In a Japanese poll from several years ago, respondents said that one of the things they most speculated about was their neighbors, about their finances rather than their sex lives. At one time I might have questioned whether it wasn’t the other way around but now I realize the truth of this statement. Most everyone is curious how other people are doing ; they want to compare themselves against others , to feel that they are doing better or at least that they are doing all right.
On Sundays, one of the things I unfailingly read in the Business section of the newspaper is a feature about one family’s finances. In it , a family’s finances are detailed for all to see. In a box are listed their assets, their liabilities, their income, their net worth and their monthly expenses. Their names are altered ( to preserve their privacy) but their ages, number of children and their financial goals ( Paying for college,retirement etc. ) are also given. Why do families agree to disclose their finances in this fashion ? Well, their inducement to do so is that a certified financial planner will review their situation and advise them on how to improve it.
Surprisingly, most of the cases involve people with a sizeable net worth. These people are far above average. Typically, a family in their late forties/ early fifties with one or two children enjoys a family income of about $125,000 ( the dollar ain’t what it used to be ) and a net worth of between three quarters of a million to one million, including the equity in their home. Surprising when one hears how so many people are living paycheck to paycheck but then I realized that such people would not be thinking long term or volunteering for this column.My interest in reading the column is to pick up any pointers I can and, yes, to reassure myself that I’m not doing too badly. However, over a period of time, I’ve also picked up the following interesting trends.
1. There are quite a few couples where the wife is the major earner in the marriage. This bears out other data that I’ve seen that indicate girls are outperforming boys academically in school and that more of them are going on to college.
2. Also, quite a few instances where the wife is older than the husband ( by two to five years).
3. In general,the singles are not doing as well as the married couples.
4. These financial planners rely heavily on mathematics and probability but , in at least a few cases, lack common sense. In one case, a couple approaching retirement was advised that, based on a 6 % return on their holdings, there was an 85% chance that their money would not run out by the time the husband turned 100 ! Give me a break! How ridiculous is that. Why project that far ahead particularly when the calculations are based on an assumed rate of return ?