We Live Too Short and Die Too Long

September 10, 2013

The philosopher Satchel Paige asked: “How old would you be if you didn’t know how old you were?”  This question explores the central issue in our life’s journey.  Age is really about how we feel.

We’ve met 40 year olds that plod along and end their day in front of a TV and 80 year olds that have a twinkle in their eye and a schedule so busy you have to book an appointment.  However many still view aging as a time in our lives where we relax, ‘enjoy’ life and slowly decline in health, activity, productivity, and contribution.

“I don’t have a problem with dying, I just don’t want to be around when it happens!”       Woody Allen

If you’re not getting the most of your life – please read on….

The title of this article is borrowed from a book by Walter Bortz, MD.   Reading the book gave me three key insights:

1 – We’ll continue to live longer. Humans have the capacity to live to 120 years.  Given advances in healthcare and our knowledge of what keeps us healthy, we will likely continue to live longer than current estimates.

2 – What will we do with that time? The concept of “retirement” is outdated.  We need to consider and plan for how we will fill the last third of our lives.

3 – Our financial security will require different planning.  Maintaining our financial security in future will require a whole new way of thinking.

Much scientific analysis has been done on the ‘limit’ of the human body.  Dr Bortz summarizes five separate lines of scientific evidence suggesting 120 years is our true lifespan.  Current estimates suggest a male child born today will live to about age 79.  A difference of 41 years is a lot of time to waste!  What’s happening that prevents us from living to our true limit?

Baring genetic predisposition to disease or an unfortunate accident, maybe it’s the choices we make regarding what we eat, how we exercise and what we fill our time with that reduces the years we can truly live.  We know what those choices need to be – yet do not always choose what’s best for living a longer, healthy, and fulfilling life.

Here’s a thought – “Will a constant and unwavering purpose in life encourage us to maintain our health like nothing else can?”  Maybe replacing ‘a life of leisure’ with a ‘life of purpose’ is the answer.   A purpose that causes us to focus our physical and mental energies to achieve something important to us.  A purpose that encourages us to make better health decisions because we need many years and a strong and active body to achieve that purpose.  We could call it ‘our life’s work’.  Why can’t all of us have a ‘life’s work’?

“The mystery of human existence lies not in just staying alive, but in finding something to live for.”
Fyodor Dostoyevsky, The Brothers Karamazov

 

Many spend more time planning a vacation than planning the rest of their lives.  Others rush through everything in life without really thinking about what they truly want.  Maybe having a life’s work or a purpose that continues beyond what we currently do for a living will help us plan for those 41 years, or the extra we may be fortunate enough to get.  You don’t have a life purpose?  That’s your life purpose -to find a life purpose – you get to try anything!

As a financial life planner one of my roles is to help life my clients achieve and maintain their financial security as they age and transition through their lives.  My life planning clients don’t see retirement as a date when they will need to have a portfolio from which an income will be drawn for the rest of their lives.  They see no reason why they couldn’t continue to earn well into their 70’s and 80’s. They expect the income they earn and need will vary and see a gradual change in type of work or amount of hours worked as they redefine their purpose.  Some time may be spent not earning any income – then returning to another type of work.  At times the income earned is sufficient to cover their expenses and at other times they need to draw on their financial resources.  Of course an unforeseen health issue may prevent them from continuing to earn a living so a base level of financial resources is always necessary.  If they are fortunate to have sufficient financial resources, their focus may be personal growth or volunteering.  Downsizing, pensions, inheritances must all be included in their cash flow.  Financial planning for this type of life involves regular cash flow planning and requires an intimate knowledge of all expenses, assets, the ability to project correctly, and to complete “what if” analysis.  Being able to calculate and estimate the financial impact of a life decision is valuable to life planning and ultimately to fulfilling a purpose.

Time is worth more than money – you can always make more money.

In his book Dr Bortz asks why our lives cannot follow a more consistent path where our interest, drive, creativity, and productivity are maintained throughout our increasingly longer lives.  Then, in our 10th or 11th decade we expire exhausted but complete rather than worn out.

We will be living longer.  We need to ‘fulfill’ rather than just ‘fill’ the time we will be given.  This kind of life requires a different kind of financial planning.  Choosing a purpose in our life, something we feel most important, may just be the answer to encouraging us to do all the other things we need to do to live long and die short.

Richard Yasinski CFP

“Life is not lost by dying; life is lost minute by minute, day by dragging day, in all the thousand small uncaring ways.”
– Stephen Vincent Benét

Focus on medium to long term trends

When I make investment allocation recommendations for my clients, I negate the short term hyperbole and noise the Financial Press puts out and focus on the medium to long term trends in our global economy.  Anything 1 – 5 years out would be a medium term trend – 5 years + would be long term.

This strategy allowed me to ignore the mess the Europeans got into regarding their debt crisis last year. It helped me see the strength in the US economy given the jobs growth, productivity increase, corporate cash and earnings rising last year which resulted in recommending increases in US allocations.

One medium to long term trend I see is a flattening in growth of the Canadian housing market.  Over the last 20 years the Canadian housing market has increased by about 6% on average per year.  The long term trend is about 4% over 40 years.  With a reversion to the mean likely – we should expect a 2% decline (on average over the long term) in real estate prices.

Click to read Housing Market article.

Other medium to long term trends:

After years of predictions that the US dollar would lose its global reserve currency status – over 60% of the world’s central banks holdings of foreign currency continue to be in US dollars.  The US dollar continues to strengthen against all currencies.

Emerging market equities continue to be below value and will see outperformance in the next 3-5 years.

With equity markets continuing to move into all-time highs, we can expect a return to performance mania within the next few years.

Rising home prices in the US continue to fuel the wealth effect and make the consumer more comfortable with spending.

US Household net worth is rebounding and continuing to make new all-time highs while the debt service burden continues to make new lows.

US corporate profits for second quarter beat most estimates and will continue to rise at a slower pace for the rest of the year.

 “As to the markets, I hope you realize that they are separate and apart from the economy. The data overwhelmingly shows that most of the time, stocks and the economy are wholly uncorrelated. Over the short and intermediate term (days weeks months), there is almost no relationship in either direction or magnitude. People often have difficulty accepting this, but the academic studies on it are overwhelming. Over the longer haul (decades) there is some correlation between GDP growth (3% – 4%) and corporate earnings (6%), and I assume that is not coincidental. But that is only over long periods of time, and even then they can become somewhat disconnected.”

—Barry Ritholtz, CEO and research director of Fusion IQ, in a June 25 interview with Financial Advisor magazine

Student spending without a plan

Almost 50% of students wished they curbed their spending while in school.  Following a budget is worth the time for students.  If you’d like a copy of a simple student budget form I’ve developed, send us an email.

Click to read article.