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March, 2002


(A few weeks ago Julia, my mom, heard about our [above] primary personal finance concept, during a hilarious discussion of such matters between Julia, Ann, and Larry. Naturally enough, she thought it an appropriate topic for this section of larvalbug bytes. Here, then, both for domestic harmony and achieving one's financial goals, is the best advice we have to offer. Perhaps in another, later column we may focus on a related concept, also discussed with Mom and Ann at the same time, EEEEE! [Entertainment, Elective Expenses, & Everything Else])

Although Val and I have seen our combined retirement assets increase many-fold since our very modest beginnings, when newly married, and though we are old enough to supposedly take a mature approach to things, discussion of budgets and other money matters can still raise the tension level in our house.

Recently one such talk began with blood pressure at least slightly above normal but ended with laughter, once we had discovered a new version of a tried and true principle, one we have come to appreciate, as in the title, for it's homespun reality: "pay MOM first," or, in its longer variation, "take care of MOM and she'll take care of you." For what we have discovered, rediscovered, and then reaffirmed again and again over the years is that Most of Our Money needs to go for the basics first and, hardly less important, almost co-equal in precedence, for savings and investments second. Only once these maintenance and nest egg priorities have been addressed is it appropriate to consider our many less crucial expenditures, our discretionary spending.

Yet, ironically, our best hope for an eventually ample supply of such "extra" funds comes from giving MOM her due from the start and considering our less essential, though often very strong, personal wants (and at times our quite disparate wishes between us as marriage partners too) as having at most third place in our dedicated uses of still fairly scarce resources.

We include under MOM all the necessities, the mortgage, autos, maintenance items, food (except perhaps occasionally for really special dinners out and/or gifts we may give each other in fine restaurants, etc.), most clothes, all health costs, taxes, and so on, and so forth. Attending to these MOM issues first assures we do not have to do without the basics or pay down large credit card bills or other debts just to get by.

But we also include as a priority assuring that our investment nest egg goes generally up. If we do this, then, by the magic of compounding, MOM will eventually look after not only our future basic essentials but some or even most of those discretionary items as well.

My brother, Andy, awhile back provided us with some very helpful spreadsheet software that shows how much a small retirement portfolio may become (or not) under various scenarios of adding to it, subtracting from it, inflation's inroads, eventual Social Security benefits, appreciation of principal, etc. With some restraint on spending for anything other than MOM first, this kind of information can be made to work for you to achieve some of your most cherished goals. Even with only small salaries and other income, taking caring of MOM can often lead to almost amazing results over the long-term.

As an e-mail friend of Val's, Dodie, has put it, if at all possible, one must also not break the "Eleventh Commandment: Thou shalt not touch principal!" So, let's assure the basics are covered and that the nest egg keeps growing, even if only a little above inflation. Eventually the discretionary rewards may exceed, if not our wildest dreams, at least most of our smilingly more optimistic fantasies.

Thus, although Val and I are looking forward hopefully to both being retired before long, we shall need to keep our spending quite limited for awhile. We find we have only enough funds to contemplate no longer working, far less than enough to have our ideal home, vacations, amount of gifts to others, etc.

But those things may come too if, for now, we continue to pay MOM first!


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

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