The good life…..a beautiful home in a tony neighborhood. Private schools. A high end luxury car or high performance car – maybe both. Cool vacations. Frequent nights out for expensive dinners or entertainment. Shopping for nice clothes, the newest gadgets. All the best for today, and tomorrow is another day.
All of this is what many people have seemingly aspired to – or have gotten caught up in. Whether it’s the desire for nice things just for the sake of having them, or it’s the drive to keep up with the Joneses and maintain an image, many Americans have been working for this type of life.
Many people still keep this approach. I’m willing to guess that even if these tendencies have been muted lately in a lot of people, they are still there and are just dormant for now but will re-emerge. However, for others, the recent economic conditions in this country– namely the manifestation in job losses, home value declines, and the topsy-turvy stock market – have caused a shift in perspectives when it comes to money and its role in our happiness. It may be a smaller segment of the population, but for some, being frugal is now cool.
I can relate, because I’m one of those, to a certain extent. Now, I have always had some focus on saving and investing, but have aspired to some of those nicer things to a certain degree. I still want certain things, and do set long-term goals that I am working toward when it comes to those things. Goals are great, and its fun and exhilarating to work toward them. But higher on my list is living within my means and saving for retirement, medical issues, unexpected financial emergencies, and overall financial peace of mind.
Why? Because these economic times have left the impression on myself and many others that ups and downs in the economy WILL happen, and to large extent, most of us WILL be impact to some degree. Some of us be impacted a little bit, some of us will be impacted tremendously. These ups and downs have caused people to take another look at what is truly necessary in day to day life, and how limited financial resources should be allocated.
Is it worth living in an expensive house with big mortgage payments and tax liability, that don’t go down even if the value of the house goes down? Is the house truly an asset as many of us have been raised to think, or can it be a huge liability as many going through foreclosure have come to find out? Is it worth driving an expensive car with monthly payments? Or is it worth spending far less, perhaps paying cash up front, and saving the extra money?
Ultimately, what many people have found out is that the income streams that most people use to feed their families are not guaranteed. If a job is lost, there might not be a replacement job to be found in short order…it may take a long time, and the replacement job may not pay a salary comparable to what was made before. That’s if a replacement can even be found in the same industry or line of work. With limited or uncertain income, what should we focus on first?
Many people are realizing that its best to focus on necessary daily expenses while preparing for future cash flow needs that could result from loss of job or the medical or unexpected financial emergencies I mentioned before. The stress of meeting needs today has jolted people into thinking about the rest of their lives. Is it worth it to have all of the finest things today, while worrying about tomorrow some other time? Or, is it better to live with the necessities today, and forego the finer things for additional savings instead?
What’s the tradeoff? It’s the mental dissonance of living with less than you technically could purchase now, knowing you could buy more – in exchange for the peace of mind that you have by knowing that you are taking pressure off yourself in future years. In its simplest form, it could be seen as delayed gratification. But looking at it further, its risk management because today you have income, but you really don’t know what could happen in the future. You might not have income, or you might have it but have massive cash outflow. Smartly, many people are in a way “self-insuring” themselves by living on less today so that they preserve the possibility of at least living on something in the future. Given that positive cash flow appears less certain now, in the minds of many, the value of that peace of mind that comes with saving has increased. Yes, the value of savings not just in monetary terms but in peace of mind has increased. In the overall scheme of things, savings are more important now than before to many people.
Pulling these thoughts together, what it comes down to is that the fear of financial problems has changed the value equation for what we invest our money in. Instead of buying all the luxuries in life with our current income, many of us are valuing peace of mind and financial FREEDOM more. And it redefines what it means to be “rich” – not just having money to buy the best things or luxuries, but enough money to reduce pressure on our minds and bodies. It’s cool to have freedom, and live responsibly and be out of financial misery. It’s not as cool to talk about how you bought a big house 3 years ago with big payments, one which has declined in value substantially since then and your hard-earned equity has been wiped out.
Ah, the good life……a good enough home in a safe neighborhood with quality public schools. A practical, fuel-efficient, safe car. Inexpensive family getaways. Inexpensive, meaningful family activities for entertainment. Shopping for good, reasonably priced clothes on sale, and the technology we truly need. At least we have the basics for today, and the basics for tomorrow. And if we’re smart, maybe tomorrow will offer those finer things. That peace of mind makes us truly rich.
This article was included in the Carnival of Personal Finance – Blogthority.com Relaunch Edition! Make More Money Blogging edition