Saturday, February 24, 2007
Friday, February 23, 2007
Sunday, February 11, 2007
HE: I can't find it anywhere....
ME: I think I hung it up, out in the barn, next to where the basketballs are kept.
HE: Well, I couldn't find it. I looked everywhere.
A while later he went out to the barn and looked again. Still later, the conversation continued after I came inside from going out to the barn, where I found it hung up, next to where the basketballs are kept.
ME: Here you go. It was right where I said it was.
HE: Thanks. I guess I looked everywhere but there.
ME: . . . .
This was said without a hint that he understood the implications of his comment. In his mind, it was just a reasonable explanation.
Posted by RB at 4:22 PM
Sunday, February 4, 2007
The smarter thing to do is to watch Puppy Bowl III on the Animal Planet channel during Superbowl commercials.
The smartest thing to do is to skip the Superbowl halftime show and watch the Puppy Bowl.
Do you want tacky or do you want cute? It's your choice.
BTW, you don't want to miss the Animal Planet extravaganza, the Kitty Halftime Show!
Posted by RB at 6:49 PM
We started holding Dave Ramsey’s Financial Peace University seminar in our home. The first lesson was about saving. I always find the concept of compound interest amazing. My favorite example is about the two twin brothers. One starts saving $2000 per year at age 19 but stops saving at age 26, not touching the money and letting it grow. The other twin starts saving at age 27 and continues saving $2000 each year until age 65.
Question: Guess who ends up with the most at 65? The first twin who saved $16,000 early or the second brother who saved $78,000?
Answer: The first twin who started early winds up with substantially more. They both end up retiring as millionaires but the first does better since his money had more time to grow exponentially. With time, the principle of compound interest becomes the miracle of compound interest.
I understand the math. I can do the math. I can even teach the math. However, I have trouble getting my brain around the results of the math.
The lesson? Anyone who saves and invests consistently will do well, but if begun early, the results will be even more spectacular.
Last fall there were some young men taking the seminar. They saw this same lesson. They each had audio CD’s of the lesson to listen to later and a book that showed step-by-step, year-by-year how the money grew. They were told that they had just been taught how to become millionaires. They could end up as millionaires in terms of what the dollar buys today. They could do so without much sacrifice or trouble. Older people in the class exhorted them to start saving NOW.
They were even told how an undisciplined person could save in a disciplined manner.
If these young men would just consistently save 10 to 15 percent of their income, they would all become multimillionaires. They could live comfortably when retired, no matter how long they live, and still have loads of money to give away or to bless their children and grandchildren. They could create a legacy and change their family tree - the pattern of their descendants for generations. The possibilities are endless.
This is mathematics, not theory.
This is a no-brainer!
Did these kids start saving and investing? I doubt it. I can only speculate as to why. Maybe they are so imbued with a spirit or attitude of poverty that they cannot believe this or take it seriously? Maybe they are too immature to appreciate minor delays of gratification for huge future gains?
I admit that my generation is dumb. Most of us did not know these things when we were young. Which is worse, to not save and invest due to ignorance or to not save and invest despite knowing better and being without excuse?
Which is the dumb and which is the dumber generation?
Posted by RB at 1:50 PM
Saturday, February 3, 2007
THE GREATEST. A few years ago, my children gave me Tom Brokaw’s best-seller, The Greatest Generation. I wouldn’t say it was a fascinating read but I did enjoy reading it because it brought back a flood of good memories. The people and their recollections were people like my dad and the men of his generation who I remember from my childhood. These were guys who came of age during the Great Depression and WWII, then went on to accomplish great things in the post-war era. There was a certain quality, an attitude, a mindset, that they shared that I never thought of before, let alone appreciated, until I read the book.
They had character.
DUMB. This week came the announcement that savings as a percentage of after-tax income, the U.S. savings rate, is at the lowest level since the depths of the Great Depression. Now savings rates tend to be lower during bad economic times. If so, the current savings rate should be high. The economy is doing quite well, thank you very much. National income is growing strongly and we are at or very near what is considered full-employment. Although not the best indicator of the economy, stock markets are strong as well. The Dow Jones Industrial Average is hitting record levels and the other stock market indicators are very high.
Now there are technical reasons why we must be careful in comparing savings rates between different time periods, but I will spare you the details. However, the difference in rates is so great that there no need to quibble over the fact that the U.S. savings rate is at a very low level.
The following graph shows the US savings rate over the past forty years. Notice that it has been trending downward (i.e., dropping like a rock) over the past twenty years. What happened?
The demographic bulge known as the baby boomers were in their thirties back in the mid-1980's. The oldest ones were starting to hit forty. This is a period in the life cycle when households start saving more, not less. As the bulk of the baby boomers aged even more and entered their forties, the savings rate should have gone even higher, and then even higher during their fifties. My generation, especially since there are so many of us, should be drawing the average savings rate up, not down.
What happened is the pathetic behavior of my undisciplined generation (including me). Never had a generation been so rich. Never had a generation in this stage of their life cycle acted so immaturely, not saving for the future and not delaying gratification like they were teenagers rather than adults.
This is not a proud moment.
DUMBER. I’ll save that for my next post.
Posted by RB at 3:57 PM