Bad Things Happen to Good People

The first chapter of Daniel R. Solin’s book, The Smartest Money Book You’ll Ever Read is titled, Bad Things Happen to Good People. Solin begins this chapter describing how a successful small businessman lost his small business during the 2007 recession, then was diagnosed with cancer, and lost another job. Before long his lost his home.


Solin points out that disaster can happen to anyone. Stock markets crash, investments fail, businesses close, layoffs occur, and disease or accidents strike. Politicians make empty promises every year and teach people to become dependent on government to solve their problems. In fact government does not solve their problems, they lose their jobs, they get sick and they lose their homes.


The Straight Talk


He then gives the reader the “straight talk”. No one is going to take care of us. Each person must take responsibility for their own financial future. The average “baby boomer” (people born between 1946 and 1964) has less than $100,000 in savings and investments. An entire generation has grown up spending most of their income, saving little, and frankly doing little to plan for their own financial security.


As Solin observes, the point here is not to blame anyone for anything – it is what it is. The important thing now is what we do from here on out.


Not everyone is in this situation. A minority of people and a disproportionate number of them are immigrants to the US, have saved large amounts, invested wisely and provided a serious cushion for the bad things that do happen to good people.


I do not suggest here that we can provide for every disaster that comes our way. There are isolated disasters that will consume any savings except for the very richest people. But thankfully most people do not face such crisis. For most people, if debt is reduced and avoided, and savings and investments are made a lifelong priority, can weather most of the things that will happen.


The Consumer Society


In the United States we have become a consuming society. Americans do enjoy a generally affluent and comfortable standard of living compared to some other parts of the world. But much of this consumption is at the expense of a sound financial plan and investment in our future.


For those who can and do work throughout their working lifetimes, it is possible to save far more money than Americans typically do.

Between 2001 and 2011 the average American spent on average $811 for Christmas gifts. In ten years that is over $8000 and in a normal working lifetime that exceeds $32,000. (  That is just one form of expenditure. Much has been written about the idea that buying “things” does not make anyone happy and is probably not what the holiday spirit should be about anyway. Throughout most of history people did not spend this kind of money on holiday gift giving. Yet we do.


Each person must decide for themselves what a reasonable amount is to spend on events like this. The point here is to consider how much we spend on discretionary spending. It adds up. That amount, wisely invested over a 40 year period can add up to a considerable amount. At a savings rate of $800 per year and a simple six percent return nets over $135,000 in 40 years.


If you look at all the other discretionary spending average people spend each year you can significantly increase that amount.


Making Smart Choices


I am not suggesting here that people should not buy holiday gifts. I am not suggesting that no one should spend any money for luxuries or for anything other than necessities. I suggest that if we control discretionary spending and save first, then spend what is left after saving, the potential for building financial security is significant.


Every time you decide to buy that adult toy (new car, boat, vacation, etc.) you need to evaluate what you are giving up in the long term. Every time you eat out, go to the movies, buy jewelry, and even by a latte, you need to examine whether or not it is truly the best investment of your hard earned cash.


The best way to do this is to save first, and spend what is left. Too many people do that opposite, they spend first and save what is left, which is usually little or nothing.


Straight talk is rarely easy to hear. It is even more difficult to follow. We like our toys and our gifts and our lattes. To the extent one can afford those things and to the extent those things genuinely enrich their lives there is nothing wrong with buying them – if and only if they have provided for their financial security first.

The surest way to provide for your financial security is to accept personal responsibility for it. That means making sacrifices and doing without all the things you can buy if you spend all your income on stuff. It is time to take responsibility for our own financial future and exercise the discipline that requires. Because as much as we wish it was not true, bad things do happen to good people.

Wishing you success and prosperity,
Daniel R. Murphy
Helping People Learn to Build Wealth

Wishing you Success and Prosperity,

Daniel R. Murphy

Wishing you well,

Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.