A cryptic summary for people who haven't read Simple Living Investments for Old Age. (click here to order)
The answer is relevant because most people who are giving advice about investment have no experience with simple living and little interest in it. Conversely, many simple livers have not had a broad range of experiences in the investment world. I have been a simple liver for more than twenty-five years and have had a wide range of experiences in the investment community, ranging from being a banker, foundation president to being a corporate treasurer and portfolio manager.
*Giving investment advice is a morally dubious activity, since so many people get hurt following investment advice. My advice is intended to be low risk and should only be followed by people who have lived "simply" for several years and are fully committed to simple living.This advice is intended for experienced simple livers. *If your friends consider you dimwitted or incompetent, please don't follow the advice on this page. If you are a loner, uncomfortable with people, don't read any further. You will needs lots of money in your old age.
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money for retirement. |
interested in me, not my money. |
The word investment usually refers to actions associated with savings and assets. Savings and assets are generated from the part of income that is not consumed or used to pay taxes. That is the subject most investment advisors deal with.
I disagree with this notion of investment. I believe that the way you generate income is also a central part of an investment decision. For example, people often choose a high-paid, salaried job in a boring environment over a low-earning, risky function as a sole proprietor. That is an investment decision because the former is often justified on the basis that, "I need to earn savings for my old age." The latter is generally much better, in my opinion, because it generates the skills and reinforces behavior patterns that give one more competence in old age ... and may help one generate income under many social circumstances (wars, depressions, migrations and other social upheavals).
The way you generate income is a very important simple living investment. Your choice of livelihood is central to simple living values. As you get older, you will need friends and friends will be attracted to you for your vitality, wisdom, competence and compassion. The best sources of income are the ones that:
*involve your passions...evoke your intensity,
*fit right livelihood considerations,
*increase your wisdom and
*make you a more interesting person.
The way we spend money is also a central part of our investing. There are four categories of spending that I consider parts of an investment plan. In rough order of importance.
1) Spend on future health. A long life doesn't offer me much appeal unless it comes with good health. (If your health isn't good, aim to keep it from getting worse.) Therefore, spending that could possibly result in good health in later years is my number one priority spending investment. (Ref. Health Records) Examples:
*Spend everything possible on building sustainable physical strength and flexibility: exercise, yoga, martial arts, chi gung.
*Spend on healthy food.
*Live in a healthy location, choose fresh ocean air over smog-laden, pesticide-ridden air at the stagnant end of a valley.
(Don't spend a lot of money on a new sport. Learn the sport first with rented equipment. I've seen people buy expensive ski equipment that gets used once.)
2) Invest in yourself. Examples: academic schooling, astronaut training, overseas jobs, languages, learn all the major constellations, become an expert on succulent plants, get a pilots license, scuba, tuba etc.
3) Spend on your friends. Be generous with gifts, have lots of parties, take friends with you when you travel, visit friends when they are sick, be financially helpful when you know it will be appreciated (only when you "know" it, financial help can be resented).
Don't try to buy people... the wrong kind of people respond.
4) Pay your taxes. Why would anyone advise this? Because I get asked about it often. A good rule is: declare all your income. The penalties are most severe for hiding income. Losing sleep is seldom worth the tax savings of undeclared income. If you wish to exaggerate, exaggerate your expenses, then be willing to pay the tax difference if you are ever questioned.
If all or part of your income is illegal, do your best to launder it and pay taxes. Accept the fact that you live in a Puritan country if you wish to live here.
Small business people are hurt the most on this point. Skimming has mostly adverse consequences that range from encouraging employee theft to lowering the sale value of the business.
401ks, IRAs, other tax shelters? A good rule is: don't change your life to save on taxes. You, as a simpler liver, know that the easiest way to reduce taxes is to reduce income.
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a walk if I'd put my money into exercise classes instead of my 401k. |
500 TV channels, I can't find programs worth staying alive for. |
This is the part of the investment subject that investment advisors focus on heavily. My advice is simple: go for long-term safety. The financial environment makes a paradigm shift about every twenty years, so be prepared to review all decisions at regular intervals. (An example: index funds and money market funds didn't exist before 1970).
The same investment strategy that would work for a person born in one era would not have worked for people born in another era. With a twenty year savings period, a person born in 1915, 1925, or 1935 would have experienced very different outcomes. The person born in 1915 would have tripled their money by investing in the U.S. stock market, after subtracting for inflation, but the one born in 1925 would have done better with a money market fund. The person born in 1935 would have done equally well with money market funds or the U.S. stocks market. If the person born in 1935 was Japanese investing in Japan, they would have lost nearly all of their savings in the stock market but done very well in money market funds.
Most careful individual investors don't do better than a money market fund, when viewed over a randomly selected twenty year investment period. *So consider putting your surplus money in a money market fund and revisit that decision every five years.The amount of time you save by not learning about investments and the lack of anxiety you experience are very valuable to a person who loves life.
If you feel you must invest, for some reason, such as you have a lot of money... keep 75% in a money market fund (tax free is ok if you are in the appropriate tax bracket), put 15% in an international mutual fund (to provide genuine diversity insurance in your investments) and use 10% for silly money to invest in what ever will teach you about the world. Most of what you learn will be how frivolous, arrogant, deceptive and superficial the investment world is. Try to use one entity for all transactions, such as Fidelity, just to keep your tax records consistent and simple. (I use Fidelity because the owner, Ned Johnson III invented modern money market funds, his organization doesn't push you to buy anything and he is generous to many non-profits that I like.)
TOUGH CALLS
Renting or Owning your living quarters.
*Owning a house is the most favored tax subsidy that exists in U.S. tax law. The subsidy is greatest for people who can build the house they live in.
*Unless you are very handy at household repairs, the costs of owning a house are always greater than you can anticipate.
*Houses have been poor investments in many American circumstances. Without the S&L bailout, several million people would have lost money on their homes.
*Rent control can be found in some of America's best cities. Its great for renters if you can get it.
Insurance: Life and Health:
*Most life insurance is still based on traditional investment ideas. If you have dependent children, the best value in life insurance is a "term" policy.
*Health insurance is more of a bargain for women. Men with above-average fitness will find health insurance a poor value. Consider a policy with a high deductible.
*If you can't get health insurance, public health services and emergency wards are better quality than most people assume, especially in big cities.
Marriage and Children:
These are critical investment decisions. The biggest problem for a simple liver is that a spouse without simple living values will make a simple living life difficult or impossible. Having children in such circumstances will nearly always end the simple living. Having children with a committed simple living spouse and maintaining a simple life may be possible; as far as I know, few examples exist.
To understand this page more fully, you should shell out $6.00 and buy Simple Living Investments for Old Age. (click here to order)