Going from thirties to fourties
Posted by Frugal on August 14th, 2009
People say that one may have a mid-life crisis around 40s. That’s definitely true.
When I started blogging, I have always thought that I’m “young” and energetic. But a reader while in college addressed me as “Sir” as if I’m so much older. Come on, about 10 years ago, I was still in grad school. I didn’t feel that I have grown out of the school years at that time.
And just a couple of days, I asked my dad NOT to come to airport to pick me up for my upcoming trip to go back home. I needed to remind my dad that I’m almost 40, and he is almost 70, and I’m not a kid anymore. Time flew by so quickly.
I still remember when my dad was 40. He appeared to me as “old”, since I was a little kid. I wonder how my own kids look at me now. I even have white hairs that can’t be hidden anymore.
The same story goes for personal finance. I really thought that I was young and capable of taking bigger risk. After 2008 stock market debacle, suddenly I realized that I’m not as young as I thought. What I have lost from peak to bottom, I could have never recovered that by decades of saving until retirement. In reality, if I assume that one could accumulate savings from the age of 28 to 58 for thirty years, I have already used up about one third of the time. Doesn’t that sound a little bit scary?
That’s why it’s always better to start saving as soon as one can. If you save for consecutive 30 years, you multiply and compound your savings for 30 years. But saving for 40 years will be at least better by 33%=40/30-1. Now, if you only save for 20 years, you will be worse off by 50%=30/20-1. But if you could only manage to save for 10 years, well, I sincerely wish that God will bring you some good fortune. Or alternatively, you can always go out and buy a personal finance book, 99% of which is always overly optimistic. These authors always play games with “stock market return” percentage from 5% to 12%, and then tell you that by math of compounding (if stock markets consistently returns 10+%), you will just become magically rich and retire.
Is that really so? Maybe it works for this generation of baby boomers, since they’ve got all the entitlement programs supported by all the younger generations which are bigger in numbers. When a population graph looks like a pyramid, with few people retiring, and many youth working, it always work by the Ponzi scheme principle. But most of other generation won’t be so lucky, especially we are already over-burdened by trillions of fiscal deficit.
Am I too pessimistic? No, I’m advising you to take actions NOW! When you don’t let time (and money) work for you, then time will just go against you. And the only way to break the spell is to take actions now. Whether you’re on a job, or out of jobs, take actions for yourselves. Don’t just sit there, and lament what has transpired. If you don’t do something, your situation is not going to change for you. Plan for the worst, but try your best and hope for the better. Even if nothing happens, at the end of everyday, if you have tried your best in everything, whether it’s saving money, doing your job, or finding your next job, you can always tell yourself and God, that you’ve got a grade of A+ today for the 105% effort that you’ve put in. And therefore, there is absolutely no regret. That is how can a great man and a great task (saving for retirement) get accomplished, one day at a time, even when there may be a long stretch of apparently zero progress.
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August 14th, 2009 at 1:46 am
Aging is part of life. Sadly, it is not something we can prevent, but we can make sure we use the time we have as best we can.
Saving early and always for retirement (and other purposes) is fundamental – having the means to support yourself without relying on a faltering welfare system or securing employment late in life will go a long way to providing peace of mind and the confidence to deal with whatever problems life throws your way.
Put differently, it is morally better and financially safer to create your own nest egg than to rely on future taxpayers (who are already burdened with burden of servcing the debts built up by the current and previous generations).
August 14th, 2009 at 10:08 pm
People have a hard time trusting, themselves or experts. They see experts will rip them off and they don’t have enough education on the issues to make their own good decisions.
Dr. Letitia Wright
The Wright Place TV Show
http://wrightplacetv.com
http://www.twitter.com/drwright1
August 15th, 2009 at 8:22 pm
Frugal,
Point taken. We are in early mid-life now. But I must say your heavy focus on saving so much is truly an Asian mentality (I’m Asian as well so am not looking down by any means), most of my friends in the US don’ think like this!
-Mike
August 19th, 2009 at 11:16 am
As someone who is in their early 20′s, I can’t even imagine being 40. But then again, college flew by me in the blink of an eye. Time is the most precious resource, even without thinking of it financially. But when you think about compounding and what that can do for you financially, it becomes an even greater commodity. You make a great point – start early, or at the very least start NOW.
-DC
DINKS Finance
August 24th, 2009 at 3:51 pm
Your article on this blog is fantastic. Well done! I’m a big fan of your blog and be sure to keep up the great work.
I plan on returning and linking to your site.
Sincerely,
Author
The Alan Haft Blog,
August 30th, 2009 at 9:55 am
Time accelerates the older we get. Frugal, are you still short the market? If so, sorry. However, I think you’re time will finally come!
Shogun
Financial Samurai – “Slicing Through Money’s Mysteries”
September 3rd, 2009 at 12:12 pm
this read depressingly. aren’t you supposed to buy a sports car or have an affair with a 19 yr old? Instead, you are acting like you’ve actually reached your mortality.
September 6th, 2009 at 12:15 pm
You have written well about 30′s to 40′s. But, I formulated what life is all about for each decade and I have designed the ‘macro’ element of this life when I was 23-25 and followed it closely.
The pattern of getting married at a certain range of years, having kids by a certain age, jumping onto a career, building the savings, dumping money into major goals/retirement, investing wisely and doing asset allocation along the way, HAS WORKED OUT FABULOUS.
My point is, that doing things when nature recommended it based on other successful patterns is very critical to ‘major success’. Exceptions to these rules does not mean death, or failure, it just means less freedom. For example, not having a decent fund for college education will be less freedom for the child, or not having enough money for a car, will mean buying a used one, or not having enough at age 60-65 will mean compromise in ‘travel plans during retirement’, or aching bones when you play soccer with your 10 year old at age 50 or……
Timed events are defined by other successful people around each of us. We should learn, and not too carried away with ‘I know what I need to do, and I like my way’. Nothing wrong with the ‘freedom of that thought’, but see the roadmap of that thought through a friend/relative/neighbor and you will quickly know what is right and not so right about it.
Plan each phase (decade) with major events you want to accomplish, and you will wind up executing a good life for yourself and your kids, but more importantly for your ‘OWN’ future.
KKP
November 13th, 2009 at 11:28 pm
I had my personal epiphany upon entering my thirties. I spent a good deal of my twenties chasing get-rich-quick schemes, only to turn 30 in pretty much the same financial situation as I was ten years earlier. Of course, I now have the “wisdom” that comes with those experiences. The trick is, of course, turning that “wisdom” into financial gain…