Jeremy Stein - Journal

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The Lifestyle Dial

A child and an adult have very different perspectives on money. For a child, money is a pile that can be added to with gifts or earnings and subtracted from by spending. For adults, this pile is less important than the big pipe that pours money into the pile and many pipes that suck money away from the pile. Adults think about changing the flow of the pipes.

Children learn that they need to anticipate future purchases. If they want to buy something expensive, they need to save up first. Similarly, adults learn to anticipate future pipeline changes. If a new outgoing pipeline (e.g. mortgage, child, change in lifestyle) is on its way, the other pipelines need to be adjusted accordingly.

When children transition to adulthood, they sometimes continue to think about money with the child perspective. “I can afford this nicer car because I have enough cash to buy it (or can afford the payments).” This purchase is actually laying a big fat pipeline labelled “fancy car” that will suck money for the rest of one’s life. It’s hard to switch to a skinnier “modest car” pipeline once one has laid the pipeline for the more comfortable car.

I think of this kind of purchase as dialing up the luxury level of your lifestyle. It’s not a one-time purchase, but rather it’s increasing your base expectations. Now you need to maintain this purchase, and you’re going to expect to someday replace it with something at least as nice.

I wish I had understood the lifestyle dial earlier in life. I wonder whether I can convey it to my children. Perhaps it’s something you have to experience before it really sinks in. Hopefully this happens before you sign on the dotted line for the McMansion mortgage.

September 7, 2013 1 Comment.

One Comment

  1. Carol Stence replied:

    Great thoughts, Jeremy!

    January 20th, 2014 at 9:40 am. Permalink.

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