By Don McNay
CNHI News Service
I preach a simple gospel: Think about the long-term. Don’t trust Wall Street, your government or your employer to take care of you.
The world is an increasingly complicated place, but one rule has held true for centuries: People who have financial security control the destiny of the people who don’t.
The late John Savage, a frequent speaker at the Million Dollar Round Table, said, “Spenders in the world always work for savers. It never happens the other way around.”
The rich get richer for many reasons. One is that they take a long-term view about their money.
I was flipping though the news channels when I heard someone demand that we not give tax rebates to the poor. “Rich people accumulate wealth. Poor people accumulate things,” he said.
He had a trickle-up theory of economics. He believed poor people will go on wild spending sprees while wealthy people sock it away.
Most poor people need their income just to survive. Many people are broke because they don’t handle money well.
A line separates savers and spenders. Savers wind up with wealth, and spenders wind up with debt. People on their way to wealth have good savings habits. People living beyond their means blow money on stuff they don’t need.
When I was growing up, I used to think some people didn’t have good jobs. They lived in rundown houses and often had their cars repossessed. I found out some made as much money as my parents - sometimes more. The people who lived in rundown houses spent money on gadgets they didn’t use and motorboats that never made it in the water. They had no sense of long-term planning and ultimately had no money.
Spending beyond your means is an addiction that is probably as hard to cure as a drug addiction. It requires changing lifestyles.
Some argue blowing money is a form of “financial freedom.” I hate the J.G. Wentworth commercial where people are screaming, “It’s my money and I want it now.”
I have an obvious bias. I am in the business of setting up structured settlements for injured people; Wentworth is in the business of ripping those settlements apart. Wentworth has an easy task. All they have to do is get people to focus on the immediate and forget about the future. I try to get them to focus on the long-term.
To me, real freedom means stability, security and independence. It means never running out of money. It means never having to work at a job you hate because you can’t afford to quit. It means never becoming a slave to creditors. It means having control and stability in your life.
Our grandparents didn’t have access to quick money. Debt absolutely frightened them. Maybe we should be frightened, too.
As Joe Nocera pointed out in “A Piece of the Action,” his classic history of personal finance, the rise of credit cards, mutual funds, 401(k) plans and individuals investing in the stock market are all things that have happened primarily since the mid-1960’s.
Our parents lived in an era where they worked a lifetime at one company and got a monthly pension when they turned 65. Our children will switch jobs frequently and will need to depend on contributions and the investment results of 401(k) plans to allow them to retire.
Our parents and grandparents had systems to protect them. Our children and grandchildren are on their own.
Janis Joplin sang, “Freedom is just another word for nothing left to lose.” Actually Janis - and Kris Kristofferson, who wrote the song - had it semi-right. Real freedom means living in a way where you can have fun, enjoy life and know that you are never going to hit a time when you are out of cash and out of luck. Instead of, “It’s my money and I want it now,” a better way to think is, “It’s my money and I want it always.”
Don McNay is a columnist for CNHI News Service. Contact him at firstname.lastname@example.org.