The art and science of spending money(collabfund.com)
collabfund.com
The art and science of spending money
https://collabfund.com/blog/the-art-and-science-of-spending-money/
139 comments
Similar. I left home at 15 made my own way. I saved 95% of what I made - drank powdered milk, worked 7 days a week for 15 years multiple jobs, side jobs (flip houses, production company). But I set a goal so, unlike my grandmother, who never stopped fearing the return of the Great Depression, I could stop. I retired in my mid-thirties and now I study languages and write and travel, but I don't buy stuff. Maybe if you set an achievable goal it will help.
Do you feel satisfied in that series of decisions? This was something I started doing in my twenties, but am glad it didn't continue, despite having some major financial difficulties now (though I don't have much control over that anyway). Do you feel like your travel experiences offer you more substance than any possessions would, and do you feel like language learning is a fruitful use of time?
Yes. I'm learning Russian, traveling all the time, studying philosophy, working with a small think tank and I've become a black belt in Krav Maga. I hate stuff, don't miss it and learning a language has changed my writing, thinking and it's actually fun.
Thanks for answering, have two follow up questions. How do you differentiate between acquisition of intangible things like Krav Maga and Russian language, and tangible things; is the value you derive from exclusively engaging with them sufficient? Secondly—and this feels like an obvious one—do you feel like the social connections you've made along the way, in what appears to be a black and white intensity of lifestyle, are where you want them to be?
I enjoy travel, and don't have the resources to travel full-time, but at 30 I feel like if I were set up financially for it, my lack of relentless working has let me build a resilient group of relationships that I struggle to think would be around otherwise, and I'd be able to leave for a while without them suffering too much. Those two fulfillments strike me as diametrically opposed, but I always like to hear about other paths.
I enjoy travel, and don't have the resources to travel full-time, but at 30 I feel like if I were set up financially for it, my lack of relentless working has let me build a resilient group of relationships that I struggle to think would be around otherwise, and I'd be able to leave for a while without them suffering too much. Those two fulfillments strike me as diametrically opposed, but I always like to hear about other paths.
Out of curiosity, which think tank?
May I ask what did you think was your number or how did you come to a number?
I don't know that I have a problem spending money. I just don't want things.
Take cars, for instance. I can afford to buy a new car. My current car is old enough to have its own driver's license. But, why? It runs all right. It's solid. It has literally never let me down. I don't worry about it getting a dent. I don't worry about taking it on decent unpaved roads. Sure, it will die eventually, but until then, why would I replace it?
Or take vacations. I like vacations. But I don't need to fly to Vegas and stay at the Encore and drop a few thousand at the tables in order to feel like I had fun. I can have fun camping in the Mojave and never pay a dollar for a motel room. (I mean, I can see the point in a really nice hotel room from time to time...)
Or take eating out. I like good food, at least once in a while. But a good medium-to-high-end steak place is as far as I want to go. These Michelin starred places? I look at their menus, and I don't see anything that I actually want to eat.
For me, it's not that I'm still worried about money. It's that I don't have much of a taste for expensive things.
Take cars, for instance. I can afford to buy a new car. My current car is old enough to have its own driver's license. But, why? It runs all right. It's solid. It has literally never let me down. I don't worry about it getting a dent. I don't worry about taking it on decent unpaved roads. Sure, it will die eventually, but until then, why would I replace it?
Or take vacations. I like vacations. But I don't need to fly to Vegas and stay at the Encore and drop a few thousand at the tables in order to feel like I had fun. I can have fun camping in the Mojave and never pay a dollar for a motel room. (I mean, I can see the point in a really nice hotel room from time to time...)
Or take eating out. I like good food, at least once in a while. But a good medium-to-high-end steak place is as far as I want to go. These Michelin starred places? I look at their menus, and I don't see anything that I actually want to eat.
For me, it's not that I'm still worried about money. It's that I don't have much of a taste for expensive things.
Yeah, similar here. It seems to make some people angry, it's like if I have money, it is my moral duty to spend it all immediately. But the things I want are surprisingly cheap. Even computers, were crazy expensive 30 years ago, but now they cost almost as little as books.
The expensive food, I think is not about the taste, but about getting dozen tiny pieces of food, each of them has a French name, and you always wait 10 minutes until they bring you the next bite. You pay for the feeling that many people have spent a lot of time and work preparing your food, even if the result is not really better. Probably other people enjoy that feeling; I don't.
The expensive food, I think is not about the taste, but about getting dozen tiny pieces of food, each of them has a French name, and you always wait 10 minutes until they bring you the next bite. You pay for the feeling that many people have spent a lot of time and work preparing your food, even if the result is not really better. Probably other people enjoy that feeling; I don't.
It was a great experience for me traveling to a foreign land as an adult. One of my most valuable lessons came as the trip began to wind down, and I was left with a medium amount of money in that country's currency. I suddenly realized that this money was essentially going to become useless the moment we left. It wouldn't be enough to justify a trip to the bank to convert it, especially with the fees. I started buying anything I wanted, and some things I didn't. Anything I could spend this useless money on would be better than taking it back home with me.
As you might realize, there's quite a parallel to our lives here. At some point in your life, and it might be now, and it might not be until moments before the end, you will realize that all this money is useless to you. You'd trade literally all of it for another moment that matters. Do you want to have that realization when it's too late, or do you want to get started on that now?
As you might realize, there's quite a parallel to our lives here. At some point in your life, and it might be now, and it might not be until moments before the end, you will realize that all this money is useless to you. You'd trade literally all of it for another moment that matters. Do you want to have that realization when it's too late, or do you want to get started on that now?
To extend your analogy: All of us will return from that foreign land at some point.
Almost all of us will leave behind other traveling companions we care about who can use that money.
Almost all of us will leave behind other traveling companions we care about who can use that money.
This is me and I struggle with it on a regular. We are quite comfortable (on my single salary I can cover mortgage, private care for my kids, and good food), but I feel behind -- because I came from a poor family who scraped on a regular. My parents still work their fairly simple factory jobs as they need to pay off their debts (albeit they are below 65)
What I'm trying this year is ensuring I can allocate a certain amount to savings (automatic withdrawal) and then treating the leftover money as "free to spend"
I don't know if this will work, as once I see that excess cash I think "Ah, let's use this to pad the emergency fund..." but I need to begin training the mind to be more comfortable with spending.
What I'm trying this year is ensuring I can allocate a certain amount to savings (automatic withdrawal) and then treating the leftover money as "free to spend"
I don't know if this will work, as once I see that excess cash I think "Ah, let's use this to pad the emergency fund..." but I need to begin training the mind to be more comfortable with spending.
I *strongly* encourage you to pick a budgeting program and stick with it. I say this as someone who comes from perhaps more meager means than most in this thread and I now am in a similar position as you.
I use YNAB but I'm sure any will do. Essentially, I give every dollar a "job", whether that is to be the next car insurance payment 6 months from now or for our vacation fund. I know what money I have and where it's going. I have tracked every single dollar I've spent for about the last 10 years, less some petty cash.
I still have financial insecurity worries that likely stem from my childhood and I doubt they'll ever fully go away (see: people who grew up during the Great Depression), but I can allow myself to spend now and do so confidently.
I use YNAB but I'm sure any will do. Essentially, I give every dollar a "job", whether that is to be the next car insurance payment 6 months from now or for our vacation fund. I know what money I have and where it's going. I have tracked every single dollar I've spent for about the last 10 years, less some petty cash.
I still have financial insecurity worries that likely stem from my childhood and I doubt they'll ever fully go away (see: people who grew up during the Great Depression), but I can allow myself to spend now and do so confidently.
I think you're right. I've mostly stayed away from budgeting apps. I'm already quite busy with work and parenting two young kids, but it may be the best way to train the mind. Thank you
I have the same problem, I don't track my spending but have money automatically plowed into different investments and am generally frugal. Been looking into money manager ex and home bank as foss softwares. Mint, quicken and ynab are popular but I don't want a cloud solution where I have to pay a subscription fee, I mostly just want transactions with labelled data so I can see where the money goes.
Personally, I realized that I was wasting a lot more in opportunity cost by trying to make all the various non-subscription solutions work for me (and writing my own for awhile), and I'm much happier now paying ynab a yearly pittance instead of spending all that time on something without much actual value to me. (And by switching to a subscription model they've been able to improve the product much more quickly than they were with the classic version.)
I also work a lot and have two young kids. Going through and updating the budget each week or two is one of the main things I do to relax :)
> for our vacation fund.
Well most people with the mentality GP is describing cannot get themselves to do this in first place. not sure if this is a budgeting problem. Ppl save obsessively because they think they might need that money for an unavoidable future expense even though they can't quite tell what that might be.
Well most people with the mentality GP is describing cannot get themselves to do this in first place. not sure if this is a budgeting problem. Ppl save obsessively because they think they might need that money for an unavoidable future expense even though they can't quite tell what that might be.
You don't have to spend the "free to spend" money, and you shouldn't feel bad for not spending it.
Maybe collect the unspent amounts into an "Emergency Fun" fund, so you can dip into it if you have a crisis related to fun (gaming device breaks, see something really cool that you want to have or do, etc)
Maybe collect the unspent amounts into an "Emergency Fun" fund, so you can dip into it if you have a crisis related to fun (gaming device breaks, see something really cool that you want to have or do, etc)
Good luck with that "Free to Spend" category. It just turned into emergency fund 2.0 for me. One thing that allowed me to spend some money is the idea of diversifying my savings by purchasing assets. Rather than let Emergency fund 2.0 sit in an account as cash burning a hole in my pocket why not buy an asset. This could be an apartment, a collectible, a storage facility, etc. For me this feels like saving and spending at the same time.
It’s possible it’s not a problem, I’d be inclined to give yourself a break. A lot of the “essentials” we’re supposed to splurge on (big house, cars, expensive food, etc) are often overrated when you look at it from a “does this make my life better” lens.
Investing in yourself - be that skills or life experiences - is worthwhile but you can do even that with a frugal slant.
Investing in yourself - be that skills or life experiences - is worthwhile but you can do even that with a frugal slant.
You made an unconvincing point by reducing money to stereotypical 'expensive cars' . What about going on ski trip while your kids are still young and having a magical and memorable moments in life.
> What about going on ski trip while your kids are still young and having a magical and memorable moments in life.
For trips, talk to friends from any background about their cherished memorable trips from their childhood and try to repeat what worked. Figure out what caused those childhood trips to be memorable. It is rarely expense from what I can tell.
Expensive trips are often social status signalling. Kids don’t need expensive trips, they won’t appreciate the sacrifices which could be frustrating, and you really need to be able to afford follow-on trips if it turns out your kids love it too much!
For one of my close friends, the family went camping, which was about the cheapest way to go away when I was young. She still loves it and she just bought a new tent (she is mostly careful with money, so even buying a tent is a notable purchase). She took her kids camping, so the good experiences were shared across generations.
Disclaimer: skier. But my childhood skiing was cheap club fields, with cheap gear. Working bee days at the club to work on the club field for a few days each summer. Social. Affordable for a working class family. New Zealand had more of an egalitarian frontier mentality to fun.
For trips, talk to friends from any background about their cherished memorable trips from their childhood and try to repeat what worked. Figure out what caused those childhood trips to be memorable. It is rarely expense from what I can tell.
Expensive trips are often social status signalling. Kids don’t need expensive trips, they won’t appreciate the sacrifices which could be frustrating, and you really need to be able to afford follow-on trips if it turns out your kids love it too much!
For one of my close friends, the family went camping, which was about the cheapest way to go away when I was young. She still loves it and she just bought a new tent (she is mostly careful with money, so even buying a tent is a notable purchase). She took her kids camping, so the good experiences were shared across generations.
Disclaimer: skier. But my childhood skiing was cheap club fields, with cheap gear. Working bee days at the club to work on the club field for a few days each summer. Social. Affordable for a working class family. New Zealand had more of an egalitarian frontier mentality to fun.
> Expensive trips are often social status signalling.
I would love to go to so nice destination with magical mountains in colorado than my local hill in wisconsin. I don't care about posting in on facebook or whatever.
Memories are not just for kids though. I would argue they are more for adults.
Sure there are yogis in Himalayas that perfectly content( or atleast pretend to) with no money.
I would love to go to so nice destination with magical mountains in colorado than my local hill in wisconsin. I don't care about posting in on facebook or whatever.
Memories are not just for kids though. I would argue they are more for adults.
Sure there are yogis in Himalayas that perfectly content( or atleast pretend to) with no money.
> What about going on ski trip while your kids are still young and having a magical and memorable moments in life.
That's a necessity.
That's a necessity.
someone said : all-life-rich person can learn being poor ; all-life-poor person cannot learn being rich..
my granddad would pick the best wooden board and cut some small piece he needed from the best part of it - even if in the middle.
My dad would pick the most-matching-possible board at-hand and cut some corner of it. Saving the rest for something..
i am torn between the two..
my granddad would pick the best wooden board and cut some small piece he needed from the best part of it - even if in the middle.
My dad would pick the most-matching-possible board at-hand and cut some corner of it. Saving the rest for something..
i am torn between the two..
My parents are similar.
They had a cash/coin business and would count everything by hand. My mom developed shoulder/neck problems. I repeatedly asked them if I could buy them a bill and coin counter. Eventually I just bought them.
They thanked me and wished I had done it 5 years sooner.
One problem is that my parents treat all spending the same - whereas I think spending to invest in their health or quality of life is a no brainer.
They thanked me and wished I had done it 5 years sooner.
One problem is that my parents treat all spending the same - whereas I think spending to invest in their health or quality of life is a no brainer.
Ramit Sethi has good advice on learning to spend, geared towards those that "made it" but can't escape past habits
And What is this advice. I couldn't search for it with the keywords in your comment.
> The more you were snubbed while poor, the more you enjoy displaying your wealth.
Man I dunno about this. It does seem like a thing for certain personality types, but I usually see exactly the opposite. All of the people I know who have "made it" from a less wealthy background are the opposite, living with a ton of guilt about their new wealth. I think this is because of having tons of family and friends still scraping by. It is very unseemly to be flamboyantly wealthy when everyone from your past is struggling. Maybe there is another inflection point of wealth, further down the road than the circles I run in, where you can afford to pull everyone else up too. But I'm pretty skeptical of that too. Something that has frustrated me to no end as I've started making good money is that I can't use any of it to improve the lives of people I actually know. They aren't going to take my money! They're doing just fine thank you very much. Even broaching the subject could ruin a relationship.
Man I dunno about this. It does seem like a thing for certain personality types, but I usually see exactly the opposite. All of the people I know who have "made it" from a less wealthy background are the opposite, living with a ton of guilt about their new wealth. I think this is because of having tons of family and friends still scraping by. It is very unseemly to be flamboyantly wealthy when everyone from your past is struggling. Maybe there is another inflection point of wealth, further down the road than the circles I run in, where you can afford to pull everyone else up too. But I'm pretty skeptical of that too. Something that has frustrated me to no end as I've started making good money is that I can't use any of it to improve the lives of people I actually know. They aren't going to take my money! They're doing just fine thank you very much. Even broaching the subject could ruin a relationship.
> Something that has frustrated me to no end as I've started making good money is that I can't use any of it to improve the lives of people I actually know. They aren't going to take my money! They're doing just fine thank you very much. Even broaching the subject could ruin a relationship.
There was a period when we had this "dance" with part of my family, who had a rougher patch financially, but tried not to show it. We'd occasionally help them out with shopping (as they didn't have a car, but we did), and always conveniently "forgot" to take money from them, or "accidentally" mixed their and ours grocery so we had to pay for both, and the receipt would "somehow" get "misplaced" along the way. I think both sides knew what's going on, but neither wanted to talk about it directly.
But I guess it's better to maneuver around feelings of pride like this, than having to defend yourself from family members and "friends" who do want your money, quite actively, as I hear is a common problem faced by those who get a windfall.
There was a period when we had this "dance" with part of my family, who had a rougher patch financially, but tried not to show it. We'd occasionally help them out with shopping (as they didn't have a car, but we did), and always conveniently "forgot" to take money from them, or "accidentally" mixed their and ours grocery so we had to pay for both, and the receipt would "somehow" get "misplaced" along the way. I think both sides knew what's going on, but neither wanted to talk about it directly.
But I guess it's better to maneuver around feelings of pride like this, than having to defend yourself from family members and "friends" who do want your money, quite actively, as I hear is a common problem faced by those who get a windfall.
The 80s Disney movie "Lots of Luck" is about what you describe in your last paragraph, and I'm willing to say that watching this movie as a kid probably influenced my style of money management.
Something our family does is to purchase things for the good of helping others. E.g. buy a trailer/truck that others are free to use to move stuff, this can save hundreds of dollars. Broach the topic of getting rid of appliances you are ‘upgrading’ and asking if they would want the old ones, etc.
>They aren't going to take my money!
Hey! It’s me your friend.
Seriously though. They’re probably not that bad off, or the next most important lesson for them to learn is to take help when it’s offered.
Hey! It’s me your friend.
Seriously though. They’re probably not that bad off, or the next most important lesson for them to learn is to take help when it’s offered.
No that's right, they aren't "that bad off". But just to give a concrete example, I have a number of loved ones who have been unable to afford a house, much longer than they would have liked. And I can't help them with that. I'm sure I could help if they were starving or homeless, you're right.
This is something that is valid more for societies like US, where being rich is seen as proof of 'hard work' and 'making it'. It defines your social status and actual social worth, therefore not being rich is like a stain.
Its even built-into the terms used for describing it - someone's 'net worth'. As if a human being can be qualified by the amount of imaginary numbers attached to his or her social identity.
So becoming rich from poor gives a proof of 'making it' and therefore being a 'valued member' of the society who does not 'laze around' but 'works hard'.
Its early Puritan Christian belief repurposed as a social norm, really.
Its even built-into the terms used for describing it - someone's 'net worth'. As if a human being can be qualified by the amount of imaginary numbers attached to his or her social identity.
So becoming rich from poor gives a proof of 'making it' and therefore being a 'valued member' of the society who does not 'laze around' but 'works hard'.
Its early Puritan Christian belief repurposed as a social norm, really.
I live in the US, and as I said, this is not my experience at all.
Individuals' personal experiences being to the contrary does not mean that something is not a societal paradigm. From the cover of Forbes to the arguments used in discussions during lawmaking, the situation is as my comment described.
Your comments are also just anecdotes, except that they are second-order, based on your anecdotal impression of what you've read.
From my experiences living within it, I don't think US society is actually the way you have become convinced it is from your experiences reading and watching things about it. Both of our beliefs are just anecdotal experiences.
We could get closer to the truth with a bunch of sociology and anthropology, but financially there is no randomized controlled trial for this kind of question.
From my experiences living within it, I don't think US society is actually the way you have become convinced it is from your experiences reading and watching things about it. Both of our beliefs are just anecdotal experiences.
We could get closer to the truth with a bunch of sociology and anthropology, but financially there is no randomized controlled trial for this kind of question.
> Your comments are also just anecdotes, except that they are second-order, based on your anecdotal impression of what you've read
I really doubt that the Randian philosophy that took over the US since Reagan is 'just anecdotes'...
I really doubt that the Randian philosophy that took over the US since Reagan is 'just anecdotes'...
Randian philosophy has not taken over the US since Reagan. You seem to have read or watched things that have convinced you of this false thing; those are the anecdotes I'm talking about. Elsewhere, I have conversations just like this with people who are certain that Marxism has taken over the US. They're in a "look at these examples of Marxism" bubble just like you're in a "look at these examples of Randian philosophy" bubble. The truth is that you're both wrong and the reality is a lot more complex (and a lot more interesting).
Just realized I typo'd "financially" instead of "fundamentally", but too late to edit now.
Growing up poor and then becoming self-made wealthy - nothing like it. My life is so sweet because I am one of those fabled bootstraps people who walked 15 miles to school both ways uphill (paraphrasing).
And what is my favorite thing? I can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want. Unfathomable
And what is my favorite thing? I can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want. Unfathomable
> I can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want. Unfathomable
My budget for food used to be limited by money, now it’s limited by calories.
My budget for food used to be limited by money, now it’s limited by calories.
And time. Restaurants are very time consuming.
Depends on when you visit them. If you go at peak, the wait times get pretty bad. If you go not too long before the peak, things usually go much faster as it may be fully staffed already. If you go between peaks, things get slow because the kitchen may not be fully staffed or is also working on prepping for the rush.
Apparently you didn't pay attention in economics class. Human wants are infinite.
Nope. I've got everything I want. It's not a lot. I'm collecting a ton of money now that I don't know what to do with.
Promoting wants is the foundation of economics however.
Promoting wants is the foundation of economics however.
> I'm collecting a ton of money now that I don't know what to do with.
Why not increase your desires.
Why not increase your desires.
I did pay attention in physics. I learned that cows are approximately spherical and live in a vacuum.
Happy for you. I hope to one day be able to honestly express “this is a good life, and I am experiencing things that were unfathomable when I was younger”.
Care to share any details about how you did it in the context of a website dedicated to an older root of the word hacker than the more modern meaning?
Care to share any details about how you did it in the context of a website dedicated to an older root of the word hacker than the more modern meaning?
The only reliable way of creating a huge fortune from scratch is to start a business. Many failures for me before it worked out.
So it isn't so reliable after all, according to your own testimony.
There are many reasons to start a business. I like doing so because the most honorable path IMO is serving others - I make more money the more I provide people what they want. They voluntarily give my businesses money. That’s far superior to being paid by taxes, stealing, inheriting it, and so on. Voluntarily receiving money from people who desire the services of my businesses is the best thing I can provide humanity. Becoming wealthy was a consequence of serving a huge amount of people well.
The latter part of my life will involve various ways of using my wealth in ways I see benefit society. This will be very unique to my own style.
The latter part of my life will involve various ways of using my wealth in ways I see benefit society. This will be very unique to my own style.
From this I derive that you believe you are compensated for the good you do humanity. I, too, hope this is true. Thanks for answering my question and defending your position.
> ... can buy any meal at any restaurant I want and I never care about the price. It’s a glorious feeling. I eat whatever I want.
This. Not quite there yet, but still have a decent selection of restaurants where I do not have to look at the right-margin. It is truly a sense of freedom one can only experience in hindsight (not consciously while looking at the menu).
Good for OP.
This. Not quite there yet, but still have a decent selection of restaurants where I do not have to look at the right-margin. It is truly a sense of freedom one can only experience in hindsight (not consciously while looking at the menu).
Good for OP.
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A fun article.
> If you develop an early system of savings and living well below your means – congratulations, you’ve won. But if you can never break away from that system, and insist on a heavy savings regimen well into your retirement years … what is that? Is it still winning?
Those two things aren't quite connected though.
If you build a good life living below your means, you can absolutely carry that on into retirement (which you get to do sooner) and that's still winning.
The disconnect is in having two distinct phases - one where you are saving and one where you finally get to be free and spend. If you have this I wouldn't count it as winning, for precisely the reasons the article explains.
I think this is often reflected in peoples unhappiness either within the FIRE community or those looking at it from outside.
> 5. The joy of spending can diminish as income rises because there’s less struggle, sacrifice, and sweat represented in purchases.
This, imo, makes it all the more important to avoid equating being paid with having value and try and make the money side blander. Find this type of joy in other pursuits, the fact you can't just buy being good at the guitar makes your progress more valuable. You can also think about how transactions in a pay-to-win game reduce the value of your effort (is beating this really only worth 50 cents?).
A relevant quote from Arnie:
> A well-built physique is a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it. You cannot hold onto it without constant work. It shows discipline, it shows self-respect, it shows patience, work ethic, and passion. That is why I do what I do.
> If you develop an early system of savings and living well below your means – congratulations, you’ve won. But if you can never break away from that system, and insist on a heavy savings regimen well into your retirement years … what is that? Is it still winning?
Those two things aren't quite connected though.
If you build a good life living below your means, you can absolutely carry that on into retirement (which you get to do sooner) and that's still winning.
The disconnect is in having two distinct phases - one where you are saving and one where you finally get to be free and spend. If you have this I wouldn't count it as winning, for precisely the reasons the article explains.
I think this is often reflected in peoples unhappiness either within the FIRE community or those looking at it from outside.
> 5. The joy of spending can diminish as income rises because there’s less struggle, sacrifice, and sweat represented in purchases.
This, imo, makes it all the more important to avoid equating being paid with having value and try and make the money side blander. Find this type of joy in other pursuits, the fact you can't just buy being good at the guitar makes your progress more valuable. You can also think about how transactions in a pay-to-win game reduce the value of your effort (is beating this really only worth 50 cents?).
A relevant quote from Arnie:
> A well-built physique is a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it. You cannot hold onto it without constant work. It shows discipline, it shows self-respect, it shows patience, work ethic, and passion. That is why I do what I do.
i like the idea behind the quote but with PEDs (which Arnie himself used for most of his life) i feel it rings pretty untrue
> All success is simply relative to someone else – usually those around you.
That’s important for spending money, because for so many people the question of whether you’re buying nice things is actually, “are your things nicer than other peoples’ things?” The question of whether your home is big enough is actually, “is your home bigger than your neighbor’s?”
This is pathological behavior. Unfortunately, it's ingrained in humans. We are improving the world in a faster-than-ever rate, and the objective difference between wealth classes was never lower than it is now. Not even remotely close. (see the book "Factfulness" for some interesting data)
Yet due to the way the world stopped "being huge", due to social networks and everyone being "approachable" (low degree of separation or whatever), the level of envy is at absolute maximum. This problem was always present in humans and is perhaps the primary reason (well, if we can make the jump or at least connect envy to evolutionary pressure for procreation) we have achieved so much in this world. Not knowing when is "enough" is unsolvable problem, even though philosophers wrote thousands of books on this topic.
People cannot stop being envious even if it leads to unhappiness, almost always.
For myself, if I don't have to worry about bills, buying healthy food, having shelter and I don't have to work 14 hours a day, I consider myself on par with anyone in the world money-wise.
This is pathological behavior. Unfortunately, it's ingrained in humans. We are improving the world in a faster-than-ever rate, and the objective difference between wealth classes was never lower than it is now. Not even remotely close. (see the book "Factfulness" for some interesting data)
Yet due to the way the world stopped "being huge", due to social networks and everyone being "approachable" (low degree of separation or whatever), the level of envy is at absolute maximum. This problem was always present in humans and is perhaps the primary reason (well, if we can make the jump or at least connect envy to evolutionary pressure for procreation) we have achieved so much in this world. Not knowing when is "enough" is unsolvable problem, even though philosophers wrote thousands of books on this topic.
People cannot stop being envious even if it leads to unhappiness, almost always.
For myself, if I don't have to worry about bills, buying healthy food, having shelter and I don't have to work 14 hours a day, I consider myself on par with anyone in the world money-wise.
I have two rules to guide me that can be summed up to maximizing the joy of spending:
It's not what you have, it's what you do with what you have that matters. Going with a car example, spending significant income for a nice car that you use for normal transportation like commuting and shopping will bring little joy. On the other hand if you are into motor sports, regularly tour on or off-road, like to restore classic cars, etc, you will get a lot out of a big car purchase.
Spend it on one thing, don't have it for another. It's really hard for me to calculate if something new is worth X amount of my money. So I transform that money into something I already know how much it costs and how much I enjoy it. Would I rather change my car for a new one or take 10 one week trips abroad? I'll take the later so I decide against the new car even though that will not be exactly what I spend the money for.
It's not what you have, it's what you do with what you have that matters. Going with a car example, spending significant income for a nice car that you use for normal transportation like commuting and shopping will bring little joy. On the other hand if you are into motor sports, regularly tour on or off-road, like to restore classic cars, etc, you will get a lot out of a big car purchase.
Spend it on one thing, don't have it for another. It's really hard for me to calculate if something new is worth X amount of my money. So I transform that money into something I already know how much it costs and how much I enjoy it. Would I rather change my car for a new one or take 10 one week trips abroad? I'll take the later so I decide against the new car even though that will not be exactly what I spend the money for.
> So I transform that money into something I already know how much it costs and how much I enjoy it. Would I rather change my car for a new one or take 10 one week trips abroad? I'll take the later so I decide against the new car even though that will not be exactly what I spend the money for.
This is a really important idea to me, it's a way of optimising your spending without doing big central planning. If I would get more from doing X rather than Y, why would I do Y at all? You could then repeat that with 10 trips abroad vs some other thing.
You can also compare a relative thing as well. You may need a new car, but can choose between different options. If one is £5000 cheaper than the other - what's the most fun you can possibly have with £5000? Would you rather whatever that list is for you or the more expensive car?
Would you rather have a larger rented apartment or £Z to spend at restaurants every month? Or £Z on track days, or whisky, or having an extra few days off a month?
All of these things can be answered any way and it's totally fine - the key is to identify what provides the most value to you without getting stuck in trying to optimise your entire life as that's (to me) paralysing.
This is a really important idea to me, it's a way of optimising your spending without doing big central planning. If I would get more from doing X rather than Y, why would I do Y at all? You could then repeat that with 10 trips abroad vs some other thing.
You can also compare a relative thing as well. You may need a new car, but can choose between different options. If one is £5000 cheaper than the other - what's the most fun you can possibly have with £5000? Would you rather whatever that list is for you or the more expensive car?
Would you rather have a larger rented apartment or £Z to spend at restaurants every month? Or £Z on track days, or whisky, or having an extra few days off a month?
All of these things can be answered any way and it's totally fine - the key is to identify what provides the most value to you without getting stuck in trying to optimise your entire life as that's (to me) paralysing.
Just being pedantic here, but: if we take your approach to the extreme, we would only ever pick the one thing that maximizes joy. Eg say one week trips above are the coolest thing you can think of. then you'd compare any potential purchase against it, and it would fall short. So you'd end upmnever buying anything (except tickets for one week trips). Don't get me wrong, your strategy sounds sound, I'm just saying that it's too greedy of an algorithm to apply it thoroughly. A slightly improved strategy would be to instead think of marginal prices: how much would I be willing to pay for X, instead of another piece of Y. Ie, if you already had 10 one week trips this year, you'd not be willing to spend as much for #11 than you'd be willing to spend to go from from 0 to 1 trips or 1 to 2
> then you'd compare any potential purchase against it, and it would fall short. So you'd end up never buying anything (except tickets for one week trips)
I think there's a number of folks out there who do this all the time, except it's not trips. It's saving for retirement in general.
If all you do is compare every outgoing dollar to "but if I invested this instead, then over X years it would have compounded to $X" you never buy anything non-essential because spending $400 today really means $1,787 in 30 years at 5% (of which $1,387 is interest), so now you need to ask yourself if future self is happy about that decision.
This becomes more important with larger purchases, a $30,000 car is really $134,032 after 30 years at 5%. Now this becomes a question of "is this 30k car worth trading 1 year of my life while working?" because it kind of is, especially if you factor in income tax on a pretty normal software developer's salary.
I think there's a number of folks out there who do this all the time, except it's not trips. It's saving for retirement in general.
If all you do is compare every outgoing dollar to "but if I invested this instead, then over X years it would have compounded to $X" you never buy anything non-essential because spending $400 today really means $1,787 in 30 years at 5% (of which $1,387 is interest), so now you need to ask yourself if future self is happy about that decision.
This becomes more important with larger purchases, a $30,000 car is really $134,032 after 30 years at 5%. Now this becomes a question of "is this 30k car worth trading 1 year of my life while working?" because it kind of is, especially if you factor in income tax on a pretty normal software developer's salary.
> Would I rather change my car for a new one or take 10 one week trips abroad? I'll take the later so I decide against the new car even though that will not be exactly what I spend the money for.
Wait till you experience one with a heated steering wheel. That might change your mind, especially if you live in a colder climate.
Wait till you experience one with a heated steering wheel. That might change your mind, especially if you live in a colder climate.
Brilliant article, thank you. This should be a classic. Ranks up there with wisdom such as 'don't spend your youth pursuing wealth and wealth pursuing youth.' PS one of the best ways to develop a healthy relationship to money that I've found is to absorb Buddhist teachings on how to avoid the suffering caused by grasping after things. Fixes most all forms of money-inspired unhappiness.
My wife and I have accumulated a few overall principles about money over the years. What's interesting is how they have played out over time. Here are a few of them:
1. Money and debt are amoral financial tools. It's important to be smart about how we use these tools, but neither money nor debt is evil or all that valuable in the moral sense. This is especially important for us, because our conservative background has pretty much taught us from childhood that money == good and debt == bad.
2. Treat money like it belongs to someone else (in our case, as Christians, we acknowledge it, like everything, belongs to God, and we try to spend in a way that honors the responsibility he's given us).
3. Always pay off the credit card at the end of the month. When we got married, I got my first credit card and set the automatic payment to 100%. I only made $40k/year back then, but we have the same rule today, even though our spending power is 5x what it was.
4. Retirement savings. This one's obvious, but most couples can save a combined $13k per year in Roth accounts that can grow tax free for your lifetime. Maximizing this as early as possible in life is extremely important. As your income grows, your next goal is to maximize other vehicles like a 401k. Don't make your kids take care of you financially later in life.
5. Your kids won't be around forever. This doesn't sound like a financial principle until you start thinking about all the trade-offs having kids presents you with. For instance, we're more likely at this point (with 4 kids 6-13 years old) to put in a pool than we are to redo our kitchen. And we're more likely to take on some manageable debt in order to make improvements to our home or give our kids experiences that normally we would take the time to save up for.
Edit: forgot an important one
6. Spend more to buy things that last. Especially if you live in a wet climate. I live in Florida, where everything rusts and rots. 4-5 years ago, instead of buying another gas grill that'll just rust in a year, I bought a Kamado-style grill. It's still in perfect shape, and I use it more often as a result. When we bought patio furniture in 2020, we spent extra to avoid natural wood, which takes regular upkeep and, again, eventually rots anyway. It's still in perfect shape. When we replaced our rotting exterior doors/doorframes, we went with an industrial PVC material. I'll never have to worry about any of those things again.
1. Money and debt are amoral financial tools. It's important to be smart about how we use these tools, but neither money nor debt is evil or all that valuable in the moral sense. This is especially important for us, because our conservative background has pretty much taught us from childhood that money == good and debt == bad.
2. Treat money like it belongs to someone else (in our case, as Christians, we acknowledge it, like everything, belongs to God, and we try to spend in a way that honors the responsibility he's given us).
3. Always pay off the credit card at the end of the month. When we got married, I got my first credit card and set the automatic payment to 100%. I only made $40k/year back then, but we have the same rule today, even though our spending power is 5x what it was.
4. Retirement savings. This one's obvious, but most couples can save a combined $13k per year in Roth accounts that can grow tax free for your lifetime. Maximizing this as early as possible in life is extremely important. As your income grows, your next goal is to maximize other vehicles like a 401k. Don't make your kids take care of you financially later in life.
5. Your kids won't be around forever. This doesn't sound like a financial principle until you start thinking about all the trade-offs having kids presents you with. For instance, we're more likely at this point (with 4 kids 6-13 years old) to put in a pool than we are to redo our kitchen. And we're more likely to take on some manageable debt in order to make improvements to our home or give our kids experiences that normally we would take the time to save up for.
Edit: forgot an important one
6. Spend more to buy things that last. Especially if you live in a wet climate. I live in Florida, where everything rusts and rots. 4-5 years ago, instead of buying another gas grill that'll just rust in a year, I bought a Kamado-style grill. It's still in perfect shape, and I use it more often as a result. When we bought patio furniture in 2020, we spent extra to avoid natural wood, which takes regular upkeep and, again, eventually rots anyway. It's still in perfect shape. When we replaced our rotting exterior doors/doorframes, we went with an industrial PVC material. I'll never have to worry about any of those things again.
Loved this article, very spot on.
> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase.
This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on holidays 60km from home. They died with over 600k euros just in savings (plus 2 apartments). Does this make sense?
> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase.
This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on holidays 60km from home. They died with over 600k euros just in savings (plus 2 apartments). Does this make sense?
Depends. Do you think they were happy with their lifestyle?
I have a friend who is happily collecting his pension, has plenty of cash in the bank, but still works because he chooses to. He's a bit less frugal than your uncles but still lives well below his means.
I have a friend who is happily collecting his pension, has plenty of cash in the bank, but still works because he chooses to. He's a bit less frugal than your uncles but still lives well below his means.
Happiness for sure is a personal concept but I think they were in general on the "we came into these lives to suffer" boat. So, I think they were not "happy" for a healthy definition of happy, but they probably not even interested in being happy.
> I think they were not "happy" for a healthy definition of happy
Being happy with what you accomplish and do instead of trying to be happy through consumption and excess seems very healthy to me.
What do you think is wrong with that?
Being happy with what you accomplish and do instead of trying to be happy through consumption and excess seems very healthy to me.
What do you think is wrong with that?
It would be a bit too long/detailed/personal answering that, but IMO a healthy definition of "happy" involves using the money you earn to make your life easier most of the time, during different phases and under most situations. For example, living in a house that is physically loosing pieces, that should be fixed to avoid problems, it will not generate happiness through consumption, but it will relieve you from stress of possible bad consequences. Not doing that when you do have the money indeed, it's not healthy.
Spending money on those things takes a lot of effort though, maybe they just had ADHD and didn't want to think about all the ways they could spend money?
Typically it is much easier to not spend money than to spend money. A trip to a foreign country is more effort then a local vacation, an expensive renovation is more effort than just living as is etc. A big home is more effort to clean, a big yard is more effort to manage, a big car takes more work to keep reasonable etc.
Typically it is much easier to not spend money than to spend money. A trip to a foreign country is more effort then a local vacation, an expensive renovation is more effort than just living as is etc. A big home is more effort to clean, a big yard is more effort to manage, a big car takes more work to keep reasonable etc.
Depends entirely on what you value. Some speculative propositions:
-Some find less value in material things and worldly experiences as they age, so the expected happiness return on splurging can decline.
-Some find living by a principle of some kind (eg- humbleness and frugality) to be very fulfilling in itself.
-Some value being relatively protected from risk and misfortune, and ultimately there’s no upper limit on risk insulation.
-Some highly value being able to leave something behind to the people, organizations or causes that they love.
-Finally, these motivations can change over time and act in concert to shape the story in ways that might not be apparent when you just examine the visible surface facts.
-Some find less value in material things and worldly experiences as they age, so the expected happiness return on splurging can decline.
-Some find living by a principle of some kind (eg- humbleness and frugality) to be very fulfilling in itself.
-Some value being relatively protected from risk and misfortune, and ultimately there’s no upper limit on risk insulation.
-Some highly value being able to leave something behind to the people, organizations or causes that they love.
-Finally, these motivations can change over time and act in concert to shape the story in ways that might not be apparent when you just examine the visible surface facts.
Yes, money in the bank means you don't worry, that is by far the most impactful part of money. Spending more doesn't make you happier but having money so you don't have to worry is huge.
Ads try to tell you that you will be happier if you spend money, but if you learn to ignore those signals you can be perfectly happy on very little.
Ads try to tell you that you will be happier if you spend money, but if you learn to ignore those signals you can be perfectly happy on very little.
That and the not-fun part where you really don't have a clue if you are going to die when 60 or 65 or maybe 90. Then you also don't have a clue if you become a burden on your family for years - where that money would be used to take care for you - or you just don't wake up one day without means to use any of the savings.
> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase
I think a lot of financial planners start from a base assumption that their clients will be happiest if they spend their accumulated wealth. That’s not true in my case (at least as far as I can self-analyze).
Whatever we don’t spend isn’t lost potential for us, but rather is future potential for our kids. Taking only the financial sorts of potential, some of that is embodied potential (money spent on education and health); others are concrete figures on finance statements.
We could spend more and seek to “have the check to the undertaker bounce”, but it’s a lot less stressful to my mind to have a low 7-figure balance be the much more likely ending net-worth, giving us a cushion for our later years and knowing that’s enough to be helpful but likely not enough to be detrimental to our kids.
I think a lot of financial planners start from a base assumption that their clients will be happiest if they spend their accumulated wealth. That’s not true in my case (at least as far as I can self-analyze).
Whatever we don’t spend isn’t lost potential for us, but rather is future potential for our kids. Taking only the financial sorts of potential, some of that is embodied potential (money spent on education and health); others are concrete figures on finance statements.
We could spend more and seek to “have the check to the undertaker bounce”, but it’s a lot less stressful to my mind to have a low 7-figure balance be the much more likely ending net-worth, giving us a cushion for our later years and knowing that’s enough to be helpful but likely not enough to be detrimental to our kids.
>Whatever we don’t spend isn’t lost potential for us, but rather is future potential for our kids
That's extremely lazy. If your children follow the same pattern then no one will ever benefit. It was all for nothing.
So your kids will spend the savings but when will they spend those savings? After your death when they are in their 40s and 50s and long past the point where they need your help or while they are still young and you spend time with them?
That's extremely lazy. If your children follow the same pattern then no one will ever benefit. It was all for nothing.
So your kids will spend the savings but when will they spend those savings? After your death when they are in their 40s and 50s and long past the point where they need your help or while they are still young and you spend time with them?
It's a matter of capacitance and safety against being broke. Being broke and needing services at age 95 is a pretty bad spot to be in. Dying at 85 instead of 95 and, as a result, dying with $1-2M in assets isn't nearly as bad.
If the present is any predictor, I'm sure we'll spend adequate time and other resources (financial and not) with them while we're alive, but in order to minimize the chance that we'll become a financial burden to them, we're very likely to live in a way that will unavoidably present them a surplus at the end.
If that's lazy, then we're proudly lazy, and we come from a long line of lazy people.
If the present is any predictor, I'm sure we'll spend adequate time and other resources (financial and not) with them while we're alive, but in order to minimize the chance that we'll become a financial burden to them, we're very likely to live in a way that will unavoidably present them a surplus at the end.
If that's lazy, then we're proudly lazy, and we come from a long line of lazy people.
Just because nobody spends the money doesn't mean nobody benefits.
If I've got a bunch of money in my account that I'd rather not spend, because I want to keep it for a rainy day, I can still spend the dividends. I can also spend more of my income, if I'm satisfied that the bulk amount is enough that I no longer need to save more for emergencies. I can also be less worried about increasing or even maintaining my income; so I can find a job that makes me more happy instead of one that makes me more money; or work less hours or retire earlier.
Having a target dollar amount for savings and not just increasing it without reason does help maintain perspective though. In my mind, from a very priviledged place, I'd like to be able to pay for long term memory care for several years, even in the face of a market crash and high inflation. Anything more than that, is kind of silly to retain; but I'm still frugal, so spending freely isn't spending frivalously.
If I've got a bunch of money in my account that I'd rather not spend, because I want to keep it for a rainy day, I can still spend the dividends. I can also spend more of my income, if I'm satisfied that the bulk amount is enough that I no longer need to save more for emergencies. I can also be less worried about increasing or even maintaining my income; so I can find a job that makes me more happy instead of one that makes me more money; or work less hours or retire earlier.
Having a target dollar amount for savings and not just increasing it without reason does help maintain perspective though. In my mind, from a very priviledged place, I'd like to be able to pay for long term memory care for several years, even in the face of a market crash and high inflation. Anything more than that, is kind of silly to retain; but I'm still frugal, so spending freely isn't spending frivalously.
Check in with your kids about this. I'd rather my parents spend what they have saved. I don't need or really even want them to pass anything on to me. I'd much rather they enjoy their retirement more, pay for more visits to their grandchildren, and have lots of interesting stories and about what they've been doing to tell them.
If we knew when we’d die and how much care would cost from 80 until death, that would be easy. It’s unknowable and my wife’s family has exceptional longevity in most of her genetics. She could realistically blow out a Roman numeral C candle on a cake. Or she could die at 75… One set of my grandparents passed quickly in their 60s; the other in their 90s (with over a decade of independent then assisted living then years of memory care)…
Yes but you have to choose a philosophy either way. I'm saying the philosophy of "we want to leave our kids money" should be run by those actually kids before it is pursued. In my experience most adult children don't want their parents to focus on leaving them anything.
The chosen philosophy is “we don’t want to run out of money before we run out of heartbeats”.
Having money left over is a by-product of that, not a primary goal. If the kids don’t want the money in the end, they’ll figure out some way to dispose of it I’m sure.
Having money left over is a by-product of that, not a primary goal. If the kids don’t want the money in the end, they’ll figure out some way to dispose of it I’m sure.
This seemed contradictory to your original comment. But I went back and read it and I guess it isn't quite so much as I thought. But a seven-figure cushion seems pretty unnecessary to me. That's a lot of wiggle room! But :shrug:, you do you.
Yeah it's weird. The optimization function seems to maximize the spending rate from retirement age to death, which happens of course when you hit $0 at death and save as much as possible before retirement.
Just finished living with a financial and emotional hoarder.
When a person groans about spending $1,000 on high quality Michelin AS4 tires for an appropriate car, they are being obstinate. Money is to purchase things for life, not the purpose in life. It doesn't take a lot if one sets expectations and standard of living appropriately.
Personally I've learned the corporate rat race is really detrimental to my handicap so I'm going to file for disability and continue to participate in society with my arts and letters. It's not quite UBI but it's close enough for my purposes. I grew up in a wealthy household - again, came up poor and seem obsessed with "investments" and "security" instead of enjoying the food and experiences those monies can buy - so I'm over it.
Yes it's nice to have nice things. I have some maintenance expenses I understand but can be flexible about in the short and long term. Strings, new music, alcohol and cannabis, it's all pretty low-key and low rent. The only thing I really need as a basecamp is electricity, air conditioning, indoor plumbing, food access and storage and cooking, and connection with the outside world by way of phone, car, or internet. That's all. Everything else is basically static and for whatever reason, it's getting more expensive.
"The only way to win is not to play" holds pretty true to me when it comes to US financial system and navigating the aspects of "real" property and life versus synthetic engineering for the sake of jargon. Source: Worked Wall Street muni bonds, derivatives, arbitrage rebate, and asset management ~$4B.
Also anybody have the address to Jack Welch's grave? Gonna get loaded like a freight train and give him the Thomas Kinkade-Walt Disney treatment. What a horrible human being.
When a person groans about spending $1,000 on high quality Michelin AS4 tires for an appropriate car, they are being obstinate. Money is to purchase things for life, not the purpose in life. It doesn't take a lot if one sets expectations and standard of living appropriately.
Personally I've learned the corporate rat race is really detrimental to my handicap so I'm going to file for disability and continue to participate in society with my arts and letters. It's not quite UBI but it's close enough for my purposes. I grew up in a wealthy household - again, came up poor and seem obsessed with "investments" and "security" instead of enjoying the food and experiences those monies can buy - so I'm over it.
Yes it's nice to have nice things. I have some maintenance expenses I understand but can be flexible about in the short and long term. Strings, new music, alcohol and cannabis, it's all pretty low-key and low rent. The only thing I really need as a basecamp is electricity, air conditioning, indoor plumbing, food access and storage and cooking, and connection with the outside world by way of phone, car, or internet. That's all. Everything else is basically static and for whatever reason, it's getting more expensive.
"The only way to win is not to play" holds pretty true to me when it comes to US financial system and navigating the aspects of "real" property and life versus synthetic engineering for the sake of jargon. Source: Worked Wall Street muni bonds, derivatives, arbitrage rebate, and asset management ~$4B.
Also anybody have the address to Jack Welch's grave? Gonna get loaded like a freight train and give him the Thomas Kinkade-Walt Disney treatment. What a horrible human being.
Thanks for sharing, and I wish you shared way more than this.
I am curious about your partner, the hoarder - even the tires example is so weird and specific.
You mention a handicap. Would you mind sharing what type/kind of handicap is it?
I am curious about your partner, the hoarder - even the tires example is so weird and specific.
You mention a handicap. Would you mind sharing what type/kind of handicap is it?
Not enough people critically question their day-to-day spending and life assumptions.
I find the easiest way to save money is to avoid competition. Everyone wants a 2 bedroom house within commuting distance of work. I bought a 1 bedroom flat within walking distance of work, converted the kitchen into a second bedroom (moved kitchen to living room), couldn't happier.
I find the easiest way to save money is to avoid competition. Everyone wants a 2 bedroom house within commuting distance of work. I bought a 1 bedroom flat within walking distance of work, converted the kitchen into a second bedroom (moved kitchen to living room), couldn't happier.
Picking a neighborhood where you are relatively well off seems to usefully calibrate those assumptions. Maybe it has to do with status, which is relative.
Earning well and living in a regular middle class neighborhood of teachers, carpenters, and office workers, I don't feel stressed about keeping up with the Joneses I'm surrounded by. I can afford enough relatively (to my surroundings) nice things.
My social circle is not full of wealthy people, so living in a regular middle class area is also not low-status. I also feel like that the kids feel more secure about the things they do and have than they would be if they were always falling behind their friends, doing and having exactly the same stuff.
Earning well and living in a regular middle class neighborhood of teachers, carpenters, and office workers, I don't feel stressed about keeping up with the Joneses I'm surrounded by. I can afford enough relatively (to my surroundings) nice things.
My social circle is not full of wealthy people, so living in a regular middle class area is also not low-status. I also feel like that the kids feel more secure about the things they do and have than they would be if they were always falling behind their friends, doing and having exactly the same stuff.
Yes living below your means is a key to happiness. Too many people end up pushing what they can afford without planning for tougher times.
I think one of the biggest positive impacts on me was my parents deciding to raise me until 16 in a developing country. They had a middle class income, but my country of origin they could afford to put me in the best schools and pay for plenty of out of school activity. That changed my mindset of what was possible. By the time I came back to Europe, I went to a free school, but performed much better than my peers, I believe mostly due to my own expectations for my future.
I think one of the biggest positive impacts on me was my parents deciding to raise me until 16 in a developing country. They had a middle class income, but my country of origin they could afford to put me in the best schools and pay for plenty of out of school activity. That changed my mindset of what was possible. By the time I came back to Europe, I went to a free school, but performed much better than my peers, I believe mostly due to my own expectations for my future.
And how are your kids doing?
Who's living in a 2 bedroom house solo - that sounds like a lot of maintenance for a lifestyle where you don't need to be spending your time at home.
Who's living in a 2 bedroom house solo - that sounds like a lot of maintenance for a lifestyle where you don't need to be spending your time at home.
I grew up an equally-sized 2 bedroom in a city centre and its totally fine. Neighbours have kids in a similarly sized house and are not planning on moving. They are wealthy asians with apartments being standard in their part of the world. The American obsession with terraced housing is bad for the environment and highly inefficient.
> terraced
Do you mean detatched housing? (which takes up a lot more space than terraced). I live in England though where small compact terraced housing (relative to the US) is very common in the housing stock.
Do you mean detatched housing? (which takes up a lot more space than terraced). I live in England though where small compact terraced housing (relative to the US) is very common in the housing stock.
Lower middle class kid to now a slightly upper middle class person here. Migrated from small towns to cities. I think this falls into majority category.
Wow! I don't experience even one of those points the author mentions. In fact quite the opposite. It is unsettling to feel even mildly rich or show the world that I am doing well. Maybe I am not in the majority after all. Or the article is so very rooted in western demography.
Wow! I don't experience even one of those points the author mentions. In fact quite the opposite. It is unsettling to feel even mildly rich or show the world that I am doing well. Maybe I am not in the majority after all. Or the article is so very rooted in western demography.
Yes. This is my experience as well. I don't really relate to any of this status seeking through wealth stuff.
I'm curious where you're from. I'm from a small town in the midwest. I live in a cosmopolitan urban area now, but I always wonder if this sort of thing is a coastal or city culture that I still don't, and maybe never will, understand.
I'm curious where you're from. I'm from a small town in the midwest. I live in a cosmopolitan urban area now, but I always wonder if this sort of thing is a coastal or city culture that I still don't, and maybe never will, understand.
I’ve sort of adopted the mindset that money comes and goes and we should spend it on things if we reckon we will get enough value out of it. Now, I’m having a daughter soon and feel a bit immature about it all despite earning a decent salary, but I can’t help not wanting to feel like a slave to money especially knowing how many people with far less get by just fine.
> and we should spend it on things if we reckon we will get enough value out of it
This is totally true, but I think you just need to broaden what you mean by getting value out of money. Money saved provides safety, time, and options.
Money saved is just money to be spent in the future.
> but I can’t help not wanting to feel like a slave to money
Once you're in a regular pattern, you're not. I have regular things that go out, a budget under my income and don't need to check on things all the time. Not spending everything I have makes me less tied to income and outgoings.
This is totally true, but I think you just need to broaden what you mean by getting value out of money. Money saved provides safety, time, and options.
Money saved is just money to be spent in the future.
> but I can’t help not wanting to feel like a slave to money
Once you're in a regular pattern, you're not. I have regular things that go out, a budget under my income and don't need to check on things all the time. Not spending everything I have makes me less tied to income and outgoings.
Two money aspects that I find useful, which weren't mentioned in the article:
Price per use: if I buy X, how much/often will I use it vs. it's price
Time sacrifice: considering my current hourly wage, how many hours of my life do I need to spend in exchange for this item?
Price per use: if I buy X, how much/often will I use it vs. it's price
Time sacrifice: considering my current hourly wage, how many hours of my life do I need to spend in exchange for this item?
I think these concepts can be very dangerous if applied too liberally. In both examples you need to have a rough understanding of how happy the thing might make you feel, or how much "value" it's going to provide. I can buy A for £50 or B for £100. B is in some measurable way "better" than A, but I can't quantify how much. B being better might make me use it more? it might also be used equally little and be a waste of money.
Growing up poor and becoming comfortable financially as I grow up has only made these sorts of assessments much harder I've found.
Growing up poor and becoming comfortable financially as I grow up has only made these sorts of assessments much harder I've found.
The time sacrifice thing doesn't work in practice because the division of labor has a very big expense called taxes.
If you do things yourself then you avoid the tax burden. But if you decide to let someone else do the work you have to pay VAT and income tax.
If you do things yourself then you avoid the tax burden. But if you decide to let someone else do the work you have to pay VAT and income tax.
When quoting your hourly wage deduct income tax and all expenses you incurred to earn it - commuting, meals, clothes, etc.
You’ll see suddenly your hourly wage is not so high, and it a huge number of hours of your life for that tv
You’ll see suddenly your hourly wage is not so high, and it a huge number of hours of your life for that tv
It's very much good advise to optimize spending by not spending where it's useless (no utility, social signaling) and to possibly increase spending where the happiness return is high.
For the people that are frugal for life to the point where it comes at the expense of quality of life, one relief is the tactic "spend to save". Lower your TCO by spending. Pay down loans and the mortgage. Make your home more energy efficient. Replace crappy products with things that last a long time.
It's an undervalued strategy. Extreme savers basically prepare for volatility. They have insecurities about the future. Lowering your future expenses reduces volatility and increases freedom at a later age. You're less affected when bad things happen. You can scale down work by working less hours or a simpler job.
This is one way to not end up as the richest person in the graveyard and it allows you to gradually retire.
That aside, one aspect the article did not address are family dynamics. I do not care about what car my neighbor drives or what he thinks about my car. Yet still one can be affected by "social wealth" within the context of a family.
One may be frugal whilst the other is not. You can guess who wins. The kids need Disney+ and somewhat later a smartphone, as you don't want them to be outcasts.
Society does have (subtle) ways to force you to spend, it's not necessarily flexing or one-upping, rather "fitting in".
For the people that are frugal for life to the point where it comes at the expense of quality of life, one relief is the tactic "spend to save". Lower your TCO by spending. Pay down loans and the mortgage. Make your home more energy efficient. Replace crappy products with things that last a long time.
It's an undervalued strategy. Extreme savers basically prepare for volatility. They have insecurities about the future. Lowering your future expenses reduces volatility and increases freedom at a later age. You're less affected when bad things happen. You can scale down work by working less hours or a simpler job.
This is one way to not end up as the richest person in the graveyard and it allows you to gradually retire.
That aside, one aspect the article did not address are family dynamics. I do not care about what car my neighbor drives or what he thinks about my car. Yet still one can be affected by "social wealth" within the context of a family.
One may be frugal whilst the other is not. You can guess who wins. The kids need Disney+ and somewhat later a smartphone, as you don't want them to be outcasts.
Society does have (subtle) ways to force you to spend, it's not necessarily flexing or one-upping, rather "fitting in".
Very interesting article. Following the articles logic, you should be able to deduce a country's Social mobility based on the number of exotic items (such as supercars) you see in public. Furthermore, it becomes apparent that Europe has lower Social mobility than the United States. You will seldom see exotic sports car in the streets in Western Europe because most of the wealth are from well established institutions and families.
Western Europe has generally higher social mobility by most metrics than the US (mobility between income cohorts, education level vs parents, etc). The US probably does have more people becoming really, _really_ rich, though, and also has slightly different social norms around money and the showing-off thereof.
(That said, this is mostly differences at the margins. The mean price of a new car isn't much different between the US and the wealthier EU countries, say; the upper-middle-class are happy enough to buy cars that cost more than an average annual household income in both places. It's where you start getting past low six figures that people start getting squeamish)
(That said, this is mostly differences at the margins. The mean price of a new car isn't much different between the US and the wealthier EU countries, say; the upper-middle-class are happy enough to buy cars that cost more than an average annual household income in both places. It's where you start getting past low six figures that people start getting squeamish)
Social mobility is the wrong metric. The economic mobility in the US -- the ability to increase your absolute income -- is far higher than in Europe. Countries with compressed wages have high social mobility, almost by definition, by low economic mobility. Since the US experiences very low wage compression compared to most countries, it will never be "socially mobile" but will have anomalously high wages for a large portion of the population.
You're right, I meant to say economic mobility.
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The goal of saving is to have a lifestyle that you can MAINTAIN during retirement.
- if you save 60% of your income, your lifestyle will be severely damaged and you won't become a spender all of a sudden the day after retirement.
- If you save 5% of your income, then you won't be able to lower your lifestyle once you retire.
Saving 15/20% of income isn't a magic number. But it's something that doesn't damage your lifestyle + it accumulates to a meaningful amount that saves your ass in old times.
Going aggressive in either direction (spending or saving) is not the right mindset, because you won't be able to CHANGE once you adopt a specific lifestyle.
- if you save 60% of your income, your lifestyle will be severely damaged and you won't become a spender all of a sudden the day after retirement.
- If you save 5% of your income, then you won't be able to lower your lifestyle once you retire.
Saving 15/20% of income isn't a magic number. But it's something that doesn't damage your lifestyle + it accumulates to a meaningful amount that saves your ass in old times.
Going aggressive in either direction (spending or saving) is not the right mindset, because you won't be able to CHANGE once you adopt a specific lifestyle.
There can be many goals for saving.
It is easy to imagine parents that want to save as much as possible for their kids, for example.
It is easy to imagine parents that want to save as much as possible for their kids, for example.
Why would a kid need "saving as much as possible", did you ask them? What if they need the money before your death?
To help them go to extra curricular classes they enjoy, university, study or live abroad, buy a house …
My original point was about saving not having a single reason, but varied ones. Maybe not "as much as possible" but enough to provide for any of the things above for one‘s kids.
My original point was about saving not having a single reason, but varied ones. Maybe not "as much as possible" but enough to provide for any of the things above for one‘s kids.
I must be in the minority. I grew up poor (collected pop cans from my local Sun office as an office cleaner and sold them for deposits), so its scar will always be with me.
But when I was younger, someone once said 'money is not the thing; money is the thing you use to get to the thing.'
So now I can switch between being thrifty or being 'careless', depending what I really desire- and this requires constant self-reflection, a constant self-question of would spending this money do anything for my goals (which should include helping others.)
In other word, like that Japanese cleaner lady, I ask myself would spending this bring me joy?
But when I was younger, someone once said 'money is not the thing; money is the thing you use to get to the thing.'
So now I can switch between being thrifty or being 'careless', depending what I really desire- and this requires constant self-reflection, a constant self-question of would spending this money do anything for my goals (which should include helping others.)
In other word, like that Japanese cleaner lady, I ask myself would spending this bring me joy?
It's too easy to overspend. It's effortless to give people money. It's much harder to earn money. Hence, being frugal is a good idea generally.
Especially in the day of fairly abundant credit where one is often spending against future income and not what is currently in the bank.
I've been struggling with knowing how to spend money now that I have it. I don't even have that much, just slightly above a median salary but that's so much more than I've ever had before. I spent all of college wondering if the current semester would be my last and now I can just pay off my loans in a year if I really want to. It's incredible but also really unjust because I know so many people are experiencing what I experienced but here I am with a bunch of money sitting around not helping people with it. I want to make sure I can really justify every purchase and investment because I know how much the same money could mean to someone else. At the same time though, that's a stressful worldview to have and I also need to make sure I'm living a quality of life that my loved ones are comfortable with. It's a hard balance.
You should have kids - never wonder what to do with your money again! :)
My three children all have completely different attitudes to money despite being very close in age and being raised together. Two spend freely now they earn their own money, my middle daughter saves almost all she earns and knows the price of everything.
I have a feeling that the friends your children make have an underestimated influence on their behaviours, and what they consider worthwhile to spend time and money on, from their mid-teens until they work out their own life plan (which is sometimes never).
The lessons parents can teach them about life only seem to be learnt if they're relatively immediately applicable. I didn't care about 'saving' until well after I realised I was earning enough to be worth saving - in my early 20's. Prior to that, I never had any money worthy of 'considering my future' beyond a new skateboard deck or fashionable pair of shoes so, you know, take your advice about saving for the future and stick it because it doesn't apply here.
The lessons parents can teach them about life only seem to be learnt if they're relatively immediately applicable. I didn't care about 'saving' until well after I realised I was earning enough to be worth saving - in my early 20's. Prior to that, I never had any money worthy of 'considering my future' beyond a new skateboard deck or fashionable pair of shoes so, you know, take your advice about saving for the future and stick it because it doesn't apply here.
Spending is tiresome at old age. Traveling, buying new things, even eating out requires effort. But recently, I found an easy and very satisfying way of spending money - donating to U---ne.
> If you dig into it, I think you’ll see that a disproportionate share of those with the biggest homes, the fastest cars, and the shiniest jewelry, grew up “snubbed” in some way. Part of their current spending isn’t about getting value out of flashy material goods; it’s about healing a social wound inflicted when they were younger.
I thought this was just called nouveau riche.
I thought this was just called nouveau riche.
Rich people always love to say $3 questions don't matter.
But avoiding a latte is how you save a few hundred dollars a year, instead of not being able to save at all. It won't buy you a house, but it will certainly let you hire a Lyft if you have to come in at some crazy time, and you might save your job because of it.
But avoiding a latte is how you save a few hundred dollars a year, instead of not being able to save at all. It won't buy you a house, but it will certainly let you hire a Lyft if you have to come in at some crazy time, and you might save your job because of it.
I've been saving money for future smarter self who will know what to do with all the money. Here I am almost a decade later and I am not any smarter. I'm scared sh*less to invest so the 2x annual salary that I managed to save is just rotting in a savings account.
My idea is to spend as an average person would.
I increase my lifestyle only spending interests from bonds/dividends. In this way I have a better life as my net worth increase but not at the same rate.
So if the risk free interest rate is 5%, I don’t only increase my lifestyle of 1$/y for every 20$ earned.
I increase my lifestyle only spending interests from bonds/dividends. In this way I have a better life as my net worth increase but not at the same rate.
So if the risk free interest rate is 5%, I don’t only increase my lifestyle of 1$/y for every 20$ earned.
One thing that helped me coming from a background of poverty is realizing that all unspent money is charity, because if you die, it is going to someone else. If you are not comfortable with where it is going when you die, change your will.
I agree with the point that there is a difference between a savings mindset and investment/growth mindset. One should invest in physical and mental health.
But a lot of the advice seems like narrative fallacies.
But a lot of the advice seems like narrative fallacies.
I agree with the point that there is a difference between a savings mindset and investment/growth mindset. One should invest in physical and mental health.
But a lot of the advice seems like narrative fallacies
But a lot of the advice seems like narrative fallacies
There was a lot of depression-era frugality and Macgyver-level fixes in my home growing up. Not necessarily a bad thing, but I feel as if I've unwittingly internalized certain habits ;)
I always wondered - what rich people did before Instagram? What's the point of splurging without getting likes?
Newspapers had the 'society pages.'
I imagine that every social gathering also doubles as a showing-off.
Coming from a poor family and knowing the hard way the issues of not having money I've been obsessed with saving money since I got my first paycheck 8 years ago and I always thought "at the point I would earn current salary + x I will start enjoying life more and stop worrying about money" but that never happened.
8 years have passed and I still have the same thoughts despite earning 15 times more and having no financial problems, my mind just makes it very difficult whenever I have to spend money on something.