Calvin, Let’s Have a Talk
This morning I woke up early, as I usually do, and picked up my phone from my bedside table. It’s kind of a ritual. I turn on my phone, take it off night-time mode and check the weather.
Something was different this morning. Something told me to click on the Medium app first. I’m glad I did. I saw this amazing article from Jessica Wildfire:
You Shouldn’t Have to Risk Everything for a Little Financial Security
It’s becoming the only way.
Jessica explains, very brilliantly IMHO, that Americans today are in a financial bind because they can’t save money, they can’t buy or pay off a house, they don’t have healthcare, and, therefore, they can’t invest in the stock market like previous generations could. It is now virtually impossible for the average American to save for retirement. People are basically screwed financially, and growing older under these conditions is, let’s say, a little problematic.
I thought what she says in this article was pretty uncontroversial and that she brilliantly summed up the dilemma of the average American today who lives paycheck to paycheck in a gig economy with few or none of the New Deal niceties that previous generations enjoyed starting in the mid twentieth century.
The comments were mostly positive and it seemed like Jessica’s summary of what’s wrong with America (that the middle class has been gutted, fried, battered and swallowed up by a dysfunctional social system) hit home with a lot of people. The home they may be kicked out of in a few months when their pandemic back rent comes due.
People who don’t have stock portfolios, 401Ks, Roth IRAs, paid-off houses, pensions, and permanent jobs.
Too many Americans today under the age of fifty do not have these things. And there are far too many over the age of fifty in the same boat. Sold down the river to an old age of poverty and despair.
The people who do have them may be smart, savvy, and careful, but equally important, they are also lucky.
But no, Calvin, you had a different perspective. You thought that Jessica just didn’t get it about how great investing is. You decided to educate her, and her clueless readers by writing this:
I guess I see things differently than you do.Yes, a single bad investment can be difficult to overcome, but lots of good ones can get you past that situation if you are smart about what you are doing. Get advice if you need to.Slow and steady wins the wealth building race. Get rich slowly. And stay there.I saved as much as I could along the way, maxing out my 401K contributions as well as my Roth IRA when allowed to do so. Living below my means helped too.As one of my first investments, I bought about $3000 worth of Home Depot some 30 years ago. Nothing sexy there. Never sold it nor added to it. It is now worth almost $125,000 and pays me about $2500 per year in dividends.Last year in the early days of the pandemic and the lockdowns, I bought some ARKK. Willing to roll the dice there & take on a little more risk. When I was up 200% in 9 months, I sold enough to get my original investment out. And now I am playing with house money and letting my gains ride.I could go on and on, but I hope that I have made my counterpoint to your points.Saving and investing are not inherently bad. It is about making good choices, setting priorities, and even making some sacrifices if necessary.I have not worked for over 10 years, yet I still have an almost six figure annual cash flow…all without having to tap into my portfolio.And if I can do it, a simple guy from a small South Carolina town whose high school class was just 36 students, similar success is within the capacity of others.And now my wife, my son, and my grandchildren will benefit from my efforts long after I am gone.
That’s great Calvin. I am truly happy for you, your children, and your grandchildren. You were savvy, smart, disciplined, and forward thinking. Great American values to embrace. I wish my parents had been like you. They wouldn’t have ended up in poverty in their old age. I would venture so far as to say that they were clueless about money and should have been a bit more like you. I won’t say their lack of prosperity was all their own fault, but they did miss a lot of opportunities to build wealth.
I’m guessing, Calvin, that you were born some time between my parents and me. My parents were born in 1940 and had me in 1960. I doubt that you are much younger than me (you do mention grandchildren).
You see, Calvin, being born near the middle of the twentieth century is a matter of luck, not savviness. Being wealthy involves savviness, discipline, and always, to some extent, luck.
Sorry Calvin. You were talented, self-disciplined, and lucky.
I know you don’t want to hear this. It flies in the face of the ethos of American rugged individualism. Americans like to believe that if they are financially successful, it’s because they pulled themselves up by their own bootstraps. And people who are not financially successful? They are hoist by their own petard.
That’s an expression brought down to us by Shakespeare. It means, basically, to be blown up by your own bomb.
My parents were hoist by their own petard. Their particular bombs were having too many children too young, getting into debt, alcoholism, and bad investments.
Their poverty was a kind of choice. They lived through the most prosperous decades of the twentieth century. They had opportunities my grandparents could only dream of. My father was the first person in his family to attend university. He got a good job. My mother was a housewife. They bought a nice house in 1974 for $67,000. It had a swimming pool.
I saw a house just like it in the same town advertised a few months ago. It was literally, almost exactly ten times that amount.
My parents’ house could have been a great investment for them.
If they could have paid it off and then sold it for that price. And a young couple wanting to buy that house today? They are probably out of luck. Or taking on way more debt than they should.
Like I say, my parents were financially clueless. They walked away from the sale of their house with about $3000.00.
So Calvin, you have every right to be proud of your financial situation.
But I think you need to acknowledge the role that luck played in your accumulation of wealth.
I can tell that you are still not convinced. So I will share my story of prosperity.
I am also prosperous. I don’t have to work. I have investments. I am not financially clueless, but I am also not savvy.
I was not savvy enough to profit from the red-hot housing market of the late twentieth and early twenty-first centuries. I live in a beautiful home, but it’s rented. If I had been more like you, I would also have a paid-off house by now.
So why am I prosperous despite my relative financial cluelessness?
Luck. First, I was born near the middle of the twentieth century. I was born in Canada, a country that one could say is… No. I won’t use the S-word. It can be triggering to people like you. The S-word might make you think that the government would come along and take away all of your hard-earned prosperity. That would be upsetting. And it would be unfair. I too am happy to be prosperous and I don’t want the government confiscating all my money.
Let’s not describe Canada using the S-word. Let’s agree to call it a country with a social contract.
A country where people can trust the government to give them something back for their hard work and payment of taxes.
Canada has had S-ized medicine since a few years after I was born. I have never had to pay for or worry about medical treatments for my entire life. Six years ago, I had an operation. I looked up the cost for that operation for someone without medical coverage. It was about $200,000 CAD. I paid nothing. It has enriched my life immeasurably. I would be basically disabled by now if I had not had that surgery.
When I need to see a doctor, I don’t have to put up with this kind of bullshit:
There’s a Reason Why It’s So Difficult to Get Me to Go to the Doctor
You might say I’ve been there before.
In Canada, privatized, for-profit healthcare is only for treatments not covered by provincial health plans, like going to the dentist. It is not a major player in our stock market. Some privileged few, like nurses and teachers and others with similar good jobs, get these as work benefits.
Oh yeah. Teaching and nursing are good jobs in Canada that are fairly compensated.
And here’s another interesting difference between our countries. Teachers’ and nurses’ salaries are not determined by taxpayers in a particular school district or by private insurance companies. They are determined by provincial governments. And everyone in the province makes the same amount. Rich school districts don’t get to attract all the good teachers so that their privileged residents can afford to pay them a good salary and their kids can get a better public-school education than the poor kids in the next district.
That leads to more equality and more prosperity over all. And it makes Canadian society healthier and more stable than American society.
Calvin, I’m sure you appreciate having good schools and a stable community for your children and grandchildren.
Or maybe you like it that they can afford an exclusive community and a “good” school district. That they have an advantage over the poor kids in the next county or the next state. All thanks to your financial savviness. I can’t tell from your comment. You might not have even thought about that.
But just think about it, Calvin. American society is fast becoming destabilized. Democracy is under threat from extremists. Do you want that for your grandchildren’s future? Do you want them to struggle in a gig economy with no chance of buying a house or affording healthcare? Maybe your grandchildren won’t have to face this because of your careful investing and planning. Will your great grandchildren enjoy all of these benefits? Will they be living in a stable society? I hope so.
But I’m beginning to have doubts about America’s future and maybe you should too.
I retired from my job as a high school teacher last June. I have a good pension. That the government paid into. All while keeping my income tax rate at a manageable 30 percent. I live in a stable society. One that did not have a financial crisis in 2008 because the government regulates the banks and the financial system to a degree that American middle-class people like you might find unacceptable.
I never had any student debt to speak of. I was able to attend university in the early 1980s, get a bachelor’s degree and a teacher’s degree without help from my hopeless parents. At the end of the five years, I owed about $6000.00. I paid it off in the first year of my teaching job.
That was one of the legacies of the prosperous 1960s. Affordable education. Luckily for me, it lasted into the 1980s.
I have a nice investment portfolio. I don’t want to lose that in another financial crisis. I trust my government to keep on regulating markets so that such a crisis is much less likely here.
As for that investment portfolio, how did I get it, you ask, even though I am not a financial wizard like you and did not even have enough sense to capitalize on the housing market of my youth?
It was mostly pure luck. Circumstances that I will not go into converged to allow me to make investments and retire early.
Hard work was also involved. I was a dedicated teacher. I was paid a professional salary with benefits. My job was protected by a strong union. Power needs to be shared. That’s how we have stable, prosperous societies.
Like they have in Europe.
Anyway, back to being a hard working teacher with a good salary.
Yes, I was making enough to put money aside for investments. But I’m not a financial person like you Calvin. Those things are hard for me. Not everyone is good at it and knows which stocks to buy. Some of us have to rely on financial planners and mutual funds.
I was spending so much time preparing lessons, marking essays, taking courses to make me a better teacher, being involved in teacher organizations, extracurricular activities and committees that I didn’t have time to research stocks.
And I wouldn’t have been any good at it if I had tried.
Does that mean I don’t deserve prosperity? Do only people who understand investing deserve to live a middle-class life? Deserve healthcare?
It’s not a far stretch to say that if only financially savvy people deserve this things, then perhaps people who inherit wealth and have social networks to help them get lucrative jobs are more deserving of these middle-class amenities than teachers and nurses.
It’s a slippery slope, Calvin.
I lucked out and I got a good financial advisor. I lucked out with my husband. Being in a stable marriage helps with financial stability. That’s why I’m relatively prosperous.
It’s why I could retire at age 59. Not because I knew about something called ARKK. Which is perfectly valid.
But it shouldn’t be the only way to achieve prosperity.
I think America should listen to people like Jessica rather than just to people like you, Calvin.
Because a healthy society is a prosperous one but also a balanced one. One where teachers and nurses can live the dream along with stockbrokers, talented investors, small business owners, doctors, and lawyers.
And healthy societies are all over the place: in Canada, in Europe, in New Zealand. They survive financially with some policies related to S-ism and so can America.
America just needs to restore its social contract. The one that existed from Presidents Franklin D. Roosevelt to Jimmy Carter. The one that was dismantled starting from President Ronald Regan and continuing until Donald Trump.
Your new President Biden looks like he wants to restore some of that lost social contract. I hope he succeeds.
I don’t think that’s asking too much.