Broken Piggy Bank

I grew up in a pretty conservative home. My parents were very right-wing Christians and I remember them persuading me as a child to adopt the same conservative views. I think all parents are more right leaning when it comes to matters related to their children. If it wasn’t a pre-built survival mechanism, I’m sure the species would’ve died off. One lesson that my parents consistently told me was the idea of going to school and getting a good paying job. Keep low expectation and live within your means.

Although I’ve pretty much done away with a vast majority of my parents’ beliefs and values, I find that many of my friends continue to hold on to this basic belief. They convince themselves that you don’t need that much money to live. Just live a simple life and you’ll be happy. While that’s a personal decision people must make for themselves, there’s risk in living that safe lifestyle.

The World Won’t Leave You Alone

There was a great line in The Lord Of The Rings where a hobbit says, “Don’t go looking for trouble and trouble won’t come looking for you.”

Depending on the style of life you decide to live, this could very well be true. If you’ve decided to live amongst the majority of society, you are very much a part of a system. And in that system, you simply cannot live without money. You need it to eat, to sleep, you need it to save for emergencies, for buying a house, and even retiring. Now, I’ve basically beaten to death the concept of inflation — and I promise I have a lot more, because it’s a cool topic (for me, anyways) — but this is a topic that is inseparable from inflation.

Ahem… Inflation

The old saying went, “A dollar saved is a dollar earned.” Looking at US history for a moment, from 1665 to 1905, the average annual rate of inflation in the United States was 0.001%. That’s basically zero.

It was such that the economy moved so slowly, you literally could save your money and have enough to live off of and retire. This is also considering that this time period saw numerous major wars, including the War of 1812, the Mexican War, the American Civil War and so on. Only when World War I came along did we see a new trend: one where inflation constantly and consistently went up. This brought with it implications for the average civilian. Ever since then, all the way up until today, the idea of simply saving your money hasn’t sufficient since, every year, your dollar was getting eaten up by the printing of more money.

The Options

If you have a job (or maybe you are a business owner), as inflation keeps going up, you have essentially three options for achieving your long-term savings goals:

  • First, there is the idea of making more money. This is an option that has captivated a vast majority of the population. You only need to look at the success of the multi-level marketing industry to see how anxious people are to increase their wealth.
  • Second, you can hold off on your savings goals. Again, you only need to look at the number of people who are working until the day they die.
  • Third, and the option that most seem to take, is to invest your money. Assuming that most people want to save money and retire at some point, unfortunately inflation has put them in a position where they must now put their money at risk in the stock market. Since simply saving alone won’t cut it anymore, people are forced to hope that the stock market will work in their favor and no matter what any financial advisor tells you, mutual funds do not offer any more or less in the way of average returns. If only there was a non-depreciating asset that held its value against inflation over time… if only (cough)gold(cough).

The Solution

I’m wary to offer any sort of solution, since it simply is either to make more money or to change your goals. I really want to encourage people not to be so nonchalant when it comes to their finances. If you well and truly don’t care, then all the power to you. It’s just the people who typically feel that way, I find, are also the most blindsided by the eventuality of realizing what they had spent their lives hoping for is, all of a sudden, completely different.

As far as I can tell there’s never any harm in increasing your earning power. Which side are you on?