How to Make the Right Choices

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I thought I’d share a personal conversation that took place between my son and me one Thanksgiving.

He asked me a question that completely caught me off guard. You see, as a family, I think we’re doing pretty well. We live in a comfortable house, have three cars, take vacations, go out to restaurants and live like a typical suburban family.

But the town we lived in at the time is quite wealthy. It’s an equestrian community. Bruce Springsteen has a house there. So does Michael Bloomberg. There are a variety of rich and famous people who spend part of their winters there.

As a result, we have many rich friends (not Springsteen, unfortunately). Out of the blue, my son asked why many of our friends had bigger houses and fancier cars than we do.

He wasn’t being obnoxious. He was genuinely curious. He knows I’m financially savvy, so he wondered why we didn’t live like other people who we hang out with. As I talked to him, I emphasized that the choices his mom and I have made have directly led to our financial well-being and, more importantly, our happiness.

Keeping Up With the Joneses

Growing up, many of my friends were wealthy. We were not. Though I never went without, we were solidly middle class. My dad was an assistant principal at a middle school, and my mom stayed at home.

Because we couldn’t keep up with the Joneses, I never tried. I valued my friends for who they were, not for their houses, their cars or the businesses their parents owned. These guys remain some of my best friends 30 years later.

Though the home we lived in at the time I had this discussion was 50% larger than the one I grew up in, it was smaller than those of many of my wealthy friends in my town.

We explained to my son that having a huge house wasn’t important to us. We had moved from an apartment, so the house seemed large enough. Our priority was creating a home for our family, not having more square footage. And we explained that by buying the house we did, it enabled us to invest in rental properties, which generate income.

He understood that.

A few of our friends have very nice cars. One drives a Ferrari. Several own Teslas. I explained that cars were never my thing. I really don’t care about cars. I want a safe, comfortable ride. That’s it.

I buy my cars used. Don’t get me wrong, I’m not buying a beat-up jalopy. My most recent purchase, in 2014, was a 2013 model with 7,000 miles on it. But this way, someone else eats the depreciation for driving a new car off the dealer’s lot – which is thousands of dollars.

The money that we save on cars is used for investing and travel.

We take a big summer vacation every year. The kids love these trips, and they are something they’ll remember their entire lives.

What You See Isn’t What You Get

I also explained that there are many people who live in big houses and drive expensive cars, but can’t afford it. We had a neighbor who, the first time I met him, told me he made $400,000 a year. I hadn’t asked, nor was I particularly interested, but he felt the need to puff out his chest and tell me anyway.

A year later, his business shut down, his house was foreclosed on, and he was literally pulling trees out of the backyard and selling them for whatever cash he could get before the bank kicked him out.

We have a friend who, at the end of a divorce, went out and bought a new Mercedes, despite the fact that he was going to have to downsize his home because, without his wife’s salary, he couldn’t afford to keep the house.

As I looked around our home, I pointed out that we don’t have a lot of knickknacks. We don’t buy souvenirs from every place we visit. Instead, we spent our money on a very large and comfortable sofa that is the center of our living room and family life. On that sofa, the four of us watch movies, play board games and take naps (though that doesn’t happen as often as I’d like).

I told my son that some of the friends with the big beautiful houses or the fancy cars never go on vacation or are a few paychecks away from insolvency.

Those are the choices they made, and if they’re happy, then that’s all that matters.

For us, it is more important that we invest our money in income-producing assets and spend our money on experiences like travel.

Low Stress

If you know me, you know that I can be pretty laid-back. I do my best to not let things bother me. I’m all about eliminating stress from my life. I try not to associate with people who constantly have drama going on.

Money, and the lack thereof, is one of the most common forms of stress in a marriage. It is not unusual for couples to break up because of money issues.

One thing my wife and I decided on early in our marriage was not to let our finances become a source of stress. When times were tough, we’d scale down our lifestyle. We’d save for rainy days, and if one person was working particularly hard, the other person would support them as much as possible.

I pointed out to my son that he probably never heard his mother and I argue about money. One of the important reasons is that we didn’t put unnecessary financial stress on ourselves.

As we finished our discussion, I explained that, sure, some of our friends have nicer houses and cars. Some have more money than us. Some don’t. But I also told him that none of it mattered. What was important was that we were making choices that allowed us to live the way we wanted.

I asked him, “If we had an extra $1 million in the bank, would you want us to do anything differently?” He thought about it for a long time. Finally, he answered, “I don’t think so. I like the way things are.”

Mission accomplished.

Good investing,

Marc

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