Our decisions tend to compound – for better or for worse

  • September 8, 2015

Originally published in the News Star and the Shreveport Times on Sunday, September 6, 2015.

QUESTION: My parents never had much and lived modestly all their lives. But they never lacked for anything. Mom died years ago. When it came time for Dad to retire, he just walked away from work and never gave it a second thought. He lived like he wanted to and I never once heard him complain about money. Then when he passed, we were frankly shocked to learn how much money he had just sitting in the bank. I don’t think I’m doing so well and I worry about leaving my kids a stack of IOUs. How does a simple man like my father do so well financially?

ANSWER: Your daddy had a habit of having good habits.

happy elderly_0_0I’ve known many men (and even more women) that sound like your description of your father. He made the most of his life and was content with the results. People like your father know how much is coming in the front door and that if the same (or more!) is going out the back door, there’s going to be a problem. Knowing this, they’re usually pretty good savers. I’m not surprised to see them save 15% to 20% of their income.

Of course, in order to do this they live in modest homes, eat most meals at home, drive the same car for many years and probably wouldn’t be selected to be in the best dressed section of a style magazine.

As a result of such habits, these folk weather storms better and take advantage of opportunities that come their way. In fact, to the onlooker, these people can tend to look “lucky.” I say that’s the wrong word. They aren’t lucky, they’re thrifty. And thrift tends to attract opportunities.

Decisions (good or bad) tend to compound over our lifetimes; choices that we make become larger and more significant than we’d ever imagined. Time tends to expand the results of the choices we make, so that the oak trees of our consequences are unrecognizable as the seeds of our initial choices.

This can work out for your benefit. Or it can haunt you.

In the case of your father, it seems to have worked for good. But it isn’t always that way.

Charlie and Theresa (not their real names of course) live on his $75,000 per year income, are debt free and were able to save up enough money to pay for an adoption. By any measure they are content, even very happy, with their lives.

Joey and Kathryn both work (a lot) and bring in over $200,000 of household income. They live in a very expensive house and drive import luxury cars. They didn’t build the house of their dreams and buy those lovely cars to be unhappy. But they are. Money is tight, they feel pressure to keep up socially with their friends and beyond a modest contribution to his 401K plan, they have almost no savings. They love each other, but they feel constant financial pressure from a lifestyle prison built with their own choices.

For Charlie and Theresa, and for Joey and Kathryn, the clock is ticking. And the consequences of their decisions are not static, but growing. Compounding, actually.

Odds are good that Charlie and Theresa will see the day they can declare themselves financially independent. Joey will be able to go to work because he wants to, not because he has to. Most of this will have been made possible because years earlier they made a choice to spend less than they earned.

For Joey and Kathryn, it’s hard to imagine a financially happy ending to their story. Financially pressures may eventually drive their marriage apart. As they age, professional and financial stresses may impact their health. The death of either breadwinner could have devastating consequences to the lifestyle of the survivor. And the numbers would indicate they will both work longer (and harder) than they wish they had to.

I’m glad to hear that your parents (and perhaps especially your father) gave you such a worthy (and thrifty!) example to follow.

Now, if you’ll begin following his lead, perhaps your story will have a happy ending, too.

Subscribe to our monthly newsletter and get exclusive info straight to your inbox!

Just send your name and email address to info@argentadvisors.com.

Byron R. Moore, CFP® is Managing Director / Planning Group of Argent Advisors, Inc. Email him at bmoore@argentadvisors.com. Write to him at 500 East Reynolds Drive, Ruston, LA 71270 or call him at (318) 251-5858. The opinions of any single advisor do not necessarily reflect the opinions of Argent Advisors, Inc.  No forecasts can be guaranteed.  Argent Advisors, Inc. does not offer tax, insurance or legal advice.  The information contained in this column should not be construed as a substitute for personalized investment, tax, insurance or legal advice.