I had originally planned to write something different tonight, but after reading Sharon’s post today I decided some things I wanted to say couldn’t wait until later. I’ll wait here while you go over and read Sharon’s story. (Dum dum dum dum dum dadadadum dum dum dum dum dum dum …are you now humming the Jeopardy theme? You’re welcome)
Now that you’re back, what did you think? I like what Sharon has to say. I’ve been moving along those same thoughts lately. My difference is that I think it will be far, far worse than most people think. Most of the people who work in America now are accustom to their cushy lifestyle. Life now is nothing like it was in the 20s, so we have a lot further to fall back to a base level before we can make any progress. I know I’m being a pessimist when I say this, but I really think the impending picture of Peak Oil, mortgage/financial market meltdowns, layoffs and general rabble rousing will make the Depression seem like a cake walk.
We’ll see. I could be wrong. But either way we’ll be prepared. If things don’t go bad then we’re just more secure than we were before. If things do fall apart then the plan is to have a place to live. We finally put our money where our mouths are recently. We did something really nutty. All those financial pundits will say we’re nuts, but we don’t really think so. You see, we stopped saving for our retirement. Yeah. I know. It’s crazy. It’s insane. CCCAAALLLL THE CRAZY PEOPLE!
But here’s the thing, we know this is the house we want to be in for the long term. We know that it’s a reasonable size with a fair amount of land area to grow a fair amount of crops. We know that it’s in the city and it’s close to things we might need. And we know that we would feel a lot better if we had it paid off. So we decided to stop saving in our 401ks and IRAs, for now. Besides, what’s the point of these accounts anyway? If things go awful and we need the money Uncle Sam takes 40% before I can get any right? And if things go awful the stock market won’t be going up right? So the real reason they exist; to take advantage of tax deferred high income investment growth, won’t be happening. Why add more to the pot?
Why not use that money to get our morgage paid off faster and that way we’ll own a chunk of space we can call ours and have a place? If things don’t go bad, like I said, we’re still fine. But now we have a house free and clear and some serious bank each month to work the retirement savings, if it’s even important to save for retirement in 10 years. Of course assuming we’re able to stay gainfully employed. Yes, I did say 10 years. 10 years is a long time away, but assuming no additional payments, with the schedule we’ve set up it should be around 10 years from now when it’s paid off. I have no idea what the world will be like in 10 years, I just hope we can hold it together long enough to make it that 10 years. But, 10 years is shorter than 30 so we’re moving forward. And if we are able to get enough equity in the place that should protect us on the downside as well, even if it’s not paid off.
But what about your tax write off you say? Mortgage interest is “good interest”. What? It’s good to pay someone interest? Are you hearing yourself talk? That is nothing more than good advertising. Next time you do your taxes ask your tax person what the “benefit” of your tax write off is. You’ll be surprised. Same thing with student loans. Get rid of that debt!
Now, one major reason I think this will work for us is because we’ve always been LBYMers. When most people in their 20s were out partying and buying new furniture and cars and whatnot we lived with cast offs and limited our partying. We did buy some new things on credit, one car and one living room set. The car is still with us, a Honda Civic (almost 10) , and will probably be for many more years. The furniture set is too. We know that if we set this direction down we can follow through with it. That may not be so with you. You need to look yourself in the mirror and see if you have what it takes. (I’m lucky that I have an American wife who DOES NOT like to shop)
We also have had the benefit of well paying jobs and have used those opportunities to save diligently for retirement. I know that with what we’ve already saved, assuming no additional contributions and a decent yearly return, we’ll pass that magical 7 figure mark before we’re 60. But who knows what the dollar will be worth by then? That may not be enough money. Hell, the Dow might be back at 2000 by then. Who knows. One thing I do know, the Dow has averaged 11% a year for the past 75+ years, but we’ve never had a world climate like we do now for companies to operate in. We are in a world where resources are scarce. Oil, wood, coal, natural gas, tillable land are all being used up or fully utilized. The corporate business model doesn’t work without an unending supply of resources to suck in the front end, both of people and natural materials. I think the latter will be in high demand but low supply in the future, which possibly means wage deflation if workers are in low demand/high supply situations. Keep an eye on that.
This was a long, possibly boring way for me to tell you to read what Sharon wrote and get serious about it. Be serious about it. You may not believe all this and that’s fine, but maybe you believe some of it? Is that enough to make you want to do anything about it?
Don’t you wonder why gas is approaching $4 a gallon already and the magical “Don’t buy gas today” strikes don’t work? Why do you think prices for things you are buying at the store are going up every time you go there, but the government is saying there isn’t any inflation? Do you really think paying interest is a good thing?
If you’ve got some spare time read this guy and watch his videos. He talks about things in a very good introductory way, if you are new to this stuff. It’s time to get with it America.