Comment by noduerme | Hacker News Reader

Comment by noduerme | Hacker News Reader

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There's probably a corollary, although I don't know the name for it. I still have one pair of shoes and a week's worth of shirts and underwear, an old projector and 10 year old speakers although I own a house and have a net worth over $1m.

I've certainly felt the sudden gravitational pull that comes from having one nice new toy enter your life. It manifests as a sense that "wow, this little overpriced thing is so enjoyable... why am I sitting on a pile of savings and denying myself things that would make my life so much nicer?" Slowly, I started spending $20 for a bag of coffee beans I really like instead of $12 for something that's just okay. But it has to stop somewhere.

I realize I only buy the big ticket items when I either am seriously depressed or feel like I'm going to die soon, or both. The rest of the time, money in the bank is more interesting to me than nicer stuff. This is probably a phobia of spending money that I'll go to my grave with.

I feel guilty spending money on nice things I can do without. I call it therapy by shopping. But I made a rough calculation of how much it added up to over the last 10 years: < 2 months of income. I would not be a whole lot better off having that money in the bank.

So, as always, it's a matter of balance. You can't judge spending as good or bad, what matters is how much relative to your means.

A one-time $1k splurge is less expensive than a new $10/mo habit as long as it really is one time - the whole Diderot Effect thing helping us to think about why the splurge might not be as bounded as we’d hoped, though.

I try to think of recurring expenses in terms of how much capital it would take to fund them in perpetuity (because I may well live another 50 years!), at 3% interest.

That $10/month subscription? $120/yr, or $4,000.

That’s not at all guaranteed to support the expense forever, but I find it’s a useful way to think about little recurring expenses before they add up out of control.

I kind of sweep through those small $10/mo subscriptions once a year with a sponge, as if cleaning the shower. They tend to attach like barnacles. It's good to sit down with your credit card bills and have an overall review of, e.g. "did HBO MAX actually provide me with $160 worth of entertainment?" If you remember $160 is ten burrito supremos, you think one way (i.e. HBO sucks). If you realize it's half an hour with a methed out hooker in Florida you think another way (i.e. Last Of Us was way better and lasted a lot longer). The point is, y'know, to think about it once in awhile so you're not some asshole just dumping money.

I'm joking about all that, if you can't tell. But... Fuck people who say that counting pennies makes you cheap. Those are the people who'll never be rich.

A one-time expense also has an opportunity cost though. If you invested your $1000 with an average 4% yearly gain it'd be $4800 after those 50 years.

(but then of course the same opportunity cost also applies to your monthly payments)

Also you switched 3% to 4%.

(And for inflation of the subscription, I assume theae are after-inflatiom rates)

> what matters is how much relative to your means.

Needs, not means. (And some comfort/relaxation is a need). Being richer than most isn't a reason to splurge more, it's a signal that something may be wrong with society.

> Being richer than most isn't a reason to splurge more, it's a signal that something may be wrong with society

I have to disagree hard with this. The rich _should_ splurge, as that makes the money flow back to the economy. And in some cases go to artisans that have no mass market appeal.

This sounds like a useful corollary for a high income individual that should apply generally, but if you watch videos on the "death of the middle class" videos you'll learn that the middle class in America didn't actually die recently, its actually just as big as it ever was, it's just stuff like spending on cars and housing is wayyy more expensive than ever so even us well paid software people are functionally poorer than we should be.

https://youtu.be/0sj-8pjt9Xk

IRL the vast majority of these consumer spending things don't play a massively damaging role in the average consumers life / upward mobility... at least relative to history or other regions. But a few things do. When you start getting serious about personal finance people tend to obsess about the small less important things we're wasteful about. Mostly because it's more obvious locally and easy to feel guilty about (consumer electronics, clothes, restaurants, etc).

But in practice for healthy well employed workers 80-90% of the time self-imposed poverty comes down to two things: cars and renting housing.

Cars ranks #1 easily in terms of actionable things, if you asked 90% of middle class households making >$100k you'll find car loans/costs are easily the biggest burden on disposable income. People buy cars they can't afford and getting $30k+ loans plus the associated costs of nice cars (damaging them, insurance, etc) it becomes very apparently the biggest thing stopping someone from having extra money that could be invested in 10x+ more value like paying off high interest credit card loans (rather than adding another +interest car loan) or simply investing in better things like real estate, small businesses, personal development, stocks, etc etc.

The other elephant in the room that far, far outweighs spending on vanity consumerism is housing. This one involves plenty of personal responsibility but of all the things in Americans/western life this is the least to blame individuals.

Stopping Americans from buying stupid expensive cars is a very hard mostly social problem, but housing is something that could be solved much more simply through stuff like ending zoning and anti-NIMBY laws.

We could gain plenty from working on the smaller tier consumer stuff at the same time (every dollar really does matter and you don't know until you track it) but education about cars and gov action on increasing housing supply would be the most productive work in the short term.

I seriously don't understand how is it possible to overspend on a car. House sure, because many people, conveniently for developers, confuse it for investment, but a car? Besides, cars are cheap and getting cheaper vs inflation let alone incomes. Are people just trying to buy the most expensive car they can get a loan approved for?

Since the vast majority of American car buyers finance them, a lot of them get channeled by salespeople to think in terms of the monthly payment instead of negotiating on the full price. Also, a lot of people go car-shopping when they think they need a new car right away - current one has an expensive problem or just got wrecked, and can’t step back a bit by deciding to spend a few hundred more on Ubers or a rental for a week or two (this is where even somewhat inconvenient public transit can make a huge difference).

And since enough of them have $40k+ SUVs and “crossovers”, those become the norm for middle class families who really would have been just fine with small station wagons (if those were actually available in the US market)

The best way to escape this cycle is to only buy the car you can pay for up front (even if you then take a loan because the interest rate appears to be in your favor). Do this enough times, and you’ll be ok with plonking down the cash for a $15-20k carefully-researched, moderately-used vehicle with a warranty, but be horrified by the very thought of that $600+ 5-7 year loan so many of your colleagues accept as normal.

I'm baffled by how much people spend on cars. But I get it. Everyone else is driving a nicer car, so you feel left out. Even if your rational side knows it's stupid, you still feel less than.

It's the same with homes. But as you say, at least real estate tends to hold it's value somewhat.

> But as you say, at least real estate tends to hold its value somewhat.

Expensive land usually does appreciate (in some areas, only until interest rates go up?), but the house on the land is a money pit.

In America, the best investments in the past 100 years have been structures like car dealerships built on cheap land around the exurbs of major cities. You get commercial use of the structure, wait 20 years for it to be surrounded by residential development, then sell the land. This, working hand in glove with the driving and commuting culture, had been the middle class gear in the system attached to the resource extraction itself.

I'm not here to pass moral judgments on this method of creating wealth, although to me unnecessary mineral extraction for energy is largely fraught with moral hazard. But to say that real estate isn't an investment is to consider the past two centuries of American economic growth to be a temporary aberration, and I don't think you can do that in light of the degree of economic reliance that has grown up around it.

There's a smart side to this, and a lot of people take it: Buy a car that has all the features you want, for almost half the price. Buy a house in a neighborhood that's run-down but improving and that you can help to improve. You don't have to be famous on social media to be a "thought leader" and increase the value of your assets by pulling gullible people into your aesthetics or way of thinking.

You can just show up and buy the thing and use your skills to improve the thing, which improves everything else around it.

There is enormous financial leverage if you can do that, because most people aren't willing to put in the work.

I think it can be easy to overestimate your requirements for a car.

If you mostly use your car for a ten minute drive to work, but twice a year need to drive several thousand kilometers, it may be tempting to optimize for the latter (in terms of size, comfort, velocity), whilst it may be cheaper overall to optimize for the former and hire a vehicle for the latter.

In my case it's not optimization, it's just constraint satisfying. My constraints are: I don't want two cars and when I drive on holiday I pass through eight countries. Most rental companies don't like you to take the car out of the country. So to satisfy all the constraints I have a big car that is comfortable to drive for long distances.

Of course not everyone takes long holidays (several months) touring so their constraints would be different and satisfiable with different solutions.

Most cars can drive a little over the speed limit just fine, and a cheap minivan has as much space as most expensive three row SUVs. Maybe getting an upgrade with a TV counts as "optimizing?" But you can get portable screens that strap to a seat for under a hundred bucks on sale.

A house in America is an investment and it's considered a depreciating asset for tax purposes, which means that even if it isn't a good investment, it's subsidized against taxes over a long term. A car is an asset that simply depreciates the second you buy it.

parent here... I own two cars. One I bought outright for $2700 and put about $15k into restoring over the last 5 years. The other is the only substantial debt I have, but I bought it for $30k at 2.99% ...and considered that a good place to put my money. I understood interest rates were about to rise and used car prices wouldn't fall anytime soon. Nothing I did in that regard was something they don't teach you in 9th Grade Macroeconomics. I take small loans if the rate is right because I'm pretty sure I can use that $30k to generate more than 3% a year, so, it's free money. Other than that, I'd never take a loan for anything, ever. That seems to be the fundamental piece of logic most people haven't been acculturated to.

Yet... I know a lot of people who are otherwise uneducated (high school, if that) who understand this implicitly. I don't think it's exceptionally American or even related to education level. It's learned by going through actual deprivation and remembering how hard it is to earn every dollar you make.

[edit] what I'm referring to here as 'it' is: Never take a loan unless you are sure the value of the money over time in interest or investment favors you. A loan is just a bet that you can do better with that money than the interest rate you have to pay for it. Why don't they explain this to children anymore? [/edit]

I'm a 3rd generation American. I've had a view, for my whole life, that America is a machine that turns ambitious producers into lazy consumers over the course of a couple generations. Being ambitious, and producing, is at least as much about making wise decisions with your savings as it is about earning.

Personal observation: The immigrant tendency to save their money used to be racially judged and regarded as a type of "cheap" "hoarding" - always, of course, by the 3+ gen stock of old money. But the phrase "a fool and his money are soon separated" is as true today as it ever was: the tendency of the children of the rich to be idiots and blow it all is the greatest bulwark against generational wealth we possess in a free market democracy. Far more effective than any tax.

Deprivation is key not just to the hunger to create, but the hunger to conserve. It has to be experienced or taught.

I feel like I'm the same.

In my case, personally, this is a product of my upbringing. My parents were the first generation of our family to have a little extra income (grandparents were poor farmers).

I have a good salary by all accounts, but still count the beans, since this was what my father taught me. I am extremely weary of spending large sums of money in anything.

not weary. Wary (it's a different word: weary means tired, wary means suspicious). You are right. All Americans of the 3rd generation miss this. Many of the 2nd generation miss it.

COUNT THE BEANS. Teach your children to count the beans. The moment you stop counting the beans, you become a degenerate consumer zombie.

That means: Make money AND save money.

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