An A+ Financial Report Card

We just returned home from our annual meeting with our financial planner, and she gave us a big A+. She also jokingly asked if we'd consider giving pep talks to some of her other clients on how to deal with the current financial market by containing expenses and saving more. I non-jokingly responded "Yes!", which leads to the point of this post.

In spite of the shift in popular thinking that times have never been worse, in our household they have never been better. I'm not sure I understand the doom-and-gloom crowd, but I have some thoughts on how they got there, as well as some thoughts on how they can snap out of it, so here goes . . . 

• The financial meltdown of 2008/2009 was not fun. It took a good chunk of change off our table, and left me with a permanent shift in my overall confidence, as well as a permanent loss of confidence in the US and world financial markets. But here is my question: Was there ever a justification for being confident in the first place? Those people who experienced The Great Depression probably would say there wasn't. Those people that experienced the oil crisis, Black Monday or the dot.com bubble burst would probably say there wasn't. My parents were never able to afford being in the investment sector at all, nor were Mike's, so they would probably say there wasn't either.
• Increasingly I'm convinced that much of the late 80's, 90's and early 2000's were about being under the illusion that we were entitled to a standard of living we really weren't. The run up in housing values was clearly unsustainable when salaries were evaluated alongside, but we didn't want to pay attention. Since we personally never pulled equity from our home to purchase consumer goods we really couldn't afford, as much as it hurt, we weren't left standing without a chair when the music eventually stopped. 
• We were resolute about not carrying consumer debt. That made life a lot easier post-2008/2009 as well.
• We saved 10% of our income from day one, even when it pinched to do so. We bumped our savings percentage level up each and every time we received a salary increase, even when it pinched to do so. We did not increase our standard of living significantly as our salaries went up, even though it pinched not to do so.
• We began putting 90% of all financial windfalls, including tax returns, into savings, electing to "blow" the remaining 10% as a small reward for jobs well done.
• We avoided falling prey to anything that would increase our fixed expenses run rate. On that list of things we rejected were: Timeshares, Smart phones, New vehicles, Leased vehicles, Luxury vehicles, Vacation homes, Premium cable, Club memberships, Season tickets, Anything requiring storage and Fancy gym memberships (our's runs $9.95 a month per person). All of which we could have easily afforded as long as we remained employed.
• We tried to be careful what we got used to, because we recognized that for every "wouldn't this be nice" we took on, we'd have to work longer to sustain it in retirement.
• We calculated how much we thought we needed to have saved to be able to comfortably live on 3-4% of the proceeds. We used this to evaluate each and every spending decision, and ending up taking a pass on many, many things as a result.
• We moved into retirement with a conscious decision to withdraw at a rate lower than the prevailing norm of 3-4% in order to ensure we had room to maneuver should the economy sustain another significant hit or hits in our lifetime. We obsess about keeping our fixed expenses low in retirement for the same reason.

Flash forward to today. I watched my children struggle for about two years after college to find sustainable employment during The Great Recession, but then they did, and are now doing just fine. In comparison, I had to go to work immediately upon graduating high school, not college, and made $119 a week as a typist in 1980. That was enough money to pay for renting a room in someone else's house, make my car and car insurance payments, buy groceries to cook at home, save, and have a couple of dollars left over each week. That was it, and it never occurred to me to complain.

When I eventually got around to deciding I wanted to go to college, I did so at maximum intensity, and ended up graduating at the top of my class at a local public university. Because I graduated at the top of my class, I had three immediate job offers in spite of 1995 being a horrible year of employment for college grads. I started off making $24,000 a year, but worked smart, as well as hard, volunteering for each and every extra duty I could find, and the salary increases and promotions started to roll in.

I never worked a job with a pension, nor did my husband. I never worked a job that would grant health benefits upon retirement, nor did my husband. It never occurred to me to be angry or upset over either situation. It simply meant we needed to save, save, save if we wanted to retire well. The fact that we retired so early was a case of both good luck and prudent planning. We were lucky when one of the companies we worked at got sold, and the stock value zoomed as a result. We were prudent when we elected to put all of the financial gains that resulted from it into the bank, rather than using the money to increase our standard of living. Had we not had the good luck we did, we'd probably have needed to work a few years longer, but we were still solidly on the path toward early retirement regardless.

Life today is uncertain, but then it always has been, and our financial choices should reflect that. Sometimes we choose to live under the illusion that it's otherwise, but I believe we're playing games with ourselves when we do.