With five kids all college-aged now – and two beautiful grandchildren in the picture – I have plenty of Christmas memories I cherish.
The delight on their faces when they got what they hoped for… the sound of their feet racing down the stairs (after waking me up way too early)…
And setting out cookies and milk for Santa on Christmas Eve, a time-honored tradition I just learned the origins of.
According to History.com, it dates back to the Great Depression.
In that time of great economic hardship, many parents tried to teach their children that it was important to give to others and to show gratitude for the gifts they were lucky enough to receive on Christmas.
Today, of course, many parents still try to instill a sense of kindness into the act. But let’s face it: It has become much more capitalistic in nature.
The kids “pay” Santa milk and cookies as “currency,” and he hands over the gifts. In which case, as much fun as it is to keep the tradition alive, we’re losing out on the translation.
Really, we’ve lost sight of too much in the past 90 years. Our culture today doesn’t understand the real value of gifts, possessions, or money in general.
Look no further than last week’s viral post by Michael Green, a Wall Street portfolio manager and chief strategist for Simplify Asset Management, for proof of that.
“We have been told, implicitly,” he wrote on Substack, “that a family earning $80,000 is doing fine – safely above poverty, solidly middle class, perhaps comfortable.” But once you consider typical expenses, that “family would be living in deep poverty.”
Instead, he stated, a “basic needs” budget requires a whopping $140,000 per year.
It’s a crazy claim that desperately needs to be broken down.
America’s Spending Problem
I don’t use the word “crazy” to be disrespectful to Green. I get what he’s saying about $80,000 hardly being well-to-do. And, yes, $80,000 certainly isn’t what it used to be… even just a few years ago.
But his breakdown is based on faulty analysis and assessment alike.
For instance, he claims that the average American family with two jobs and two kids in 2024 spent:
- $32,773 for childcare
- $23,267 for housing
- $14,717 for food
- $14,828 for transportation
- $10,567 for health care
- $21,857 for “other essentials”
People can and have picked his analysis apart, including how childcare only applies to families with younger children.
How the childcare figures he did quote are exceptionally high.
How a family of four can (and probably should) spend a whole lot less than $14,717 on food.
And how the “other essentials” category seems pretty darn high when the only other real “essentials” are clothes and utilities.
As for me, I want to focus on the definition of poverty itself. Dictionary.com describes it as “the state or condition of having little or no money, goods, or means of support.”
In which case, making $80,000 a year for a family of four just doesn’t fit.
Green himself completely backtracked on his “deep poverty” language when discussing the matter to USA Today.
“What we experience in the United States is very rarely absolute poverty,” he acknowledged. “What we’re describing is precarity. That feeling of holding on by your fingernails.”
But even then, he’s far from correct. Just because people are spending that kind of money doesn’t mean they have to.
I know that times are hardly ideal, with inflation taking a toll on just about everyone. My team and I have written about Americans’ sorry financial state more times than we’d prefer these past six years.
So, no. I’m not victim-blaming. I’m not victim-shaming. And I’m not forgetting about exceptional cases where $140,000 really just doesn’t end up cutting it.
I am, however, pointing out that most of us spend more money than we need to on short-term luxuries when we could be storing it up for much longer-lasting satisfaction.
Like retirements that are actually sustainable.
Those kinds of happy endings are very obtainable even if you’re living in precarity or deep poverty – by Michael Green’s standards, anyway.
The Father of Value Investing
It’s not only milk and cookies that came out of the Great Depression. Benjamin Graham, one of the most famous investors who ever lived and Warren Buffett’s mentor, did, too.
Graham was born on May 9, 1894 in London, but he and his parents moved to New York City when he was one. His childhood was marked with intense changes, especially after his father died and his family fell into poverty.
Those difficult times served to shape his lifelong quest for investment values.
Graham came to understand that financial success encompasses two very important factors: playing offense in the form of earning money, and defense in the form of spending as little as possible.
This extreme frugality gave him an enormous edge when it came to stock-picking skills. As he once said:
The years of poverty since Father’s death had touched me only lightly. They had developed in my character a serious concern for money, a willingness to work hard for small sums, and an extreme conservatism in all my spending habits.
In other words, he didn’t waste money on things that didn’t promise a worthwhile physical, psychological, or financial return.
When it came to his investments in particular, Graham grasped the danger of risking capital. Even a few significant losses, he realized, can ruin overall investment performance.
There was no FOMO (fear of missing out) or keeping up with the Joneses for him. Every asset he added to his portfolio was carefully researched and justified.
That’s why, by the time Graham died in 1976, he was able to leave his heirs around $3 million – even after giving away much more than that over his lifetime.
Today, Graham’s approach inspires everything we do here at Wide Moat Research, where we stay laser-focused on principal preservation. You don’t see us chasing down every new crypto scheme or high-yielding stock.
We want quality. We want meaning. We want lasting wealth.
Like Graham, we recognize that every dollar you make and invest is earned. Money really doesn’t grow on trees, and “milk and cookies” should mean something.
So as this year winds down and a new one begins, promise yourself to make the most of what you do have. You might find that a little goes a lot further than you ever thought it could.
Happy holidays,
Brad Thomas
Editor, Wide Moat Daily
|