Money and austerity

Through the magic of the Internet, I recently managed to re-establish connection with an old college pal of mine, whom I had not seen or heard from in several years. After exchanging a few e-mails, he gave me a call.

One of the first questions he asked me was, “So, tell me, Charles, how much money do you have now?”

I was a bit taken aback by the question and hesitated to answer. “Well …”

“Come on, sport, how much do you have? How much have you accumulated so far? You must be doing well. You were a good student, as I recall.”

“Not very much,” I assured my old friend. “Not very much at all, I am afraid. I have made a number of mistakes. How about you? How much do you have?”

“Oh, roughly [X] thousand dollars,” said my friend.

“Really? Is that all?” I said. “Frankly, I’m a bit surprised. I thought you would have had more than that. Actually, I have a little bit more than that: X thousand dollars. What’s your monthly salary?”

My friend told me how much he made every month. It turned out to be at least a thousand dollars more than I ever made in my working life so far.

Yet, somehow, I still managed to have a couple grand more than he had, even though he is 27 and I am just twenty-five. He had two years more to accumulate — a big lead.

The lesson here is simple: It is not how much you make but how much you get to keep that counts. If you earned $400,000 last year but spent $500,000 in expenses, you have lost. You are in a hole, in debt, and probably burdened with a negative net worth. It would be far better to make $25,000 and keep $5,000.

(A lot of us would probably be quite surprised to learn that many so-called “ill-paid” Chinese garment factory workers have saved up more cash than the average debt-laden CNMI government worker.)

Now that our government is in a financial quandary of its own — a $52 million deficit — pay cuts have to be executed. For PSS employees, a 10 percent deduction will soon be in place. For higher paid government bureaucrats, the cuts could be even more severe. A number of people will no doubt become very angry and upset. However, it has to be done.

This should be an opportunity for all of us to make the best use of our money, to put it through proper use, avoiding all waste and extravagance. The Asian financial crisis and our subsequent tourism collapse should ultimately be viewed as an excellent opportunity to practice sound, sensible, prudent financial management.

We are all capitalists now!