Financial Goals Must Be Sensible

Morgan Housel raised a fascinating point in a post for Motley Fool titled Having Control Over Your Time Is The Only Sensible Financial Goal. Housel covers multiple concepts in the post including the economic reality that American are now more productive at work, he says “if every American worked just 11 hours a week, we could effectively be as rich per person as we were in 1950 — a time most of us look back on as a nostalgic era of prosperity.”  The point is understandable but I’m not sure it plays out in reality as life has more moving parts than it did 64 years ago.

He also talks about most people his age that he knows not liking what they do for work. Morgan discloses that he is 30 years old so the people he talks about are reasonably close to 30 as well. Although the world (the internet) has evolved since I was 30, based on what I see from my nephews who are mid-20’s to early 30’s and to a lesser extent with more recent graduates from the fraternity chapter I was in (we keep in touch with Facebook, a newsletter, email distribution list and they are trying to get a Twitter feed off the ground). people this age are typically still in the paying their dues stage of their careers.

With the right combination of luck and competence the odds of having control over your schedule increase when someone gets into their late 30’s and early 40’s so it is not surprising that the typical 30 year old isn’t in love with their work. Hopefully the paying their dues stage yields some good experience and some good decisions to create the opportunity for those who are interested to move into a position that gives more control over their time/schedule.

This sequence loosely describes my career arc but I disagree with Housel that control over your time is the only sensible financial goal.

Over the weekend my wife and I went to a big family/friends function down in Phoenix and I had the opportunity to reconnect with a lot of people who who played large roles in the earliest years of of my paying my dues stage more than 20 years ago. Most of these folks have been wildly successful by just about any measure and of course there was a lot of catching up all the way around which reminded me of a definition of success that I like because of how much of it is in our control as opposed to arbitrarily wanting $5 million in the bank or wanting to make $1 million a year.

Someone who earns more than they spend with an adequate savings rate and enough left over for some fun can be thought of as being successful and that recipe does not require a high six figure income or even a low six figure income.

This moves the conversation into living below your means which may not be an easy mind set to adopt but is a key to success and is a sensible financial goal. Adopting this sort of financial lifestyle compounds quickly not into be financially independent necessarily (but it could) but certainly into being financially flexible at an early age. Being financially flexible means being able to better withstand a job shock (like getting laid off), or taking a career risk like lower pay at a startup or to take advantage of some sort of unique life experience opportunity that presents itself. An over indebted, under-saved lifestyle would make these opportunities much harder to take advantage of.

This is an ongoing theme here that we revisit regularly. It is an important idea because the manner in which people accumulate wealth appears to be changing in terms of how reliable stock market gains are or aren’t–meaning a financial plan that needs 10% annualized returns to succeed may have problems in a 5% world. Living below your means to save more mitigates that problem as well as probably reducing instances of stressing out over finances.

Soleri

The picture is from Cosanti in Paradise Valley which where architect Paolo Soleri lived for a time. He was probably most known for the Soleri Bells which they still make to keep the foundation and properties operational.

1 Comment

  1. though the goals should be sensible, it should n’t be in any way decreasing our standards of thoughts in making money.As our thoughts turns into actions and that lead to earning.:)

    Reply

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