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Why Am I Not Rich? — A Study in Contrasts

I am sitting in a public cafeteria catching up on some email and other stuff after getting back from Honduras and couldn’t help over hearing a young lady that was sitting 2 tables away.  I wasn’t listening on purpose, but there was almost no one else in the room, and she talked really loud!  Then a couple ladies sat at the table next to me (again one was loud) so I could hear her comments as well.  It was interesting to hear the contrasting comments.

Lady Number One

The first lady was complaining about life and bemoaning her financial situation.  At one point, she stated to the individual on the other end of the phone, “Why Am I not rich?”  Well, since I got several details about your life during my 90 minutes working on my blog, I might be able to offer a few hints.

  1. You are a single mom.  She stated that it was hard to support herself as a single mom to the guy on the other end of the line.  I know it was a guy since she thanked him for his child support.  There is no doubt that single moms have it incredibly tough especially with so many deadbeat fathers out there.  At least she has the luxury of a decent relationship with the father of her child such that she can communicate on the phone.  And it sounds like he is paying his support.
  2. You don’t have an education.  I know this because she stated that she had decided to go finally go for her GED.  I would guess her to be in her mid-20’s so I would suspect that she isn’t making much more than minimum wage if she is going for her GED and complaining about how tough it is to pay rent.  No doubt that education has some correlation with income.
  3. You have maintained a quasi-victim mentality.  I say this because she joked on the same call that she was “holding out to marry rich” (like I said, she must have a good relationship with the father of her child).  And maybe it is not a victim mentality per se, but you can’t wait for someone to save you.  And maybe she is waking up to that fact since she is going to be working on her GED and who knows after that.  Kudos on that front!

The Second Lady

Contrast that to the second lady who offered this sound financial advice.  She was telling a co-worker that:

  1. She was paying an extra $120 per month toward her mortgage to pay it off in half the time.  Obviously, she is somebody who doesn’t like debt and must not have higher interest rate debt that she should be paying off first.
  2. She has 10% of her paycheck put away for retirement.  She knows the importance of paying oneself first and preparing for the future.

She also looked to be about the same age.

I found it an interesting contrast good for a blog post.  I also wonder if lady #1 heard what I heard and if she did, what she thought of it. So if there is a lesson to be learned, speak quietly in public places.  You never know if a blogger is sitting at the next table or two.

 

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8 comments - What do you think?  Posted by Cash Flow Mantra - October 18, 2012 at 11:44 am

Categories: Earning, Spending   Tags: , , , , , ,

Sound Money and Cheap Gas

I read an interesting post two weeks ago that discussed buying gasoline for 25 cents per gallon.  Just reading the title made me think it was an article about getting gas in one of the OPEC nations where gas is provided at a subsidized price to citizens.  But it turns out the post was talking about getting gasoline for a quarter per gallon here in the United States.  I am not including a link since it was a thinly guised ad but the basic concept behind the ad was thought provoking to say the least.

The premise was that, in 1964, quarters (as well as other coins) contained silver.  According to coincalculator.com, a 1964 Washington quarter contains 0.18 troy ounces of silver.  Valued according to the silver content at $35.54 per ounce, a quarter would have a melt value of $6.43!  This is a lot more than the $3.45 per gallon of gas that I paid yesterday.  In fact, I could get almost 2 gallons of gasoline with that one 1964 quarter.  When I do a search for gas prices in 1964, I find that the cost of a gallon of gas was 30 cents so I probably could get a full 2 gallons for the equivalent of 30 cents.

Another interesting comparison is the cost of a new house compared to the price of spot silver.  Again if you can believe what you find on the internet, the price of a new house was $20,500, and the price of spot silver was $1.29 per ounce.  These numbers make sense to me knowing that my parents paid $30,000 for their house in 1973.  These prices mean that it would have taken 15,891 ounces of silver to buy a new house.  Today, the median house is priced about $157,000 and silver at $35.  Do the math and you find that it takes about 4,485 ounces of silver to buy a house today.

Now, you can argue all you want whether or not silver is a good investment or whether silver should be considered money.  But that is not the point of this post.  The point is that this information should really get one to thinking about the impact that inflation and money supply has on what we all pay for basic necessities of life.

What impact will this have on your retirement savings?  You may argue that stocks beat inflation so there is no worry.  Will you be 100% in stocks during retirement?  Well, the S&P 500 closed 1964 at $84.75 according to this site.  At $1.29 per ounce of silver, that is a stock market to silver ratio of 65.7.  The current stock market to silver ratio is about 35.8 meaning that it takes less silver to buy the S&P 500.  Interestingly, the difference is about 45%, and I have read that about 44% of the S&P 500 returns can be provided by dividends.  Since the index numbers are without re-invested dividends, it seems that stocks have simply kept pace with the price of silver but offered no better returns on capital gains.  Maybe the only reason stocks can outperform inflation is because of the dividends?  Just another fact to ponder.

So, does this information mean anything to you?  Were you a little surprised that a gallon of gas today would cost less than a quarter if that quarter were from 1964?  Do you even consider silver a viable investment?  I would love to hear your thoughts.

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12 comments - What do you think?  Posted by Cash Flow Mantra - June 20, 2011 at 6:05 am

Categories: Saving, Investing   Tags: , , , ,

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