A personal finance lesson from Apple
Apple is the world's most valuable company. Innovations like the iMac, iPod, iPhone and iPad from the storied company that was passionately driven by the late Steve Jobs has the company's market capitalization to more than half-a-trillion dollars.
Apple also stands out because the company has accumulated an enormous cash hoard -- now nearly $100 billion. Jobs believed that the cash was a financial anchor for an innovative company that took risks in a highly competitive, dynamic industry. However, many voices on Wall Street are calling on the company to distribute to shareholders at least some of the bounty.
Whatever the outcome of that struggle over cash, there is an important personal finance lesson in Jobs' eagerness to build up a cash cushion. What's true for Apple is true for the household: Savings is an anchor that allows for experimentation, risk-taking and innovation.
Unfortunately, the idea of thrift, of savings, of a cash hoard is popularly associated with penny-counting, money-hoarding and austerity.
"The thrifty man was regarded as one who spent money most grudgingly, who drove sharp, unfair bargains, who gave no encouragement or support to the finer interests of life, such as the development of education, the arts, the sciences and charities -- a man whose interests lay only in himself in all things," wrote Simon Strauss in 1920's History of the Thrift Movement in America. You hear the same sentiments today.
Yet Strauss believed thrift was nothing like the popular caricature. "It is the thrift that recognizes that the finer things of life must be encouraged," he wrote. "The skilled workman, the artist, the musician, the landscape gardener, the designer of beautiful furniture, the members of the professions -- all those, in fact, who, through the devotion of their abilities, contribute to the real betterment of mankind, must be given support through judicious expenditures." Jobs would have empathized with his perspective.
When it comes to personal finance (or any other aspect of life) the key is delving deep into what it is you really want out of life. What do you truly value? Where do your passions lie? Those passions and goals aren't static, either -- especially if you enter the workforce at age 22 or 23 and work until your late 60s or early 70s.
During part of your work life, you might want to pursue a career in the private sector. At another stage in life, your desires could push you toward a nonprofit with a mission, to starting your own business, to heading back to school, staying home with the kids, running for political office, and so on. Savings supports a life of experimentation and discovery, of risk-taking and innovation. "If you can discover what you want out of life -- the why -- then there are a number of ways to get there -- the how," says Ross Levin, certified financial planner and head of Accredited Investors Inc. in Edina, Minn. The rest is number-crunching.
The theme we hear so much about the New Normal -- saving more and borrowing less -- means a slow growth economy and a dull household bothers me. It reflects a belief that the good life and the good economy only comes with lots of accumulated things and lots of debt. It's nonsense. Savings and investment anchors risk-taking and transformation in innovative companies like Apple and other entreprenuerial ventures from Silicon Valley to Route 128.
Savings and investment also anchors risk-taking and household experimentation over the span of a work life.