A personal finance (r)evolution rolling alpha

[Preamble: this blog is full of all the traditional personal finance questions: “Rent or buy? What kind of insurance do I really need? How can I save better?” There are calculators and graphs and plenty of words. But recently, I’ve been thinking about people in Venezuela, Zimbabwe, Argentina, India, Syria, Yemen, Haiti, and all those other countries that have recently experienced macroeconomic disasters. Spreadsheets and budgets are great – but they’re often redundant when a banking sector collapses, or if civil war breaks out, or if everything is destroyed by a hurricane. You can be living frugally and putting away savings – and then lose it all.

This also got me thinking about more personal dramas. Savings aren’t ringfenced – they often get called upon for sick parents, strapped friends and the rainy days of all those we love and care for. So I think we need an updated version of Personal Finance. Something that steps beyond the myopia of early retirement. In this post, I’m making that first step.]

It’s a New Year, and the online air is crisp with the resolute status updates of people announcing on social media that they’re quitting social media, and signing up for Veganuary (although I do worry that if you can’t be vegan on Instagram, does it even count?). In the physical world, the gyms are moderately fuller. And I resolved to stop eating sugary treats – although the commitment only lasted the time it took me to walk to the fridge and help myself to ‘one last’ Christmas mince-pie. The peculiarity of human time

Or let me put it this way: I spent New Year’s Eve at a wedding in the Kruger National Park. In the Kruger, I saw many elephants, none of which paid any attention to the passing of 2018 into 2019, except perhaps to be irritated by all the extra revellers swilling about on the back of Safari tour trucks. Every elephant alive woke up in 2019, and continued to graze, drink and defecate as it had before, untroubled by the passage of the years.

I, on the other hand, am back at work now, picking up all those projects and tasks that I didn’t finish before Christmas. But somehow, I have this (mostly) fresh resolve to sweep clean the 2018 slate. Out with all the fail and fatigue creep! I’ve got a diary with some monthly goals, and a flurry of proactive emails in my outbox. It’s a New Year, after all.

• Why aren’t the rich all that frugal? Sure, some of them may be thrifty with their money. But most of them fly first class and drive expensive cars. And the ones that don’t – well, they seem a bit stupid. Because what’s the point of being rich if you live like a Scrooge? But are you meant to be a Scrooge in order to get rich, and then decide to not be a Scrooge after that? Is that how it works?

Step 2: be aware of your macro-presumptions. It’s not going to be the ‘collapse of fiat money’ that will get you – it’s things like “Democracy is forever” and “My country is forever” (the current form of democracy is barely 50 years old, and most countries are younger than that – the long curve of history will no doubt judge modern democracy and today’s nation states as brief anomalies in the much longer saga of human history).

Step 4: understand how ‘financial freedom’ really works. Somehow, we seem to assume that you can go from being a burden on society (or your parents), to the nirvana of having more money that you have needs. That nirvana has some fineprint: because the people around you will still have needs. Unless you are a literal island – the full transition is from “being a financial burden” to “being a financial backstop” (with a brief in-between phase of “managing to make those ends meet”). As with Brexit, that backstop part also requires some careful thought.