasures Include Financial Security
by Ben Stein
Saturday, December 26, 2009, 5:09PM ET - U.S. Markets Closed.
Ben Stein How Not to Ruin Your Life
Posted on Friday, April 27, 2007, 12:00AM
In my never-ending quest to learn more about personal finance, I keep my eyes and ears open for the good, the bad, and the ugly.
A few weeks ago, one of my favorite human beings, a handyman in Malibu, was fixing a balky kitchen cabinet door in my house when he told me excitedly about his new car. "It's a Bentley," he said. "I've always wanted a Bentley. It's about 20 years old and needs some work, so I got it pretty cheap. I got it online at eBay."
"Great," I said. "Did you sell your Corvette or your Chrysler Sebring?"
"Neither," he said "The Bentley is my third car."
Consumer Debt Peonage
My heart sank. This fellow is a great handyman. He's a great guy in general. But he has no regular income of any size, works freelance, has either no savings or almost no savings, and isn't young.
Buying that car is placing himself into a form of peonage. He's made himself drastically more susceptible to downward mobility by having an extra monthly bill to pay for car costs, and he's deprived himself of money he could have saved. In a word, he's harmed himself.
If the Bentley breaks, as it will, his repair bills will be astronomical. I tried to gently point this out. He answered simply, "I love cars."
"Then good luck to you," I said and shrugged.
Lives Well-Lived
On the other side of the spectrum, I dined last night with an old friend from the glorious street of my childhood, Harvey Road in Silver Spring, Md.
Gene Daumit, who was accompanied by his beautiful wife, DeeDee, is a super-smart guy with a Ph.D. from MIT, a major job at a huge chemicals company, a spouse with a great job in real estate, a home and a vacation condo that are both paid for (or mostly paid for), a substantial pension, and impressive savings.
As they told me about their life, especially their wildly successful daughters, I said to them, "Your lives have been perfect examples of prudence."
"No," said DeeDee. "We just kept it simple."
This showed staggering wisdom. People who can keep their lives simple are so far ahead of the game it's ridiculous: a steady job or a good business; saving money regularly starting at an early age; great self-discipline about health (Gene and DeeDee are thin and fit); instilling the same discipline in your kids -- it all adds up to a life well-lived.
Set Yourself Free
Gene and DeeDee's example weighed on me heavily, because in my own life and in the lives of those around me there's so much complexity: too many cars, too many houses (my main curse), too much of an image to have to show off, too much keeping up with the Joneses.
All of this keeps you stuck behind the eight ball for too much of your life, working and slaving to support a lifestyle that starts out as a pleasure and becomes a burden.
How do you get back on track? Call a family meeting or just sit down with your financial advisor. Make a list of your monthly obligations. How many of them do you really need? How many of them are freeing you and how many are enslaving you?
Generally speaking, with the exception of a home and a vacation house, if it's eating money and not paying out, you have to question if you really need it. Do you need that time share? Do you need those three cars? Do you need a $20,000 TV? (If you do, please tell me what's on that makes it worth paying that kind of money for.) Illiquid assets that you rarely use enslave you unless you have so much money that their cost is incidental.
The Liquid Life
On the other hand, liquid assets equal freedom, as my old dad used to say. Liquid assets that pay good dividends and have capital gain potential, such as index funds weighted toward companies that are financially strong, are especially lovely.
The XLU, the REIT, and the ICF are all lovely as well. Any form of broad index fund that tracks the larger markets at home or worldwide is a darned good thing -- and for most of us, far better than a third car.
The fact is that life is deeply uncertain. We often need money when we least expect it, and at that point a third car is useless. A third car doesn't compound unless it's a rare antique. (I sure hope my handyman has such a car.)
Money in a broadly based mutual funds or a low-cost variable annuity does compound. Life goes by pretty quick, and as my old student Ferris Bueller said, "If you don't slow down, you might miss it." And slowing down takes money.
The Luxury of Financial Security
The Daumits have it right, and far too many of us have it wrong.
So keep it simple, my friends -- the burl-wood dashboard and plush leather seats of a Bentley may feel great, but opening up your mutual fund statement and seeing how much you have to cushion you and your family against life's uncertainties feels even better. Besides, peace of mind gets you down the road farther and in greater comfort.
Start now. Get those unnecessary monthly costs out of your life and replace them with monthly savings in broadly based funds. I promise you'll be grateful. And if you still want a Bentley, you can always go to the hobby shop and buy a model of one.
Rate This story
Showing comments 6-35 of 386<< PreviousNext >>
Meet the Experts
-
Charles Wheelan, Ph.D.The Naked Economist -
Jeremy Siegel, Ph.D.The Future for Investors -
Laura RowleyMoney & Happiness
-
Robert KiyosakiWhy the Rich Get Richer -
Ben SteinHow Not to Ruin Your Life -
Jack M. GuttentagThe Mortgage Professor
-
Anya KamenetzGeneration Debt -
Mick WeinsteinThe Week's Best Stock Blogs
Recent Articles by Ben Stein
- Congratulations, Bankers -- You're Rich AgainFri, Aug 7, 2009
- These Rights Don't Come for FreeMon, Jul 27, 2009
- Get It Right Today, Be Glad TomorrowThu, Jul 16, 2009
- Madoff: Many Questions RemainTue, Jun 30, 2009
More From Ben Stein
Let Ben Stein show you how! Stein outlines the steps you can take today to assure your future tomorrow.
Don't leave middle age without it!
Only $16.77 plus S&H
Top 5 Questions & Answers
Ask a financial question and get answers from real people on Yahoo! Answers.
Asked by Tameka
Most Popular Articles
- S.Korea's Lee in UAE to discuss nuclear dealReuters - Sat, Dec 26 - 4:06pm ET
- Weekend Update 12.26.09- The Suessical EditionAllThingsD Online - Sat, Dec 26 - 3:36pm ET
- Argentina's economy may grow in 2010Reuters - Sat, Dec 26 - 3:14pm ET
- Even as economy mends, a jobless decade may loomAP - Sat, Dec 26 - 1:43pm ET
More from Yahoo! Sources
Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data and daily updates provided by Morningstar, Inc. Fundamental company data provided by Capital IQ. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.
Yahoo! Answers is provided for informational purposes only, and no Q&A is intended for trading or investing purposes. Yahoo! shall not be responsible or liable for the accuracy, usefulness or availability of any Q&A information, and shall not be responsible or liable for any trading or investment decisions based on such information. View Complete Answers Disclaimer.