"I bet that cost you a pretty penny," I said with a grin. "No Daddy, it cost you a pretty penny," my daughter replied with an even bigger grin. The object we were referring to was a very expensive double BOB stroller that had caught my eye in my daughter's garage. It appears that, unbeknownst to Grandpa, Grandma had gone a little wild with gifts from Babies "R" Us. With a new grandchild arriving virtually every year for the last ten years, my wife has purchased so much stuff from that store that you would think she could have saved them from bankruptcy all on her own.

However, I don't begrudge her joy when it comes to buying presents for the grandkids. On the contrary, I encourage it because being doting grandparents is important to me. Growing up, I thought of grandparents as old people who lived far away, and you never saw. My mom's mom was 86 when I was born and her father was older than that. They lived in Boston and we were on the west coast. I saw them once before they died and I was only two at the time. My Dad's parents were half as far away, in the mid-west, but I only remember seeing them twice. The first time was when I was eight, and the main thing I remember about that trip was the agony of having to sit in a car for 10 hours a day. To calm me down when I threw one of my recurring "I can't stand sitting still" tantrums, my parents would tell me how wonderful it would be when I finally saw grandma and grandpa. So you can imagine the consternation I felt upon pulling into my Dad's hometown of Pewaukee and having Dad stop at the graveyard and say "That's where grandma and grandpa Ely are buried." Not realizing he meant his grandparents and not mine, I blew a gasket.

For those of you who are not mechanically inclined, that idiom refers to a car engine. When the head gasket blows, your car loses power, overheats, and eventually stops running. I don't know much about leaky head gaskets, but as a financial advisor I know the warning signs of a faulty financial head gasket. And that is why I am not worried about my wife's spending on gifts for the grandkids. They are well within our targeted spending rate, so there is no danger of blowing a financial gasket.

In a September 2018 blog, Michael Kitces, a well-known financial writer and advisor, explains why spending rates are so important. In his article he writes about the rule of thumb of saving 10% to 15% of your income for retirement. "The key point, though, is that it's not really the 'savings rate' that defines a successful savings path to retirement. It's actually the spending rate - and having a spending rate that is less than 100% of household income - because functionally most people don't 'choose' what to save per se... they choose what to spend, and then save the limited dollars that may or may not be left over..." And it is the big ticket items that make the biggest difference. So, "...making good decisions about the cars and the house matter way more than the lattes and the avocado toast!"

From the start of our marriage, we were prudent not only about our housing and transportation costs, but also about the lattes and avocado toast. We always lived in houses that were a little below our means and bought cars based more on economics than ego. We also controlled our monthly expenses by artificially limiting the amount available to spend. On top of that, we practiced what Kitces preaches that "...you can improve your spending rate (and therefore have more money available to save) by either spending less or simply by spending the same but earning more (or even earning more and spending more as long you don't spend ALL of the raise!)"
To paraphrase the Beatles: as an eight year old, I blew my mind out in a car. However, as adults, my wife and I have lived far enough within our means to avoid blowing a financial gasket. And now that our house and cars are paid for, grandma has the freedom to go a little bit wild.

I want to do great things, but it is the little things I do each day that are the great things. That paraphrase of an Ann Kiemel quote is my life motto. It both inspires and frustrates me. It frustrates me because I wonder if I will ever do anything noticeably great. At the same time, it reminds me of the importance of life's little - and often unnoticed - acts of thoughtfulness and generosity.

A text I got this week from my oldest daughter, Sarah, perfectly illustrated this point in a way that was very touching to this Grandpa. She wrote, "Olivia [age 5] has been urgently asking to make her 'Christmas list' all evening. She's feeling behind. I assumed she'd be writing all the things she wanted on the paper. Instead she put each family member's initial and drew what she wanted to get them."

Sarah's text got me thinking about a Wall Street Journal article by Alison Gopnik on the neuroscience of generosity. In How Children Get the Christmas Spirit she asks, "Are we born generous and then learn to be greedy? Or is it the other way round?" To answer that question, researchers have built on the work of Nobel Laureate Daniel Kahneman who discovered that human behavior is not so much explained by the differences between the left and the right brain as it is by the differences in what he calls fast and the slow thinking. In his book, Thinking, Fast and Slow, he explains that fast thought "...operates automatically and quickly, with little or no effort and sense of voluntary control." Slow thought, on the other hand is, "... the effortful mental activities... [of] the conscious reasoning self that... makes choice and decides what to think... and what to do."

In her article, Gopnik says that two researchers from the University of Chicago explored this 'born or learned' question by monitoring the electrical activity of children's brains while they were engaged in various structured activities. They wanted "...to see which patterns of brain activity predicted the children's generosity." Was it the areas of the brain related "...to automatic instinctive reactions..." or to "...more purposeful, controlled and reflective thought?"

"They found that the quick, automatic, intuitive reaction didn't predict how generous the children were later on. But the slow, thoughtful...brain wave did. Children who showed more of the thoughtful brain activity when they saw the morally relevant cartoons also were more likely to share later on." So, while there are automatic responses "...to help or harm..." it is the "...more reflective, complex, and thoughtful responses..." that appear to determine our "...actions like deciding to share..." In other words, generosity is more likely a purposeful decision than it is an intuitive instinct.

Interestingly, investing is not an intuitive instinct either. Kahneman reminds investors that they operate in a very unstable environment and "...intuition cannot be trusted in the absence of stable regularities in the environment." So, as investors, you have to have a plan and make purposeful decisions to follow it. I would also suggest that you make purposeful decisions on how to use your money. John Wesley, the Anglican cleric and theologian, recommended that you should strive to "Earn all you can, give all you can, save all you can." At this time of year, the lesson of Scrooge reminds us that our instinct for self-preservation that manifests itself as greed needs to be tempered by conscious acts of generosity.

As I get older, I get more enjoyment out of the accomplishments of my kids and grandkids than I do from my own. While Olivia is not the youngest child in her family, she is definitely the runt of the litter - but good things come in small packages. Little Olivia got the Christmas spirit. Instead of thinking of herself, she made a purposeful decision to be generous. And while that may be a little thing, it truly is a great thing. Merry Christmas!

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