Being frugal is for the rich
theoutline.com
theoutline.com
Here's an excerpt of the article that really clarified this for me:
"Thirty years ago, she says, you could walk into any hotel in America and everyone in the building, from the cleaners to the security guards to the bartenders, was a direct hire, each worker on the same pay scale and enjoying the same benefits as everyone else. Today, they’re almost all indirect hires, employees of random, anonymous contracting companies: Laundry Inc., Rent-A-Guard Inc., Watery Margarita Inc. In 2015, the Government Accountability Office estimated that 40 percent of American workers were employed under some sort of “contingent” arrangement like this—from barbers to midwives to nuclear waste inspectors to symphony cellists. Since the downturn, the industry that has added the most jobs is not tech or retail or nursing. It is “temporary help services”—all the small, no-brand contractors who recruit workers and rent them out to bigger companies."
from: http://highline.huffingtonpost.com/articles/en/poor-millenni...
Shifting all the "liability" onto workers, creating an economy where everyone but the wealthiest are fungible serfs, is a specific set of values and decisions advanced by these people because it benefits them.
But politics played a big role too. It deserves to be noted here that almost all the employees at this (1960s NYC, say) hotel were born Americans. While today a large proportion would not be, a factor which tips the balance of power towards their managers.
I don’t disagree that technology has changed these dynamics, but the way power and wealth has been distributed in response to these changes is almost exclusively upward and to fewer and fewer people. Nothing about that is neutral or organic, unless you’re talking about the trajectory of wealth and political power under some Marxist analysis of Capital accumulation.
So legislation purportedly for employee protection backfires by making direct hires uneconomical and you call this " something the rich choose to do, in collusion with politicians"?
If we we're talking about somewhere like France, perhaps this argument would hold water. Otherwise, seems like a strawman.
Average people don't really have the resources or connections to open a company.
Incorporation paperwork and filings, even for an LLC in an inexpensive state will be a few hundred, with an Inc generally more. Annual filing fees run $800 minimum in my state; that's if you do all the calculations and paperwork yourself.
Then, you need adequate capitalization for the company (to avoid it being regarded as under-capitalized should the question of piercing the corporate veil ever come up).
This must be used for working capital for inventory, WIP, raw materials, utilities, salary/living expenses, perhaps rent or transportation and needs to cover you between the time you start and when you are cashflow positive. You may need a license or permit from the town/city/AHJ to operate.
Telling someone living paycheck to paycheck to "just go start a company" is fairly unrealistic I think.
A factor for courts to consider: Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances)
Money, for one. Time for two.
They choose to spend that time working 2 jobs. I've done the same in the past. I've decided between buying dinner or getting gas to drive to work to earn enough to cover the commute in the first place. Eventually you make decisions to get you out of that life and into a better one. There's luck involved sure, but I absolutely reject any excuses as if it's completely out of your control.
Because otherwise you'd say they'd "choose" to starve or be homeless?
Situations don't change instantly which is why there are always comments about how it seems impossible - but like any other large goal you only get there with slow steady progress. No matter how bad you think you have it, many others have climbed out of worse. So it's not about choosing to starve but about making those tiny decisions that build up to will eventually get you out of that life.
Or you can choose to ignore all that and give up.
No, it's reality. It's what you choose to ignore while you blame others.
I'm not blaming anyone. I'm saying that life is in your control and your personal responsibility. Things happen to you, but you can always choose how to react and thereby overcome obstacles.
Interestingly, you seem to saying that nobody in that position is at fault and are instead blaming everything else and "reality" which I find rather disingenuous at best. You either have control over your life or you don't, and if you think you don't then there's nothing to discuss and you can pontificate on the lack of free will I guess.
That's why living the experience is important. It gives you perspective on the decision process, which is more than just numbers.
A side effect of the government guaranteeing student loans is that universities could charge basically whatever they want, knowing that students would still be able to pay it. It funded massive expansions, but instead of universities taking on the debt, students did.
In my view, the product hasn't improved at the rate of tuition increases and I'd just follow where the money went to know where the problem lies.
https://www.nytimes.com/2015/04/05/opinion/sunday/the-real-r...
I agree with you that government-guaranteed loans have had the paradoxical effect of being one of the primary contributing factors to increased tuition costs.
This is only true of private for-profit universities, not private nonprofit universities nor public universities. For public universities, the main cause of rising tuition is state funding cuts:
https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
Unfortunately, most of us only ever work 40 years (if we're lucky), so the budget of a life is, in 99.9% cases, zero sum.
The problem is not with income as much as costs. The NIMBYism of a lot of places inflates the cost of the main expenses like rent - where most people's money goes - and the cost of getting around, as people are forced to live further away from jobs. That was the big finding from the minimum wage hike in Seattle, that poor people where forced to travel further for work, and it cost them more. Ironically, I think that is pretty much how all cities work since crime went away. The days of the poor occupying prime real estate near a city is pretty much over.
Even sans better employment opportunities, fixing the zoning laws in most cities would lead to better lives for many people. Sadly, this NIMBYism is really hard to fight against, and often the people it hurts fight hardest for it.
Instead of mobile phones and TVs, look at bigger items like health care, housing, and education, all of which have gotten more expensive (in the case of education, astoundingly so) even as inflation-adjusted wages have decreased.
No, I think it all matters. And the fact that technology is getting cheaper IS an improvement in our standard of living. People who can find anything within minutes and talk to anybody anytime ARE wealthier than those who have to spend large amounts of time to do the same things.
If they can tap into the entire universe of education and experience an Internet connection implies, and pick cat videos... what would you say is the critical link in their paupery?
I mean, horses to water and all that, and it's a matter of choice.
>I mean, horses to water and all that, and it's a matter of choice.
No, it's not. Claims like "education" should be based on reliable expectations of effects, not "possibilities" that ignore actual human behavior. The Internet has not actually made people more educated, with few exceptions.
Food and shelter are more important than Internet access. Having a house and a steady income in the 1970s is wealthier than sharing an apartment with roommates and working irregularly in the 2010s; we know this because people prefer it, which is the only actual measure of economic anything.
Phones and mobile software are exquisitely engineered to be as addictive as possible. And it works.
Here I am, having this largely pointless Hacker News conversation, instead of completing a Deep Learning course or something.
so... there is something deeply addictive about hacker news... but I personally think? it's the same thing as talking to someone for hours at the pub. same reward mechanism. I mean, the pub closes, and that helps; and most people at most pubs are... difficult to relate to. but I can remember just last month I was hanging out front of my local computer club talking to someone until like 4am.
I think the difference here is that hacker news is more like my computer club than it is like a random pub, just because the people I meet are more likely to hold my interest.
> Here I am, having this largely pointless Hacker News conversation, instead of completing a Deep Learning course or something.
Yes, like that.
And now at 30 I'm pretty convinced that I would have liked 1950 better. Why ? Because the space and that I know that for 30+ years my life would consistently improve, maybe even 50+ or 60+, including an actual pension etc, even if I was born black. The basic standard would be different, but the constant improvement wouldn't. I mean I'd miss my PS4 and iPad, except of course I wouldn't, not really.
Maybe I'll change my mind again.
Maybe immersive VR solves this by allowing the mass of people to transition from "lives of quiet desperation" to being rulers of their own miniature virtual worlds.
Indeed. Question is, what will a dollar buy you? We have more treatments for illness, we have more educational options, more and more.
There is no silver bullet to be sure, and there is no universal upside option, but surely now is a better time to be almost any income percentile, in almost any place on the planet.
Where geographically it has gotten worse, e.g. Flint Michigan, I am not sure how we make a world where Roger & Me is released in 1989, and 30 years later, the population is 2/3s what it was then. Part of life is change, and making the world better requires that people adapt with the changes.
Indeed. I can do without my TV. In fact, I turn it on only once or twice a week for a few hours. I can do without a flagship mobile. In a pinch, I can get a cheap-o no-name brand for important calls.
Housing, health-care, education - these are all key moneypits that are more expensive, for less in return. Don't even get me started on pensions. For as long as I have been actually aware of pensions as a thing, all I have heard is how the fund was lost, raided, payouts going down, pensionable age going up, and without exception, those tat subside off their pension only live in abject poverty, often making choices between eating or heating.
Take the hotel example, it's probably much more costly to hire (and interview and vet etc) all your own bartenders and cleaning crews and all that piecemeal. Then you also have to train them and figure out a replacement when someone calls in sick or something. I'd imagine a company that's specialized in hiring and training bartenders could do it much more efficiently than a single independent hotel owner.
Those efficiencies (you specialize in bartenders and so are able to train them with less resources than other places) result in lower room rates and more money customers can use on other things.
However, I suspect my living costs (in an apartment) are actually somewhat lower than the Frugalwoods in their country villa.
This seems backwards. The poor never occupied prime (at the time) real estate, but cities did used to be more compact. The rise of crime (from the 60s) was one of the factors driving suburbanisation, as those who could afford to do so moved to more distant suburbs to be safer. Not just to have bigger lawns.
Their NIMBYism comes in part from this experience. Making sure your suburb stays expensive has the effect of helping it to stay safe, because it will only be occupied by people as rich as you, and will be able to afford plenty of police. Of course this is not the only effect. This protective blanket of high prices is an extremely blunt instrument, there is a lot of collateral damage. Nevertheless I think it's important to realise that NIMBYism isn't coming from nowhere.
Couldn't agree more! That's the irony. For many cities, crime kept the richer people further away from the inner city, where many jobs are/were. In places like London, Sydney, NYC and SF, it is really hard to find workers for hotels because the people that do such jobs live so far away.
This is the great irony of improving city conditions like reduced crime. In a really scary way, crime was poor people's saviour from long, perhaps even un-profitable treks to work.
Take London. https://www.toptiplondon.com/transport/tickets/underground-t... if you trek in from a zone that is cheaper and further out, the costs as a fraction of income are huge.
This isn't true for a lot of impoverished areas. Most of the students my wife works with at her elementary school do not have any of these.
Would you rather live in a world with no smartphones where you afford a house/apartment, or one with smartphones where you can't?
Why I think the value proposition of a smartphone is completely justified, it probably pays for itself many times over.
How rich are your poor? That may seem a silly question, but are poor people really buying houses? Did they ever? You seem to be talking about middle class people - perhaps lower middle class at worst.
The question is where is that threshold? At what decile is the world worse? The bottom 10%? The third bottom? Where?
This is not as clear cut as house no technology/no house technology. This is an issue that affects different percentiles of the income curve differently. There are no doubt some parts of the income curve in some specific locations worse off, but I'm not sure people have a full grasp of how much better life is in general in the 1st world today versus 1960, let alone 1920 or worse, during the Great Depression.
My point is just that the temp agencies are not the whole of the story here; for some reason, there's not enough demand for most kinds of labor to lift wages much above the statutory minimum. Why is this? We've got an oversupply of labor, why hasn't the market figured out how to use said labor?
Maybe so, but why would we discourage good spending habits? For example, choosing to eat one or more meals out each day versus bulk cooking is an option available to most people. Likewise, choosing to spend $800 on rent with roommates versus $1,600 for a studio or one bedroom apartment.
I'm not seeing how millenials or members of the middle class benefit by uncritically opting for more expensive options. My read on frugal culture is spend however much money you want on whatever you want, but do so eyes-wide-open. Break free from all the advertising, inertia, and "keeping up with the joneses".
Frankly I think if more people adopted this style of thinking it would have serious ramifications for the rich and their businesses built on over consumption and debt.
Perhaps pursuing FIRE is something only available to the upper middle class. That's an interesting argument, but not one put forward in the article. Furthermore, I think it's bordering on class warfare to set the upper and lower middle classes against each other. It reeks of divide and conquer, and who benefits? The people pushing over expensive lifestyles funded with debt.
Each of them typically does three things: They keep their household yearly spending under $35,000 (some even less than this), increase income as much as possible, and invest the savings, taking advantage of tax-deferred accounts whenever possible. Though, the three things are basically common sense when you think about it.
Can't we focus on the message instead of the messenger? Or stop assuming that the message is for Millennials alone?
If you're poor, being frugal is very unlikely to lift you out of poverty. That doesn't mean frugality is bad, but that marketing is as the key to financial stability is deceptive.
It sure looks like that to me:
"My Courses to Help You Make More Money" - https://millennialmoneyman.com
It resonated me with a lot.
They claim they could've paid cash for it but chose to get a mortgage - so they don't own it "free and clear". Unless they've ended up paying off the mortgage early. Assuming a 25% down payment that's a $310k mortgage. You'd need annual household income of around $80k to qualify for a mortgage that size, which also seems within the reach of a dual-earning household of white-collar/skilled trades professionals.
A household earning $80k annually could save up the $90k down payment for that property in about 3-4 years, assuming a 40% savings rate. I'll admit it's aggressive and ambitious by most people's standards, but not actually impossible.
Now I don't think it's actually a good idea to buy property worth nearly $400k if your annual household income is $80k but it's not an entirely outlandish idea.
I assume the Frugalwoods had annual income well in excess of $80k before they "retired". Their savings rate is also correspondingly huge - 71% according to the article. A brief skim of some other posts suggests they're going to be renting out their current house + putting the new property to revenue-generating uses. They clearly know how balance sheets work and the numbers make sense for their situation.
Pulling back a bit I think we should acknowledge that the Frugalwoods are people who have optimized the heck out of the very good hand that they were dealt. We should be applauding that rather than trying to pick at their story and point out why it doesn't work for everyone. I might not have Michael Phelps' swimming genes but following his workout routine would probably improve my health, even if I never become an Olympian.
It's obvious that having a higher income makes it easier to frugal your way into early financial independence. The vast majority of high-income households don't take that path even though there's not much stopping them.
1. https://www.frugalwoods.com/2016/04/22/the-finances-of-our-c...
Being frugal is incredibly helpful for all but the richest among us, and I'm amazed that people are so critical of it. I see so many people who would be so much better off than they are if they just didn't buy so much unnecessary shit.
I actually think the higher-income you are the more frugal (in terms of savings rate) you should be.
It's infinitely more likely to do so than being financially irresponsible.
But here’s the thing. Regardless of intent, these Millennials are telling an older generation of elite Americans — the very people whose policies and financial decisions kneecapped the economy — what they want to hear: that everything is more or less okay, and young people just need to be more thoughtful about their money. And that’s a shitty idea to perpetuate. Because whatever happens in the years ahead, penny-pinching will likely remain a lifestyle enhancement for bourgeois Millennials who possess enough money to enjoy the dividends of being thrifty. For most of us, there are no dividends: just thrift.
It's not about the advice itself -- the advice all seems pretty reasonable -- it's about the place that advice has in the story we tell ourselves about young people. I myself practice many of these thrifty tips, but I cringe to think that the blog posts that people write about them will be used to justify continuing to build a world where they are more and more necessary.
I’ve personally seen people with high five figure student debt go on regular international trips. These people more or less live paycheck to paycheck and save specifically for travel (or use credit cards — if they can get them).
Educating people as to why that might be a bad idea and creating a supportive culture of anti-consumerism seems like a good idea. Sure there are policy decisions at play too, but being “frugal” can hardly hurt.
The “American dream” of the 20th century was never sustainable. We’re just now realizing that en masse. Being frugal is just a natural realignment of culture and reality.
Regarding the American dream, maybe it's sustainable or maybe it's not, but it's clear that it would be a lot more sustainable if people where willing to create a world with fewer obstacles to attaining it e.g. by implementing universal health care. If we tell ourselves that people who can't afford health care probably deserve to struggle with money because they're not being frugal, then that's a problem.
As for universal healthcare, good luck getting everyone to agree on that...
I disagree that every word spoken in public is political. “Don’t touch the hot stove” is great advice. Let’s be free to have those kinds of conversations without dragging them into the political mud.
We need to get to the idea that there are not enough good jobs for everybody. Once we get to that point, we can start to figure out what to do about it.
Is it tight?
I see very few occupations with rising wages. That's the REAL test for a tight labor market.
Let me be anecdotal for a moment ...
I was at a conference recently where the companies had a panel session complaining about getting more people into the business. Unlike most software disciplines, they really do have an infeed problem. In addition, they are also getting poached and losing their junior guys from the shop floor.
Okay, think I, I was a hiring manager in the DotCom Boom(tm), I understand getting poached in a narrow field.
So, do you know who their primary opponents are?
Amazon and Foxconn.
Two of the worst employers on the planet. You are losing employees from your manufacturing line to Amazon warehousing and Foxconn manufacturing.
Um, please go bankrupt and may your industry die in a fire if you treat people so badly as to lose them to Amazon and Foxconn.
And black unemployment is at historic lows a well.
Does the absolute inflation and purchasing power adjusted value even match 90s?
That said, the original discussion was about the rate of wage growth as a measure of how tight the labor market is. In that sense, the instantaneous rate is fine.
So why am I harassing you about your answer to AstralStorm, when AstralStorm was disagreeing based on something that was outside the scope of the discussion at hand? Because of the way you answered, with dismissiveness rather than actually thinking about the point raised. That's not cool.
Yes: https://news.ycombinator.com/item?id=16682711 for references. (Wages rising slightly faster than inflation over decades long period.)
To hear someone who was making $10/hour out of college and bought a home for $40,000 say that the reason millennials can't buy a home today is because they're buying avocado toast and not because equivalent homes cost $1.6 million today is infuriating. Relatively speaking, millennials are doing better, frugally, than baby boomers were (saving more, spending less, etc), but the cost of the things that people are complaining about has grown exponentially.
Meanwhile, almost all of the growth of the economy has gone towards the top 1% of people. If you look at, for example, Canada, the average CEO makes as much by January 2nd as the average worker does by December 31st.
CEO pay growth over the last few decades has skyrocketed (compared to inflation, worker wages, or even corporate profits), while worker wages basically track inflation. In other words, people are making the same amount of money as people 50 years ago, even though a lot of things cost more (e.g. housing).
Blaming the economy inequality on the fact that people aren't willing to take on second jobs ignores the fact that wealth and power is all being concentrated in a small number of people and the rest of us are forced to fight over what they're willing to leave behind for everyone else.
Your essential argument is that from a relative perspective the American middle class is not as well off as it was during a unique time following WWII during which the American middle class reached the highest levels of relative wealth in the history of the planet. Okay, but they're still nominally better off than they were back then and an almost unimaginable number of people have had their lives dramatically improved across the globe in the process.
We can all care about societal inequality, and how it probably suggests that the levers of civilization need to be jiggered a bit, without hating anyone.
I think housing in the PNW is way unaffordable but that doesn't mean I hate either the developers, the planners, or the numerous other social and geographical factors that have led to this situation.
In short, please don't bring up things like "hate the rich" when no one else is.
Affordable housing is a problem best addressed by the people who live in the areas that have a lack of affordable housing. It's not something that needs addressing on the national scale.
If you think the poor need something, like say more funding for inner city schools, then say that and suggest a reasonable tax, perhaps a tax on luxury goods that would disproportionately affect the wealthy. Or if there's a specific bad behavior, such as pharmaceutical advertising, talk about that. But just complaining about wealth inequality sounds more like hating the rich than caring about the poor.
Do you suppose it's possible for you to advocate for a specific amount of welfare that you feel is "generous" without attempting to villainize the very people you hope to pay for it?
>They advocate against redistributive inheritance taxes, so that their own children continue to have enormous advantages over anyone else.
First, one of the major motivations of achieving success in life is so that your children will be better off. So all you've established is that rich people are good parents. Secondly, you're still just upset that someone has a lot, rather than focusing on a specific problem that some group of poor people has. You're just hating the rich rather than showing an interest in helping the poor. Third, fortunes generally disappear after 3 generations, so it's not as if huge dynasties are being created that last forever. If you're rich, your grandkids get to go to a nice private school. That's pretty much it.
>They advocate policies that guarantee they can continue to extract wealth from rents rather than productive avtivities, dragging down the economic well being of all.
Yes, things like regulatory capture are a problem. I will hold up a sign and protest it alongside you. But do you see you you're STILL pointing to the "rich" rather than "bad policy?"
>And the rich are more likely to cheat on their taxes, try to bribe officials, or flat out disregard the law.
I've never met a person who worked for tips that didn't cheat on their taxes, have you? But more importantly, we're back at the same place. Rather than advocating for or against a specific policy, you're just slinging mud. You care more about saying mean things about rich people than you do about issues the poor might be facing.
This is not universally true. It is not true across individuals among the rich/nonrich nor is it true across specific agenda items. This caricature you've created for these two groups is called classism. You are no better than the people who think all poor people are stupid or lazy.
>yet only one of these groups have any great power to see to it that their interests are served.
Okay, let's talk about campaign finance reform. Or is making sure there's no rich people more important to you than making sure everyone has equal political power?
Saying that rich and nonrich have different interests is not controversial, except to those intent on denying what is obviously true.
Either you are ill equipped to engage in a discussion on this topic or you are being utterly disingenuous; certainly you have misrepresented what I have said in ways that push a rather tired narrative, one trotted out every time someone pushes back on the status quo of enormous wealth disparity by noting that it has serious negative consequences.
You just can't help yourself. Once again you express more hatred for the rich than you do concern for the wellbeing of the poor.
I'm not denying that there are consequences to wealth or income disparity. I just think you don't appear to care about the wellbeing of the poor beyond the minimal lip-service you have to pay it to justify voicing your hatred for the rich.
I haven't seen any convincing evidence-based argument that a high degree of inequality is either neutral or good for society as a whole, nor do I have any philosophical leanings that suggest that it is an acceptable byproduct of an otherwise fair and just society.
Going by both evidence (health outcomes, class mobility, etc) and by my philosophical leanings that it don't seem right for so few people to own so much (when ownership itself is a purely fictional thing), I'm going to keep talking about inequality as a Bad Thing to be addressed.
Don't like it? You do you, but telling me I'm focusing my behavior on one thing or another is about the least compelling thing to say.
Common talking point, not borne out by data.
See https://news.ycombinator.com/item?id=16682711 for references.
My grandmother can still, to this day, recount living in an apartment with no furniture except a mattress, with my grandfather who was employed as an engineer in New York. It took, by her estimate, about two years to have enough furniture before she was willing to invite over any sorts of company.
Today you can furnish an apartment reasonably with about a months worth of wages. I know this because I helped take a friend who makes a bit over minimum wage to IKEA to get all their furniture for an apartment they moved into.
The myth of decline is that - a myth. The economy is better then it has been in decades, violence is at an all time low, and jobs are widely available in many areas of the country.
I have friends who complain about the economy "being destroyed", who max out credit cards to buy brand new cars and buy expensive home theaters. I have one friend who despite making six figures a year, took a predatory payday loan because she had spent her wages on expensive unused tools.
That's not to blame "millennials" anymore than to blame any other generation. Bad financial choices have existed since the dawn of human history, but in many cases today they are choices, not pre-supposed economic outcomes. We can help correct that by teaching good finance skills (budgeting, doing things yourself instead of hiring people, focusing on cheaper hobbies, etc).
Food went from being very expensive (people actually died of starvation not that long ago!) to being so cheap that obesity is a major epidemic among the poor.
Since 1940, the percent of the US with a high school degree went from < 50% to over 80%. The percent of the US population with a college degree went from < 10% to over 20%.
What is your argument that the economy is in decline? That you don't magically get a two story house with a yard, a new car, and the ability to support a family of four? That has never once been the case in US history. It's a great myth in the past that the 1950s were somehow a magical time when everyone had a house and the income for a family, but it's that - a myth.
I make about 4X what my parents combined made as schoolteachers, yet my housing costs about 10X what theirs cost. In order to get that great price I had to move about 2 hours from work (and pay for the required transportation), compared to their 10 minute commute. I came out of grad school six figures in debt, whereas theirs was cheap enough that they barely had to finance it. They paid for reasonably priced doctor visits out of pocket, compared to my high deductible "healthcare plan" that still has me dropping $hundreds for a single X-ray.
But I have a cellphone so I'm a reckless spender.
Food being cheap is not the reason for the obesity epidemic. It's because food has become of such poor quality. Also, it is engineered to cause you to overeat.
Otherwise, I agree with your overall point.
Further the needs have also grown: without a car it’s impossible for most people to have a job
Yes and no. One thing to keep in mind is inflation, so we always need to compare prices to average incomes. A house is listed as being <10k in 1940, but the average yearly salary was also <2k, and the minimum wage was $0.30 per hour.
However, things have genuinely gotten more expensive in some cases usually due not to the economy, but due to safety. That's a good thing - we no longer have asbestos and lead paint, cars are safer, and working fire alarms are a thing. However, those things do cost money. You can no longer buy an all metal box that goes 80mph without seatbelts or airbags.
I find the car claim to be somewhat of a red herring. Yes, you need a car now whereas before a bicycle might of sufficed. However, a decent car can be had for two thousand dollars - not a pretty one, but a functional one. You might be able to go cheaper if you have any mechanical ability, but we'll assume the average person doesn't have that.
In addition now of course you need drivers insurance, and you probably need to take a drivers ed course before getting your license. Those things do add cost, but they also save lives.
The median home value in 1940, adjusted for inflation to 2000, was $30,600 ($2,938 pre-adjustment).[1] The median income for a man was $9,948, using the same inflation factor of 10.406639 ($956, unadjusted).[2]
The median home sales price in 2015 was about $300,000[3] while median household income was $54,000.[4]
[1] https://www.census.gov/hhes/www/housing/census/historic/valu...
[2] https://www.npr.org/2012/04/02/149575704/the-1940-census-72-...
[3] https://fred.stlouisfed.org/series/MSPUS
[4] https://www.census.gov/library/publications/2016/demo/p60-25...
The size of homes has also gotten much bigger.
So the $30,000 home in 1940 (in today's dollar) wouldn't look anything like a $300,000 home today.
I'd be more interested to learn what a townhouse in Manhattan cost in 1940 and 2010.
Nowadays the cost (for a new house) for "utilities" (water, electricity, heating, A/C, etc.) plants/hardware is a considerable factor, as a rough estimate 20-30% of the construction costs, and a large house in the 40's would probably have had one single bathroom/WC (if any[1]) for a 3 bedrooms home.
jaclaz
[1] In rural parts it was not so unusual to have an external loo
With housing, on the other hand, we are routinely seeing people pay upwards of 500% what people were paying for the exact same property a few decades ago with few or no changes, even with the effect of inflation removed.
In parts of the US. For most parts of the Europe, and indeed many cities in the US, a car is not a requirement.
My grandfather's college fund (to be a dentist) was wiped out, the bank closed. He worked at a GE factory his whole life, work that I will say was far beneath his potential. He never complained. He once traded his easy job on the line for a much harder one, where he had to lift each engine block twice to inspect some fiddly bit on it. He traded to get a 5-cent raise. If you offered my grandfather a government subsidy, he might not have been able to conceal his contempt.
I don't think the decisions of any of the individuals we've mentioned are great indicators of what's correct or incorrect, but the depression didn't influence everyone the same way.
A five cent raise in today's currency or back then? Per hour or week?
Assuming it's hourly, if it's from "then" could you convert it to modern currency, or present it as an percentage increase so we can understand what kind of relative increase that was?
Five cents sounds like nothing today, but 70 years ago it would have been significant.
Figuring out a percentage increase is a bit complicated without knowing how much mod's grandfather earned. According to https://www.archives.gov/publications/prologue/2012/spring/1... in the 1940 census average (yes, not median) annual income was $1368, which works out to $24,505 in 2018 dollars, or $12.25/hour assuming 40 hour weeks and 2 weeks of vacation.
So at a guess, $0.05/hour was less than a 10% raise, but more than 1%. I expect it was /hour, not /week, because weekly wages would have been in the ballpark of tens of dollars.
Disclaimer: I am not mod, and this is not my grandfather we're talking about.
You do understand there's a difference between a month of wages and having a month of wages saved to spend, right?
Considering most people live month to month... saving an entire month would take many people more than 2 years.
Maybe you shouldn't start a family when you are making minimum wage, in a city with a high cost of living.
But its a little weird that a Caveman's most basic prerogative (To procreate), is not something many people in modern society can afford to do.
It's also something that is fairly important to the continuation of our species, so hopefully we can figure out a way more people can responsibly afford to have children.
For comparison, when do you plan to retire?
Now do the same run down for your entire cohort.
I'm a distinctly unfair comparison, since I could retire as early as 55 to 60 (I doubt I will, I do terribly when left without something to do, but who knows.) That being said, I recognize my situation is very unlike most of my peers.
My cohort falls into three categories:
+ Those with high income and good financial management. Like me they are capable of retiring without any government assistance at 60ish in most situations.
+ Those with high income, but no financial management skills. Even now with no family to support and no "required" debts, they struggle to remain afloat. Simply throwing more money into the fire doesn't help it turns out.
+ Those with low income. Universally, and not for lack of intelligence, they have no 401k, no major longterm savings. If they retire it will be through programs such as Social Security (assuming it still exists). This is the group that worries me the most, because I don't have any answer for how to improve their situation. They're simply caught in the spiral of not having enough money to make progress on saving.
Please don't take my argument as "Everything is perfect now!". Mostly my argument is, "Things aren't majorly worse and are generally better." Nor am I making the claim that the future will forever be better - Social Security might collapse, pension programs dry up, etc. We shouldn't stop assisting the poor, teaching financial literacy, or behaving intelligently. Simply that the average condition of people is better than it was.
Ok. Peace.
"...average condition of people is better than it was."
My generation (X) griped about student load debt, which seemed crippling at the time.
No comparison with today's kids. Then pile on housing costs, rising insurance premiums, day care & pre school (for anyone choosing to have kids), ...
I despair for the millennials.
Inflation has been 3% a year for decades and wages have stayed flat.
Your example of home furnishings has been improved by industrialization.
Property value have skyrocketed, vehicle prices have skyrocketed, college, healthcare...
Things you NEED have become way more expensive. Luxury goods have gotten cheaper.
What hasn't remained flat is the wages paid to the top N% which has greatly increased and accelerated the wealth gap. It is this gap that leaves people less satisfied despite being generally better off.
Every time I read this claim and go looking for data, I find data that says that real wages are roughly flat, which means that they have kept pace with inflation. (That's the definition of real wages: that they are in inflation-adjusted terms.) It seems a common journalistic (and often political) talking point to say exactly what you said, which makes the math or reading comprehension challenged assume something quite different. While the author or speaker is not technically lying, they are merely misleading the reader/listener with a confusing (and sometimes confused) combination of nominal inflation and real wages.
See figures 3 and 4 here: https://www.epi.org/publication/charting-wage-stagnation/
> Property value have skyrocketed, vehicle prices have skyrocketed
This next chart is in nominal dollars (meaning, not inflation adjusted): http://ritholtz.com/wp-content/uploads/2018/02/pricechanges....
It shows that vehicles have not gotten more expensive (even as they've gotten much, much better, safer, more reliable, etc) and that housing and food/beverages have inflated by less than wages and by roughly the same amount as general inflation (which is no great surprise, given that they are a substantial component of the inflation calculation and that it would be difficult to sustain inflation over a long period of time in a consumer-driven economy in the absence of [nominal] wage growth for consumers).
College and healthcare have indeed risen much more quickly than wages or general inflation.
Do you have contrary sources?
Figure 4: "Middle-class wages are stagnant—Middle-wage workers’ hourly [real] wage is up 6% since 1979, low-wage workers’ [real] wages are down 5%, while those with very high wages saw a 41% increase"
I wouldn't exactly describe those figures as "misleading". In fact, they're pretty clear: one group is benefiting much more than the others.
As for the second one, is it really saying that real new-car prices have declined by ~50%?
I agree that they would likely not refute a different, unmade, point about income inequality.
The second reference is saying that real new-car prices have declined by about 36%. ==> 1-(100/155.6)
Median wealth has fallen by 28% in a decade.
The middle class has been reduced by 11% since 1971.
Even in the chart you posted, things people NEED have become steadily more expensive while wages have remained flat.
Student loan debt has skyrocketed over 200% since 1990 which is needed in most cases for a good job.
How is this not decline?
* http://www.pewsocialtrends.org/2015/12/09/the-american-middl...
People who knew me early on in certain contexts thought that I was "rich" comparatively speaking.
They didn't see the 10 year old car, 4 roommates (in a cheap city), camping vacations, sale clothes, etc. I was debt free quickly. I'm in a fairly well compensated gig now but kept the habits. The car is a 2003, my house is older, vacations are in nicer hotels but we drive, etc.
That's not to say that people have challenges that are tough... but so did I!
Things like the extraordinary rise in the cost of higher education -- which has become a near defacto requirement to obtain a livable wage -- should not be discounted. The example of student debt is particularly salient because it appears to materially impact the vast majority of millennials. Even those of us fortunate enough to be making six-figure incomes spend many years pouring money into debt instead of retirement or brokerage accounts. In most cases this setback leads delays in home ownership, starting a family, and retirement. This is a problem that cannot be remedied by teaching good financial skills.
Perhaps the article got that wrong though.
It could be just as likely that the Millennials are saying that they are shunning the crass consumerism that the 'older generation of elite Americans' are steeped* in.
* Boomers, "You're soaking in it." ;)
Keeping up with the joneses is less about having the same thing and more about having the joneses quality of life. They aren't the same if you look at them.
Having a fancy car for example is a status symbol, what is the status? The status is that this car has nicer features, butt warmers, more comfortable seating, better safety. Taking that status symbol a step further, I can deduce that if the joneses can afford that fancy car they also have other fancy things.
Most reduce this logic down to the following: The more individual items I have that the joneses have the closer I'll be to their quality of life.
I think this is a really interesting dynamic though because the more money I make I am not proportionally happier. In fact, my happiness stopped increasing with salary increases the moment I was able to afford bills and have leftover for savings. Since than my salary has grown many times over and I am still the same person I was fresh out of college getting by. My wife and I are still the same couple, we are no happier with the weather we have achieved over the years.
First, you can't tell from looking at their car how well-suited their finances are to paying for it. They could have a 12.99% 72-month loan that doubles the actual cost (plus higher insurance premiums, premium fuel, etc). Or they bought it cash, self-insure, and have money invested that compounds over time and pays their insurance and gas bill for them.
Second, you probably don't know how they are using it. If you're a master salesman with an excellent income, selling 7-figure deals to executives, you might actually get utility out of perceived status! But if you're a coder who walks a quarter mile from parking and works in the basement of the building, the brand name on that car is worth nothing. And most of those comfort features can probably be found in a Mazda for $20K less. Or a ten-year old luxury car. (Personally I love the hatchback which combines all those features with utility and fuel economy! No need to buy the luxury sport sedan.)
Finally, wait, why do you think advertising isn't doing its job? People know what they can't have because of advertising. Then they want it.
This is the perspective people need to have to stop comparing themselves against others. When I learned this I stopped comparing myself and try to buy based on the value add a product gives to me in my use case.
I don't really like doing plumbing, but I've replaced quite a few faucets and toilets. Not because I wanted to be "frugal", but because I could not afford to pay someone to do it; if I didn't, it wasn't getting done. I didn't blog about it; I didn't tell everyone, "Hey, lookit me! I'm saving money!" because everyone else I knew was also doing their own plumbing because they were also broke.
(Now, of course, I could pay someone. But that ship's sailed. Besides, it's really hard to find good contractors.)
The McFrugals, according to the article, aren't talking to millenials or anyone else who needs to be frugal; they're talking to the wealthy, saying "all those people you think are whiney, spoiled kids, really are spoiled, whiney kids."
No, because my taxation burden alone is well above 29%.
I'm pretty sure they're calculating that they're saving 71% of their earned income, but they're almost surely not saving 71% of their earned income plus gross rent receipts.
Edit: Here's how they do it: https://www.frugalwoods.com/2014/04/10/how-we-save-65-annual...
While it's debatable whether everything is "more or less okay", and -- to some degree -- there are definite systemic issues preventing people from being where they want to be financially, I guarantee you that adopting this attitude ("it's not my fault I can't get ahead, the system is messed up") is going to make you worse off financially vs believing/focusing on what you can control and your own agency.
For example, I do think there are some current millennials who sort of got unlucky with the student loan/college bubble and "were told" (or believed) that they could just borrow whatever they wanted to study whatever they wanted, and it'd all turn out OK. But I'm not sure people graduating high school now nec have that excuse. And if you are graduating high school and reading this, for gods sake, please take it upon yourself to think a bit about what you might like to do and take a long, hard look at what exactly borrowing the median 10's of k's of debt might get you before you do it.
To hear people tell it, large swaths of the American population has a retirement savings crisis, not just Millennials (who actually have time on their side to build wealth). Their advice is universally applicable, regardless of age or income.
The folks who were targeted are largely unable to pay, and desperately wanted the airdrop of money they got from Financial Aid to attend.
Tax burden is higher here as well, and while the cost of housing is exorbitant many parts of the US, so it is in cities like Dublin, London and Paris, but without the salary adjustments you see in San Francisco, New York, etc.
This makes it difficult to understand why frugality is impossible for an American making triple the average salary of an average Czech or Croatian.
That's not entirely true. In many cities, minimum wage is substantially higher ($12-$15/hr) than the Federal minimum ($7.25/hr)
> in big cities > So you have to have a car and car insurance
Not in big cities.
I'm saying this as someone who previously had a 1 hr 20 min commute via public transit just to go 16 miles, and that was with the relatively good public transit in the Portland metro area and me literally living a block away from main downtown transit hub.
Name five big cities where a average-wage worker can get by without a car and car insurance.
No demand, no program. Ride a bus in a large city, and you'll see a majority of bus pass users.
Now I spend ~$80 with Google Fi, but I could rely exclusively on wifi and reduce that to ~$20/30. Every other american company seems to want to extract >$80 per month from you.
I'm not sure about housing though. There's a few crazy cities in the US, NY, SF, LA etc. But by and large, the median American pays a substantially lower square footage price than citizens of somewhat similarly rich European countries like the UK, Netherlands, France, Germany, as far as I'm aware. And we also have our outliers in London, Paris etc where the price-income ratio is off the charts. The US has far more land and is far less dense than Western-Europe, with land prices as a function of density (demand for land) I'd say Europeans have less real purchasing power on housing.
That's still $11k coming out of your pocket for the privilege of living in California.
I don’t dispute that state taxation makes a difference. I dispute that it makes such a huge difference.
As for triple the salary in eastern Europe, well, housing and other big expenses are presumably lower. But so is the standard of living.
You have to compare people to those around them.
Plenty of people in Africa would think a $10k annual salary is exorbitant and unnecessary.
No, it doesn't. It's rent and healthcare.
While we have compulsory health insurance not dissimilar to the German system, most areas only have one or two providers (vs. 130 of Germany) whose prices have been going up like 30% every year. We still pay out of pocket for most medicine, dentistry, emergency (like ambulances), and psychological services.
Some utilities are ridiculously expensive. Like internet can be 80$ a month for basic 2 mbps.
A large number of people are employed as contractors these days (the gig economy), which adds a 15% tax (that the employer would pay for employees) for a social security service we will likely never see, so I'm not sure the tax burden is higher. Contractors also have to pay for all their own health insurance (and our cutoff for public assistance for health insurance is like 12k, not the 50k Euro like in Germany)
Which brings me to: we have to pay for our own retirement, even if not contractors most companies don't assist with that anymore, especially for entry level jobs.
I'm not complaining. I'm happy to have those speeds as I live in a very rural area (South/Midwest). I can stream netflix or youtube without hitches, almost all the time.
And I second @sokoloff—I've never heard of a plan that had an order of magnitude greater for upstream!
As an example, last I looked the GDP per capita in San Francisco is $48K, whereas in Miami it is $24K. That is a pretty massive difference, and leads to very different outcomes in a lot of areas.
The best way to think of the USA - and China BTW, which has an even worse demographic spread - is to compare it not to one country like England, or Croatia or the Czech Republic, but to the EU as a whole. Luxembourg is Washington DC, Switzerland is Connecticut, London is New York, Seattle is Berlin, Croatia is Alabama and New Orleans is Barcelona. Those are not exact comparisons, but just a framework for understanding how aggregate US results are so weird.
Because even healthcare, if you combine the population Conneticut and Massachusetts, it is the same as Sweden's with very similar outcomes. Alabama and Mississippi, on the other hand, aren't doing quite as well.
TL;DR, The average for the USA is really misleading, as the spread is much larger than it is in smaller (area and population) countries.
My wife and I were in Barcelona a few weeks ago to celebrate our honeymoon. Prior to going, I did some research on what life was like there. The max salary for most people in tech in the area is about €75,000 (~$USD 93.5k). This is considered a great wage over there. The rents within the city are similar to NYC (studios >€1000k, etc). Barna has a pretty good transit system, but living farther out requires a car. Also, employees get taxed HARD all over Europe and the cost of goods (groceries, entertainment, etc) aren't cheaper than their US counterparts.
The story is similar in London.
It just doesn't compute for me.
Basically, Europeans on average have much lower incomes than Americans, and they seem much more frugal.
Now in SF, I order sushi twice per week. Go out at least 3-4 times per week and lots of times pay for drinks for friends etc, never walk when going out always rideshare. And it's not only about alcohol and food of course.
I could be saving way way more if not for this lifestyle. That's how it goes. Everyone who tells you otherwise are lying to you and worse themselves. Basic human nature. The moment you make more money, you want to take your girlfriend/boyfriend to a fancier restaurant. You want to buy the nicer phone. Except for rent prices which are insanely high, the regular cost of living is not that much higher than living in eastern europe. Actually funny enough when I first moved here, I was shocked at how cheap everything seemed - of course taking into consideration the high salaries. In many cases actually eastern europeans pay more for certain things because for some unknown reason 1 dollar turns to 1 euro, instead of 0.75 of a euro or whatever the price at the moment is. Our petty $350 salaries can sure take it!
Mate, people here have a favorite whisky!I now have a favorite whisky. And as any self-respecting adult it needs to be fancy, not the cheap stuff. Ardbeg, tastes smoky, like swalloing in dim campfire and most bars here will charge you $16 for a glass. There you have it, how people aren't saving money.
It adds up. But I also have a friend here who on a 120k engineer salary and saved 100k in 2 years. Only eating at work, living on a shared room with 3 more people in treasure island. Reimbursing bus fares to work etc. The other side of the coin. Almost everyday I say to myself that soon I will do the same, and sure enough every day I don't. Just like not going to the gym and forgetting to call mom again.
You know what, it's true. If you took a robot and gave it a ground floor job, that robot could work that job 7 days a week, 9 hour shifts, without missing a beat. It would never get sick, it would never need time off, it would just keep working. And it could eat really cheaply, just electricity really, but even if it needed food it could make and eat it's own meals, cutting spending down to pennies per. And it could do this for YEARS and have no problem at all doing so, and buy a million dollar house after doing it for a few decades.
BUT, and say it with me: PEOPLE. AREN'T. ROBOTS. No people are, regardless of which generation they're from. We get sick. We get diseases. We have car accidents. We date. We sometimes have children unexpectedly. We occasionally even, yes, get drunk. We want to go out and party, because you know, we're social animals, and doing nothing but going to work, coming home, and cooking and eating alone is fucking SOUL CRUSHING, and was never ever expected from any other generation to not be.
We're messy, emotional, unstable little things. We make bad decisions. We'll stress about our bills and then go do drugs with friends because it's the only way we can scrape ourselves together to go do it for another day.
The fact that so many politicians and so many pundits just "don't want to deal" with the messy emotional side of being a working student, or just a low-achiever, DOES NOT MEAN THAT THE MESSY EMOTIONAL SIDE IS NOT RELEVANT. To deny any of these things, to deny they exist, to deny they are absolutely warranted, and to deny that they should be allowed because again we are all people, messy little people, is to deny what makes us human, and therefore is to de-humanize the working poor.
The % of people making minimum wage at any given time is a snapshot, and it covers people at all stages of their lives. Are there some people working their ass off and not making it a la an Upton Sinclaire book? Sure. But that's not most people. In fact, most people (1) making minimum wage are between the ages of 16-24 and aren't going to be making that forever. And even among those who aren't, most are well above the poverty line.
[1] https://www.heritage.org/jobs-and-labor/report/who-earns-the...
The linked Federal Reserve article[1] doesn't seem to directly support that statement, but does say that ~55-60% of 18-29-year-old's used or are using loans to finance their own education, but that, "Among respondents who report that they currently owe student loan debt for their own education, the mean level of this debt is $30,156 and the median is $12,000." (Note: that doesn't include those who have already paid off their debt.)
Some things they seem to have in common:
1. A married couple on the same page financially.
2. Both worked and saved before having kids.
3. Decided to move to the country to live more cheaply.
4. Developed a source of income that was portable such that moving to the country didn't leave them stuck with some underpaid local job.
If you study history, part of the secret to the success of the parents of the Boomers is they were two income families during WW2 because of the men being off at war and the women taking factory jobs. Savings rates were as high as 50 percent due to basically war time rationing. So there wasn't anything to spend it on. With the guys off at war, babies were mostly not being conceived.
So, if you can marry the right person, get on the same page financially, both work full time at something better than slave wages while not yet having any children and socking away the dough, you, too, can have this American dream. The reality is very few people can check all those boxes and if anything goes wrong at any point, the entire thing can be derailed.
Please note, this sort of assumes that neither partner has serious health problems or any addictions or needs tons of therapy for some reason. It assumes nothing goes drastically wrong while you merrily work towards your dream, such as an unexpected pregnancy that could derail your plans even if you get an abortion.
No matter how bad your situation, there are a few takeaways worth noting. Celibacy, paying down debt and making sure you jibe well with anyone close to you are all excellent choices that tend to benefit the bottom line.
But, you know, much easier said than done.
(Mr. Money Mustache isn't too different from the FrugalWoods. They never made quite so much money, but they did have good careers. Still, there's a similar message to be heard.)
I get that the high income and extravagant Vermont estate are a turn off for median-and-below earners, but that doesn't mean you have to have their income to benefit from their frugality. After all, MMM and FW have the time to write about frugality because of their financial independence. But they are able to live the lives they want due to the choices they made with their money.
It isn't hard to find counter-examples. How often do you hear of people that make $300k/year, yet fail to accumulate wealth and achieve financial independence? How often do they continue to be held to wage slavery to support their chosen lifestyle?
Anyway, while you can't save money by not painting your kitchen, you can improve upon your self-sufficiency, and you can certainly become more mindful of your values and the choices you make with your money. It takes education (self or otherwise), and financial bloggers can serve as source of education. But you still have to learn how to filter and apply knowledge to your own situation. You can't pluck fruit from an orchard in your 600 sq. ft. apartment, but you can track your spending, and figure out where money is being spent on things that don't line up with your values and long-term goals.
The important thing is to figure out what you can do to improve your situation. Complaining about people being more successful than you doesn't improve your situation. (I do get that income inequality is a whole other issue to address, but I think that muddies this specific message.)
Remember that you can probably find ways to be more frugal and mindful, and know that doing so alone will not get you a 66-acre homestead at the age of 30, but it can improve your life and get you to your goals faster.
That's it.
What you choose to do with your time, whether that be work, or whatever, does not enter into that equation. If you think MMM is lying about being financially independent, then that's a different story. But that he chooses to work has no bearing on his financial independence.
and intentionally is the root skill necessary to a place that isn't dependent on "the system".
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
— Terry Pratchett, Men at Arms
This really isn't as crazy as it may sound. When my spouse was working in BigLaw, we rarely paid anything for weekends out. A typical case was a "charity gala" at a downtown hotel. A law firm partners would buy the tickets for an entire table but would inevitably be working and couldn't go. Even if he could, he still needed 6 or 8 other people so his table didn't have empty seats, which would be very embarrassing. So the call would go around - who has time to attend a free party? Me, that's who. The bar would be stocked with top-shelf liquor only, food was provided and excellent. The catch? You have to know people to get invited. And you have to be able to show up in a perfectly-fitting tuxedo with only a few hours notice. So you buy one, and it needs to be pretty good because you're going to wear it 20-30 times a year. Amortized out, an Armani costs a fraction of a rental.
Furthermore, the author doesn't fully explain how these two were "rich" before pursuing their journey to frugality aside from purchasing a home in Cambridge (which was a smart decision and is definitely possible with a dual-income tech salary in the area, assuming they didn't have debt to begin with).
There are definitely people that are able to live extremely frugally with sizeable salaries and achieve large goals/financial independence in a considerably short amount of time. However, like building a beach body, the question is always "How much are you willing to sacrifice to get it?"
For many (myself included), the answer is "not enough."
And a lucky one. I'm boggled that they found a 4 bedroom in Cambridge MA for $460k in 2012. I was very actively looking for real-estate in Cambridge that same year, and decent 3 bedroom condos started at $500k. I don't think I saw a single 4 bedroom single family home under $1M. Maybe it was a wreck that were able to fix up for not to much $$.
Today their formula can't be replicated here. Any place in that area that can rent for $4400/mo. costs well over $1M so they had great luck AND great timing (interest rates were around 3% also) - on top of smarts and hard work I'm sure.
And yet, I know several people who have done exactly that (more quietly obviously). And several who tried and failed.
The difference? It's debt.
If you can avoid debt completely this really does work, but it takes a LOT of sacrifice on your part to get there.
It's basically a real life form of min-maxing in games. Minimize all pleasure and ease at the start of life, and never get into debt.
Then once you are past that part suddenly it's all easier.
Over time, it will make you much richer than you'd otherwise be. It really works.
/s
And referencing Warren Buffett's shit breakfast advise without considering the money needed to budget for the inevitable health disaster of eating a sugary breakfast at McDonald's every day is frankly ridiculous.
it's super important to make sure that no stone goes unturned in the constant battle to find out who's keeping them down over there on "The Great Left".
/s
I'm emphatically NOT suggesting that poor people are only poor because they don't understand how to balance a checkbook, avoid predatory loans, and how to use the tax system to their advantage.
If Warren Buffett is indeed still paying only $3 for breakfast every day, that's giving a big middle finger to the economy. Money is half of the circulatory system of the economy. When it pools too long in one spot, it clots, and then a thrombosed clot can cause damage somewhere else.
He really needs to spend more on breakfast. As one of the richest individuals on the planet, even if he just wants a sausage muffin, it should really be made from only the highest quality agricultural goods, with a lot of personal services added. If he can't manage to swallow that level of ostentation, buying thousands more of the consumer-grade item than he could eat personally would also work.
The only reason for poor people to permit rich people to continue existing is that concentrations of wealth allow for the development of novel classes of goods and services. There would be no luxury yachts if nobody could afford more than a fishing reefer. There would be no Acura if nobody could afford more than a Honda; no Lexus above Toyota; no Cadillac above GM. The luxury goods and services are the early adopters. Without them, some technologies would have died at inception, never to make it to consumer-grade products, because they were too big and expensive.
Anyone can spend small. Everyone else needs the rich folk to spend big, whenever they can. If you don't buy the best, you are not doing your job as a rich person. If you aren't spending on someone's wage, you aren't really "creating jobs". If you can afford to have your cabinets painted instead of doing it yourself, hire someone for that and get back to being the QC/beta-tester for humanity's R&D. This crap where you "retire" and pretend to be rustic and homey isn't helping anyone. If you want to live like a poor person, that's easy; just get rid of all your money. Give it to someone more willing to spend it.
Frugality stops once you can pay all your bills from your paycheck and still have some left. After that, it's called stinginess or miserliness.
He is fundamentally correct. If you are rich and decide to stop hiring people from your community to build extensions to your already large house, then the money is just going to be pooling in your over-sized bank account: potentially just being deployed by a bank to create profit for other rich people.
As a sidenote, if you are spending all of your money after paying your bills off, it sounds like you're not saving anything, which is a recipe for disaster. You should most certainly not consider such a person to be miserly.
I don't really care if Buffett spends on one $3000 breakfast sandwich, or 1000 $3 breakfast sandwiches, or 10000 $0.30 vaccinations, so long as he spends. He certainly has ample savings and investments for himself, and doesn't seem to intend to support his own descendants in a lavish lifestyle. That spending is what pays other people's living expenses. It is up to him to spend in a way that reflects his personal values and preferences, but if he chooses to accumulate wealth, rather than circulate it, that benefits only him, and no one else. Spending only $3 on a breakfast signals that Warren Buffet does not greatly value breakfasts, or the cultural practice of breakfasting.
That's fine. I'm not a big fan of it myself. But when I skip breakfast, I may be signaling that I don't have $3 to spend on breakfast.
Strictly speaking, hardly anyone does genuine saving anyway. Most people with money to save will deposit it in a bank, which then invests it and just pretends it is being saved through mathematical fictions. The recipe for anti-disaster is to spend on insurance and to buy financial instruments that promise a steady income. Burying your gold just makes you worry about where your gold is buried.
Once you have that $X in your portfolio, and are living comfortably on the 3% return from it that you can safely spend annually, then in my opinion, it is then your economic responsibility to spend that whole budgeted amount on things you like. If you aren't spending more, you must be entirely satisfied. And if you are entirely satisfied, you don't need more money to spend. If you don't need more money to spend, you don't need to buy additional income. And if you don't want to spend and don't need to invest, then what are you saving it for? If you continue past that point, you are crossing a rich-person event horizon where you can't send money out as fast as it comes in. You will start sucking ownership out of the economy and asphyxiating businesses that would otherwise be viable. In the end, you will either have to start frantically giving away money, people will have to start stealing it from you on a massive scale, or you will become a wealth singularity as everyone around you starves.
how do you expect to get to a place that enables you to farm with your comrades if you're all too busy getting a paycheck?
imo, you MUST take care of yourself and your financial needs before worrying about how stingy or miserly you are.
That is, Warren Buffet probably can't move the needle much through consumption of goods. Even if he replaced his $3 breakfast with a $300 breakfast it's just not going to have a huge net effect.
Instead if he manages his finances carefully and leaves himself capital for investments then he's able to influence entire markets at once. This is a lot more effective use of his leverage than simple consumption because it drives innovation, fosters competition, etc.
There's certainly something to be said on your points of wealthier consumers pioneering technologies and solutions for the rest of the world. I believe it's more realistic to look at the upper-middle-class for that sort of thing than the ultra-wealthy though, as people like Warren Buffet are the 0.1% of the 0.1% of the 0.1%.
He buys companies with it. He invests and invests and invests during the day, and at night, he sits in his $150k house, with all the lights turned off except the room he's in, with the mechanical thermostat set low in the winter and high in the summer, mending his own socks.
He's an octogenarian, and it doesn't look like he has any plans to support the luxury goods and services industry any time soon. Nor does he seem all that interested in starting new, risky ventures with a lot of R&D. Instead, he has pledged to leave the majority of his fortune to the Gates charity, so they can spend it for him. He literally can't think of enough ways in which he'd like to spend his earned wealth, and has to give it to someone else.
It's not quite leaving it in a money bin, but there's a luthier out there severely disappointed that the best ukulele never made won't be bought by the richest ukulele player that ever lived, because he's just fine with the same $15 model they sell to elementary school kids. There's a professional cook out there severely disappointed that after all those years in school and as a sous chef, the guy that could give someone a break on the way to their own restaurant is still eating his breakfast at McDonald's. And there's a Patreon dependent only one $10/month subscriber away from making rent. And a Lyft driver that would rather be a personal driver. And a landscaper that is one big account away from buying another truck and hiring more employees. And a TaskRabbit peon that would rather be an executive assistant. And a gym teacher that would rather be a personal trainer.
He's just not doing what everyone expects from people with enough money. He's selling underwear and insurance policies and Dilly Bars, and not buying anything fun and expensive from any of the people who would desperately like to sell something fun and expensive, to anyone who could afford it.
Gates is buying malaria and parasite eradication. Musk is buying a Mars colony. Buffett is buying all the same old boring crap that poor folks can buy.