Your Future Wealth Depends on what You Decide to Keep and Invest in Now
- Millienials look for instant gratification
- Spend half of their income on leisure
- Instant gratification doesn’t work if need to save for the future
- Savings rates falling, few have retirement funds
- Important to understand marginal difference between spending and pleasure
- Future wealth depends on what you decide to keep and invest in now
This week the festival of all festivals begins, Glastonbury 2017. Ed Sheeran, Foo Fighters and Barry Gibb will each be singing to the 250,000 revellers who are currently on their way to Somerset. To those unfamiliar with Glastonbury it is a glorious few days in the countryside with camping and music. Every year there is far too much mud, lots of tears, alcohol, dodgy substances, hippies and great bands. Not to mention the fancy dress outfits and the toilets with questionable sanitary conditions. It is brilliant fun which everyone should try at least once.
135,000 of Glastonbury attendees will be on the standard tickets (priced at £243). This basically means roughing it for five days and camping with a £20 tent that you forget where you pitched it when you’re looking for it at 4am whilst also looking for your friends. But who cares? It’s basically less that £50 a day for non-stop entertainment and top music. Festivals are great levellers, you know it’s only for five days and who needs a shower when no-one else is bothering?
Glastonbury has been this way since it first began in 1970. It is all about turning up, popping up your tent and enjoying each other’s company whilst listening to music.
But, in recent years times have changed. Generation X and now the millennials have decided they would like the Glastonbury experience more on their terms. These are the people known as glampers (glamorous campers). They work really hard all week and why should they sleep in a tent when they don’t have to? Who cares if it’s all part of the festival spirit? So, naturally there are a number of companies to meet these peoples’ city-softened needs.
The Telegraph writes of one, ‘Camp Kerala has served the needs of local festival goers since 2005. It features a spa, a Kerala Cocoon fancy-dress den, bar and upmarket on-site dining options – think smoked-trout eggs royale for breakfast, organic sirloin steak with truffle-salted chips for dinner. Guests reside in spacious Shikar tents, made to a design that was introduced by the maharaja of Jodhpur, and equipped with duck-down duvets, sheepskin rugs and Egyptian cotton sheets. With tickets included, accommodation here for the duration of the festival starts at £8,225.’
I can see why some people don’t want to sleep in a tent that has dodgy guy ropes but a Shaker tent ‘made to a design that was introduced by the maharaja of Jodhpur’? Really? What happened to roughing it in order to make the most of what life was about?
The approach to Glastonbury by the Glampers is perhaps one extreme example of a generation (or two) who no longer feel the need to live carefully now in order to prepare for the future.
I’m not assuming that those enjoying the delights of Camp Kerala aren’t putting away funds for retirement, but I am suggesting that instant gratification is something that is assumed to be an entitlement rather than a real treat. This applies across most young people.
CBRE research shows that millennials are ‘a generation who spend half their disposable income on leisure, won’t conceive of a commute of more than 30 minutes and want instant gratification. They’re happy to rent everything, from clothes to computers, but they want it now.’
In the UK high spend on recreation and leisure isn’t just for the younger generations. According to the Office for National Statistics, recreation and culture is the third highest item households spend money on, above food and health.
What about their futures? Who is thinking about how this instant gratification works when they’re 80 with no income?
Millennials and younger members of Generation X are in real trouble when it comes to savings. They are running a balancing act of current debts and short-term financial goals while protecting themselves in the future.
This is not just in the UK but elsewhere in the West. In the US ‘Only one-third of Americans contribute to their employer-sponsored retirement accounts, and 43% of working-age families have no retirement savings at all.’
There is little incentive to put money in the bank. Interest rates remain at record lows and even with expected rate hikes going ahead they would need to go some way to make it really worth putting some cash in the bank.
Times are tough for many people, but there are clearly a lot of people who have money they just see little point in holding onto it for a rainy day. Perhaps it is because of the commercials that tell us we’re worth it, or life’s too short. For whatever reason, there is a myth enjoying life is incompatible with preparing for the future.
Can you have it all and save for the future?
Mark Ford at Stansberry Research wrote about the marginal relationship between how much you spend and the enjoyment you derive. I.e. how much more enjoyments does the glamour get over the camper? Surely they’re all listening to the same music and seeing the same sights? The quality and richness of the experience overall are unlikely to be that different.
Ford writes, ‘I believe you can live a rich life while you grow rich, so long as you are willing to work hard and you are smart about your spending.’ He argues that you can enjoy the good life whilst preparing for a good retirement.
He writes about that common trap so many fall into when they start earning more, ‘They have more money to put aside for the future, but they are also tempted into buying newer cars, nicer clothes, more exotic vacations and –the biggest wealth-stealer of them all – that dream house.’ Ford applies this to 40-50 year olds, but in the West we have many millennials who have far more disposable incomes than their parents’ generation. However, the desire to save has seemingly not been passed on through the family.
In order to set yourself for a wealthy, financially secure future you do not have to deprive yourself now of the niceties. But, that also doesn’t mean you can play uber rich in the meantime. Your future wealth depends on what you decide to keep and invest in now, rather than on what you spend right now.
Ford explains there are two lessons to be learnt from those who only spend more when their incomes increase:
‘First, it is very difficult to acquire wealth if you increase your spending every time your income goes up.
‘Second, setting unrealistic investing goals means taking greater risks. And taking more risks, contrary to what many pundits say, will almost always make you poorer… not richer.
‘My spending strategy is simple: Discover your own, less expensive way to live a rich life. By a “rich life,” I mean a life without financial stress, but also filled with things that give you pleasure.
‘The fact is that you can own and enjoy the world’s finest things – the things that make life luxurious – for a tiny fraction of what a billionaire might pay.’
Can you have it all and build wealth?
So, can you enjoy a festival at the fraction of what a billionaire might pay? Certainly. Can you save for the future like a billionaire and still enjoy life, for sure. The difference is you just have to pay less whilst deriving the same enjoyment.
Billionaires might be able to afford instant gratification today and in the future, but the majority of us (millenial or otherwise) are unable to. As Mark Ford writes, you have to make smart spending decisions. This should apply to smart saving decisions too.
Gold is a good example of this. Many people think you have to have a lot of money to put into gold and buy a few big bars at a time. They think they would have to forego lots of other lifestyle choices in order to own gold. This isn’t the case.
Savings and portfolio diversification are not things that are exclusive to the wealthy, or something that is exclusive to you enjoying life in the meantime. GoldCore offers savings plans starting at accessible amounts. Placing small amounts of money into gold each month is a sure way to build up a healthy holding when it comes to retirement or that rainy day when you really are feeling the pinch from inflation, financial stress and economic downturns.
Why gold? There is a reason why savings rates are low, why real interest rates are below zero and people are laden with debt – we’re in tough financial times. It is through these times that gold has repeatedly protected us when things get really tough.
In short, you might not get instant gratification from gold in a savings account, but I’m pretty sure your 80 year-old self will be glad you opted for that rather than the maharaja’s tent.
News and Commentary
Gold Prices (LBMA AM)
21 Jun: USD 1,247.05, GBP 989.04 & EUR 1,118.98 per ounce
20 Jun: USD 1,246.50, GBP 981.99 & EUR 1,117.24 per ounce
19 Jun: USD 1,251.10, GBP 976.86 & EUR 1,117.73 per ounce
16 Jun: USD 1,256.60, GBP 984.04 & EUR 1,124.03 per ounce
15 Jun: USD 1,260.25, GBP 992.57 & EUR 1,127.67 per ounce
14 Jun: USD 1,268.25, GBP 995.83 & EUR 1,131.41 per ounce
13 Jun: USD 1,261.30, GBP 992.26 & EUR 1,125.33 per ounce
Silver Prices (LBMA)
21 Jun: USD 16.51, GBP 13.03 & EUR 14.81 per ounce
20 Jun: USD 16.59, GBP 13.10 & EUR 14.88 per ounce
19 Jun: USD 16.67, GBP 13.02 & EUR 14.87 per ounce
16 Jun: USD 16.76, GBP 13.11 & EUR 14.99 per ounce
15 Jun: USD 16.86, GBP 13.19 & EUR 15.10 per ounce
14 Jun: USD 16.96, GBP 13.32 & EUR 15.14 per ounce
13 Jun: USD 16.82, GBP 13.21 & EUR 15.01 per ounce
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