Financial Lessons I Learned When My Apartment Building Burned To The Ground
Losing all of my possessions in a gigantic conflagration that made the evening network news has nothing to do with my financial life. Or does it? This event has had a profound influence on my spending habits, and is therefore relevant to spending under your means to save for retirement.
My Life Is Not My Stuff
You are probably rolling eyes thinking: “well, of course”. However, saying so is easy...until it happens to you. For a couple of years, it had a rather profound psychological effect. I felt as if my life had gone up in flames along with my possessions and rent-controlled apartment.
All My Junk
Being a single, middle-aged male, I have spent a lifetime accumulating mostly junk. Since I have moved only once, I have had little reason to do a serious cleaning-out of my stuff. I had mountains of junk, but, truth is, a couple of years later, I actually do not miss them. There are a few things I regret losing (audiophile stereo system, collection of professional chef knives, a set of expensive, French copper cookware), but that is about it. These are going to be quite expensive to replace, but it can be done.
OK, this was my biggest mistake. They should have lived in a safe deposit box, as protection against natural disaster or theft. Of course, they actually lived in carved wooden box in the back corner of a closet. I figured that the box fees would eat away at the net value, so never bothered. Sigh...
Now, this brings up a good question: I also had several Engelhard 10 oz bullion bars of silver (I loved holding them in my hands). The bars cost me $50, but were worth close to $500 when they melted back into earth from whence they came. OK, so did I lose $50 or $500? When I first bought them, the price of precious metals was low and the box fees rather high in comparison. When they became multi-baggers, the wise thing would have been to finally stick 'em in the bank, which is exactly why I never did it.
Lesson #1 – Insurance
You must buy insurance of all types: health, car, home, long-term care, life, travel, unemployment, disability, and especially, in my case, renter's. They will be your financial backstop. If you buy them but never use them, that is a good thing rather than a waste: it means that your life has been lucky and not impaled by a heart-rending and life-changing disaster. Do not make the same mistake I did: in the months before the fire, I actually looked up renter's insurance on the web (AAA, Geico). I figured it was too much of a hassle, so never got around to it.
Lesson #2 – Pay Yourself First
This is another important principle you must actually do, not just think about. I know: this is hard for people who are struggling just to make ends meet at the end of the month, and many who know they should, don't. I used to save, but would simply calculate how much I had leftover at month's end, then stick that into my investment accounts. I have now turned that upside down: I take a fixed % out of each paycheck, then force myself to live on what is left. Not always easy without cheating by using plastic, but I manage to get by.
Lesson #3 – Buy Only the Best
These days, I buy very few things, especially hard since I have few possessions to begin with. However, I buy only the best: high quality goods with superior performance, and durable to give me many years of hard use. As an example, something stupidly simple and functional: underwear. I have very few pairs, but all are high quality costing $20-$30 each. This is in lieu of what I used to have, that is a whole drawer of jockstraps, white cotton briefs, and boxers, bought via various sales. My clock radio costs $300, cuz its superior audio performance is temporarily subbing for a full-fledged audiophile system. I have exactly one chef knife, costing 3 bills. I have a drugstore wristwatch and stupid cell phone, bought right after the fire to provide me with basic functionality. They are soon to be replaced by a Cartier and iPhone (as soon I can save up enough $$$ for them, and the Cartier comes first), and I expect these 2 to be, pretty much, the last of these things I will ever purchase.
Lesson #4 – I Survived, and So Will You
It took me 2 years to get over the psychological shock, so give yourself time to heal: there are no rewards for pretending that you are OK and going through life with a faked smile. I learned that, in the end, the world continues to dance its way to the future, and so will your life. It has allowed me concentrate on what is important. Everything else, kinda like the many TMF articles on Apple and Tesla and bitcoin and the Oracle of Omaha, is simply noise: you can safely ignore them.