What is the Purpose of Money Now? v. 2013Submitted by Affiance Financial on July 16th, 2013
Approximately four years ago, in the midst of what turned out to be the Great Recession, I wrote an article titled “What is the Purpose of Money Now?” Now that the economy has turned the corner, investments have improved, and the financial outlook seems to be brighter for some (though not for all) of us, I've decided to revisit this topic. In fact, I have so much to say that I’ve turned my thoughts into a series of four articles. And unsurprisingly, while the economic situation has changed, my philosophy about money has pretty much stayed the same. Read more…
Does Money Have a New Purpose in 2013?
By Steve Lear
Approximately four years ago, I wrote an article titled “What is the purpose of money now?” At the time, the US financial system was in profound crisis. Created by a set of disasters that included the housing crisis with its massive foreclosures, the stock market meltdown, the credit market freeze, an overleveraged banking system and the scandals of Bernard Madoff (to name a few), the as-yet-unnamed Great Recession was taking its toll on our prosperity and our peace of mind.
What a difference four years makes.
How have things improved since the l wrote that first article? Let me count the ways:
- From its lowest point (S&P at 676) on March 9, 2009, the stock market regained and then surpassed its previous highest level in history (S&P at 1,669) on May 21, 2013. 
- On the other side of the equation, interest rates are close to their historic lowest levels.
- Unemployment has fallen from a high of 10% in late 2009 to a current 7.6% as of May 3, 2013. 
- Our 2012 trillion-dollar-plus annual deficit is now projected to be a much more manageable $642 billion in 2013. 
- The value of gold is declining, suggesting a renewed confidence in prosperity ahead.
Similar to what occurred during the housing bubble, as of 2013 the “wealth effect” of the rising stock market has started to permeate our spending/saving habits.
Moreover, the uncertainty that preceded the 2012 presidential election has been replaced with more clarity. This has less to do with the outcomes themselves than the fact that people are nervous when faced with uncertainty. Anything that’s decided—Obamacare, limiting tax deductions for the wealthy, even the sequesters—provides clarity and makes people feel more secure.
So my question is, now that our wealth has come back, what are our priorities? What do we do first?
Do we commit to financial goals and save more money to increase our confidence that we will reach those goals? Do we increase our standard of living? Do we enhance our risk management plans to gain peace of mind? Can we make generosity a higher priority? Can we use our newly-increased wealth to address our social problems?
Choosing priorities and then “bucketizing” for our goals is crucial at this stage. I’m not referring to the ultimate state of the world; I’m referring to your personal economics. As a financial planner, I’m being self-serving: I want you to put your financial house in order! If you’ve already done this, congratulations! Pass this along to someone else.
- Secure your future so that the burden of your care isn’t left to others.
- Save for retirement.
- Ensure adequate protection in the event of illness, disability, long-term care, and death.
- Create an emergency reserve to protect against unforeseen gaps in employment.
- Establish educational funds for your children. Providing for their post-high school education is the best way to help them become independent.
- Contribute to causes to help build communities that are healthier, better-educated, kinder, more ethical, and most of all, more compassionate.
Typically, we have thought of acquiring material possessions and luxury experiences as the way to create joy in our lives. While I’ll agree that these create joy, I have found that for most people, there is a way to create true contentment that is deeper and longer-lasting—and that is by creating security. I believe that if you acknowledge what you need to do to create security and take the steps to do it—as in item #s 1-3 above—before moving on to item #4, you will feel better and the entire community will be better off.
4. Your choice. If your resources permit, after making progress in accomplishing priorities 1, 2 and 3, now is the time to expand your home or buy the cabin or lake home, join the golf club, take the international cruise.
In my 32 years as a financial planner, I have had plenty of opportunity to observe people and their relationship with money. I can tell you that almost without exception, those who see money as a means by which to help others have the highest level of contentment in their lives.
The Dalai Lama said, “If you want others to be happy, practice compassion. If you want to be happy, practice compassion.”
Principal, Financial Planner
The views and opinions shared in this article are strictly those of Steve Lear and do not represent Affiance Financial or Cetera. Further, nothing in this article should be viewed as financial advice. Please consult with your financial professional.