The Gift That Keeps on Giving 9-24-10

Anderson, South Carolina

A friend of mine was telling me yesterday of the vast legacy his grandfather had given him – the presence of mind to evaluate every financial decision, even the most trivial, as a cost/benefit problem. My friend gives abundant credibility to his grandfather’s gift in that Benjamin is perhaps one of the most financially powerful people I have ever known, perhaps the most so. I don’t say he has a lot of money, he just knows how to do a whole lot with the little money he does have; thanks to the mentoring of his grandfather. My best guess is he and his family would be classified as living at poverty level or below, based on what I know of his income and recently stated Federal guidelines for being officially poor in America. Benjamin runs around town in a Mercedes and I last saw his ‘non-working’ wife in a Lexus.

Benjamin has recently been able to buy a second house for less than many people pay for a HDTV at Best Buy. He can completely rebuild a house with complete environmental awareness for less than most people pay for a two-week vacation. In his role as the director of one of our community non-profits, what he has been able to do containing costs while expanding programming has been surreal. For one who spent years doing cost engineering, this has been a true delight to observe.

The take-home message from Benjamin’s life and the work of people like Joe Dominguez with his ground breaking work, Your Money or Your Life in 1992 or Thomas Stanley’s The Millionaire Next Door in 1996, is that financial affluence really derives from empowerment over money rather than enslavement to hoarding more of it or the stuff it can buy. Alas, both of these books were probably ahead of their time. America was in the midst of the technology craze, the Internet was just giving birth, the dot com boom was still conceiving, the housing myth yet untarnished. With the advent of economic reality one night in September of 2008, the message of these visionaries is perhaps timely. I’m suddenly finding audience for my own two cents on the matter. Perhaps new work such as Jeff Yeager’s The Cheapskate Next Door will gain wider attention with fiscally challenged consumers.

Despite economic tsunami washing over our economic shores, a disquieting phenomenon persists strongly, the failure to consider the true cost of one’s economic behavior over time. Years ago I attempted to present week-long workshops on financial empowerment. Initial enthusiasm was strong but lasted little longer than morning dew at sunrise. In those lectures I presented engineering economic principles showing the average person achieving financial affluence was absolutely a reasonable goal, if one but paid attention to the details of one’s small financial decisions every day. Alas, many of those individuals have since been economically plundered because they failed to pay attention in economic environments that are designed entirely to separate consumers from their largesse. I nearly despair over dear people who have bought into a life time of fiscal bondage by believing cultural myths about money, self worth, and empowerment. It is stunning how quickly personal financial infrastructures can collapse.

I was in a retail shop a couple days ago, one rather clogged with inventory and the detritus that accretes after fifteen years of commerce. The daughter of the owner took a deep sigh and proclaimed out loud, almost despairing, ‘the abundance of our success is overwhelming.’ I was instantly reminded of the aphorism of Thich Nhat Hanh, the Buddhist sage who declared something to the effect, “It is better to love a few things well than to resent a life filled with too many of them.” The retail shop I visited is precarious at best.

Despite economic challenge, self storage lockers proliferate across the land. People continue to acquire and accumulate so much stuff; their ever-larger houses can no longer contain it. Others horde things, believing vast sums of money are to be made by doing so. Vast sums of money are being made, not by those who horde, instead by those who cash monthly rent checks for storage lockers. The ex-husband of a friend collected computer parts for years and ultimately paid to store them in a storage locker. For twelve years he paid rent on this locker, nearly $12,000 for storing materials considered of so little value as to ultimately be landfilled. My experience going to locker sales put on by managers of such facilities revel many of these lockers contain little of sentimental or economic value. In some cases I could not be coerced into taking the contents for free. Apparently, there are deep emotional drivers that compel people to horde worthless consumer detritus. Grandfathers and parents did not pass down the wisdom of considering financial decisions carefully. One man wrote nearly one hundred fifty rent checks rather than making deposits into good mutual funds. He would have amassed perhaps $300,000 in fast rising funds in the late twentieth century instead of a mountain of worthless dusty computer parts.

Corporate America is making billions providing access to assorted communication resources. A family well known to me has been paying for high speed Internet access since it was invented. Most of that time there was no computer in the house. A year and a half ago I was asked to buy and configure a computer. I did so and provided initial training in its simple use. It has never been used a single time. The warranty on the computer lapsed without it ever being powered up. This family has often lamented about financial matters. My best guess is something on the order of $5,000 has been paid for a service never once used. The lost investment opportunity costs would easily double this amount. They continue to pay the piper.

Another friend with catastrophic medical conditions and precarious employment has a state of the art computer with very expensive high-speed access. She makes almost no use of it and has acquired virtually no knowledge of its use.

Several friends with permanent disabilities are paying close to $2000 a year for video access on their TVs. To the best of my knowledge, one has not used her access in the last year and my queries as to why she does not cancel it are disregarded. Another admits to watching nothing on her TV. All of them are writing checks every month to support the profits of corporate America. Despite talk of a deep recession, aggregate corporate profits in America are staggering. The employed ninety percent still fulfill their main mission in life: spending.

What people spend on cell phone and data access is surreal. It’s nearly a badge of honor to own a so-called smart phone. New aficionados declare how wonderful their phones are. My query “Don’t you have to pay nearly $100 a month for a call plan and data services to get that to work?” is disconcerting. Suddenly enthusiasm wanes when I point out pre-tax income required to keep them surfing on the fly is about $1,800 a year. Many individuals are anteing up $250 a month or close to $4,500 pre-tax income to stay connected to Facebook. What happened to black desk phones for $10 a month? One can acquire robust cell phone service for $12 a month and get the phone free. One can use ambient community Wi-Fi for free. Listen to your grandfather.

A most compelling scripture from the New Testament is nearly acerbic in its brevity and directness. “For where your treasure is, there will your heart be also.” Is yours in the storage locker down the road? In your attic? In your garage? In corporate Accounts Receivable?

Listen to your grandfather? He was probably wiser than any of us.