With our girls back at college after winter break, my wife and I were reading the Sunday newspapers at our kitchen table. My wife was regularly pointing out articles that interested her and relating those pieces to our life. After around 20 or so interruptions, she said, "Isn't it nice how quiet it is?" I replied, "I hadn't noticed."
But actually, this was an example of holding two simultaneous truths together. With our daughters gone, we were able to quietly read the papers and not so quietly discuss what was in them. I was reacting to my expectation of total silence rather than recognizing how nice it was to have both parts.
We do this all the time around our money. One of our client couples has very irregular income year to year, but it smooths out over a five-year time frame. In lean years, they can't live off of what they earn. Yet in big years (which are somewhat dependable), they make far more than they need.
The contradictory truths to confront are that they are being reasonable by going into debt during the lean years and paying things off during the big years. Living within our means is necessary, but the time horizon for those means may not be a calendar year. Ideally, the couple will get to a place where, during their next big year, they set aside the money in low-earning accounts from which they will draw during the tough years as opposed to living off credit lines.
Our money stress tends to be created by only being able to see one way out when there are always a number of choices available. It's important to confront situations directly, while realizing that there may be many right answers. Evaluate your situation honestly. Clients often rationalize their spending rather than reviewing it. I recently met with people who had accumulated a large amount of debt. Their debt built up because they misconstrued wants with needs and then developed reasons for why they should have what they can't afford. Now they were in trouble and, unfortunately, the path out was going to be extremely painful.
Yet others do the opposite. They don't spend money that they have because they get too worried about not having enough someday. Saving for the rainy day can leave you with a drought of experiences.
Try to get information about your spending that you can easily review. My favorite vehicle for this is the online service Mint (www.mint.com). Once you are able to see the numbers, you can realistically evaluate the effects of your spending. Did you spend your money in a way that was consistent with your values? Did your purchases create the experiences that you had hoped? Were those experiences lasting or temporary?
What tends to happen in spending money is that the first dollars directed in any category gives us more pleasure than later dollars. Eating out once a week may be a choice; eating out every night is a habit. Our lives get fed better by directing our money to places that matter most.
We see dual truths all the time on the investment front. Many people with whom we initially meet want stock-market returns during good markets and money-market returns during bad markets. No chance. But the stock market often has multiple truths. How did the market go up so much in 2012 when there was all that bad news around? Because there was also good news. That is why it almost never makes sense to be all in or all out of stocks. Now we are seeing people who want to play catch-up after missing last year's returns. That's like assuming that your date actually will look like their posted Match.com picture. There are still qualities that make stocks interesting, but they are not as good looking as they were a year ago.
Instead of playing catch up, understand why you missed out. Being too aggressive or too nervous will lead you to short-term decisions that are probably inconsistent with your long-term aspirations. The trick is not trying to find total quiet, but rather listening to what's important.
Spend your life wisely.
Ross Levin is founding principal of Accredited Investors Inc. in Edina. His column appears on the last Sunday of the month. His e-mail is firstname.lastname@example.org.