After my recent change in lifestyle (the one where I now try to live a much more enjoyable life on a daily basis), the issue of personal finances (both spending and earning) have not so surprisingly risen to the forefront of what I often find myself thinking about. And the more I think about things and realize the utmost importance of bringing down one’s cost of living, the more I try extremely hard to convince my closest friends that more than anything else, they need to do the same.
But people are creatures of habit, and needless to say it is very, very difficult for me to convince them of this fact.
And so this got me thinking about what the actual reason for that is. I actually don’t think it’s what everyone else thinks – continuous streams of marketing and advertising in our faces, greater levels of disposable income for most, unmeasurably large varieties of junk for purchase everywhere we look… of course all these things contribute to the problem, but none of them are the real reason for such suffocating levels of spending in today’s society.
The Real Reason for Today’s Exorbitant Spending
I think the heart of the problem here actually comes from these three things not mentioned so far, and barely ever talked about:
- Not understanding that every dollar you manage to save is a little soldier that works very hard for you for the rest of your life
- After a recent discussion with a friend, the idea sort of struck me: this person managed to save a hundred bucks because they didn’t make a certain purchase they were going to make. Great work! You now have a hundred extra soldiers to add to your army!! And then the kicker? They traded the hard-working front-liners in for a pair of jeans to add to their collection of ten other depreciating pairs.
- Not understanding how to put your army of soldiers to work
- I would say this has developed from not learning anything about it in school (at least they didn’t really cover it when I was in school!), followed by the dry and overly complicated media coverage on the topic, as well as the sensational sounding events (and often times are!) that can unexpectedly occur (for those who aren’t paying attention, at least :) putting people off of the whole thing. Conspiracy idea: I even have to wonder if these things aren’t done on purpose so that the rich people in control don’t have to share the wealth with the rest of us common folk!
- Not knowing how many soldiers you need in order to complete your army
- Any idea how many you need? To know this you basically need to figure out two things here: How much does it cost you to live a year of your life, and, how hard can you make your army work for you. Most everyone seems to assume you need the power of Desert Storm behind you to retire, but that really isn’t the case at all. I’m fairly confident that all I actually need to fully retire (whatever “fully retired” even means) is a small battalion of around 400,000 strong. There’s no need to conquer the entire Middle East! More to come on that in a future post.
So how the hell have I managed to turn thinking financial news is boring into being the source of society’s over-consumption problem??
Quite simply, if you understand the fact that having money can earn you money, and more importantly you understand the few steps you need to take to actually make that happen, and lastly, you’ve done the simple exercise of figuring out how much money you genuinely need to have so that you are earning enough off of it each year to be able to spend some of it without losing any of it (it is imperative that you know where the finish line is if you ever hope to cross it!), decisions such as whether or not you need to lose 500 lifelong workers to the latest iDevice start to become very apparent.
And unfortunately very few people know the answer to these three things, so the spending spree continues…