No one is born knowing how to balance a checkbook or shop for the best mortgage rates, but you can learn a lot as you go. Here are five personal finance epiphanies from the author’s life.
How did this happen?
The first hint was last June. I noticed, at my 40th college reunion, that all my classmates were old men. It seems only yesterday that my main goal, at 17, was to die tragically misunderstood after a short but brilliant life of ravenous excess.
Today, at 62, I smile at a newspaper clipping of my paternal great-grandfather. A violinist and professional photographer in Edinburgh, Scotland, his obituary picture has a headline that says, “Nonagenarian Succumbs.” Today I hope to last that long — and to be well understood.
What happens in 45 years? Allow me to introduce the Five Great Moments of Personal Finance.
If we can fog a mirror and have a record of work — however reluctant it may have been — the great lenders of America are waiting to lend us money. This is a truly great moment. The scentof megalomania is in the air. Want a house? It is yours. Want a car? Sign here. Need a vacation? Take this plastic. Need anything else, anywhere? Open your mailbox. Sign the offer.
Getting stoned on credit is the great American high. There are only two things you can’t buy on credit in America: discipline and common sense. Credit is wonderful. But discipline and common sense are more valuable.
Learning life is always more expensive
In my late 20s, I thought life would be easy once the kids were beyond diaper service. I was wrong. Decades later, I am still waiting for life to become less expensive. The price of breakfast at the Plaza Hotel in Manhattan is as intimidating today as it was in 1965.
Whatever you earn, prices and taxes will rise to the occasion. This is not a complaint. It is the way things are. All of us need to get over it. Breakfast costs less around the corner.
Learning you must pay it back
There is a day when all borrowed money must be returned. It can be deferred. It can be put off. But it will come. We tend to forget this, often at the urging of our credit card company(s), home equity credit line provider, etc. The party that follows the discovery of credit is always followed by the hangover of paying it back. This is not moralizing. It is a reminder about avoiding hangovers.
Learning the law of unexpected consequences
Planning is one thing. Actual living is another. Want to empty a room quickly? Ask those who have never been surprised to stay. Ask others to leave.
This doesn’t mean we shouldn’t plan. It just means the unexpected is inevitable. When Congress voted to allow everyone up to $500,000 of tax-free capital gains in their primary home, they thought they were simplifying taxes for homeowners.
In fact, they accidentally reinforced the best investment most Americans ever make, created a bubble and provided the wealth to offset much of a major recession.
Other changes — like the special accounting Congress allowed thrifts that led to the S&L crisis or the congressional capping of executive compensation that led to the options boom and related disasters — weren’t so beneficial. Murphy rules!
Learning real problems aren’t money problems
Our easy problems involve money. They may be terrifying, but there is always a solution. Our big problems are the ones that can’t be solved with money. They are the ones that make us cry in the night and pray for relief.
- The marriage that doesn’t work
- The illness that can’t be cured
- The child who is afflicted
- The friend who won’t be helped
If you are an adult and still think money problems are real problems, you have led a charmed life. Be grateful.
By Scott Burns