Book Review: Happy Money

Does money come with new-agey energy flows or emotions attached? For most of my life, I’d have said no (or more likely just rolled my eyes at the question). As you might expect from an economics major, I bought into a free-market model of how money worked.

Experiences over the course of my career, gradually convinced me that those ideas were . . . Well, not wrong exactly, but incomplete. I came to understand that money isn’t the kind of neutral object that it is in economic theory.

Ken Honda’s new book will let you skip over the 25 years of first-hand experience it took me to figure this out.

If you think money is a neutral, transactional artifact, then it just makes sense to earn as much as you can in the easiest ways possible. Because I was a software engineer whose career started in the early 1980s, it was pretty easy to find a job that paid well, and salaries grew rapidly, so I was doing just fine as an employee. There are certain things that come along with being an employee, the main one being that you’re supposed to do what your boss tells you to do.

I was okay with that. More okay than a lot of my coworkers, who objected when the boss wanted them to do something stupid or pointless.

My own attitude was always, “Yes, attending this pointless training class is a waste of time that I could be spending making our products better. But it’s easier than doing my regular work, and if my boss is willing to pay me a software engineer’s salary to do something easier than write software, I’m fine with that.”

The idea that I was fine with that turned out to be wrong. In fact, putting time and effort into doing the wrong thing is a soul-destroying activity. Getting paid a bunch of money for it doesn’t help. That money is, in Ken Honda’s terms, Unhappy Money.

Money that flows into (or out of) your life in a positive way is Happy Money—money that you receive (or give) as a gift, money that you earn by doing something useful (or spend to get something that you want or need). Unhappy Money is money lost or gained by theft or deceit, paid grudgingly by someone who feels cheated or taken advantage of—or, as in my own case, paid willingly, but paid to someone who doesn’t think what he’s doing to earn it is worth doing.

Honda’s thesis is that if you adjust your life around this idea—so that your own money flows are all Happy Money (and that you refrain from receiving or spending Unhappy Money)—your life will improve. My experience is that this is true.

If that insight is the key to the book, probably next most important is understanding that “There’s no peace to be found in always wanting more,” which is one of the points I tried to make when I was writing for Wise Bread.

To be honest, probably one reason I like the book so much is that a lot of the practical advice sounds a lot like what I talked about for years at Wise Bread. (For example that the strategy of just saving more quickly reaches limits in terms of its utility for making your family more secure.)

Much of the book is on the details of how to shift all aspects of your financial life toward Happy Money. There’s a long discourse on what he calls your “money blueprint”: The attitudes and practices passed down from parent to child (or rejections of those attitudes and practices), people’s basic personalities, and simple ignorance about how money works. A crappy money blueprint will predictably lead to people into cycles of Unhappy Money flows.

I’ve been interested in money for a long time, at least since sixth grade. Between studying economics in college, and embarking on an enduring interest in investing, I’m sure I’ve read hundreds of books on money. Among them, Happy Money: The Japanese Art of Making Peace with Your Money stands out.

Facebook and Instagram: Even worse than Twitter

Whenever I tweet about a company, I like to go ahead and tag the company in the tweet, so they can see what I’m saying about them. Besides that, I’ve a natural inclination toward brand loyalty (for companies whose products I like), so I like to keep up with what the company is doing, and twitter is a good way to do that. (Not nearly as good a way as an RSS feed, but that’s neither here nor there.)

The upshot is that I’m not infrequently searching for a company’s twitter handle—and just lately, I’m pretty often not finding one. More and more companies are limiting their social media presence to Facebook and Instagram—both of which are terrible choices.

Facebook is very bad. It tries to monetize passing on information! It deliberately holds back information that the company wants to share and that I want to see, specifically in order to pressure the company to pay up.

Instagram may be even worse. It is inherently about sharing pictures, whereas information is often best presented as text. Worse yet, it won’t share links, which is almost always what companies (should) want to do, if they’re trying to tell me about the sorts of things I want to hear about.

Twitter is a bad company that provides a service which is bad in many ways, but at least it will show me all the tweets of the company I’ve followed, tweets which can include text and links as well as pictures.

The photo at the top is of a donut I bought this morning at Industrial Donut—the latest company I noticed limiting its social media presence to Facebook and Instagram.

The Fed admits it’s a failure

In a recent speech, Fed chair Jerome Powell talked about “balance sheet normalization” in terms that strike me as essentially admitting that the Fed is a failure as a central bank.

Here’s the quote:

The crisis revealed that banks, especially the largest and most complex, faced much more liquidity risk than had previously been thought. Because of both new liquidity regulations and improved management, banks now hold much higher levels of high-quality liquid assets than before the crisis. Many banks choose to hold reserves as an important part of their strong liquidity positions.

Source: Federal Reserve Board – Monetary Policy: Normalization and the Road Ahead

Powell seems to be suggesting that banks have chosen to treat reserves in the same way a gold-standard bank treated specie: as cash on hand to meet demands from depositors who want their money back.

I call this a failure because a big part of the reason behind the creation of the Federal Reserve was that this system—where every bank held some gold—was clearly inadequate. Commentators at the time likened it to a fire protection district which, instead of having a fire engine, required every household to have one bucket of water on hand.

By having a large common stockpile of gold at the Federal Reserve, a loss of confidence in any one bank could be easily handled. Faced with a bank run, a solvent but illiquid bank would bring some assets (loans, bonds, bills, etc.) to the discount window and receive enough gold to handle redemption requests.

Powell is saying that banks seem to have decided that they can’t count on the Fed to discount their illiquid assets—a basic function of a central bank. Instead they’re choosing to stockpile large quantities of reserves exactly the way nervous banks stockpiled gold reserves in the pre-Fed days.

I’m sure this is based on the experience of the financial crisis, where many banks held a bare minimum of reserves and safe assets, choosing instead to invest the maximum amount in complex derivative instruments, which were highly profitable until they suddenly became worthless (or at least of dubious value).

But that just means that this is a double failure by the Fed:

  1. As a lender of last resort it can’t be counted on to provide reserves to a solvent but illiquid bank.
  2. As a regulator it can’t be counted on to require that the banks hold enough high-quality assets with sufficiently transparent valuations to be usable at the discount window.

By paying interest on these reserves, the Fed is enabling this behavior—solving the old problem that “gold in the vault pays no return.” But banks should be in the business of facilitating commerce in the economy, not the business of using their depositor’s money to score some free cash from the Fed.

I completely understand the Fed not wanting to again put itself in the position of having to decide what discount rate is the right one to apply to 3rd tranche mortgage-backed subprime paper. But a strategy of “just hold more reserves” is a pretty poor solution to the problem, for exactly the same reason that “just hold more gold” was a poor solution in the pre-Fed days.

Why isn’t the 1% in a tizzy?

I marvel that the 1% is being so indifferent to the large and widening leftward political shift in the U.S. and elsewhere. It seems to me they should have already started telling their politicians, “Give the poor folks 20% of what they want, quick! We need to nip this in the bud!”

Of course, maybe they’re right and I’m wrong.

They got away with globalization, after all. And then they got away with the financial crisis. And so far they’ve gotten away with Trump’s tax cut.

Now, I can understand the first two. Globalization, despite how it crushed many individuals, families, and communities, did make people better off on average. Having the average person end up better off makes a policy supportable at some level. I can see it providing enough political cover for them to get away with it. Who doesn’t like buying cheap crap at WalMart? Nobody but freaks and weirdos like me.

The financial crisis is harder to understand, which I think is due mainly to it being harder to understand. There was a real sense that our whole economy could implode—and it was a real sense because it was actually true. The technocrats managed to save the economy, so they get some credit for that. They did it in a way that crushed homeowners, which is bad. They did it in a way that subverted the rule of law, which is bad. And they did it in a way that crushed a whole generation, which is also bad. But they did save the economy.

But now we’ve got multiple cohorts of people who have already turned against the system. It’s no longer just the freaks and weirdos who care about their local community and the natural systems that support life. It’s no longer just former homeowners whose homes were seized to save the banks. It’s no longer just millennials who graduated into a job market so bad that they’re a decade behind their parents’ generation in things like family formation (and further than that in preparing to retire).

Now it’s basically everybody except the 1% who is being harmed, and they’re being harmed right now, every day.

The Trump tax cut is just a naked grab at wealth by the wealthy. It didn’t help anybody else. Trump’s tariffs aren’t even that—they don’t help anything but Trump’s ego.

I cannot imagine that any amount of voter suppression and gerrymandering—even with the structural anti-democratic features of our constitution—will keep the supermajority of people being harmed by our current system from making some major changes.

If the 1% had any sense they’d have thrown some bones to the people already. I can’t imagine that the smart ones haven’t figured this out already.

Sure, there are plenty of dumb ones who figure that they can build a survival bunker in Alaska or New Zealand and survive the ensuing revolution and climate catastrophe. But are they really all that dumb?

Evidence so far suggests they are.

Or maybe they’re right and I’m wrong.

Ignorance about retiring early

It’s been eleven years since I retired, at age forty-eight.

I hesitated at first to call it “retiring early,” even though in my head that’s exactly what I was doing. Partially that was because I hadn’t decided to take the plunge. I had been intending to retire early, doing the planning, doing the saving. But part of a proper early retirement is deciding that you’re ready, based on having established an income stream that covers your expenses.

I hadn’t done that. What I did was learn that my employer was closing down the site where I worked, and then wing it. I counted my money; I did some figuring. I secretly figured that I could retire, but I didn’t tell people that. What I told people was that, “Although I couldn’t retire, I had reached the point where I didn’t need to work a regular job any more.”

I’d meant to celebrate the 10-year anniversary with a post about how things had gone, but haven’t gotten around to it. And I guess this isn’t going to be that post either, because I’ve gotten so annoyed by an ignorant article  by Jared Dillian in Bloomberg Opinion, The ‘Radical Saving’ Trend Is Based on Fantasy—which manages to both be wrong about the facts, and (more fundamentally) miss the whole point—that I’m compelled to write a response.

Dillian’s item number one manages to be both wrong on the facts and miss the point in roughly equal measure:

Most people save now because they want to consume later. But the FIRE folks don’t want people to consume. For the FIRE folks, the point of saving is simply not to have to work. To give you the freedom to do whatever you desire over the last 50 years of your life. Trouble is, the freedom to do anything you want isn’t much fun when you’re hemmed in by a microscopic budget.

First of all, the “financial independence/retire early” (FIRE) folks do want to consume. It’s just that they’ve figured out that, at some point, just consuming more doesn’t make your life better. Rather, they’ve thought deeply about what they need to consume to make themselves happy, they consume that, and then they stop consuming.

I think of it as drawing a line under the stuff that’s worth paying up to get all I want of exactly what I want, and then paying zero for the things that don’t make the cut. (Most people don’t do this. Instead of a cutoff they have a gradual trickle off, spending smaller and smaller amounts as they work their way down the list of things they want. This is no way to be happy. The money they’re spending on stuff they only kinda want eats into the money they could be spending on the stuff they really, really want.)

Second, the whole point of FIRE is not to “simply not have to work.” Rather, the point is to free yourself to do whatever work you want, instead of whatever work pays best. Everybody I know who’s retired early still works at something.

This point is made very clearly by literally everybody I know of who has written about FIRE. To miss it suggests either that Jared Dillian was very careless indeed in doing his research, or that he is willfully missing the point.

Third, it’s simply false to say that “the freedom to do anything you want isn’t much fun when you’re hemmed in by a microscopic budget.” Rather, the freedom to do anything you want enables you to do the most important thing you can think of.

Maybe the most important thing you can think of is really expensive (in which case you’d have saved a lot of money to fund your retirement). But very likely the most important thing you can think of is free, or cheap, or even modestly remunerative. (The list is endless—crafting musical instruments, researching obscure topics in your field you didn’t have time for while working full time, helping care for a family member, documenting the history of your ethnic group, researching the natural history of your region, working for a candidate or a political party or a non-profit that’s trying to stop global warming or child trafficking or hunger or poverty…)

Finally, who says your budget has to be microscopic? Rather, your budget should fund your planned expenses. If the most important thing you can think of is to take a round-the-world cruise every year, you’ll want to save more money than someone whose most important work is to study the local mosses.

I’m going to skip over his second item, because he just makes the same mistake again, imagining a purpose of being able to “consume more later” is a better justification for saving than being able to live exactly the life you want to live and do your most important work.

His third item manages both to make the same mistake yet again, and to insult everybody who understands the difference between the most important work you could do and the work that pays the most:

What is wrong with working? Why do the FIRE people dislike working so much that they want to quit at age 35? Working gives people purpose… I have had unpleasant jobs, and even working an unpleasant job is preferable to not working at all. I am one of these people who thinks there is dignity in working, that every job is important no matter how small.

(I left out a random swipe against basic income.)

I don’t know any FIRE people who dislike working. I know a lot of FIRE people who dislike working at regular jobs. I know a lot of FIRE people who dislike working for psycho bosses, bosses who take inappropriate advantage of them, and stupid bosses who don’t know how to do their job well. I know a lot of FIRE people who think there is great dignity in choosing to do whatever they think their most important work is, regardless of whether it pays enough to live on.

I’ve worked at bad jobs now and then. Not unpleasant jobs, which are okay as long as the work is worth doing. But some jobs are not worth doing.

One example: a manager one place I used to work put huge pressure on employees to finish a task, despite knowing that the project the task was for had been canceled —because completing the project on-time was required for the manager to get a big bonus. That is work that was not worth doing. (Literally. It produced nothing of value to the company, while keeping the employees from doing something that would be valuable.) That sort of situation, which is more common that you might think, is what FIRE people are trying to escape.

Finally, Dillian suggests:

The biggest issue with the FIRE movement is that it’s the ultimate bull market phenomenon. FIRE seems to work because the stock market has gone straight up. A bear market will change that. Even if stocks do return 8 percent to 12 percent over time, it’s not going to be any fun living on a shoestring budget and watching your nest egg decline in value by 30 percent to 50 percent.

Here I have actual first-hand experience. My early retirement started in the summer of 2007, and pretty much right after that came the financial crisis in which my stock portfolio lost about 40% of its value.

I engaged in some pretty dark humor during those first two years, joking about how I wouldn’t want to be retiring early in that kind of market.

In fact, I was just fine. I did the obvious things: I found a way to earn a little money (in my case by writing, which was what I wanted to do anyway), and I got a little extra frugal (on a temporary basis, to preserve my capital).

So, yes, I did live on a “shoestring budget” for a few years while watching my nest egg decline—although not by as much as 30%, even though the stock portion lost 40%, because the bond portion soared and the cash portion remained stable (although the income it produced declined).

Contrary to Dillian’s concerns, it was actually great fun. I was writing full time—fiction in the mornings and articles about personal finance and frugality for Wise Bread in the afternoons—which was exactly what I wanted to do. We didn’t travel much, and we didn’t buy much in the way of new clothes, but we were very happy.

Since then my portfolio has more than recovered. Part of that was just the bull market. Part of it was basic portfolio re-balancing, which automatically had me sell bonds near the peak and buy stocks near the bottom.

After all, the 4% rule (which I assume is what Dillian is implicitly rejecting) was never a law of nature. It’s always been just an empirical guideline. The FIRE people all understand that you can’t just “set and forget” your spending. Instead you need to pay attention, and adjust as needed. Maybe you need to spend less. Maybe you need to find a way to earn a little money. I did both those things, although not very much of either one.

For eleven years now I’ve spent every day doing exactly what I chose to do.

What I chose to do has varied, of course. At first it was all writing. When I realized that I wasn’t taking full advantage of not needing to be at my desk during working hours, I rearranged my schedule so I could spend more of the daylight hours engaged in outdoor exercise. I took a taiji class, discovered that I really enjoyed the practice, and persisted with it. Now I teach taiji, and it has become one of those modestly remunerative things I was talking about.

But for eleven years, it’s always been whatever I most wanted to do.

The luxury of ownership

Being a member of the Winfield Village Cooperative, I’m technically a home owner and not a renter. In fact, more then technically: I’m actually a home owner.

On a day-to-day basis, living at Winfield Village is a lot like being a renter. I pay a monthly housing charge that feels a lot like a rent payment when I pay it. There’s an office staff that shows units to prospective new owners, and a maintenance staff to fix things (plumbing, appliances, etc.), and keep up the grounds—all very similar to what you could expect at an apartment. But there are differences, and most of the differences are luxuries.

There are a few differences that are financial. For example, I’m entitled to deduct my share of the property taxes and mortgage interest that Winfield Village pays.

One that I hadn’t thought of before was made especially apparent to me a few weeks ago, when a friend mentioned having to sign the next-year’s lease for his apartment, and I was reminded what an annoyance that always was.

Every year when we used to live at Country Fair, we’d get a call from the office asking if we wanted to renew our lease for the following year. Every year the rent went up a little, which was just to be expected.

More annoying was that every year we had to read the new lease. Most years it was the same or nearly the same—the office staff would go through and indicate changes—but we still felt like we ought to read it, because we’d still be agreeing to any changes that the office staff failed to point out. I think twice there was a complete re-drafting of the lease, so we had to read it all the more carefully.

Even years when it was still (mostly) the same, after we read it we then had to go through the whole thing with the office staff, because there were a dozen places we had to initial specific provisions, and then we had to  sign three originals.

Although it was just an off-hand comment, my friend mentioning his lease re-signing brought up a whole bunch of stressful memories, such as deciding how to deal with the provisions that were so badly drafted as to require us to do preposterous things. (One I remember was a provision intended to reduce the chance of pipes freezing that seemed to require that we leave a trickle of water running anytime the temperature was below freezing, which would basically be all winter here in lovely central Illinois.)

There are other ways in which we are owners. We can repaint. We can buy our own appliances, or make other upgrades to our kitchen. (But we don’t have to. If our stove or refrigerator fails, maintenance will come fix it, or replace it if necessary.)

Until my friend brought it up, it hadn’t occurred to me that I haven’t had to go through the whole stressful lease-signing process for three years now! Instead of a lease, I have an occupancy agreement. That agreement hasn’t changed in three years, so I haven’t needed to re-sign. The housing charge hasn’t gone up either. And because it’s a co-op, I’ll have a vote on any major changes that do come up.

Ah, the luxury of ownership.

Losing a job

My friend Mart lost her job this week.

I know all about losing a job. Over the years I was fired or laid off four times.

Getting laid off is humiliating and insulting. The process is stressful and and unpleasant. The aftermath, where you have to deal with your feelings about the fact that other people kept their jobs while you lost yours, at the same time that you deal with having a sharply lower income, layers more stress and unpleasantness on top of that.

Losing a job is also frightening. It fills your future with unknowns.

The middle time I was laid off, my former employer hired an expensive outplacement firm to help us make the transition. We had a series of meetings at an off-site location where a counselor gave us advice on dealing with the emotional and practical issues. Although the somewhat simplistic advice was another layer of insult piled on top of the insult of being let go, it was actually pretty well done. I used what I learned there for pep talks that I’d give former coworkers when they were let go. I used it as the basis for part 1 (losing a job) of the Wise Bread series I wrote on getting by without a job.

These last few decades—as the whole economy has adjusted to eliminate the working-class jobs that used to provide a middle-class standard of living—losing a job has become even worse than it was back when I lost mine.  And yet, while losing a job is a pretty bad thing, but it’s not always purely bad. Even people who love their job don’t love everything about it. (Mart in particular, I think, loved books a lot more than she loved her job at a bookstore.)

Still, losing a job sucks, even if things go as well as possible after that.

Visit Mart’s website! Consider buying her book!

Busy writing

Because it was so precisely in my wheelhouse, I simply had to submit a story for the Universal Basic Income short story contest Into the Black.

I plugged away at a story most of October. In particular, I worked on it three different times with Elizabeth Shack’s Thursday writing group. And I got a story nearly finished, except it refused to turn into a basic income story.

Finally, about three days ago I gave up trying to twist that story into a basic income story and sat down to write another—even though I only had four or five days until the submission deadline.

It reminded me of Clarion in a way—sitting down at my computer, determined to get a story done in less than a week. At Clarion the motivation was simply that if you didn’t get a story done each week you’d miss out on the chance to get a story critiqued by that week’s instructor, but it was enough. And this made for a similarly strong motivation.

And I’m pleased to report success: I finished a draft on Saturday. On Sunday I read through it and made minor edits and gave it to a couple of first readers. Today I made another pass through it, making changes suggested by my reader’s comments, and then submitted it to the contest.

That was all fun and good, but there is yet more good.

First, the story that would not be a basic income story is nevertheless a perfectly good story. I’ll let it sit for a bit, then go through and remove the failed attempts to twist it into one, and then take a go at finishing it on its own terms. I’m hopeful.

Second, there’s also a fragment of that story that I pulled out and stashed that might well turn into another story. It was part of one effort to twist the story, but it’s really a pretty good idea in its own right, and might make for a whole story all on its own.

So I come out of this with one finished story, one mostly-written story, and a few fragments of a possible third story. Go me!

I am also reminded that I have a couple of finished, critiqued stories that only need a rewrite pass to be ready to submit to markets, which I have been woefully lax about submitting. (My Clarion instructors would be appalled.)

So, with a little luck, in a matter of days I might well have five stories out to markets. Well, not luck exactly: Diligence and persistence are what’s called for.