Tuesday, January 18, 2005

Money and Meaning

Dymphna writes via e-mail:

Bill--I just saw this entry on your blog:

I once tried to convince a twentysomething guy to open a Roth IRA and contribute whatever he could year by year. Despite the unparalleled rigor and clarity of my arguments, it was soon evident that I wasn't getting through to him. Well, he'll wake up eventually. . . .

But maybe he won't. What meaning does money have for him? What meaning does it have for you?--I mean when you consider that Fives are stuck in avarice.

BV: As I understand it, avarice is the typical vice of the Enneagram Five (The Observer), but that doesn't mean that every Five falls into it -- or does it?

We need a definition. Avarice (avaritia) or greed, counted among the Seven Deadly Sins, is definable as excessive or insatiable desire for wealth or gain.

Since wealth is good, and poverty bad, I would say that the desire for wealth is also good. It is only the inordinate desire for wealth that is bad. But when is the desire inordinate? I would say that the desire for wealth is ordinate if it gets to the point where it blinds one to the fact that money cannot be reasonably viewed as an end in itself but only as a mere means to an end. This agrees with what Kant says in his delightfully readable Lectures on Ethics, namely, that "money is valuable merely as a means. . . ." (p. 181)

You ask what meaning money has for me. Money is power: the power to 'vote with my wallet' by supporting the causes I believe in; the power to inspire others to do my bidding, e.g., build me a house, rearrange my cardiac plumbing, etc.; the power to buy freedom from oppressive people and environments; the power to get my children out of lousy public schools and into good private schools; the power to help the needy; the power to live my life in my own way and march to the beat of my own drummer.

My Five son-in-law is famous for his frugality, but he can't manage to save money.

BV: Then his fame doesn't correspond to reality. There are hundreds of ways to save money if he puts his mind to it. I'd wager he simply lacks the will. People waste money on newspapers, magazines, unnecessary cable/satellite options like HBO, eating in restaurants. Make a rule: no eating in restaurants of any kind except for once a week. I guarantee he'll save money.

I've never run credit card debt in my life. According to Suze Orman, the average American family carries $8,000 of credit card debt. That is unbelievably stupid. Use credit cards only for the convenience, the float, the recordkeeping, and the rebates. My no fee card pays me $100-200 per year in rebates.

Never borrow money to buy a car unless you can get a 0% APR. And when you buy a car keep it for at least ten years. I've had my Jeep Cherokee now for going on 18 years. It costs almost nothing to insure and register, and if it is parked at a trailhead for a few days I don't worry about it.

My Nine spouse is careful with $ and accumulating enough to handle emergencies (the "Evil Stuff" fund) makes him feel secure.

BV: The experts recommend an emergency fund sufficient to cover six months of expenses. That's for liberals. A true conservative, one with a sober view of the world and the two-legged varmints in it, maintains 1-2 years worth of cash or cash equivalents. Imagine a terrorist attack using 'dirty bombs' and biochemical agents that renders Manhattan uninhabitable. That would put a serious dent in the economy -- to put it mildly. And not only the U.S. economy, but the world economy. America bashers abroad ought to reflect that the U.S. is an economic dynamo that can survive a major depression. Wish ill on us, and it will be far worse for you.

Being a One, I've turned the whole thing into an anxiety attack--i.e., what if I invest in something that loses money?? Ohmygod...so I tend toward inertia for fear of doing it wrong.

BV: As a general rule, never buy individual stocks. Invest in no load, low cost mutual funds from reputable companies. How are you going to go wrong in the long term with an index fund pegged to the Wilshire 5000? Of course, it is wise to spread your loot across the asset classes. By my count, there are five: stocks, bonds, cash, real estate, and precious metals.

With the terrorist threat, I wouldn't want to have more than 1/3 of my net worth in stocks. The stock market can go south and stay there for a long time. (It took the stock market about 20 years to recover fully from the '29 crash.) On the other hand, we don't know how long we will live and we must be concerned about the geezers we will turn into. This brings up the issue of 'time-preference.' I am a firm beleiver in deferred gratification; I never sacrifice the future to the present. Of course, the future is uncertain, and we must live now; but to my mind, living responsibly in the present with peace of mind requires being prepared for more of the same.

Be sure and max out all 401ks, 403bs, IRAs, and whatever else is available to you. If you have a mortgage, make additional principal payments month by month. At the risk of offending liberals, I will say that practically anyone who has a grip on the ancient virtues, can defer gratification, gives herself an elementary financial education, and has a half-way decent job, can become wealthy in the USA. But past performance is no guarantee of future results!

. . . I remember a Jewish therapist who said he believed that the point of therapy or analysis was to make the world a little more Jewish, one patient at a time. [That's great] I think it's my job to make investors/owners out of the next generation. Healthy investors, that is. One grandchild at a time.

PS I want to respond to your remarks about education, too. I think about this a lot as I watch the next generation coming along. Besides, as a One, I have an opinion on everything.

BV: I await your thoughts on education, Lady Dymphna. It looks like Fives have an opinion on everything too. Give my regards to the Baron.