This continues the note from my friend and represents:
Note to Mr. J, Part 2: Kids and other things
From Mr. J:
Your post about ways to live and the approach to retiring had me thinking. Since graduating from USNA I have not ever come close to living outside of my means. Not by eating ramen or cranking down the heat to 62. I simply extended my basic life at college and the boat to my life ashore. Now we are doing really well and we still live the same basic life. The first raise I got I heard the advice to save 50% and spend the rest on myself. I asked, “What in the world would I blow this extra 50% on that is worth it?” When I never found a good answer I just banked it. So my wife and I have a couple of “expensive” habits. We bought a house that was located where we want to be with the amenities we wanted for the kids. The caveat I put in was it could be no more than 2X my annual salary. That’s my salary, not the wife and me combined. If that’s an $80K house I renovate myself I think that is important for keeping the debt low. Since my income is good it does get me a 4 bedroom house in a new Houston suburb. We fly a decent bit, but that is almost always to visit family. And lastly we have the most expensive habit any of us can have – kids. So not really habits, but that’s where we splurge within the limits. The added plus is having a wife who is also frugal.
I remember that same advice about banking 50% of raises. At USNA, there was a strong presence of USPA & IRA (now known as First Command Financial) which had a system they pitched very hard to senior midshipmen and recent graduates. If I remember correctly, they took your money and invested you in front loaded mutual funds, and somehow had a contractual arrangement you would sign where you really would divert half of every raise to them for investment purposes… and they knew exactly how much raise you would get every period as a junior officer. In retrospect, in some ways it was not a very good deal (fees, load, expenses, etc.) but on the other hand, had I actually signed up with them I might have ended up today with more money than I have now. The 20s were not good on my finances!
Regarding kids, they certainly can be expensive. There’s a sort of corollary to Parkinson’s Law that might state that kids are as expensive as you make them. Jacob Lund Fisker has some interesting thoughts here. In his book, he makes the point that if he can be happy living on $7000 a year, than easily a kid could be happy, having that much or less being spent on them each year. If appropriate free schooling or cost effective homeschooling can be worked out, what else do kids really need?
The most important thing they don’t need is more stuff. I was just in the last 24 hours reading someone talk about Laura’s doll Charlotte from Little House in the Big Woods. That old doll is a big, huge deal to Laura, because she doesn’t have a lot of stuff lying around. I remember parts of Where the Red Fern Grows being the same way, that kids have a few treasured possessions and those possessions really mean a lot to them. Kids only have so much love to assign to material objects, and can only play with a couple of things at a time. Laura loved Charlotte more than anything, but if she had 50 dolls, she’d only love each of them 1/50th as much. If Laura had a whole room full of toys and even more packed away in totes in the garage, then she wouldn’t be attached particularly to any of them for any length of time. What’s worse, is if there is a feeling of infinite abundance, then kids revert to a state where NO possessions have any meaning to them, rather they learn to seek and appreciate only novelty.
I’ve realized on my journey that novelty-philia and novelty seeking were among my worst traits, well into adulthood (like even six months ago). Novelty seeking costs money, prevents development of mastery in any particular area, and is ultimately unsatisfying, unless constant novelty is evoked. The worst kind of novelty seeking is collecting almost anything, since not only does a constant stream of money need to be spent but then stuff accumulates in your room/garage/attic etc.
This is how I think of collecting anything. Substitute anything for “panflute” in this flowchart and it will help you make wise acquisition decisions:
this image was found here, one of many brilliant pieces on Drew and Natalie’s sites
It’s ironic that the point of anti-consumerism is to find MORE value in your possessions!
I’ve written before about efforts to become a Competent Man, and that’s very different than novelty. While I want to work my way up the sigmoid curve in many areas, I don’t consider that novelty seeking. I’m talking about at least getting up to the linear part in my chosen areas, but true novelty seekers get nowhere close to that stage.
So, enough about kids. I think they are as expensive or cheap as you want them to be. There is a theme I hear again and again, which I just recently heard on an interview with Arnold Schwarzenegger by the incomparable Tim Ferriss. Tim asked Arnold about growing up, and Arnold pointed out that by today’s western standards he grew up dirt poor. However, he never realized he was poor because he was surrounded by people in similar circumstances, and his mother (and to lesser extent father) had lots and lots and lots of TIME to spend with him.
Kids don’t know what you have in your bank account. Their only sense of wealth is YOUR TIME. J, you have put yourself in a position to spend lots of time with your kids. So that money in your bank account doesn’t represent financial wealth, it represents temporal wealth. Spend it by using it to spend more time with your kids!
more to follow from my long email exchange with J!