What are Financial Years of Plenty? And Why Should I care?
The stock market is boomin’ and wages are up!
When times are good, as they are now, most people tend to inflate their lifestyle to match their added income. In other words, they spend their raises or gains as soon as they hit their bank accounts.
And “easy” money is as plentiful as trees in the forest.
This reminds me of an old, and true, story.
Years of Plenty and Years of Wanting
There was once a young man who was sitting in an Egyptian jail. How he got there is another story entirely. But word came to him that the mighty Pharaoh had some disturbing dreams that no one could interpret. It just so happened that this young nobody named Joseph was able to interpret dreams. He did it before, and as Pharaoh was desperate, Joseph was summoned to appear before Pharaoh. Just in case you didn’t know, this story is found in the Bible.
And the dreams? In the first of Pharaoh’s dreams, there was a group of seven fat cows grazing on a river bank, and all of a sudden, seven scrawny, skinny cows came up out of the river. They looked sickly and gaunt. And they ate the fat cows, and yet stayed skinny and sickly looking.
The second dream was similar. There was a corn stalk that had seven lush and fat ears of corn on it. And then seven withered and dried out ears sprang out of the stalk and consumed the fat ears of corn.
In ancient Egypt, superstitions abounded, and dreams always meant something. So of course Pharaoh wanted to know what these dreams meant.
Fortunately for Joseph (and everyone else as we’ll soon see), he was the only one who could offer an explanation.
Joseph told of seven years of plenty (seven fat cows and seven fat ears of corn). There would be bountiful harvests from good timely rains which would increase the livestock and produce of the Egyptians. It would be seven years of prosperity. Wealth and gain would be widespread and plentiful. In other words, they would have more food than they would know what to do with!!
But after those first seven good years, there would come seven years of famine. Famine unlike Egypt had never seen. So much so, that the previous seven great years would be forgotten. It would be so bad, that it would seem as if they never had those good years.
Pharaoh was, of course, concerned. How would they survive the seven years of famine?
Joseph had an answer for this as well.
He counseled Pharaoh that during the seven years of plenty, they should put some of their increase aside (grain and corn). And use that extra they saved for surviving during the famine.
Pharaoh thought it was such a great idea that he made Joseph the overseer of the project and second in command!
Because of Joseph’s wisdom and trust in God, he went from jail to the second in all of Egypt behind only the Pharaoh!!
You might think, “Cool story, bro. What’s it got to do with me?” (Does anyone really talk like that?)
Are we living during Years of Plenty?
Let’s bring the story of Joseph in Egypt forward to today. I think we are living during “years of plenty”, and we have been for some time now. Let’s take stock (see what I did there?) of our current financial and economical climate.
The stock market has reached all-time highs in the last few months. And is looking to increase even more despite the recent setback. More and more money is being pumped into the market.
Wages are on the rise again, after years of stagnation. And interest rates are still low.
Corporations have doled out bonuses due to the tax reform and the lower corporate tax rate.
All this means is that things are good – generally speaking. Maybe not on a micro level, but on average people have more.
So the question in my mind is, what should we do with our excess or added income? In other words, the gains that we’ve seen over the past couple years? Whether they be directly from investing, or from raises or bonuses or tax breaks. What should we do with that extra money?
What did Joseph advise Pharaoh to do?
Live it up? Or maintain our current standard of living?
Of course you can live it up with your extra money. Start eating out more, and traveling to exotic locations. Buy that dream house and fancy car. You could even finance those things and more. “Money is so cheap these days.” (I’ve heard that more than once) You could buy loads of rentals to make even more money!
And sure, you can make the payments now, but what if your company downsizes? Or what if your renters can’t pay because their company downsized? Just because money is cheap now, it doesn’t mean that it will always be. Or . . .
If you’ll permit me, I think we should take a hint from Joseph and the egyptians. They were wise enough to put some food away for the tough times. Remember, they had to save for a seven-year famine! They couldn’t run to Aldi’s when the pantry was running low on rice and bread. They couldn’t afford to “live like there’s no tomorrow”, cause for them – there might not be.
And maybe there was some smart-alec advisor to the Pharaoh who encouraged him to live it up. Because, “We could never make it through a seven-year famine no matter how much we saved.” But cooler heads prevailed, and they survived.
So start protecting your future. Invest for retirement with your extra money. Pay down your debt.
Sure you can do some of those things you’ve been wanting to do – in moderation. But the general principle is: save during the good times so that you don’t have to during the bad times.
Could you survive a seven year time period of hard times? Financially or otherwise?
I’ve already written about saving for emergencies. But this is more like maintaining your current standard of living in order to secure your financial future.
Lifestyle inflation is real. It’s during times like these when it’s so tempting to up your lifestyle to the next level. Whether that be stretching your budget for your dream house, dining out every other night instead of once a month, or financing that sports car.
When you get that raise, you can start to do those things you’ve been dreaming about. And maybe that’s fine, but if you’re stretching yourself too thin, the bad times, when they come, become even worse times.
And here’s the thing. Once you level-up with your lifestyle, it’s insanely difficult to go back to where you were before! I’m sure you know what I’m talking about.
Once you drive a new car for a while, you’ll never want to trade it in for that junky 15 year old rust bucket that drives like it has wooden wheels that you used to have. We as humans just get used to the standard of living we’re currently at. And it’s easy to level-up, but no one likes going down in lifestyle.Only level-up your lifestyle when you can realistically sustain it, because it's insanely difficult to have to drop back down a level due to unforeseen difficulties. Click To Tweet
That’s great, but how exactly can I secure my future?
When you get a raise at work, here’s what you should do. Let’s say it was 4%. Take 3%, and add it to your retirement contributions (401k, 403b, IRA, ROTH, etc.). Then add the other 1% to your take-home pay. That way, you still have extra money coming in, but you also have invested more too. And the great part is: your life continues as it did before the raise. Except you are now investing more!!
You can do the same thing with bonuses or tax refunds. Pick a percentage that goes toward one of your financial goals (paying down debt, investing for retirement, or saving for a house), say . . . 85%, and then do something fun with the rest. For instance, if you get a $10k bonus, $8500 goes towards a financial goal, while the rest is for fun stuff. You can make the percentages whatever you want, but be careful with lifestyle inflation.
And if you’re going wild with elation at your retirement account balances, just temper your exuberance. Don’t do something foolish, like borrow against it for . . . anything. Just leave it alone, and watch. At some point the market will crash, and then recover, and then crash again. Just keep investing for the future.
Use these years of plenty to your advantage! Don’t get caught over-leveraged when the financial climate turns.
What about you? Have you leveled-up your lifestyle, or are you securing your financial future during these “years of plenty”?
Let me know in the comments, and thanks for reading and sharing.