Monday, February 14, 2022

Valentine's Day thoughts in 2022


In spite of a busy schedule, this blog should say a few words for readers every year on Valentine's Day (VD). This year, I've decided to borrow some heavy firepower from Laurence Kotlikoff who is an economics professor who wrote this wonderful book called Money Magic. The book is kinda hard to read as it focuses a lot on the US context, so quite an amount of work is required to re-contextualise it to Singapore and I must say that it has changed the way I think about personal finance and these changes do percolate into my training materials.

I'm just going to focus on some main points made by Kotlikoff on marriage. I think marriage has taken a hit in Singapore as young folks have much better options to settle down. For guys, they can farm their crypto coins at double digits yields to live a carefree life playing Lost Ark all day. For girls, well there's plenty of literature to convince them that it's no fun to be married and have kids. 

I still think that there is ample evidence to support marriage in modern societies even though major issues like divorce and kids increase the risk of going through the process. Here's what Kotlikoff have to say in his book :

a) Marriage is about economies of scale within a household.

Romantics prefer Shakespeare Sonnet 116 when it comes to marriage. Even I included lines of it in my marriage album. 

In practice, I prefer to use economic data. 

A single person aged 65 needs $1,768 a month to live a dignified existence. A couple of the same age needs only $2,419. The rule of thumb across societies is that marriage cuts expenses for each party by about 20%, so much so that US levies a marriage tax penalty when rich people shack up. Singapore actually gives you HDB benefits as a couple. This should offset nerf single living.

The main issue with this argument is that young folks live with parents so they won't feel the premium associated with coupling, but the numbers become very clear after age 65.

b) Ceteris Paribus, you should marry someone rich  

I had lunch with a doctor pal and ask him what happens to single women who become medical specialists. He said they struggle a lot because they are always looking for someone better than them. One of his colleagues is dating some CFO of a company who is in his 50s even though he is triple-divorced. He even said he can introduce them to me but they might be twice my size, conveniently ignoring the fact that I am married with kids. ( Maybe these doctors don't mind. )

But if I'm single, why not? 

On first inspection, it looks like advice for gold-diggers but Kotlikoff meant for the advice to apply across different genders. If you marry rich, you can raise your standard of living and you can do this without penalizing the other party because of point (a). Kotlikoff argues that wealthy people can provide just the same amount of care and love, poor people can give. 

I agree with Kotlikoff, but he should account for psychological studies. Some folks are rich because they're disagreeable. I can't make a pile if I listen gullibly to a commissioned financial advisor. But rich people are hedgehogs. 

We're spiky on the outside but we're soft underneath. 

I think the only difference is that rich people can't complain publicly about anything because of "first world problems". 

If your Lambo develops a flat tire, go ahead and cry me a river. 

c) Divorce happens, but plan for it.

Western societies have high divorce rates, Kotlikoff has really great but unpalatable advice for folks planning to get married. 

One approach is to use a prenup but there are simply too many complications to make it work here with the Woman's Charter. But the best advice squares with my short stint in Family Law. Divorce only if it is profitable to do so. In other words, ask yourself whether you hate the other party so much, you have to lower your standard of living by, say, 35% Another tip is to agree on the standard of living post marriage. then work towards that number involving as few lawyers as possible. 

I don't see warring couples doing this in practice, so good luck to you.

Anyway, I noticed that singles have been too quiet on VD. If you have nothing else to do, better don't visit a watering hole, they are playing a lot of sad songs by Air Supply today according to my single friends. 

But this book and read it!  

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