I SPENT MINE. YOU STILL HAVE YOURS. SO GIVE IT TO ME.

5/12/13

Some of my musings on financial matters can be attacked by those who consider themselves sophisticated as a mere restatement of the obvious, and I freely plead guilty to such criticism, e.g., S&P YIELDS VS. BOND YIELDS:  I’M YOUR MAN WHEN IT COMES TO STATING THE OBVIOUS, 4/16/13.   Sometimes (usually, really) the path to the truth, and much enlightenment, lies in a firm grasp of the obvious, e.g., ANOTHER OF THOSE TRITE BUT TRUE INVESTING MAXIMS, 5/8/13.   So please bear with what might seem like simple logic in this post; such simple logic seems to escape not only our policymakers but also many people of my generation when considering their finances.

A common theme of my writings through the years in many forums has been the financial irresponsibility of my generation, e.g., THE ATTACK OF THE McMANSIONS FOR SALE:  A SECULAR BRAKE ON THE HOUSING MARKET, 4/23/13, which doesn’t hurt the popularity of my writing as much as one would think.  Apparently, people aren’t afraid of hearing the truth; they are just afraid of acting on it, but I digress.  My generation, as a group, simply doesn’t save money.   Oh, yes, our savings rate has gone up…from abysmal to merely miniscule.   Only a generation ago, the U.S. savings rate was twice as high as our current savings rate, which the baby boomer and younger talking heads describe as “healthy” and “balance sheet restoring”; two generations ago it was three times as high.

Rather than save money, my generation has spent itself silly in order to achieve a borrowing induced lifestyle of which its parents could only dream but to which this generation feels entitled.  Luxury cars, ostentatious homes, yearly “trips of a lifetime,” private colleges whose most salient feature is not their academic superiority but their snob appeal, personal trainers, weekly “spa treatments,” multi-hundred dollar shoes, regular attendance at “priced for the tax code” professional sporting events, restaurant bills that could feed a family, in America, for weeks...you know the drill.  Luxuries are now necessities.

Now my generation nears retirement.  They are, by measures of only a few decades ago, deeply in debt and have, of course, saved nothing.   Yet they are used to a lavish lifestyle.   While they probably haven’t thought about this (They have been too busy “acquiring” things.), they will be heading toward retirement with nothing…okay, maybe a 401k with about a year’s worth of income in it if they have, by standards of my generation, saved assiduously and refrained from borrowing against the 401k for that Lexus that makes last year’s model look, well, “so last year.”   AND YOU CAN’T FINANCE A LAVISH LIFESTYLE WITH NOTHING.

So we will soon be faced with a generation that has grown accustomed to living like kings but can only afford to live like paupers.   They either will be forced to adapt a lifestyle that would make even that of yours truly seem lavish or, following the great American tradition of late, they will look for someone else to not only blame but also to pick up the bills for what they consider “the necessities of life” or a “bare bones lifestyle,” which doesn’t involve less gaudy living quarters, trips to Wisconsin, or non-“luxury brand” cars.

When large groups of people no longer have access to things to which they feel entitled, trouble ensues.  Look at Greece and much of southern Europe.   This story will soon play out in America, as legions of what we used to call “yuppies” and their wannabes can no longer afford the lifestyles they spent through generations of seed corn to attain.  Besides the obvious financial consequences of their spendthrift ways, e.g., enormous debt to foreign countries, there will be societal consequences.   People will feel deprived and turn their greedy eyes on others.  Those few who have been responsible, who have lived modest lifestyles and managed to save (and surprisingly somehow never felt deprived or that they had missed something by doing so) could become the targets of vilification campaigns led by politicians eager to appease the broke majority.  The savers will be castigated as “the rich” and various schemes, like direct or indirect wealth taxes, will be concocted in order to transfer funds to those who spent their vast, or not so vast, incomes on foolish attempts to fill the voids in their lives with material things.

The nearly incessant message of all my even remotely financially oriented writings is to save your money and invest it wisely.  Sadly, in our increasingly crazy world in which politics, the art of pandering to the inattentive or the downright silly, trumps good sense, that advice may turn out to have been silly.  You save, but the government punishes you for it; notice I didn’t use the future tense; this is already happening.  See, inter multa alia, STUDENT LOAN FORGIVENESS:   THE OBAMA ADMINISTRATION’S (?) ASSAULT ON THE RESPONSIBLE, 5/10/13.

I, however, will continue to save and will always encourage you to do so.   Saving is not the ultimate act of optimism; having children is.  But saving still requires more optimism than is normally advised.  So, yes, it is surprising that the advice to save is coming from yours truly, who equates pessimism and cynicism with realism and optimism with refusal to face the plain truth.   One supposes that a spark of optimism still exists in those of us who save, that the habits of a lifetime, perhaps genetically implanted, are simply impossible to break…or that we are foolishly and naively setting ourselves up to be fleeced to pay for those whose most salient characteristics are their financial idiocy and sense of entitlement.