Americans born after World War II have grown up in a culture that seems to promise them everything. The greatest economy in history was built, in part, by creating an insatiable demand for “more.” Unfortunately, however, its consequences can be measured in part by an unmanageable national debt, the approaching scarcity of many natural resources, increasing class conflict, and the high degree of stress and unhappiness of society at large.
Many retirees, as well as those who hope to retire within the next decade, are discovering that their resources may not be able to provide the lifestyle they’d anticipated. For some, there is little alternative except to severely cut back expenditures and lower expectations. For those who have not yet reached those years, there is another option: living lean.
The Lure of Possessions and Immediate Gratification
Younger Americans often find themselves at a crossroads in life: They must choose whether to maximize their immediate pleasures, or balance them with their future needs. Unfortunately, too many opt for the former. They often do so because they believe the following.
1. You’re Only Young Once
If you don’t grab all you can now – big homes, expensive cars, extravagant vacations – you may not have another chance. However, what folks with this mindset don’t realize is that adventure, excitement, passion, and satisfaction are not exclusive to a particular age, or even income.
Former President George H.W. Bush recently celebrated his 90th birthday by skydiving, a feat he has performed every five years since turning 65. Boone Pickens, at age 86, is leading a national campaign to replace petroleum with natural gas and wind energy. Mick Jagger is still touring with the Rolling Stones. Grandmothers and grandfathers fill golf courses, ski slopes, and universities learning new skills and pursuing dreams.
The truth is, there is no single age or stage of life that is better than another. And being young is not an excuse for irresponsibility.
2. Life Will Be Filled With Triumphs
A common misconception among younger people is that the future is simply going to take care of itself. Job promotions and steady income increases are going to provide ample income to pay for today’s indulgences and tomorrow’s necessities.
In reality, careers and economies are extremely volatile. Computer programmers who were in high demand a decade ago now compete with low-cost PhDs from India. A customer service representative is more likely to live overseas than in America. Even industry leaders like Apple have lean times and lose money on failed products.
3. Fiscal Responsibility Is for People Over 40
Why should we suffer financially for a future we may not see? Despite the skepticism of youth, many people live long lives, often decades past their working years.
Financial security is generally acquired by regular investment over long periods of time, not by windfalls. A 2013 college graduate who invests about 17.5% of an average starting salary of $45,327, or $8,000 per year, can accumulate $1 million in assets by age 65, assuming a 5% annual return. A 45-year-old would need to invest $30,000 per year to accumulate that same $1 million.
4. Money Can Buy Happiness
One out of twenty people makes an adjusted gross income of at least $161,579 per year, and one in one hundred makes $369,691 or more. Are these people truly happy as a result of their earnings? Only up to a point, argue social scientists as reported by PNAS. According to the Legatum Institute’s Prosperity Index, Norway is the world’s happiest country, while the U.S., with a higher per capita income and much greater economy, ranks 11th.
The Benefits of Moderation
Even as the census reports that average family size has dropped from 3.67 members in 1940 to 2.6 in 2010, the average single-family home size has exploded from about 1,100 square feet to 2,392 square feet. The number of second or vacation homes increased from 739,594 in 1940 to 3.6 million in 2000. And, as the average house size has expanded, Americans have been eager to fill that space with electronic devices, appliances, furniture, clothes, and other personal possessions.
This buying spree has been financed in large part by personal debt, which, according to The Atlantic, has exploded from around $1,186 per capita in 1948 to $10,168 in 2010, excluding mortgages and home equity loans. That’s a 750% increase.
Salary has not kept pace with spending, though. According to The State of Working America, average total compensation, per employee, per hour was $10.21 in 1948, including benefits. By 2011, it was $28.10 – only a 175% increase.
Americans have been robbing the future to pay for the present. In the rush to fulfill every passing desire, it can be all too easy to overlook the many benefits of restraint and deferred gratification.
1. Financial Security
By consistently allotting a percentage of your income to savings and investment, you can build a cache for the future. The larger that cache, the more likely you are to be able to retain the freedom to control your life as the years pass.
One of the main requirements of living lean is understanding the difference between a need and a want. You need a safe, secure shelter for yourself and your family; you want a mansion with extra rooms for entertainment and exercise and a pool in the backyard.
Consider the following comparison: Purchasing a used home of 2,300 square feet for $310,000 with a 20% down payment ($62,100) and a 30-year mortgage at 4.5% costs $1,259 per month – $515,340 in total. By comparison, a larger new home of 3,200 square feet is likely to cost $496,000. The same 20% down payment is now $99,200, a $37,100 increase. And, the same mortgage term and interest rate result in a monthly payment of $2,011, an increase of $752 per month.
Investing the difference between these two houses – $37,100 down payment, and $752 per month – for the same 30-year period at a 4% rate of return creates an asset value of almost $650,000. If you were able to achieve a 6% average growth rate, you would have almost $980,000 in reserve.
This comparison excludes the effects of taxes, and does not take into account the savings on property insurance, utilities, and upkeep of the smaller home versus the larger one – nor the psychological pressure to buy more “things” to fill that empty space. This is just one example of how living lean can make a huge difference in your present and future financial security.
2. Mental Health
Ownership of possessions can actually cause plenty of stress. The need to protect them from theft, obsolescence, and use and misuse – in addition to having to pay for them – is a very real burden. As psychiatrist Elana Miller points out, “Having too much is hazardous to a healthy way of life. The more you own, the more time and energy you spend keeping track of it, and the more you worry about breaking or losing what you worked so hard to get.”
Miller recommends learning to be grateful for what you have and to be happy with less – in other words, live lean. She claims it is the attachment to physical things that “keeps you locked down and forces you to work when you do not want to.”
3. Physical Health
Two out of three Americans are overweight or obese. This has resulted in a recent surge in major health problems, such as diabetes, heart disease, and certain cancers. Bariatric surgeries have become a new growth industry for physicians, increasing from 13,386 operations in 1998 to 220,000 in 2009, according to the Healthgrades Bariatric Surgery Report 2013.
American Medical News reports that the average cost of these surgeries falls between $18,000 and $35,000, and is unlikely to be covered by health insurance. However, it is totally avoidable in many cases by making some drastic lifestyle changes.
According to a 2009 study, overeating is the root cause of obesity in America – not lack of exercise. There are two main factors at play: the amount of food consumed, and the increase of high-calorie foods and drinks. The Center for Science in the Public Interest, a consumer group in Washington, D.C., claims that hamburgers, steak, bagels, and pasta entrées are now at least two times bigger than what is nutritionally necessary. According to Bonnie Liebman, the group’s director, “Eating half of what a restaurant serves is often just about right.”
One of the things a live-lean lifestyle calls for is reducing trips to restaurants and replacing them with more nutritious, and less costly, home-prepared meals. However, if you do go out, try to cut back on portion sizes by either sharing an entrée or eating half and taking half home. For many people, cutting 500 calories a day can result in a loss of one pound each week. This kind of leanness can make both your body and your money last a lot longer.
Having money in the bank, good health, a secure retirement, and no possessions you can’t stand to lose are just a handful of the great benefits of living lean. The lower level of stress it affords means you can enjoy life more, and improve and expand your relationships. In short, you can feel more positive about yourself, and more in control of your future.
Are your ready for less pressure, less stress, and more freedom?