A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

Saving 10 Percent Is Death

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I recently wrote a guest blog for the plonkee money blog entitled Saving 10 Percent Is Death.

Juicy Excerpt: It is a bad idea to consult a rule of thumb when deciding how much to save. Effective saving plans are customized saving plans, not prefab saving plans. What you need to determine is, what percentage of income should someone pursuing your particular Life Goals and faced with your particular financial circumstances be saving?

Today’s Passion: Saving Too Much Is a Big Problem. Or so I say.

“If You Can Change Your Mindset
to See Saving as Buying You a Little Bit of Freedom…”

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The Tight-Fisted Miser blog has posted a review of my book Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work.

Juicy Excerpt: This book is more about motivation than nuts and bolts. He distinguishes between what he calls Sacrifice Saving and Passion Saving. If you can change your mindset to see saving as buying you a little bit of freedom rather than something you have to do that you won’t be able to enjoy for many years, then saving will become much easier….. If you have read Your Money or Your Life, you really shouldn’t need this book. If after reading Your Money or Your Life you still need motivation, then this book might work for you.

I am grateful to Andy for writing the review.

He is certainly right that the book is more about motivation than it is about the nuts and bolts of saving. It is for the best if readers know this going in. My belief is that getting motivated to save is pretty much the entire deal. Those who become motivated always are able to handle the nuts and bolts, but those who do not never even care to learn about the nuts and bolts. It’s my belief that there is lots of material available on the nuts and bolts but not too much in-depth material on how those who have never been motivated to save can become strongly motivated.

Andy is also right to see that Your Money or Your Life was a big influence. I don’t agree that those who have read Your Money or Your Life don’t need to read Passion Saving (but then I wouldn’t, would I?). My goal was to take the principles set forth in Your Money or Your Life and show how they can apply to the many types of people who need help saving who are not interested in pursuing the not-for-profit endeavors that are the motivational goal of many of those who used Your Money or Your Life to motivate their saving efforts.

Today’s Passion: My favorite review of Passion Saving is the one done by Audrey at WritersHelper.com.

It’s Not (Entirely) Our Fault That We Don’t Save

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The Wall Street Journal insulted us last Saturday.

It was not an intentional or direct insult. It was an implicit insult put forward by quoting with approval the words of two experts. Still, I believe that the Wall Street Journal insulted middle-class workers seeking financial freedom early in life in an article from the edition published last Saturday entitled “Money Advice, by the Book.”

The article reports that the personal finance category is the third fastest growing category in the book publishing field. I find that encouraging news both for myself in particular as the publisher of a personal finance book and for the Retire Early movement in general, as it suggests that there are more middle-class workers all the time seeking out fresh ideas on how to manage their money.

I liked the article. But there was one argument put forward in it that I did not like. The article cited two experts in support of the proposition that personal finance is “basic stuff” and suggested that advice that is out of the norm should be viewed as suspect. The idea being advanced was that, once you know the cliches of personal finance, you know all that you really need to know.

The implication was that we don’t need to see too many more personal finance books published.

I don’t doubt that many of the recently published books in the field repeat the conventional wisdom and I agree that we don’t need more books doing that. However, I reject the idea that we don’t need fresh ideas on how to manage our money effectively. I can’t think of too many things that we need more of than fresh ideas on how to save.

We earn more money than did our parents and grandparents. We save less. Our inability to save is causing us stress and limiting our life options. We need books that teach us how to save effectively.

The conventional personal finance books do not do this. Like Linda Ronstadt did, I’m gonna say it again. The conventional personal finance books do not do this.

If the conventional advice worked, we wouldn’t have a saving problem. Right? The point of the existing books is to help us save. We don’t. So the books aren’t getting the job done. Right?

This is an important point. People are reluctant to call a spade a spade re this one. Most middle-class workers who do not save blame themselves rather than conclude that the conventional advice failed them. I think that the time has come to begin pointing the finger at the people who parrot the cliches without stopping to realize that these tired ideas have not been doing the job for years and years now.

It is time to try out some new ideas. The first step to doing that is acknowledging that the old ones have failed us.

The insult is in the suggestion that it is the middle-class workers who are failing to save who are failing to do the job rather than the money management approach they are using. If it were a small percentage of the population not saving, I could buy into the idea that it is the poor savers who are to blame. I have a hard time accepting the idea that 80 or 90 percent of us are so lacking in willpower that we cannot follow simple rules that would work if only we shaped up.

How many people do you know who save effectively? Do those people lack willpower in all areas of life? Or is it only in the saving area that they seem unable to behave responsibly?

When there are so many people who are successful in so many fields of endeavor who cannot get to first base in the saving game, does not that suggest that we need to make some changes in the saving game?

We don’t save enough. That’s clear. I don’t think it is entirely our fault. I think that a big part of the problem is that the conventional advice just does not make sense to most workers trying to plan for their financial futures in today’s economy.

The old money rules do not work. The Financial Freedom Community’s mission is to find out what does (we have made great progress in the first six years of our discussions, of course). The first step is to stop blaming ourselves for something that in most cases is to a large extent not our fault.

Money Advice from the
Leering, Slurring, Satanic-Influenced One

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It is my usual practice to draw inspiration for the money-management advice I offer from early-period and mid-period Beatles songs. There are times, however, when it cannot be denied that there is a darker side to the personal finance story that also very much needs to be told.
It was that darker side that was on my mind during my recent conversations with Ron Lieber, the journalist who writes the “Green Thumb” column for the Wall Street Journal. It was the most evil of songs that was playing in my head as he asked me what it is that we need to do to get young people to contribute to Section 401(k) plans.

The song is “Under My Thumb.” The singer is Mick Jagger. The theme is possession. The mood is sinister. The key lyric is: “The change has come.”

It wasn’t in Mick Jagger’s nature to put forward the comforting observation that: “There’s nothing you can do that can’t be done.” His aim was to shake us up with imaginings of how it feels for the one on top when the change has come. It doesn’t require too big a leap of imagination to figure out how it feels for the one not on top.

You do not want the change that our satanic-influenced friend Mick was making reference to becoming a part of your future. If the bright-colored picture of The Good Life painted by the Beatles doesn’t do the trick for you, please consider how it would feel to be the one being sung about when your boss (perhaps not the one you have today, but one who enters your life at some later date) has the lyrics “the change has come” playing in his head while he is thinking about you and your humble request for vacation time or a pay increase or office space that provides enough quiet for you to get some serious work done.

There’s a reason why you often hear those who spend all of what they earn referred to as “wage slaves.” Think it over.

In the end, a positive approach to saving works best. But if it takes a scare story to give you the push you need to get your feet planted on the Financial Freedom Path, then use that. If you don’t save, you’ll always have a boss and never be a boss.

The Wall Street Journal article is entitled “Forcing 20-Somethings to Save: How to Make the Case to the Newest Members of the Labor Pool.” Here is the text of the section of the article that quotes my views:

“Rob Bennett, the author of a book called Passion Saving, thinks the saving problem is partly one of packaging. So he prefers to couch it in the language of freedom: ‘What works with young people is, ‘How do you feel about the fact that you’ll be under the thumb of an employer for the rest of your life?’ ‘ he says.

“If you are an employer, you might not put it quite like that. But it is as good a reason as any for young people to start saving today.”

It was Mick Jagger’s idea. I just quoted the guy. Regardless of what you think of the leering, slurring, satanic-influenced one generally, I think it is fair to say that he has this one nailed. He really does offer one of the more persuasive arguments for why young people need to participate in Section 401(k) plans, in my assessment.

The Saving Penalty

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What if we weren’t so private about our personal financial lives? That’s the provocative question asked in a recent entry to the It’s Just Money blog.

The author of the blog notes that, “after finishing school, we go from all being poor college students to varying levels of economic means.” We naturally develop an interest in seeing how our friends are doing financially, and in comparing their level of success with our own.

The trouble is–we make these determinations by looking at what stuff they have bought. We conclude that the guy with the expensive car is doing well, and that the girl going on the expensive vacation is doing well. We conclude that the guy living in the inexpensive apartment and the girl wearing inexpensive clothing are not doing so hot.

It might be that our conclusions are entirely wrong.

In our minds, we are penalizing people for saving. We are subtracting social status points from those who follow effective money management practices.

What a mess!

To really know who is a success and who isn’t, we need to see how much people have in their investment accounts. But nobody talks about that sort of thing.

It might be that that is starting to change, according to the blog entry. It notes that bloggers share all sorts of personal financial jizz-jazz with their readers. Perhaps that will put the idea in the heads of a lot of others that it is not so terrible a thing to share details of their personal financial circumstances.

Bloggers learn from putting their financial lives on public display, in my view. They learn about themselves by discovering what sorts of facts they feel comfortable sharing and what sorts of facts they feel a desire to hide. They learn about others by seeing what sorts of facts about their personal financial circumstances elicit surprise.

There’s a reason why people talk so much with their friends and neighbors and co-workers. We learn by sharing information and obtaining feedback. We have cut ourselves off from a big part of the learning process in the area of personal finance by being so secretive.

I understand why it is taboo to disclose details of our financial lives to people outside of our immediate families. I am beginning to wonder, though, whether the taboo might hurt us more than it helps us.