Saturday, 5 September 2015

Standard Life Patterns

One thing that I love to do is to try and understand what makes people tick. I am no psychologist and I admit, usually I can't figure people out. Maybe it's just me? Here is what I mean.

Nearly everyone - rich, poor, smart or not - seems to follow a "standard life pattern". The sheer number of people who march through their lives in the exact same way, to me is quite striking. See how many people you know who do most or all of these.

1. Complete their education or training
2. Get a job and work very hard
3. New wardrobe to look good at work - because you can afford it
4. Grab takeaway lunches or dinners, because work is exhausting
5. Take an expensive holiday abroad as a reward for working hard
6. Buy a nice new car with a personal loan - you commute long hours
7. Buy a home, with the highest loan that the bank will approve
8. Buy shiny things on credit because what the heck, you deserve it
9. Have kids, lose an income
10. Suddenly realise money doesn't grow on trees

If you consider each item one by one you may notice that several of them seem to be a result of the items above them. And this is critical, because so often people begin to spend according to their income and not their needs. Worse, the typical way to get some of these things is via debt. It's normal, the bank says yes, and we live in a consumer culture being told to Buy All The Things, so when the cash isn't at hand, we just add it to our bills.

What it boils down to is this: "Escalated spending" is a standard life pattern. Earn more, spend more, then you need to work more/work longer, in order to continue spending more and pay off more debt.

You'd think that more people would want to try and end this cycle - either by working less, owing less or spending less. And if "working less" seems like a crazy way to spend less money, you would not be alone in your thinking. In fact, you'd be completely standard. But there's a small (albeit growing) army of people out there who are actively looking for ways to work fewer hours, fewer years. People who radically limit their spending in order to work less. And I mean radically.

It does mean taking a good, hard look at those Standard Life Patterns. Every single one. And questioning: do I need to do this, or is there some other way? If I stop buying this, will it allow me to retire earlier and spend more time doing what I love?

I am very new to the "thinking about retirement" game. I wasted many years. But now I'm thinking about the future, thinking about whether I want to be still working when I'm 60. The answer is no.

11. Kids finally leave home - enjoy the empty nest with a holiday or three.
12. Buy a new car every five years
13. Pay off mortgage in 50s
14. Have very little in the way of savings - begin putting some of that spare cash away for retirement
15. Realise it's too little, too late, and not enough to retire on
16. Be unwilling to sell their only big asset (the house they worked 25 years to pay off)
17. Stay in the work force far longer than they wanted - perhaps never retire at all.

When it comes to spending on something we don't really need, I guess mostly we just think about whether we want it right now. Or maybe whether we can afford it right now. But now I realise that my spending habits now will have a huge affect on my future. I don't want to follow that standard work pattern of everyone around me - I don't want to be working when I'm 60 just because everyone else is. They think there's no alternative, but quite often, it's a choice. Or more accurately, a thousand small choices made for years, choices which will keep people locked in the workforce in their 60s. With every passing day where we spend instead of saving - even just one euro, one dollar - we have lost another opportunity to retire an extra day sooner. Profound, right? :)

So now when I look at something for sale - big or small - I think: "Do I want to be working when I'm 60?" and it's amazing how often I can put it back down, keep that one euro in my pocket, and walk away. If I do that every single day, then in twenty-one years' time when I'm 60, it will be worth one million.


And it's not an exaggeration.

One million.