February 2010

A Conversation About Money

Author: Lew Wessel | Photographer: Photography By Anne

I can’t stand Andy Rooney. You know, the old guy with the ridiculously bushy eyebrows who ends every 60 Minutes show with a three-minute babble on a topic, usually as fascinating as designer toilet paper. I mean, three reporters have just given us 57 minutes of hard-edged stories, interviews or exposés on matters of national and international import—stories that will generate their own headlines on Monday—and this guy sits in his musty, dusty office all disheveled and ready for the attendant to take him back to his room once he finishes boring us to death with his “Ever wonder why…” bit about basically nothing. How much does this guy make anyway?

Nevertheless, I’ve decided this month to channel Andy Rooney and just ruminate on a topic that fascinates me: Money.

Let’s face it: Money does seem to hold a fascination for just about everyone. A “money” GOOGLE search brings up almost a billion hits—974 million to be exact. This compares to 588 million for sex, 478 million for God and just 6.6 million for Brittany Spears. On a brighter note, “love” brings up 2.3 billion hits, so we’re not all bad.

You Can’t Eat It

The point is, we all think a great deal about money. It has a huge influence on our day-to-day lives. Arguments focused on it are the leading cause of divorce. We die for it and we kill for it. Yet, in the end, it’s a fiction. It has no intrinsic value. It won’t feed you on a desert island; it won’t fend off a shark when you’re scuba diving. The U.S. dollar doesn’t buy you anything for breakfast in a small village in the middle of France, as I found out on one trip a while back. Take away the arbitrary value we put on it as a society and the subjective value we imbue it with as individuals and you’ve basically got printed paper.

It’s Personal

OK, to be perfectly fair, money—at least “legal tender”—does have worth in that it CAN buy stuff. And LOTS of it can buy LOTS of stuff. True, on one level, money has an objective, concrete value even as it floats up and down against other currencies. But, in the end, the same amount of money has such a unique impact on every individual that its worth really has to be seen as subjective and fully tied to that person’s circumstances and personality. This is why financial planners cannot say X amount of money will guarantee a comfortable retirement or Y is a great investment for everyone. Money and what you do with it is deeply PERSONAL.

My Bigger Pile Says “I Win!”

One thing for sure is that, for the truly wealthy among us, the value of money in not primarily its power to buy stuff. Once you have accumulated all the toys an adult can dream of plus a few totally worthless knickknacks like “the watch that you don’t own but pass on to the next generation” (give me a break!) what’s left to buy? Only prestige or power or just winning the “game.” Money, for the hedge fund manager, Fortune 500 CEO and other fortunates, is simply a way of keeping score. That’s why they argue so fervently for the extra million in bonus: “Gosh darn it! Bob, over at XYZ company, made 52 million last year and I’m better than Bob!”

Be Careful What You Wish For

Here’s a fun thing to do with your spouse next time you’re on a long road trip: Buy a South Carolina Powerball lottery ticket, hopefully when the jackpot is something like $150,000,000 and then discuss leisurely, but seriously, what you would do with the money. My wife and I did this and came to the conclusion that it would be a total disaster for us and our family. Here’s how we figured it might unfold:

At first, our family and friends would be ecstatically happy for us and the calls and visits would be nonstop. We thought we might celebrate for a few days, maybe even blow a million or two on a Venice visit via chartered jet with our family and entourage (posse?). Now sobered up and back in the USA, we would have a few decisions to make. Stop writing my articles for CH2 ? Never! What should we give the kids? How about 5 million each to set them up for life? Great! Except that they all are at the beginning of what look like promising and fulfilling careers. Will they quit? Will they still be as hungry to succeed? Will they stay grounded? How will their spouses and friends react? Problems…How about our parents and brothers and sisters? What’s a brother worth, gift-wise? How about our nieces and nephews? How about the close friend who’s having all kinds of financial problems; maybe we should pay off his debts? And so on.

The sad fact is that wealth, particularly sudden wealth, as in winning the lottery, is often a nightmare for people. An online article from Bankrate.com related a number of truly horrible stories about mega lottery winners, including the tale of one winner of $16.2 million who, like so many others, eventually went broke; but, not before a former girlfriend successfully sued him for some of the money, several siblings hounded him into a disastrous business investment and one brother was arrested for hiring a hit man to kill him so he would get some inheritance.

I’ll keep buying the occasional Powerball ticket, but I truly have mixed feeling about the outcome.

You Can Afford It

The interesting thing I’ve found with many, if not most, retirees is that no matter how much money they have, they worry that they are going to run out of it before they die. The mindset is this: My money pile is now FINITE; it’s only going to get smaller. Sure, interest and dividend payments are coming in along with Social Security, but the paychecks have stopped and the hope of future raises is long gone. They feel boxed in financially. Couple that psychology with the disastrous and wild stock markets of the last decade and you’ve got even millionaires seeking out every early bird dinner special that offers a free glass of merlot. For many retirees, the fear of running out of money is completely rational, and in previous articles, I’ve talked of possible solutions to the problem. But for others, the retirement psychology is needlessly keeping them from enjoying the fruits they have labored for all these past decades. My most satisfying experiences as a financial planner have been giving these clients the permission to go out and spend their money.

Talk About It

Money affects all of us, and it’s something we should all talk about more. The conversation doesn’t have to be personal, as in: “How much do you make?” But, answers to questions such as “How much is enough money?” or “How would an extra $1,000 or $10,000 change your life?” or “If you had Bill Gates’ money,would you ever look for a golf ball again?” might tell you something about how the responder thinks. For politicians and voters, the answers to “How much is enough” or “What amount of money do you have to have and/or make to be considered rich” are critical to policy decisions on tax rates and structures.

Perhaps most importantly, conversations about money may just make us more money-smart. I’m convinced that a large part of our nation’s financial problems in the past decade was simply due to our collective financial illiteracy. Millions of us, through just plain financial ignorance, got ourselves into mortgages we could not afford, invested our money in totally inappropriate portfolios and entrusted way too much our money to slick parasites such as Bernard Madoff. We need to get financially smarter and there’s no time like the present to start.

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