Been there - Done that! Several times with varying results!
Here is way more than you wanted to know. And much of what seems to be a concern about money and the future is often concerns about life in general.
My wife and I met in 1974 at which time I was a semi-professional sailor. I managed race
boats, taught sailing, delivered boats, and spent a whole lot of time sailing. I told her from the day we met:
- no children
- we will head off sailing as soon as we can afford it
- no 9 to 5 job for me
I was in graduate school
at the time we met and needed 5-years to earn 42 credits for a Masters degree. Sailing and climbing were much more important than school). I started a very successful computer business and made a lot of money, much of which we saved.
I was also very good with numbers and finance (part of my computer consulting business) and knew “THE NUMBER”, which was the investment amount we needed to retire at my age 50 (1997). That investment amount would assure us a comfortable but not extravagant life style for the next 60-years. My wife’s mother’s family
all lived into their late 90s and we needed to plan for her living to that age.
I built, over a period of 10-years, an elaborate, some say obsessive / compulsive / way over the top spreadsheet world to model any conceivable economic, financial, political, medical
situation in which we might find ourselves. The system had three workbooks, over 50 worksheets and tens of thousands of rows in those sheets
. The system included a vast array of historical data, US economy stock market data. It also included Monte Carlo systems and ‘what if” scenarios.
Bottom Line for this discussion
– I planned the heck out of our future. I envisioned every possible scenario and made contingency plans for all of them. The work
I did for our planning was an extension of the professional consulting work I did for the largest computer users around the world. I was 100% certain of my work and predictions.
My wife worked in a well-paid technical position. We lived on her salary and saved most of mine. We were active investors in real estate and stocks. We put 30% of our gross income going into pre-tax savings each year.
We purchased a new boat
(SV Mirador) in February 1995 and spent the next five-years making her our perfect long distance live aboard cruiser.
We hit “The Number” (total net worth and income producing assets) in 1996 at which time my wife and I had been a couple for 22 years. We had spent thousands of hours reviewing our financial situation and future plans.
SO – let’s plan to sail south to Mexico
in ’97 or ’98!
That is when I discovered several things about my wife and her life:
- The enormous custom house we purchased, as a short term investment from an estate, in 1982 was now my wife’s home and she was very reluctant to sell it.
- She had worked in the same job since 1981 and loved the work. She was the only woman in a man’s technical world and was highly respected and was very reluctant to give up that position and respect.
- Her family
had built a chain of plant nurseries, tree farms, farm implement and hardware
stores from scratch. At age 8 she was traveling the western US with her father buying produce to sell at their small highway stand. By the time she was 18 she was running a large hardware
store. She loved to work every day.
- She wanted a regular schedule – one that she knew far into the future
- Earned income, from sweat and toil or at least intellectual activity, is real
- Investment income is a phantom seen only on paper and not to be trusted
We needed several more years to work through those concerns.
Beginning in 1999 (I was 52) we started closing out our shore side life and preparing for an extended cruise to parts
We put our house up for sale
in early 2000 and appeared to have it sold in July. My wife “retired” on July 1. We left Puget Sound
on Mirador in August 2000 and headed to warmer weather
. In early October, while we were in San Diego
, the house sale
in wife’s opinion against “we have all we need and everything is great”
We had to drive back to Puget Sound
(rental car because we had sold all our cars and trucks before leaving in August) to make arrangements for house care and maintenance
until we could get it sold again. My wife returned to work in November 2000 because her employer loved her work and would do anything to keep her there.
The house did not sell again until July 2001. My wife managed the house sale
and ‘extorted’ far more money from the buyers than I ever thought possible. I had been off sailing in Mexico
on my brother’s boat
and I never anticipated needing another 9-months to sell our 6,000 square foot custom home with 270-degree views of Puget Sound and Mt. Rainier.
Thus – Strike 2 & 3
against “I really know what our financial future holds and have planned for all contingencies.”
We moved back to San Diego
and Mirador in late July 2001 and left for our Mexican cruise in November 2001. We were fat, dumb, and happy. We had more than enough money, good investments, and a solid boat.
The US Stock Market tanked in the first half of 2002 and kept plunging through early 2003. The S&P Industrials declined over 35%. SOME of our investments really took a hard hit. I had set up three categories of investments:
- conservative holding funds for about two years of expenses (10% of assets)
- moderately aggressive holding about 40% of our investments
- very aggressive for funds we didn’t need for at least 15-years
Our conservative funds barely rippled and did not lose much value. The other two funds went DOWN, way Down! We lost
over 42% on several investments.
I had been an active investor since 1975 and had been through many of the sharp market corrections and down turns. My plans accounted for those losses. I knew that the funds with huge losses would also show huge returns in a few years and everything would work out OK. We had no debt and could easily live on our conservative funds for three or four years if the market downturn continued. We could wait out the market downturn and had really only suffered paper losses. We lost
no real money.
But, paper losses were not what my wife saw. She felt we were going broke.
My wife totally freaked out – she completely lost it and panicked, as I’ve never seen her panic. She had never paid attention to our investments and had little understanding of the stock market and economic cycles. All she could see in June 2002 was that we had lost many hundreds of thousands of dollars.
It did not matter to her that I had historical data showing how we had lost even more in previous downturns (1987?) and had always come back to more and better.
At that point her opinion that ‘earned income is real’ and ‘investment income is not something I really trust or can dependent on’ came out loud and clear.
And Strike 4
– just blew me out of the batter’s box. She remembered, in lurid and vivid detail, several horrendous investments I had made in the late ‘80s. I ignored the adamant advice of professionals who tried to save me from my stupidity. The end result was that we lost close to $100K (as in gone without a trace), the IRS closely audited us, and the general partners of one of our limited partnerships were criminally indicted. Only expensive legal
talent kept we limited partners from also being indicted.
because “you have a long history
of belief in your abilities with a specific failure to perform.”
Several months of contentious discussions ensued and in late fall 2002 my wife again returned to work. As I said, her employer would do almost anything to keep her on the job.
As predicted, our investments did regain all their losses and then made huge profits during 2004 – 2006. Just as I was beginning to convince the wife that it was save to retire again, the great recession of 2007 – 2009 hit. I even went back to work for a while, making less in a day than I used to make in an hour.
We still had no debt and a net worth that most families would consider far more than adequate. But, my wife saw the ’07 recession as just one more sign that only ‘earned income’ is trust worthy.
Part of the problem was that in ’06 thru ‘early ’08 I could not accept that the general US economy was headed so steeply downhill. I moved the money we needed for the next couple years into very conservative bonds but I kept about 70% of our money in aggressive equity funds hoping to see a lot of appreciation once the market turned around. Those funds declined over 35% in value.
My wife had told me to move ALL her assets (the ones we did not plan to touch for another 15-years) into very conservative bond funds. I ignored that advice.
“once again you’ve been way too optimistic in your ability to make money off our investments.”
During the 2010 thru 2013 period my aggressive investment style finally paid off and our investments almost doubled in value. But, my wife still had not forgiven me for leaving all that money exposed to the falling equity market. I have no faith in market timing and invest for the very long term (10+years) and don’t mind a two-year market drop because I know that over the last 80-years the US equity market always comes back.
My wife, on the other hand, hates to see any decline in net worth and would rather take a smaller overall long-term gain that to suffer drastic short term losses.
Toward the end of 2013 I convinced my wife to retire. Our net worth was again headed straight up but more importantly she had 32-years at work and had reached age 55. Her pension would not increase significantly, no matter how much more she worked.
At that time our fixed income (pension and social security) was greater than our annual expenses. Her pension is guaranteed by a very stable pension board, which is required by law to keep the pension reserves at 106% of known and estimated liabilities.
I have now built an even more elaborate Monte Carlo system for modeling future income and investment returns. (Part of my graduate work was in that area and I have 35+ years experience with financial modeling.) That system says we can increase our annual expenses 40% while our net worth also increases into the next 50-years.
Using historical investment returns for the mix of investments we currently hold the system says that in 1,000 runs our net worth in 2055 will be greater than it is today 995 times.
However, my wife still is reluctant to spend money or take on any debt. Our fixed income far exceeds our expenses and we never spend a penny from our investments.
SO – to answer the OP’s original question:
I can live with a lot of uncertainty and I have a lot of confidence in my ability to plan for our financial future. I am willing to take risks and know we can adjust our lifestyle to accommodate changes in our financial status.
My wife hates uncertainty and wants there to be NO possibility of losing money on any investment. She would rather spend nothing than take a chance on even a slight decline in our net worth. The wife wants to know for 100% sure our financial status in 2030, 2040, and 2050.
We will never come to an agreement about acceptable risk and life style choices.
Our compromise is that I spend a little more than necessary on bicycles, computers
, and some boat stuff and she ignores my minor spending.