Thinking back through the past 100 years or so, how people build and measure wealth has changed significantly. Back in the “old days,” so to speak, people may have lived on farms, included much more extended family, and had a greater focus on work for survival. Some had more than others, but the primary focus and definitions of wealth were on building the next generation. Pretty straightforward. As we moved into a more developed economy and way of life, we began to see a shift into consumerism and individualism.
From the 1950’s into the 70’s and 80’s, we saw things change in how we live, think about legacy, and how wealth is built. Some of this came from having no social safety nets to built-in systems such as pensions and Social Security, which established a firm grounding in our culture. People went from “you’re on your own” to “you’re good.” As we look at the last 30 years or so, we have entered another phase; seeing a decline and decaying of those systems which promised built-in income streams and being replaced with “opportunities” to save through things like 401k’s, etc. We’re kind of back to “you’re on your own” but moving from survival to a heavily built consumption-based society.
As we ponder the things discussed above and think about what makes us feel secure about our longer-term future these days, an interesting phenomenon is also happening. As we live longer and plan to live several decades into retirement, the time periods we measure our wealth are becoming shorter. Back on the farm, you wonder how often the family sat down and figured out how much they were worth and what it meant. For example, a typical couple these days may have two good jobs, a nice home, and the ability to accumulate most of their retirement nest egg through savings programs such as a 401k. As they move through life, much of what they perceive as the future value of their wealth has become dependent on external factors such as the stock market, real estate appreciation, or the rise or fall of stock through an employer. Combine this with the increase in technologies telling us how much everything is worth on a minute-by-minute basis, and we are now measuring something built over a lifetime daily.
You may be thinking, so what? Isn’t all this just a natural and positive progression of our culture, good that we have so much access to everything and can measure all we need at our convenience? After all, we have gone from survival to consumption. Plus, the opportunity to build wealth has never been greater. Both are true. However, we also believe that one of the most important things in this world is understanding our legacy and accurately measuring it over time. This includes the wealth we build, how we build it, and what it means to the next generation. By using short-term information to measure one of the longest-lived things in our lives, we can create emotional situations that move us away from accurate perspectives. We aim to find balance in all of this, keep things in alignment, and ensure legacies are preserved. After all, opening the oven every 15 seconds to see how the cake is doing may not make for a very good, finished product. The same goes for our legacies and how we measure wealth.
Investing involves risk. No investment strategy can guarantee positive results. Loss, including loss of principal, may occur. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax or legal advice. Keep in mind that current and historical facts may not be indicative of future results. Diversification is an investment strategy that can help manage risk within a portfolio, but it does not guarantee profits or protect against loss in declining markets.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. (C) Twenty Over Ten