Here’s a 1957 cartoon about the virtues of stock market investing from the New York Stock Exchange (NYSE). Fred Finchley is a family man with a good job, a lovely wife, two rambunctious children, and all the conveniences of modern life. What he doesn’t have, however, is enough money to pay for his dream vacation.

When Finchley’s boss gives him a raise of $60 a month, he faces a dilemma. Should he use the money for savings? For a couple of nights on the town with his wife every month? The NYSE suggests that Finchley put his money to work in the stock market with a “monthly investment plan”.

“Working Dollars” does a good job of explaining how dollar cost averaging works. The cartoon makes a case for small, regular investments. Investing isn’t just for tycoons — using a monthly investment plan, even the average family can begin to acquire wealth.

I like this film not for its discussion of investing, but for its encouragement to avoid lifestyle inflation. Have you ever noticed that no matter how much the average person makes, her spending tends to match her income? If Sally gets a raise, her spending rises to compensate. For most people, this lifestyle inflation lasts for decades, and it prevents them from getting ahead.

If, however, Sally exercises self-discipline and refrains from increased spending, the extra money from a raise (or from a windfall) can be put into savings. Or invested. If she’s willing to maintain her standard of living, the surplus dollars can be put to work to generate even more money. By avoiding lifestyle inflation now, Sally is improving her lifestyle in the years to come.

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This article is about Funny Money, Investing  

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