Personal Finance — including saving, debt elimination, investing, insurance… All these topics have been reviewed and re-emphasized and drilled to death on PF blogsphere.

Now… why is it important?

Is it because it is good to have money? That we can afford luxury when we are rich? And that we are free to do as we want?

Well, it is good to have money. I cannot deny that. I can use more myself :) But, is money that important? That many people do just about anything they can to have more of it.

Most certainly, one cannot survive in today’s modern life without money, which was invented and evolved from thousands years ago to facilitate tradings, but now is essential to our survival. So we have to be practical and take care of this aspect of our life. To say that we as a part of current system/society can do without money is simple arrogance.

On the other hand, as the so-self-claimed highest form of intelligence on earth, is all we can ultimately think about money? Is our life just about things that we can get with money? So the smartest beings on earth is stuck worrying about survival like all the other organisms?

Setting aside all the details, that is exactly what we are doing. We fight and we quarrel with each other for money (power) to be able to obtain and impose in order to have resources to survive, hopefully in the company of family and a few friends. In between, we add luxury. Even when we are talking about green and saving the planet now, we are merely striving for our own survival (The planet does not need us to save it).

That’s it to human life? Wow, mind blowing…

Borrowing from Maslow’s hierarchy of needs (not that I totally agree with the way he arranged things), I suggest that we manage our money so we can move beyond it. By that, I mean, once our basic needs are secured and that we have obtained a certain level of comfort and security through accumulation of “enough” money, it is only suitable for us to explore further about life. It’s time to ask yourself some [tough] questions. And there is so much to learn about yourself, your mind, your body, the world, the universe!

Additionally, here is what I think, you cannot counteract the absurdity that springs from money by managing your money better because that will only generate more absurdity. To break the chain of absurdity that which is driven by money-greed, we must move beyond thinking at the money level, where everything is evaluated by money. We cannot fix the chaos of the world by doing things that will generate more chaos (which is exactly what we are doing) — in reference to entropy, which is the 2nd law of thermodynamics, with my humbly minimal understanding — so either we find a way to calm down or we let chaos increase to its maximum level at which it will plateau, and somehow the system will reset itself over time.

Think like video game, you cannot move to the next stage until you beat the current stage. Nobody talks about this because this is a road that is far less travelled by humans and everyone is busy being comfortable or trying to be comfortable. It is a road without a map. It is an exciting journey yet scary at times. You have nothing to rely on except yourself… by learning and unlearning about many things and discovering yourself, you find your next step.

So the true importance of personal finance is not about personal finance.

That is, the importance of personal finance is to allow you to move beyond what the system preaches (think and identify for yourself all the things it preaches). When you start to think about the greater whole, with wider perspective, you become free from your previous perspective because there is so much more now. You don’t have to try to be free. You are free. You no longer have to “deal with” all the desires to control your spending.

Take good care of your personal finance and realize at certain point that you CAN start looking further. If you do not realize, well, personal finance is personal finance. You are stuck thinking personally, mostly about yourself.

Last thing, has it ever crossed your mind that without humans, money and all the “precious metals” would be worthless? They are just what they are, a part of nature, beautiful but not worth anything. Thought I’d throw this related question out too.

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I said I will address the topic of retirement. As a man of my words, here it is :)

Ah, retirement. Can’t you feel this warm fuzzy feeling from the dream which the word may offer?

Now take a minute, imagine yourself retired. What do you have in your mind? Feel free to write it down. Below are probably things that came to people’s mind…

Not working. (Duh!)
Having enough money to lead a comfortable, or hopefully, luxurious life.
Travelling around the world. (Sipping martini on various beaches?)
Lounging at home watching TV for most of the day, perhaps half naked.

And whatever you may have in mind. Or maybe you have never contemplate thoroughly what you intend to do in retirement. Well, you should consider doing it. Over and over again, I have mentioned awareness on this blog. One main thing about awareness is knowing yourself. Wouldn’t it be nice for all of us to know what the heck we are giving our life for?

Undeniably, many of us spend much time planning and working so hard for retirement. It’s an oh-so-wonderful topic on personal finance blogs. Moreover, even the objective for starting business or joining startups frequently is to make it big at once so they can retire. It’s the next destination after we graduate from college. Sometimes it only comes to mind after we get hitched.

Well, I say, retirement is overrated. Yes, perhaps there is a time in life that we want to, or have to, stop working. That’s fine. But until then, why are we working just so we can stop working? Doesn’t that sound a little silly? Perhaps it’s more productive to think about what you want to do with your life instead. More on that later.

Here is what I see retirement has become, what is inferred by it.

Essentially, as it is now, we have turned retirement into a kind of nirvana, salvation. Stealing a quote from 40 year old virgin, we have put retirement on the pedestal.

How did it get like this? Please allow my simple minded hypothesis below.

As we have been turned into “consumers,” like many other things, retirement is a concept that had been sold to us over the past century just like the “American Dream”… Ah, the power of gradualism. Over time, marketing drove it into a home run now, where it is an unquestioned concept. How they are making money off this? Well, look at all the retirement homes, retirement community, vacations/resorts, the amount of money being poured into the market through 401k and IRAs (not saying we shouldn’t take advantage of them).

But all in all, the reason how retirement has come to mean is not that relevant.

More importantly is, like countless other illusions we have in life, when we focus our eyes entirely on retirement, we forget to live. We forget now. We forget to appreciate and cherish what we have now. We live solely for the day of retirement as if we are immortals.

Please understand, I am not saying retirement is bad and we need to throw it out the window. Instead, it would be well for all of us to explore the reason(s) to desire retirement. What is important is the intention behind the action.

I say,
Find what you love doing, that in one way or another…
contribute to the world as a whole.

Note: I said the world, meaning not just contribute to the human race. Now is time for everyone to step beyond thinking only about ourselves.

When you have done that, you can gradually transform your life into doing what you have found, instead of what you are told about retirement. At that point, retirement is no longer needed. You no longer need the salvation. When you are doing those things, you have found the bliss in your life.

Financially speaking, it is about knowing what is enough. When you know enough, you can be free, not just financially. If you look on the Wall Street, there are tons of people with abundant money, yet a majority of them continue to work and work to accumulate more. Some may learn “enough”. Some never will. Probably just a small fraction outside of that majority is working because they enjoy it or they want to contribute.

Also, I never buy into the argument that you need to accumulate enough nest egg to maintain the same income in retirement. I say, why do you need to maintain that kind of income? Presumably, if you do retire, your home should be paid off by then. Plus, when you stop working, a lot of expense goes away along with it. And how about finding yourself and peace which implies a simple lifestyle? And how about learn what it means to be healthy so you know not to destroy it that leads to all those medical bills? After all those impacts, it means you really requires just a fraction of your previous income in retirement.

Food for thoughts.

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Reader Muzie had shared with us some great comments. Thanks! I feel compelled to respond which should allow me to elaborate more on my thoughts and myself :) Here goes.

Does it truly matter Piggy?

No, it does not. What truly matters is the questions that I was trying to provoke beyond my words for everyone who reads it. And that is different for everyone, because what truly matters for each person is also unique. We already spend too much time measuring all kinds of shit in our life and have come to value quantity vs. quality. More is better. Bigger is better. Success is determined by how famous, powerful, and rich one gets.

I like to talk about money and personal finance sometimes because it is a practical side of modern life, so it is relevant. Moreover, it enables me to bring out deeper questions. And now, writing these thoughts remind me of what a sign in Einstein’s office says, “There are something that counts that cannot be counted, and there are things that can be counted that don’t count.”

I suppose I want us to explore what cannot be counted :) and to approach through what can be counted. In another sense, we take care what matter less so that we can focus on what matters but without mistaken what matter less as priority in the process.

There is a saying in Chinese, 本末倒置 (ben mo dao zhi), which can be interpreted as mistaking the means as the end, or overemphasizing methods in the expense of content/quality.

You said yourself you’ve tried to trade markets, and found it didn’t work. Thus I assume you are investing this money for the long term. 10, 20, 30 years from now, most of us will look at this time like a blip on the radar, an episode of little or no consequence.

You are right about the blip thing. I have tried trading from couple years back and have gained experience (and still learning). I have already said before trading market is like gambling. You can make it big with some expertise and some luck, but you can lose equally as much. For us with couple decades, it matters little because the average will likely not change whatever we do. Invest stably or trade aggressively. I think everything evens out at “the end”.

I mentioned choosing the allocation, which still matters for many because it will depend on their situation, what they think is “enough”, what they think of the market trend, and how they will react to certain scenarios. I also think it is okay to adjust one’s strategy base on experience and learning.

I went through the same process. I was thinking “do I really want to place my whole life in the hands of others who may or may not be willing to buy these stocks I have now, for a higher price later on?” or “Does “financial independence” really mean anything when it is essentially tied to the fickle mood and nature of a mob of people?

On the other, I can see this same mob is extremely cautious now. Yes, yes, stocks are up 25%. They are still lower than twelve years ago. I find that saying people are being exuberant in any shape or form is very much stretching the reality.

Whenever I read that market is selling off after a small rally, such short-term trading is a detraction from investing and should not be call investing. That is again, gambling (hence, there are some lucky winners). Makes me want to throw porcupines at people.

So I definitely agree with you. Do we really rely on such fickle stock market for “financial independence”? What with all these “experts” who are not more than operating with emotions and thoughts of greed and self-interest? Even the way people had become tight-wad with the money now, is merely an emotional reaction. Like a pendulum, from one extreme (overspending) to the next (not spending at all). “Exuberant” being the word, as you used. This is not a change brought about by true understanding of themselves and reality, it will hardly be permanent.

I took action in November and got 100% invested again. I will take no further action and have discovered I can live with the consequences should the money disappear.

The fact is, we know the market is fickle on short-term because it is mostly a reflection of current human nature and behavior. On the long-term, we still have high possibility of some sort of average growth to rely on… Well, or that our market could have disappeared, which is unlikely but if happens, we will have much more serious problems to deal with than worrying about investment.

Therefore, the path is clear. I am also invested and I continue to add to the pool.

The crash made me discover I can live with a feeling of abundance if I realign my values. Which doesn’t mean selling everything and calculating every possible scenario of doom, as I did back last summer.

True financial independence, I now think, is realizing if the money I have now completely disappears, I am confident in the value of my skills and my will that I can make money again.

After all that I have just said, let me go back to the 1st question. Does it really matter? Nope, and Muzie, what you said is exactly why. Awareness, critical thinking, introspection, and finding of your own values, are all things that I attempt to promote whenever I write… and it leads to your answer, which is also mine. A sort of a detached mentality that allows us to operate optimally because we have a sense of understand of ourselves, reality, and what is important.

I had walked myself many times through disastrous scenarios, not as worries but as to practice and see my own reactions. I am confident that with my abilities and physical status, if I lose all my money, my job, and my home, I will survive.

I also agree that retirement isn’t nirvana. In fact, feeling disengaged from society and unable to contribute is what I imagine can put many seniors in depression. Retirement goals have become a psychological burden for all of us and it’s very liberating to have an “I’ll be OK” attitude. I stil think aiming to gather a million $ is a worthwhile goal. It’s very satifying to know one has enough money to have extra freedom from financial ties. But I view it more as a “gift” now than a pre-requisite for further happiness. I still think stocks will do their 7-8% over time – but I don’t think view it as “a waste” if it doesn’t happen.

Yes, I agree that gathering a million is still a worthwhile and interesting milestone. I also agree that we can bet on some % of return averaged over time. Personally, I find 5-8% that will make me happy, and of course, understanding that I am betting my money still (less of gambling vs. short-term trade).

As for retirement, I will address in the next post. It’s going to be too long for here :P

It is good to stand back, observe these things and the market, but one must not get himself influenced too much by other people who, at the end, don’t know any more than we do what will happen. The world and its economy is a supremely complex machine, and even those that say inflation is a given I think are slightly arrogant and over-confident in their abilities.

Truth be told, none of us knows what is going to happen. Inflation is likely because the Fed went on a frenzy with printing money, which dilute the value of each dollar. But like you said, the system is vast and there are too many variables. Again, no one knows what is going to happen. Experts, no experts. Some may have lucky guesses. Some more lucky than others. One thing is certain, is that the system will ultimately correct itself. ie. like people say we need a smarter planet, which is a bunch of bull crap because the planet is as smart as it could be, and it will be fine… it may just become a planet without humans :P

General people either think something’s very good (before) or very bad (now) going to happen and act to the extreme on those thoughts and emotions. There is almost no middle ground. They had forgotten to stand back and observe to see things as they are. This is exactly awareness, which enable us to see and learn to the best of our ability. Thus, we can make the best choices possible in the moment. And they are not results of being told or because we feel this or think that. That is self-realization and true living.

In the end, all these money, social, political stuffs… matter very little. On the surface, we have the market… hypes of technology… the next best thing. Underlying, we are in a world running amok with emotions and thoughts — ego. And people seem too invested in it to pull out of it (to be able to stand back and observe), which mean things will only get worse, even if it appears good.

I will end by saying — We live in a very interesting age. And we do what we can :)

Update: Forgot the extra comment…

It is not our job to become mini-macro-economists. We cannot be. One has to look the market in the eye, see how willing they are to actually take a chance losing money, and act accordingly.

I don’t totally agree that “it is not our job to become mini-macro-economists.” I believe we have responsibility to learn things that are relevant in our life, than depending on experts, especially with the amount of resources available now. No, we will not be in position to know all the details and dirts, but there is a certain level understanding that can be reached, and it is a responsibility to learn these things closely related to our life.

All there is in life are just “relationships”.

It is not our job to become nutritionist nor trainer, but does that mean we just eat whatever and do whatever? I’d like to say no. But yes, one can start dieting and training, while learn through mistakes and experience and act accordingly.

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After witnessing much tumbling in the stock market for the past few months, the gain from last six weeks is probably making many people all warm and fuzzy.

I cannot help but feel ambivalent.

On one hand, it is nice to see the numbers going back up when I do my monthly tracking. It makes us feel like we are moving past the bottom of everything (probably not yet).

On the other hand, the problem of excess runs deep into every bones in the economy and financial system. That means to completely get rid of the ill in the system, because it is so large, must take its own time and pace.

Albeit nice to see a recovery now, if there appears to be a recovery so soon, it is most probable that the problem in the system is merely being swept under the rug for a few years — meaning a worse crash in a few years. Not a real recovery. A long bear market to shed the excess in system suddenly seems not so bad in place of a worse crash (implosion of the system) than what we have seen.

That is what I believed anyways.

As a result, I think it is really important to see how things work out this year and plan one’s investing strategy accordingly. If we do recover by the beginning of next year, a bigger crash seems imminent. And what about inflation? It almost seems like there is no place to put our money, but this only means the understanding of the market AND yourself the more important.

At this point in time, if a person truly value [long-term] financial security and personal finance, one must review carefully what is important, and therefore, what is enough in life to decide what to do and then the amount of % in cash, bond, and stock he wants to hold for the years down the road.

What do I really NEED?
What can I live on with? And without?
Does it really take a million?
Do I really need to be completely not working (AKA. retirement)? <– ‘Tis a bigger topic later.
What is truly important? Happiness? Peace? Relentless excitement?
What does it mean to be healthy? (medical cost)
What does it mean to live?

Last thing, I believe one must be careful to consider if he wants to fully risk obediently chasing after the ghost of 6-8% average gain in stock market. I thought of this when I kept reading people in their late 40s and 50s losing almost half their portfolio… if they truly had diversified, meaning not holding everything in equity, would they yet lose half their portfolio? I am thinking maybe 30% instead of half. I guess it could be the problem of some fund managers.

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For every action in this world, there is an intention behind it.

To know yourself, it is very important to be aware of this intention behind each action. Therefore, to choose which action to take, one can first decide on this intention.

Notice I used the word “pure” instead of “good”. There lies the key. What action follows the intention may not always be considered “good”, at least at certain time to certain people. So by pure, I mean to the degree which you are aware — of yourself and the reality, as is.

Also notice that I also used the word “intention” instead of “thought” because the thought behind the action may not be the true intention. We have gotten too proficient in deceiving ourselves with our minds. Therefore it is important to examine the thought behind the action to be aware whether that is true intention. We must be honest with ourselves.

For example, charity donation. It is often discussed, especially on personal finance blogs, as many have it as part of their budget. Some questions I could think of for that is (for you to explore but not for me to answer and decide right or wrong)…

Is it to be done because we SHOULD?
Is it to be done because we will feel good about ourselves?
Is it to be done because others will cheer and praise us?
Is it to be done because of tax breaks?
Is it to be done because we feel guilty of all these “stuff” we have?

Or, is it to be done because we are truly compassionate about people out there who are starving, malnutritioned, without homes, without education, etc.?

One other quick example is… behind many actions that we take, how many of them is all about money? I understand we have to be practical in life, which is why I have a job, but I cannot help but wonder, money… is that all there is to our life?

Learning about yourself. Learning about your true intention. Finding that pure intention is important.

Acting out of that pure intention leaves no room for regret because that means you fully understand the circumstances and is making the best choice, and that choice is solely yours. As a result, you are also being fully responsible. It leaves no room for “I should have this, or I should have that” or “So and so told me to do it” or “If I had known better…” (because you could not have know better if you were already fully aware)

Therefore, “When the intention is pure, the action follows.” Given that the person is being honest with himself about his intention.

It will also do us well to be observant and fully aware of others’ intention behind the actions. That way, we know who are friends, and who are… not-so-friendly.

Lastly, I want to link this to the law of attraction. The law of attraction has been thrown around A LOT. Consequently, “affirmative thinking” has also gotten pretty trendy. Maybe it works for someone but I don’t believe in “affirmative thinking”. What I believe is that the true mechanism of attraction… lies in this pure intention. Thus, to make the law of attraction works with you requires awareness.

Whatever type of TRUE intention you have, things and intentions of the same types will happen more frequently. Note again, intention can be different from thought, especially for people who barely know themselves. If your true intention means well, better things will more likely to happen to you. Likewise, if your true intention is one of anger, hatred, selfishness, more of that will also happen to you. If the intention is half good half bad… I suppose that cancels out.

And well, if you don’t know your true intention, then everything around you probably seems to happen at random.

The paradox is though, if you go around doing good things because good things will happen to you, that is a selfish intention… and it also falls back onto the “agenda mindset” that I talked about last. Something I leave for us to think about.

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