Cartoon Create with Gemini
I’ve cadged a bunch of this from a Facebook post by Warren Buffett, but the ideas are not new, and I’m sure he won’t mind.
My wife taught for years at a school with a wide socio-economic spread. Acre lots on the riverbank overlooking the city, small lots with mobile homes back in the forest. And the teachers there observed a phenomenon. The poorer the family, the more pre-packaged food the kids had in their lunches, while the wealthy sent their children with whole wheat and meat sandwiches and fruit.
Warren Buffet’s post notes pretty much the same thing, and I agree. Poorer money managers put their money into short-term comfort. He calls it instant gratification.
Some Examples:
- New Cars. The stats that people quote sound exaggerated to me, but apparently a new car loses 30 percent of its value the moment you drive it off the lot. Sure, you get the warrantee, but cars don’t usually break down in the first three or four years. My aim was always to buy a three-year-old car and drive it for eight to ten years.
- Lottery Tickets. People put an amazing amount of cash every year buying the chance to dream. I used to buy a two-dollare ticket and keep it for a month or so. Buffet says you should put twenty-five bucks a month into a secure investment and have a sure bet your dream will come true. It will just take ten or twenty years.
- Rent-to-own Furniture. If you take your time and look around, you can buy excellent second-hand furniture for far less than your monthly payment to the Bank of Furniture Dealer.
- Extended Warrantees. Same as for cars. Appliances tend to break down in the first few months or last for years. Stores usually have one-year guarantees. Credit cards usually double that. So, your “three year” term is really only paying for the last year.
- Internet/Pay TV/Streaming services. Check your usage. You probably have a lot of services you never use. That’s one I have to check on, because I haven’t changed the channels I pay for in years. I use a few streaming services, and I rotate through them every six months or so.
- Fast Food,Especially Coffee and Lunch at Work. You can burn through two or three hundred dollars a month in burgers and coffees. Brown bagging it with nutritious food is the key.
- Travel Choices. Are you a tourist or a traveller? Tourists expect their standard of living to go up when they holiday. Travellers put their money into interesting places and modes of transportation, and don’t mind three-star hotels and local food.
One year Linda and I took our two sons for an eleven-month trip around the world. We saved one and a half year ‘s worth of my salary in the five years before we left, and we were half a year’s salary in the hole when we got back. The only place we stayed in a five-star was in Bangkok, and that was mainly for health reasons. We hit a few one-stars and carried camping equipment with us. In Denmark we ate at stand-up bars, because it cost too much to sit down in a restaurant.
Investment
The above list is made of factors I am aware of as I make my lifestyle choices. Buffett goes one step further, advising us to calculate how much we’re saving and invest it. Of course, he’s right, but I don’t have that kind of willpower. I’m not rich, either, so there you go.
The Bottom Line
One way to make decisions is to figure out how much your time is worth. If you get paid fifty bucks an hour at work, you might be better to do some overtime and pay for a restaurant meal. If you only make twenty bucks, you’re better to hit the grocery store on the way home.
Invest in the long term. Short term pain, long term gain.