Two Questions About Money
Picture two neighbors, Arlo and Beth, who each receive a $5,000 bonus in the same week. Arlo books a long weekend by the sea and buys a good pair of boots for the trip. Beth puts hers into a fund that pays out a little every month.
Arlo asked himself what would feel good this month. Beth asked herself what could send her money each month without her time. Both questions are fair. I have asked both in my life, and each has its place.
On $5,000, the difference looks small. At a 5 percent payout, Beth’s bonus sends her about $21 a month. Arlo has a weekend he will remember.
Say they do the same thing every year for twenty years. Arlo has twenty weekends by the sea. Beth has about $165,000 in the fund, and at 5 percent it sends her about $690 a month, whether she works or not.
Beth takes trips too. She sets aside a monthly amount for the fund and spends the rest on what she enjoys, and the trips are part of her plan, not a reward for skipping it. Arlo’s weekends are real, and so are his memories.
Many of us ask the first question nearly all the time, because ads, stores and apps are built to ask it for us. The second question rarely gets asked unless we ask it ourselves.
You might say twenty weekends by the sea are a fine way to spend twenty bonuses. They are. The point is to choose it knowingly, and to know what the other choice would pay.
A retirement abroad runs on the second question. The money you bring has to send you a payment every month. That is why our calculator starts from the monthly spending and works back to the lump sum.
You could notice, the next time you spend, which of the two questions you asked. You could keep a note of it for a month.
Which question did you ask the last time you spent money? Tell us in the comments. Someone reading may be holding a bonus right now.
Tell us in the comments