Also note: assuming a person invests merely 100$ per month from age 25 to 65 in a 401k or Roth (no match is assumed, and an average annual interest rate of 11% is assumed) that becomes one million, two hundred thousand dollars. Here is another layer. What did the person actually give up over that persiod of time(40 years)? Easy. 12(months) x 40(years) x 100(dollars). fourty eight thousand dollars, or roughly the amount of money the average person pays for a new car by the time they are done paying for it. I am talking about the actual total principle and interest they paid for the car- not the sticker price which is really not what the person has paid- but the interest on top of it. Fellow Americans- if we consider opportunity cost the car may be reasonably said to have cost us one million dollars.
Thats a pretty good argument to buy a relyable 6 or 7 thousand dollar used car with cash, yes?
Sales people and marketing organisations I listen to daily on radio and TV; from credit card companies, car dealerships and the like want us to miopically look at the "payment" and think as short term as possible, living moment to moment as if something being broken into payments somehow makes it cost less (when infact it costs a lot more that way due to interest payments and financing fees and as we looked at- increased opportunity costs).
I would suggest we think in the long term- think of the end of things in the begining when we make decisions. When a person is disciplined and also smart in the begining, later on it can mean being in a position to be a source of stability and help for others.
(E Gooden):
I agree totally that it is just too easy these days for us to get ourselves into credit trouble. And the mentality to keep up with the Jones' (to have the new car, bigger house) is just nuts.
But I have one thing to say about the 401K stuff. You are right that it's a great (or has been thus far) investment. No argument there. One thing that I don't think people think about (or choose to ignore) is that when investing in a mutual fund you are nearly always investing in many corporations that 1. Do not have the public's best interests at heart 2. Engage in unfair/unethical business tactics 3. Adversely affect the environment 4. Exploit workers (in this country and others) and so on.
Big Pharmaceuticals. Big Tobacco. Fast Food. Heavy industry. Financials. You name it - we hate it. Everyday we complain about companies doing things that we deplore. Then what do we do ? We become a part of this system by investing in these companies - hoping that our investment pays off long term.
I'm not saying to invest or not invest in stocks. I would just like for people to think about this. Think about what we are doing. If we are going to complain about these companies then we should at least realize that we are a part of the problem.
I don't have any answers. And I don't know what good can come from us realizing what hypocritical buttheads we are. But I always think that knowing/realizing is surely better than choosing to ignore.
Eric
(me):
That is a very good and thoughtful point. I admit, I am troubled by that- and thank you for bringing it to my attention.
I do think that in the long term the vehicle called the stock market needs to change fundimentally- that change I beleive is actually inevitable, and is on it's way in fact. What change? Well, a mechanism for conciencious and ethical investment needs to mature. Is the investment green? How green? (environmentally friendly or even beneficial). Is it fair? (does the company treat deflated economies and foreign bodies as equals, and it's peoples with dignity, respect and care) and heres a new one- is the company public? I have come to believe that publicly traded companies are inherently gready in terms of the definition comprising it's legal identity. Actually that isn't so much my belief but arguably just a fact. If the company behave in an un-gready way (say if it has a legal opportunity to exploit a comunity in a harmful manner which clearly will be beneficial to the company and chooses not to) they may actually find themselves in direct violation of their stockholders. In the past company heads have been sued for being generous to employees for example. I think that the fact that this is even possible is reason enouph to avoid publicly traded companies- working for them or investing in them. The leadership is by definition finally headless, and by definition greedy in purpose.
(on that last oppinion concerning publicly traded companies feel free to discard it. I admit it is nothing if not controversial, and until I bear the issue out fully in the essay or what not- it is merely my pet notion)
These things as you will well know- are starting to take shape, but a ready mechanism for investers to easilly make ethical choices is as yet very imature. I look for opportunities and also wait for better opportunities to invest in such vehicles.
--Well sure- that's why I like playing with the hundred dollar figgure, and assuming no math. That kind of sacrifice is available nomatter what your income. But why I get off on this is because when people start thinking long-term and rearing their children on the good milk of math and reason, I really believe society can change. For example- assuming we all want to ease unspeakable and widespread suffering in the world (that might not be a safe assumption, but for my part I'm obsessed with it. I am never at peace because I am not built to misplace in the back of my mind the knowledge of what the real world doles out to its unfortunate and especially it's poor)- we need the means to do that. I think we do have the opportunity but we lack the means. In this society at any rate, we only lack the means because in our habbits are so self-indulgent and mindless of the long term, and the power of sacrifice (at first in the sense of frugal living) and then generosity (later- as that sacrifice turns pursposeful). Dollars can really do something right here and now- they can buy crap- they can also rescue someone from desease for example, or from the prison of ignorence if they lack the means for an education.
(me):
That is a very good and thoughtful point. I admit, I am troubled by that- and thank you for bringing it to my attention.
I do think that in the long term the vehicle called the stock market needs to change fundimentally- that change I beleive is actually inevitable, and is on it's way in fact. What change? Well, a mechanism for conciencious and ethical investment needs to mature. Is the investment green? How green? (environmentally friendly or even beneficial). Is it fair? (does the company treat deflated economies and foreign bodies as equals, and it's peoples with dignity, respect and care) and heres a new one- is the company public? I have come to believe that publicly traded companies are inherently gready in terms of the definition comprising it's legal identity. Actually that isn't so much my belief but arguably just a fact. If the company behave in an un-gready way (say if it has a legal opportunity to exploit a comunity in a harmful manner which clearly will be beneficial to the company and chooses not to) they may actually find themselves in direct violation of their stockholders. In the past company heads have been sued for being generous to employees for example. I think that the fact that this is even possible is reason enouph to avoid publicly traded companies- working for them or investing in them. The leadership is by definition finally headless, and by definition greedy in purpose.
(on that last oppinion concerning publicly traded companies feel free to discard it. I admit it is nothing if not controversial, and until I bear the issue out fully in the essay or what not- it is merely my pet notion)
These things as you will well know- are starting to take shape, but a ready mechanism for investers to easilly make ethical choices is as yet very imature. I look for opportunities and also wait for better opportunities to invest in such vehicles.
--Well sure- that's why I like playing with the hundred dollar figgure, and assuming no math. That kind of sacrifice is available nomatter what your income. But why I get off on this is because when people start thinking long-term and rearing their children on the good milk of math and reason, I really believe society can change. For example- assuming we all want to ease unspeakable and widespread suffering in the world (that might not be a safe assumption, but for my part I'm obsessed with it. I am never at peace because I am not built to misplace in the back of my mind the knowledge of what the real world doles out to its unfortunate and especially it's poor)- we need the means to do that. I think we do have the opportunity but we lack the means. In this society at any rate, we only lack the means because in our habbits are so self-indulgent and mindless of the long term, and the power of sacrifice (at first in the sense of frugal living) and then generosity (later- as that sacrifice turns pursposeful). Dollars can really do something right here and now- they can buy crap- they can also rescue someone from desease for example, or from the prison of ignorence if they lack the means for an education.
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