There is a demon common to most that imperils financial plans and many life plans. It is the idea that it is possible to have your cake and eat it too. Perhaps the old advice that this cannot happen has been lost. Maybe because the world now has financial products that make it look possible.
The idea of having your cake and eating it too is the idea that a single limited and consumable resource can be used more than once. When you think about it that is, of course, impossible. But many problems arise because people don’t think about it. Or they intuitively believe there is a way to do it.
The two most fundamental resources in a financial or life plan are money and time. You cannot spend either of them twice. So don’t try. An hour wasted is gone forever. A dollar spent on something you don’t need cannot later be spent on groceries.
Sometimes it looks like you can spend money twice. Credit cards make spending easier so people lose track a little of the one time only limitation. How many times do you hear people say “I can’t afford to do that.” Not many. You should hear it a lot.
The trip goes on the Visa card and the payments don’t appear until later. So far so good.
The important problem to address is that if you did not have the cash to buy the trip and could not save that cash, where is the money coming from to pay the Visa bill and its interest charge over the next year or two? This is the deferred spend the same dollar twice condition. I cannot save because I spend all my money to live now but somehow I can incur a new obligation that will not affect my future ability to live the way I like. Not! Future lifestyle will go down to pay the bill.
Time incompetence works the same way. From High school, we all recall the I will go downtown and play pool instead of going to the library and doing the research for the essay due next week. That time must be taken from something else later. Probably sleeping. They don’t make the days longer in future because you squandered time today.
Time and money behave the same way as Lowney Easter Eggs. They appear for a few weeks each year at Easter,and their ad line is “When they’re gone, they’re gone”
It is a little easier to choose wisely when there is clear acceptance of the point that the expenditure of time or money is once done, done forever. If you waste it, the replacement time or money must come from somewhere else. If you don’t know where, if you don’t know how, if you don’t know if you can afford it, you are playing a fool’s game.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.
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