FOOL ON THE HILL: An Investment Opinion
Money Is Time Off

Time is money. Time flies. Money flies. So make sure you get your priorities straight, and start saving. That usually means stop spending so much, planning ahead, and distinguishing between the essential and the nonessential. If done right, you can retire decades earlier. Then you can waste as much time as you want.

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By Rob Landley (TMF Oak)
October 9, 2000

You know what the first investment activity in history was? Farming. Take some food, stick it in the ground, wait a while, get more food. Thousands of years ago our primitive ancestors discovered compound interest as applied to vegetables. The rest, as they say, is history.

What's so amazing about this is that thousands of years later so many of us are still hunting and gathering rather than saving and investing. Society has advanced to the point where you can get cheese in a spray can -- although nobody has as yet explained why to my satisfaction -- but the vast majority of people on this planet still live from paycheck to paycheck.

Society advances through the generation of surpluses. How did a man wind up on the moon? Partly because he wouldn't stop and ask for directions. But the fact that he and the rest of NASA didn't have to spend all day, every day hunting dinner with a pointed stick is also extremely important. Getting to the moon didn't put dinner on the table, but as long as dinner was already taken care of, the moon was as good a place as any to eat it.

Obviously, if something's never been done before, we can get along without it. Nothing new can possibly be considered essential before it's ever been done, so advancement can only be achieved by making time for nonessential things.

The Internet is a marvelous example of this. In 1994, the high point of the Internet was either The Really Big Button That Doesn't Do Anything, Find-the-Spam, or possibly The Very Last Page of the Internet. When it comes to wasting time, the Internet is simply amazing. (And that was true years before the first two of those sites acquired testimonials.)

When you get down to it, all this e-commerce stuff is mainly just an excuse for us to use the Internet at work. We go to amazing lengths to make this thing pay for itself, but the real reason is to have access to things such as The Centre for the Easily Amused and The Gallery of Regrettable Food. The same is true of cars: We drive them to work and to the grocery store, but is that really why we have them? Or would the bus get us where we want to go, but not be nearly as convenient or fun?

The nonessential rapidly becomes essential, and this is where our general lack of savings comes in. You can earn six figures and not save a dime if you MUST eat lunch at a fancy restaurant each day. Even a daily $5 lunch at a burger joint can add up to a couple thousand dollars over the course of a year, while a brown-bagged sandwich from home costs pennies. But that involves planning ahead, and spending money at the grocery store to save up cheap food in our refrigerator instead of performing the gastronomical equivalent of just-in-time inventory management by ordering a pizza when we get hungry.

Saving is usually just a matter of setting priorities, and after saving comes the REALLY hard part: not spending the money you've already set aside. But without savings, investing is pointless. All the stock research in the world won't do you any good if you never save any money. You're plowing, watering, weeding, and fertilizing a field with no seeds in it. And breaking into your piggy bank every six months to handle the crisis du jour means you might as well have never saved the money at all. (And yes, I speak from experience here.)

We all look forward to a magical event called retirement, but all retirement means is that the earnings you get from your savings are now enough to live off of. When your annual portfolio income surpasses your salary, you don't actually HAVE to work anymore, do you? We're conditioned to think this has something to do with how old we are, but it doesn't really. Some people retire at 30. Others can't afford to at 70.

The trick is to get your money working for you, and since money you've already spent isn't yours anymore, savings are probably involved here someplace. With the Internet close at hand, we'd better get our money working for us because we sure aren't doing too much of it ourselves.

I know I'm not. I'm too busy re-reading the User Friendly archive.

-- Oak