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« Options for Term Life Insurance Death Benefits Payouts | Main | Free Money Finance March Money Madness, Round 1, Posts 41-44 »

February 10, 2010


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There seem to be two separate camps within the finance blogosphere. First, the frugal, cut back and save until you reach your goals camp. Second, the earn more money so you can support whatever lifestyle you desire. I like the intent of this article because it sees to blend the two camps, which has been a positive trend recently!

Being frugal and not spending money on frivolous items and clutter is a wise move, but coupling that with being industrious and earning extra money on the side will really skyrocket you towards your goals.

For me, I don't see it as an either/or choice. Maybe the issue come from defining frugal. it doesn't have to mean stingy, cheap or tight. Lord knows I have "wasted" money in my life--but, always within my means. What I mean is that you can save for the future and still have that cupcake, just not the whole box at one sitting. I lived well, not lavishly, but within my income level. I paid myself first, so I felt free to spend what ever I wanted to spend as long as it was debt free.

What I like about the article is that it seems to me to suggest tath you can enjoy today and still prepare for tomorrow. Scrimping is not required if you can afford not to scrimp. One doesn't have to shop at the day old bakery, always buying clothes at the second hand store (not that there is anything wrong with that), and living a monk style life.

Moderation in all things; including moderation. Anyway, it worked for me.

This is so true and it is nice and refreshing to hear from a financial planner!

DJ, to me this article doesn't seem to combine the two views. It seems to be another book completely focused on the income side of things. No, he doesn't come out and say frugality is bad. But look at this paragraph:

"Fortunately, you have the other 8 hours. In the coming chapters, you will learn a completely different approach. Instead of focusing all of your attention on how to stretch the limited gas you have, the goal will be to find a gas station so you can fill up. Do you see the difference? You will learn to focus on your potential and what you can accomplish instead of on only what you currently have."

Sounds a lot like all you really need is to focus on those other 8 hours and how you can increase your income.

I'm in agreement with what you said, DJ. The best solution is both approaches. But I don't see how the excerpt from this book aims to marry the two.

You can follow all the best advice on saving money, living frugally, and investing wisely but unfortunately there's much more to it than that. During your highly productive working years you need the cooperation of an economy that provides steady employment, reasonably low inflation, and a rising stockmarket.

I have a very large wall chart of the market averages from January 1970 until July 1991 and a very comprehensive fund and market index database that goes from September 1988 until the present time.
What it shows are long periods such as 1970 through the middle of 1982 where there were four small waves but no significant upward progress whatsoever. From mid 1982 there was a nice upward movement that culminated in a huge selloff in October 1987 called Black Monday. By 1991 that damage had been repaired and between 1991 the market took off in the best sustained move it has ever had. This move brought about by new technological advances continued upwards sharply until March 2000 when the "Tech Bubble" burst and the market came crashing down. By October 2007 broad markets such as the Wilshire 5000 had recovered but the Nasdaq (home to most Tech stocks) never did. Then in October 2007 the markets started a freefall that by March 2009 had wiped out all the gains of the prior 10 years.

My income producing years were between 1956 and 1992. When I retired in 1992 my portfolio was a decent size but it consisted primarily of the money I had contributed (with a company match) over 32 of those 36 years, the appreciation was not very large. With that alone and the two retirement checks and two Social Security checks our lifestyle would be not that much different from what it is today, mainly because home prices were so low in the sixties and seventies. What made the huge difference to our portfolio was riding the Tech Bubble upwards from October 1998 and selling in March 2000. In that 18 month period the Nasdaq 100 gained 306%, the Nasdaq Composite gained 256%, and the Wishire 5000 gained 61%.
Conclusion - Out of a working life that spanned 36 years, the gains from just one great year, 1999, was equal to the sum of my gross annual salaries for the last 32 years. That's why I do not believe that Buy and Hold is capable of making you wealthy. I also believe that it is very difficult for most workers to devote the time that it takes to practice comprehensive fund selection and sector rotation while you are busy working in an important job that consumes most of your waking time, and by the time they retire, without nice pensions, it may be too late.
I was never in management, the highest level I attained was a senior staff engineer to a manager and leader of a very small group performing R&D on new software. I guess that if I had risen through the ranks to where several hundred engineers were reporting to me and had received company profit sharing I might have done as well without the help of the stockmarket.

While it's a good article, you're lumping all financial planning under one big umbrella. That isn't so.

Sure retirement planning is a big issue. But you can also go to a FP for college planning, disability planning, asset protection/transfer planning etc.

FINALLY - a PF author who speaks to me!

This is great, the more I read, the better it gets!

> "Gratitude unlocks the fullness of life, turning what we have into enough, and more. It can turn a meal into a feast, a house into a home, a stranger into a friend. It turns denial into acceptance, chaos to order, confusion to clarity. Gratitude makes sense of our past, brings peace for today, and creates a vision for tomorrow." -- Melody Beattie

> "That man is the richest whose pleasures are the cheapest." -- Henry David Thoreau

> "If you look at what you have in life, you'll always have more. If you look at what you don't have in life, you'll never have enough.... The more you praise and celebrate your life, the more there is in life to celebrate." -- Oprah Winfrey

So let me see if I've got it straight:

If you have a poverty-level income, gratitude unlocks the fullness of life, and turns what we have intoi enough? It doesn't pay the bills, so what if you have a family to support or children to leave an inheritance?

I'm really big on frugality, but even frugality won't solve everything, and I don't see how gratitude will either. But I cannot be sure of that; someone is working on changing my mind.

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