Time is on My Side

Our lastcolumn addressed Generation Z, the recent graduates. Here are some thoughts for their parents, the older Millennials and younger Gen-Xers.

Dear parents. Time is still on your side. That is, if a reasonable retirement is one of your goals. If not, you can quit reading now.

But a recent Wall Street Journal analysis published on June 23 paints a bleak picture in an article entitled “Time Bomb Looms for Aging America.” Your elders, the Baby Boomers, are retiring to paltry financial circumstances which have squelched many dreams. “They have high average debt, are often paying off children’s educations and are dipping into savings to care for aging parents.” Their 401Ks are miniscule. Their prognosis is poor. They will likely work into their 70s or work tedious jobs as seniors just to get by. They will not be taking river cruises in Germany. They will not even spend the winters in Florida. They will be clipping coupons and asking for heating assistance.

This could be you. But it doesn’t need to be.

In 1964, the then-young and unsullied Rolling Stones released a song about the efficacy of time. While “Time is on My Side” was meant to describe a relationship in which “You’ll come runnin’ back to me,” it invokes the power of time. Please, remember, time is now your friend. But it becomes less so as it passes and, eventually, it becomes your enemy. Please, enlist time as your friend. You must do it now as later is too late.

Here are a few general principles to guide you into a less bleak, if not downright comfortable, retirement.

Begin to follow a responsible financial authority. Dave Ramsey and Clark Howard are two such. There are others. Do some research, ask your friends, then find someone to follow.

These authorities will ask you to plan, to budget, to track income and expenses. As management guru Peter Drucker said, if you can measure it, you can manage it. The contrary is also true.

Prioritize your spending and investment. A common ranking looks like this:

1.       Save in your 401K at least up to your company match

2.       Pay off all high interest debt (e.g., credit cards)

3.       Build a six-month emergency reserve

4.       Put money in a 529 college savings plan for your kids

Note that your top priority is retirement and your bottom priority is your kids’ college expenses. That is because your retirement is a necessity while their education is a luxury. No, really. And, they have the luxury of lots of options and lots of time to finance their education. You have only one shot to get your retirement right.

Live beneath your means. Spend less than you earn. Learn to live well while also saving habitually.

Your goal should be to have no debt except for your mortgage. What, you say!? What about our automobiles? Save your money and pay cash for them. Buy cars that are two years old with relatively low mileage. Let someone else eat the depreciation.

Credit card debt is a monster. It will consume you. Here is how to manage it. Always commit to pay off your credit card bill in full each and every month. If you can’t do that, then DO NOT CHARGE! Your credit card should be a convenience, not an ATM. It is far too ravenous, in interest and fees, to feed.

Invest as much as you can in tax-advantaged retirement accounts (401K, Roth IRA). The long-term growth of the stock market over the past ninety years has averaged 10%. You could easily retire with a million dollars if you save assiduously and stay the course. But you must do it now and stick with it.

Now, regarding your biggest debt, that mortgage. Refinance when interest rates drop. That will save you thousands over the life of the loan. Choose a 15-year mortgage if you can. If not, then make regular extra principle payments on your 30-year note (assuming that there is no pre-payment penalty). Use the amortization tools that your mortgage provider provides. You must educate and inform yourself. We are talking about a lot of money here.

Throughout all this, remember basic principles. Be skeptical. Remember that nothing is free, that you will never get something for nothing. If something seems too good to be true, it is. Don’t bite. Patience and persistence win the race, there are no shortcuts.

Now, go forth and prosper.  

Life 101 in a nutshell

With the current wave of high school and college graduations underway, we have millions of young people launching into adult life. Congratulations to you. Now you will have to buy your own toilet paper.
                                                                                     

No, really. We are counting on you. You will man our armed forces, raise the children of the next generation, and fill vital jobs. You will tend us when we are ill. You will build our homes. You will teach our children. You will grow our food. God bless you.

Following are a few observations which are likely not what you heard at your commencement speeches. Those well-meaning orators were inspirational but didn’t really speak quotidian truth. Let’s try to cure that.

It is good to remember that your life is an arc. Ashes to ashes, dust to dust. We rise from the elements of the Earth, shaped and formed by our DNA, and ascend into a strong vibrant life. A miracle. We give birth to new lives as the purpose of life on Earth demands. Then descend gradually into a comfortable dotage. Ashes to ashes, dust to dust.

Here is the very interesting good news. While our physical well-being peaks through mid-life, our happiness is greatest at the beginning and end of our lives. If you grit your teeth and slog through the stresses and anxieties of mid-life, you are almost assured happiness in later life. According to Jonathan Rauch in The Happiness Curve, “aging changes who we are, and what we perceive, in ways that make us happier—even when our bodies betray us.” Hence the subtitle of his book: “Why life after 50 gets better.” Hang in there, baby.

A few other important guidelines.

Don’t ever wish a moment of life away. “I’m bored – I wish it was Saturday.” Wrong, wrong, so wrong! Make the most of every moment. You have only so few of them. They are guaranteed to be limited, finite. Each one is infinitely precious to you. Read. Give. Reflect. Nap. Do something. But don’t wish a moment away.

Another thought on time. Perhaps you’ve heard the aphorism about the United States Marine Corps: “No better friend, no worse enemy.” The same is true of time. Time can be your best friend or your worst enemy, depending on how you utilize it.

Time is your best friend when saving for retirement. For instance, it you save $100 per week over a 40-year working career, and invest it in a market which grows, on average, 8% per year, you will retire with over a million and a half dollars. Time is your friend.

On the other hand, if you squander your cash on the latest fashions, flashy SUVs, glamorous homes, and don’t think about retirement savings until you are 60, you are SOL. (Ask an older relative what that acronym means). In this case, time is your worst enemy. (Read up on the fable of the ant and the grasshopper).

Become an informed citizen and a rational voter. We are depending on you. If you haven’t already done so, take a course in basic statistics. Many are available free online (e.g., https://www.class-central.com/subject/statistics). Learn where to get unbiased statistics. (Government and academic sources are best).

Learn relative probabilities. You are far more likely to die from a medical malpractice error or automobile wreck than from a semi-automatic rifle. You will almost certainly never win a big lottery. You must understand odds.

Understand correlations. While many are ridiculous (such that films Nicolas Cage appeared in are correlated to the number of people who drowned by falling into a pool), it is a fact that 100% of properly correlated variables are correlated. This means that you should be rightly skeptical, but always investigate correlations. There may be something there.

And many more tidbits…

Always live below your means.

Always be kind to all people and all creatures. Especially yourself.

Treasure and cultivate friendships.

Be generous in material and spiritual ways.

Follow the Ten Commandments, whether you are religious or not. They spell out a simple formula for human coexistence.

Most of all, trust yourself. Ignore naysayers. Be confident.

And thank you for picking up the traces. We are truly depending on you.