Every financial expert worth their salt has long ago memorized mantras like, “Pay yourself first,” and, “start savings while your young and watch your money grow.” In most cases when these testimonials are presented with religious fervor they are accompanied by slick presentations that include multi-coloured bar graphs, arcane mathematical computations (well, arcane if you were educated using today’s public school mathematics curricula anyway, but I digress), and promises of a life of plenty. The only thing you have to do in order to one day walk in this promise land is start saving a little bit of money, make it automatic, put it in a jar, reinforce frugal habits, something about 10%, no wait 15%, or is it 20%+? Yes the only thing you have to do is look at the world with the hard-fought wisdom of a forty-year old financial advisor when you are 20. That shouldn’t be so hard right?
Of course the “eternal optimist” George Bernard Shaw revealed a much more realistic view of young people and personal finance when he stated, “Youth is wasted on the young.”
While the charts and projections that we personal finance know-it-alls love to throw up are statistically true, they fail to take into consideration the most important factor in the equation – humanity. Sure, logic and reason have their place in the minds of most young adults that I know, but they aren’t the only ones setting up shop there. In fact, immediate gratification, YOLO-ing, and material satisfaction (Google “flossing”) might have the run of the place as it pertains to most of us.
This represents an unfortunate reality. You can hardly blame the logical and reason-driven angels on our shoulder for investing their energy into the more important matters like getting an education, pursuing a career, and maybe even finding a long-term mate. Personal finance often gets delegated to the dark side. This is how luxury trips abroad get put on credit cards, 3,000 square foot homes get purchased with that maximum amount the bank will give for mortgages, and brand new luxury cars purchased with only “84 monthly payments of $299” end up in garages that have been built with home equity lines of credit (HELOCs).
A Chart by Any Other Name…
It’s too bad really, because the charts do look really pretty. The whole idea of learning to live below your means when you get your first paycheque and then investing the raises you get as you climb the pay ladder (oh, sorry I read about how that used to be the case in a history textbook somewhere) sounds pretty good. The nebulous concept of a nest egg gradually growing as those investment returns compound over time is a comforting thought. Who knows, if you listen to your financial advisor you might even be able to afford the retirement that is routinely show in Cialis and Viagra commercials right? (Judging by the amount of those commercials I’ve seen over the past few years, half of professional sports might now be owned by erectile dysfunction companies). If only us crazy young people could somehow balance out the billions of dollars’ worth of advertising that is thrown at us along with the perfect picture of consumption-at-all-costs that are parents are so fond of, maybe we could realize the reality that is so vividly shown by those escalating bar graphs titled “Millionaire at 55”.
Stupidity Compounds Too
In all seriousness, it is a little bit sad how this whole thing works. Compound interest is pretty simple to understand (it was the concept that originally got me interested in learning about personal finance). It is a basic guarantee to eventual wealth if you begin the process early enough. The problem is that this sort of planning runs entirely in the face of the new “live for the moment” theme seems to be dominating current Generation Y culture. Isn’t is possible to live like 97% in the moment, but take roughly 10 minutes out of the month to look at your paycheque(s) and decide where they should go? Do you have to fly to some exotic place to live in the moment? Is the moment always better in a bigger house or slightly more luxurious car?
Alas, numbers on a page that get progressively bigger have a certain raw and unyielding beauty. It is only when humans get a hold of them that the picture begins to transform into the muddied reality of consumer debt and unused RRSP space. Why do the laws of economics torture us young souls and tempt us with a world we are determined to never explore?