Investing in free time: How to finance mini-retirements
After periods of having earned and saved a lot of money and lived pretty skimp, I maintain my standard of living. I don’t job hunt as seriously as I could. I tend to frown upon positions that are not entirely to my liking - perhaps because they offered a wage lower than what I am used to, are in a field I don’t entirely love, or are at an organisation that I didn't think I would be able to chill out in. Instead, I turn my space between jobs into a comfortable mini-retirement. Many feel that living off the wealth they earlier slaved over is one of their biggest financially mistakes (and I too can tend to feel a bit of guilt for transforming such wealth into time spent comfortably unemployed.)
However, matching your expenses to your earnings, and similarly reducing them when my earnings are reduced, reflects fallicious thinking. It means that we have allowed ourselves to become slaves to inevitably fluctuating fortunes – when we should all in fact be doing very well, with just a little planning.
Perhaps the best way to illustrate this point is by a parallel. Consider the popular reaction to the federal government's stimulas package (the 'Rudd bonus' of $900) - people (my housemate included) went out and bought luxury goods such as plasma screen TVs (even though the average household credit-card debt is supposed to be in the thousands). This epitimises the false psychology applied to money – specifically, to differentiate one lot of money from the rest.
It also illustrates the pressure that people are under to spend – and how those who have money that they are not utilising or enjoying are ridiculed and mocked. (This, interestingly enough, reminds me of accounts on the online drug-library Erowid, where users consistently describe their inability to keep a stash for any real length of time.) Like a raver’s pills, money tends to burn a hole in our pocket. We are often so eager to push the limits of our buying power that we are willing to go into debt. In the case of a mortage, the equity for that debt is the very place that we live in; in the case of credit cards, the equity is our reputation (more precisely, our credit rating). It's like we're at a game of poker, and we're putting our good name or our residence on the table. Everybody wants to compete - because if you're not playing, as the saying goes, you can't win.
All glory to the Hypnotoad.
I propose that we should find a standard of living that is sustainable, factoring in the changes of fortune and our mini-retirements (planned or otherwise) and maintain that standard of living regardless of the income we are earning at any one time. To do otherwise is to live from hand to mouth – when some seasons will see our crops be plentiful, and during others, eaten by a swarm of locusts.
Thinking ‘big picture’ makes this mentality more palatable. Know that you’ll probably earn more money in the future, and similarly know that you could probably get a job whenever you wanted to. When you think that way, you’ll have fewer qualms about drawing from your savings. Imagine your earnings are going into a wealth repository – your bank account – which is a great pool of monies, where it’s impossible to identify the origin of any one specific dollar. You then pay for living expenses from an account. This might happen to be the same one that your money is going into, or could be separate. It also helps though, if you do not spend as much as you could while employed – this way, you’re effectively budgeting for your stretches of voluntary unemployment. This way, you can actually ‘afford’ to keep things constant. Being comfortable unemployment is the way to reward yourself for being relatively skimp while employed: you get to enjoy your time off - without being too money conscious.
Any contract worker has to cultivate the above mentality in order to remain sane - especially during their down-time. However, it can be applied just as easily, and with as much relevance, to those undertaking more conventional employment – such as those going from one ‘permanent’ job to the next with breaks in between.
What are your thoughts?