In The Beginning

My Dear Fellow Youngsters (no matter how old you feel or actually are),

So you have completed your undergraduate or technical degree (or are in the process)–great! Life beckons and it seems there are many options for your future—sometimes too many; sometimes not enough— but now what to do? You are seemingly an adult—some readers may be old veterans at adulthood—you have to attend a job; come home to cook dinner; clean the apartment; walk the dogs; and at the end of the day you just want to sit down from those hard hours of high-heals, stuffy suits and enervative meetings and open a bottle of wine and get two (or three) sheets to the wind. On top of all that—they want you to do what with money? Save, spend, invest, manage cash flows, balance the cheque-book (I will forever use the British spelling of the word, so as not to confuse the two… which I believe is both proper and less ambiguous even at the expense of being pretentious), AND go to the meeting with Larry from church about buying some life insurance? Why do I need that? Just kill me now and burn the body.

Well fortunately my dear friends, I hope to give you a brief—albeit extensive—education on personal financials so that you may have the wherewithal to wade into the path of life that leads to freedom, happiness and most certainly…wealth.

First, there are a few things we need to deal with. I want you all to ask yourselves some questions so that we can bring together a collective thought process about how you think about money. Ideally I would set up a survey and have you all submit your answers so I could directly discuss the results—but it’s not worth my time: a topic we will discuss in detail later. So I will present them here; think about them and write them down if you must but keep them in mind.

  1. What is the primary goal in life
    1. Saving money and living well within your means
    2. Conspicuous spending, living large. Work hard: play harder
    3. Spending time with friends, family, and the dog or cat
    4. Living life to the fullest, I don’t care if I have 1 million dollars or 10 cents in the bank. Life is about experiences who cares how much money you have!?
  2. How do you think of investing? Is it something you need to do right now? How immediate do you feel you should start investing your money? Retirement?
    1. I should have started when I was 5 years old, I would be so rich now!
    2. Investing is super important, I try and save a bit of every paycheck. I don’t have much in my bank but my investment accounts are full! If there is an expense or something I can always withdrawal from my investments.
    3. Investing is important, but first I need to be financially stable.
    4. I’ll start when I’m 35 and have a stable career, I can’t deal with that right now.
    5. I’m expecting a large inheritance, why invest when I can live life and spend everything! I’m in my 20’s it’s the time to make mistakes, experience things, and learn about myself!
    6. I have kids—everything I have is spent on them—I can’t afford my bills let alone investments. I’ll think about retirement when they are out of college.
  3. Figs.
    1. I am single—and ready to mingle. All my money is my own and I spend it how I want: no need to conference. Money comes in; money goes out—life is good!
    2. I am tied to the old ball-and-chain. We rarely talk finances, but I know we have a mutual cheque-book…somewhere.
    3. My sweetheart and I have been going steady for some time now, I hope we get married soon. Married life will be great! We have yet to discuss finances but I know we love each other so much we will agree on everything.
    4. My sig. fig. and I are kindred spirits—financially and romantically. We talk about finances regularly and are together in our decisions.
    5. My sig. fig. deals with all the finances—I’m in the dark. I hope he/she knows what they are doing, because I haven’t a clue.
    6. I deal with all the finances—my sig. fig. nods and listens but I don’t really think he/she knows what we have or how much we spend.
  4. Retirement Spending?
    1. I view retirement as a time to get out and experience the world! All those hard years of work—relaxation, beach, golf clubs, cruises, the works! Oh and spoiling grandbabies as well!
    2. I’m too young to consider retirement spending—that’s at least 40 years away… who knows how much it will cost to live then!
    3. I think I could get by on very little. It’s retirement, I’ll probably be too tired anyway to do much. I just need enough to meet my expenses and a few luxuries here and there—nothing drastic.
    4. Meh, I’m never going to retire anyway. I make about $30,000 a year, I’m practically poor—retiring is a dream not a reality.
  5. What are your feelings towards debt?
    1. I have credit card debt, but I manage it well. Some debt is good, some is bad. For example, I think a car loan, a mortgage and some rotating credit-card debts are okay because they are all necessary to live a modern life.
    2. All debt is bad debt. I follow the German cultural stigma: debts translates to ‘Schulden’, guilt or shame translates to ‘Schuld’. Debt = Shame. And we could all be a little more German.
    3. I don’t have debt, but I have credit. Great credit! I pay it off constantly so I never have to pay interest.
    4. I mean… I have student loans. So I guess not all debt is bad?
    5. Most debt is bad debt like consumption debt, but investment debt is good debt. (Investment debt is debt that allows you to earn more money than you would have without debt: also called financial leverage. Consumption debt is borrowing consumption from the future to consume immediately today—you pay it off in the future).
    6. I have had bad experiences with debt. I have gone into bankruptcy once already and I’m not going through that ever again.
  6. Parental duty—both to your parents and to your kiddies.
    1. I think parents should spend for themselves, their kids are not responsible for them and they are not responsible for their kids after they can fend for themselves.
    2. Denucleated families are what is wrong with the world! My parents provided for me and now I will care for them in their old-age. Just like I want my kids to provide for me. So I don’t need as much money for retirement, I can’t wait to move in and take care of the grandbabies and make a mess in the kitchen and MAKE THEM clean it up, hehe!
    3. My single parent killed them-self providing for me—now it’s my turn to care for them.
    4. I love my kids bunches and will give them anything they ask for—no cost is too much to show my affection!
    5. I provide the basic needs for my children—they will need to figure out the rest on their own.
    6. I cannot afford to provide for my parents—and its ripping me apart inside.
    7. I cannot afford to provide for my children—I feel like a terrible parent.
  7. Gift giving, charitable donations, inter-familial loans?
    1. I love giving gifts. I go all out every year for the Holidays. Spare no expense; everyone deserves a gift to make them smile, even if it’s just once a year! I will get them whatever their heart(s) desire(s)!
    2. I like giving gifts, but I recognize that it’s a reciprocal system. I try and keep gifts to minimal and within reason so as not to cast shame or lose-face with my counter-party.
    3. Gift giving is in-efficient. We are not Pareto-optimal by giving gifts, all parties would be better off if we simply did away with gift giving. The Nash equilibrium means we will give gifts but not the best gift for each person. We would all be better off saving the money and buying EXACTLY what we want—that way we maximize utility. Gifting is a terrible institution.
    4. Charitable donations make me feel all warm and fuzzy inside. I love giving people money and clothes just to feel better about myself as a person. Tithing is the right thing to do. Θεό gets 10% before I do! Besides the [insert non-secular institution] will make sure that money is put to good use! (Θεό (Theo) is my non-denominational reference to supreme being(s).)
    5. I give loans to my family members but I expect them to be paid back.
    6. I give loans to my family members, but I want them to think of it as a gift—I’m no Ebenezer.
    7. Donations should be used to better the world. Donations are not really donations they are investments in the future of the world as a whole.
    8. Donations are tax write-offs. I donate and expect my accountant to deal with it at the end of the year.
  8. Savings philosophy
    1. I give myself 10% of every paycheck, socked away. Out of sight out of mind.
    2. My mattress is where my spare change goes. I figure ill have enough to make a deposit at the end of the year.
    3. I’m already spending 100% or more of my income savings is not possible.
    4. I have a 401K (403B) at work, that’s as much as I want to deal with it. I don’t even know what that is but they said it’s something to do with retirement, so I am all set!
    5. I have significant savings from my employer—they give me non-executive employee options grants (options or stocks bonuses or yearly contributions). I’m so grateful the company lets me profit share! I have an amazing employer. Just going to let those grow and retire fat and happy!
    6. I save 50% of my paychecks. Some is in cash, some investments, some in savings accounts.
    7. I save 80% of all of my income. Opra did that and look at her now! I’m going to be rich like Opra. “You get one, and YOU get one, and YOU get one…and EVERYBODY GETS ONE!”
  9. Death, Estates and Life Insurance
    1. We all die someday, but I haven’t made a will yet. I don’t want to think about it. I know I should, maybe I’ll get around to it someday.
    2. Will? Man, I’m young; I’m not keeling over anytime soon! Call me superman/wonder woman!
    3. Life insurance is for middle-aged fogies.
    4. I have life insurance. Let’s go skydiving and I always wanted to participate in a drag/drift race!
    5. I have a well thought out will and life-estate plan. I want my loved ones to remember me fondly when the end does come—not have to fight over everything and make arrangements.
    6. Life insurance is an investment, when I die my family will be well cared for—and it’s so cheap now I’m really getting a bargain! Plus funerals are expensive! I don’t want my spouse to have to choose between a pine box and my kiddies’ college fund(s).
  10. Investments are…
    1. I or my parents lost nearly everything in 2007/2008. I don’t want to go through that again. Everything I own or will own will be cash, I like my money where I can see it and it doesn’t move.
    2. Risky and you really only make money if you start out with a lot of money. So why bother?
    3. The second best path to being a millionaire! The first is the lottery!
    4. A relatively safe way to retire early; and practically the only way I will get there on my income, but I don’t know how to do it very well. I just put money in my 401K (403B) and let them manage it.
    5. Great if you can afford to do it. I wish I could—I always wanted to say “I own some shares of Apple.”
    6. Awesome, I am constantly buying and selling stuff in my brokerage account! Trading is the life!
    7. A vehicle for payment transfer in which I am paid to take on the risk of some other party. By taking on an investment—I am making myself and my finances more risky.
    8. A hedge against inflation, the slow, silent and deadly killer.

Okay now we have gone through an extensive listing. You can have selected multiple or thought about multiple. The idea is to get you thinking fruitfully about how you view your finances. You don’t need to pigeon-hole yourself, but you do need to be rather well minded about what your current situation is going forward.

There are a few more things I want you to consider. These are the less PC and less generic issues we need to deal with. While I don’t want you to be offended—you need to be affronted with the very REAL reality. When dealing with your future it is often best NOT to live in a fantasy or delusional reality.

For example, are you male, female, cis-gendered, trans-gendered, or transitioning? Are you straight, homosexual, bisexual, pan-sexual, object-sexual or asexual? Consider the implications of each—what risks, benefits, drawbacks, etc. do you face?

Are you in your 20s, 30s, 40s, 50s, 60s, old? What problems might you have currently? Medical issues, low income, immediacy of retirement, already IN retirement?

What is your current and future expected income? Are you looking at $30,000 a year or $300,000 a year—be conservative. Collegiate recruiter estimates often DRAMATICALLY overstate how much you can expect to earn. Especially in today’s markets you should expect to earn much less than what you are told in school, particularly if you are starting out. Don’t let mental availability bias fool you—what you are often quoted in school are 5-10 years-in salaries…and that’s usually if you manage to stay at the same place for that long. But fear not—you can still do extraordinarily well for yourself at $30,000…. and people who make over $100,000 may still never retire.

Although previously touched upon, are you single, married, divorced, engaged, long-distance, civil-unioned, windowed (widowered) in jail (marital jail) or a victim of unrequited love? Consider your future given this premise, you may soon be married, your next love may be around the corner…you may be planning or have planned a divorce. You may have just put your spouse to rest—or you may, in the extreme, be planning to put your spouse to rest! (Put down the arsenic bottle…a divorce is better than murder…) Consider your playing field going forward—it has a drastic impact on your finances.

Do you have kids? Are you planning on having more? Wish you had less (again with the arsenic bottle)? Are you worried about reaching the grand- prefix stage? Have your kids started schooling, begun college, or graduated college? Or are you just wishfully walking through the baby section at your favored department store? Family planning is one of the major decisions you need to be aware of either currently or down the line. For the record—your view on contraceptives or abortion is not dependent on family planning. I will always remain respectful of either choice—but understanding the nuances of what you believe in and what is reality: is important.

Family medical histories are important to consider. How is your diet and your waistline? Do you exercise regularly? Are you a hypochondriac with a reserved seat at the doctor’s office for frequent visitors or do you avoid doctors entirely and prefer to either deal with it or fix it yourself?

And finally—and I will repeat this—consider your political and socio-political ideaologies. Now throw them out the window: save what is factual about your situation. your opinion has little to do with your financial planning. Financial planning is a mathematical (economical) science. The ONLY opinion you are allowed to have is how stingy you are willing to be. Just because you are a republican does not mean you cannot donate to certain charities. Just because you are a democrat does not mean you cannot be a devoted capitalist who hates paying taxes. For the record I am a democrat who is a devoted capitalist that hates paying taxes—while I recognize taxes are a necessary part of the social structure and is the current most efficient means of solving some Coase dynamics. While I encourage you to wholeheartedly explore your political side and your ideaologies, don’t let them interfere too much in your financial plans. There is frankly no room for you to be making such emotional mistakes in your future. Considering the vast number of emotional claims your plan will already be catered too—your children, your parents, religion, materialism, etc.—you cannot afford to become jaded by these extramural issues.

Until next time.

In Deepest Regards,

Yours and C.

Mr. Fluharty

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