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The Human Condition & Your Financial Plan

Updated: Sep 17, 2021

In the world of savings and investments, and all throughout your accumulation years, you need to be constantly asking yourself if you are getting in the way of your own success? There are stages in life that will impact your decisions and your outcomes. Your values, your basic instinctive nature, and your learned behaviours all play an important role in your outcomes. The human condition to procreate is a survival instinct welded into our biology, and one we’ll explore a bit in this BLOG. Before we get started, I want to make perfectly clear I'm not criticizing anyone's decision to start a family. I merely offer an alternative view.

Have you ever wondered why things happen predictably in certain orders and cycles, and do they really need to? You grow up, you go to college, you get a job, you get a new vehicle and perhaps a small home, you get married, you have kids, you upsize (everything), more than likely you take on debt to accommodate a bigger family, you support your kids throughout their teen years into adulthood, you become empty-nesters, you save like crazy (very likely DINK (Double Income, No Kids) incomes, and then you downsize and retire just in time (hopefully?). In many ways, the financial and economic sectors rely heavily on our basic human nature and behaviours towards these very predictable cycles of consumerism. Financial institutions, advisors, and a multitude of products and services that are sold on the open market are based on our basic human nature and these constants. These circles of life are built into our natural DNAs. All the media and marketing campaigns on TV are meant to further program viewers to continue to follow these cycles by driving this narrative while at the same time marketing alternatives to the problems created by them. Many advisors cannot see another way, and are (taught) programmed to help you achieve your financial goals (wealth) through traditional and generally accepted ways. In reality, the financial sectors absolutely do not want everyone to break these cycles, and potentially retire by age 35-40 by reversing the order of things. This would disrupt the entire world’s economy. They need people to constantly consume all and more of these products and services for their whole lives, and a growing family needs lots of resources.

Personally, the vast majority (~65-70%) of our own savings and portfolio growth happened at the empty nest stage which was in about a 10 year span starting in our mid-late 40’s. So…. what if you deferred things on the front-end that prevented this happening earlier, like buying new stuff or starting a family, and moved up the “saving and investing like a madman" stage? This is the basic concept behind F.I.R.E. (Financial Independence, Retire Early) movement, where you are encouraged to live frugally and save more earlier in an effort to retire earlier from the stress of modern day life. What if you go to college, get a decent job, get married and save frugally and tax efficiently on a DINK plan for 10-15 years? If together you were earning $120-150k and saved half of it, which is very possible practicing a bit of minimalism, you would have $900k-$1.125MM in the bank in 15 years and that doesn’t even account for the capital growth and DRIP effects of index-tracking, well-diversified, dividend-paying portfolio. You can probably add in a factor of 2-3X for these compounding effects if you are investing conservatively in a global-tracker ETF like Vanguard’s VBAL, VGRO, or the likes from other similar ETF providers like Blackrock. A 4% dividend from a $2MM portfolio generates $80k/yr. You can live comfortably on that providing you don’t have significant debt to service. Why don‘t people go this route? Human nature! We tell ourselves things like, “if we are going to raise kids, who wants to start a family in their mid to late 30’s or early 40’s?”, or ”our baby-making clocks are ticking”? We look around at what others are doing, maybe bowing to family pressures to produce that first grandkid, and follow suit. Simply, we are following the herd and doing what was always done, a product of the human condition.

It’s not wrong to start a family early, and it’s not wrong to defer having kids or not have kids at all. But an overwhelming majority of women give birth in their early 20’s. In a U.S. study 31% of all babies born were born to teens, 55% to women aged 20-29. That means only 14% are born to women over the age of 30. These numbers, though not filtered specifically to couples having kids, suggest an overwhelming majority of families are started by individuals in their teenage years and 20’s. Overall, these are extremely interesting statistics to ponder? Logically, once the family starts and then starts growing in size, the expenses grow and ability to save shrinks exponentially. In the USA, and likely similarily across the world, this is happening 86% (teens and people in 20’s) of the time when your earning power and savings are very likely at their lowest and just starting out. This makes you an ideal bank target for credit and debt, which further erodes your savings power. You require more living space, more resources and more stuff in general as your family grows. If you have the means, you tend to need find larger housing farther away from your work, making commutes more costly. You need bigger and more vehicles, etc. etc. The list goes on.

There are alternatives to starting a family early. Starting a family should obviously be an affordability consideration, and the sacrifices you are going to make financially to support your kids should be considered in your short and long term planning. The thought patterns are prevalent in society, “everything works out in the end” and this statement is generally true for the people that make it, but not for everyone! We did it the traditional way, starting a family early, learning and growing as we went, and working through it all to our retirement. Through effort, good fortune, discipline, and no huge upfront planning we did alright. We have absolutely no regrets, don’t get me wrong. Times and the norms were a lot different when we were starting out. Times are a’changing, and our kids are putting off starting families longer than we did.

What if …… you deferred the family plans for 10-15 years?

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