Why Should I be Frugal, When I’m So Rich?
Ahh, money. The more you have of it, the more you get to spend, right? Everybody does it that way, so that must be the right way to do it. We all agree that, sure, the debtors and the flashy live-beyond-their-means club need to rein things in. But for those honest folks who work hard and earn plenty of money – they might as well spend it on whatever they please. That’s the good life. They deserve it!
This is surely what people are thinking when they call Mr. Money Mustache “Extreme”.
“The triple M family retired with too little money for comfort, and that is why they are forced to live such a spartan lifestyle. They’re fooling themselves if they think they really are living well on $25,046 per year!“
To illustrate the point, let’s dive into the MMM Mailbag and consider a couple of recent letters from readers:
What made you want to retire? You are a very young guy who is very well educated. Your education allows you to make over 100K a year + benefits. I am not criticizing, I am curious. It seems that you were happy at work, what made you want to quit?
Why live a frugal lifestyle when you can easily spend without thinking about money and work?
While this reader initially caught my fancy by throwing out words like ‘educated’ and ‘young’, the letter rapidly took a turn for the worse when it started talking about the $100k and the benefits. Because that transported me right back into the cubicle, with a thick layer of tinted glass between me and that expansive view of the Rocky Mountains and the accompanying fresh air that used to taunt me at work.
Why live a frugal lifestyle when I could instead go back to work in order to earn more so I could spend more? Because I love being free to do whatever I want… right now! Because I have a seven-year-old boy, my little pride and joy, who has way too many plans for us every day to ever let a job get between us. And because I couldn’t imagine spending any more money than we already do – our life is already an overwhelming conveyor belt of abundance and I can hardly keep track of all the tumbling boxes of luxury as it is.
Now let’s consider another email that offers an interesting counterpoint:
Comments: Love the blog. Wanted to give a perspective I’m not sure gets expressed very often:
My income last year was a little over $1 million pre-tax, and while my wife and I live a quite modest lifestyle by high-income NYC standards, we still spend absurd amounts of money on absurd things.
The “problem” (obviously a cadillac problem) is that we have no incentive to make smart choices on a day-to-day basis. Since we live so far within our means, we just go ahead and shop at the crazy-overpriced neighborhood gourmet grocery store because it happens to be the closest. We buy organic meat because why the hell not – maybe it’s a little bit better for you. We take cab rides at $30-$40 a pop when the subway is inconvenient.
Now… obviously it’s a luxury to be able to put such a high priority on my own time and convenience and minor health improvement. But… I find that living this way is actually somewhat stressful and depressing. Trying to find the cheapest/best way to navigate life used to be invigorating and emotionally rewarding for me, as I know it is for you and your army of Mustachians. I stopped doing it because it started to seem irrational to put a lot of thought into saving $20 when I make that much in 3 minutes at my desk. But it turns out that putting that thought in is *fun* and keeps you vital.
I don’t know how many purely recreational mustachians there are but in 2013 I will be trying to become one!
By the way I now know two other successful Wall St types who are big fans of yours. In this business we tend to hate our jobs, so we are a very good constituency for early retirement advice!
What’s going on here? Why would a man be frugal on a million dollars a year? And then seek out additional frugality measures to make his life more interesting?
Therein lies the whole reason this blog is useful to anyone. If I were telling you to spend less money just so you could get out of debt, save up a fortune, and then eventually spend loads of money (which I recall is a paraphrase of the Dave Ramsey slogan), the advice would be useless. Because that would imply that the lower-spending portion of your life is less good than the subsequent high-spending part. What if you never get to the high-spending part? What if you fail or die first? It would have all been a waste. Better to just keep spending all your money now, to get the most out of life.
While this has become the accepted wisdom of contemporary society, you and I are fortunate to have discovered at such a young age that it is all bullshit.
Spending more money on yourself can spare you from hardships. But hardship is just an unpleasant way of writing “effort”, and effort is really the only thing getting you out of bed in the morning. Effort is the spice of life. If you smooth over all possible difficulties with Benjamin Franklin Wallpaper, you end up with your enormous jello-like form sprawled in a hovering cruise-ship deck chair staring at an LCD screen while soft-spoken robots bring you drinks. Your life would be like playing a video game with infinite cheat mode enabled and the joystick taped to the right – you just coast through level after level perfectly straight while the bad guys explode as they touch you. Except in real life, you too die at the end.
Although I’ve never made a seven-figure income, I can still relate to the writer of that second letter. You see, a little-known fact about the MMM household these days, is that while we continue to live the lifestyle that many consider extremely frugal, we’re not actually short on income.
Try as we might to earn less money, our income has gone up almost every year since retirement in 2005. Rental income increases from the rental house, stocks pay dividends that are reinvested. People take up hobby occupations that end up delivering occasional windfalls. All in all, we are now at a point where we could probably triple our annual spending forever, without running out of money. And yet, I continue to ride my 2008 commuter bike everywhere, get filthy doing local construction projects, and buy everything used from Craigslist. Mrs. Money Mustache rides a 10-year-old mountain bike for her primary transportation, wears old clothes (that still look rather nice on her fine form) and spends about $50 per year on haircuts and beauty products. We’re even shopping around for a smaller house in the neighborhood, to downsize our space a bit. How could this possibly be?
It’s because our current life is already more than enough. We don’t want to lose the challenge and the spice that is part of life right now. I have only one digestive system, so I can’t eat any more spectacular food than I already do. My house is already big enough to hold everything I own, plus all my friends. My subcompact Scion hatchback can easily hold the whole family and our stuff, and exceed any legal speed limit. How could an even fancier car possibly make us any happier?
Another factor in happiness for me is the satisfaction that comes from efficiency. I love seeing things that are efficient, elegant, well-designed. And of course you’ve probably noticed my corresponding boiling rage for things that are not. Buying treats for yourself that aren’t truly necessary is inefficient. It’s unsatisfying.
Paul Allen’s 414-foot Octopus yacht has engines totaling 19,000 horsepower, which burn about 622 gallons of diesel fuel per hour at cruising speed. It’s currently off the coast of Australia, a journey which took about $780,000 of fuel to make. This is an inefficient way to have fun. A man skilled at having fun should be able to achieve equal bliss within walking distance of his own house. He could then invest the surplus funds to save a few lives, which are surprisingly affordable these days at only about $200 per human according to Peter Singer. Or you could start companies, fix cities, or even change countries. All challenging and effort-filled endeavors, that these days can be done just as effectively in thrift-store clothing as they can in Armani suits.
And so I’d like to issue a challenge that you consider deflating, rather than inflating your own lifestyle as you get richer. The desire for luxury, while very real and occasionally pleasant to satisfy, is actually a weakness that stands in the way of a happier life. Getting off of the path that society has beaten for you will lead to much better adventures. So I’d rather work towards strength as I get older, rather than striving for weakness.
After all, which would you rather be, the man who requires 622 gallons per hour of diesel and a crew of 60 to have fun, or the one who can do it just by stepping out his front door?
Article: How To Start a Blog
Where to next? Check out a Random Article
|
Stay in Touch: Subscribe to posts by e-mail, RSS Feed, or follow MMM on Twitter and Facebook.
Join the Conversation: Learn from Like-Minded Mustachians in The Money Mustache Community |
Mr. Money Mustache is a family man living in the United States who retired from work, relatively wealthy, at about age 30. After several years of retirement, he noticed that his still-working peers were envious of his lifestyle. They were making more money than he ever had, yet they were somehow still broke. So he decided to write this blog to educate the world on how it is done.
I would like to have an investment property to work as a rental for my family. Then I would like to retire. I’m 43 and I only started saving a little aside 7 years ago.
My family began being frugal when I was pregnant with our daughter 7 years ago. In that time we got some education, found permanent full time stable jobs, purchased a small car with cash and a unit which we have nearly paid off. We stopped the parties, drinking and smoking. We chose a different path and were happy working the hours we did.
Now 6 years latter our desires are shifting again. We have worked hard and saved hard – now we want less time in the office and more time doing things for ourselves. More cooking, creating, fishing, gardening, talking, laughing… I’m sick of facing a computer each day. When I stand to stretch at my desk I have the view of the sea – it’s a paradise out there, but I’m stuck inside for more hours then I care.
My partner was recently told his job was being cut – so interestingly lack of employment has actually put us in a panic as we are not at the stage of having a rental and retiring yet.
I enjoyed your post – It was great food for thought for me in my time of thinking my life over as was http://wholelarderlove.com/forest-food/ where he talked about a similar topic but in a different way. I’ve never been to your blog before but someone posted it on the Non Consumer FB Page a few minutes ago :)
Best wishes on your plan. Sounds like you are on the right track to retire.
Ah, this is why I love your blog, MMM — because you recognize that personal finance is completely useless except as one more tool for cultivating happiness. I’ve been reading all kinds of PF blogs since I discovered this one a few months ago, and almost all of them talk only about how to improve your financial position, as if an improved financial position is the same as increasing your ability to enjoy your time on earth. They overlook the entire reason for wanting financial security in the first place. Money does nothing for us if we don’t know how to use it to improve our level of happiness. Anyone can leverage money to make more money, but it seems like only a minority of people consciously think about how to leverage money to make more happiness. This blog makes me happy.
+1 to David Cain
I agree, being frugal is actually fun for me! Now, I am pretty “poor”, being a divorced mom living on $20k a year with no child support, but we live a super nice life! I work five minutes from home for about 35 hours a week while my kids stay with their awesome grandparents! I have plenty of savings, and we can do whatever we want, including cool annual vacations, last year was Maui, this year to visit family in Oregon..we have health insurance and all the other insurances we need too.
It can totally be done if you are smart with money and think of cheap fun ways to entertain yourself. Today my kids and I are going to pack snacks and go hiking and visit the local nature center! They will have a fun day, and I will spend nothing today.
I am deeply impressed with your frugal style and approach. Two questions: What do you do for health insurance? Where do you live in the US (not asking for your address, just the State and maybe the County where you live). The first question is due to my pre-existing conditions and medication costs. The second is wanting to understand housing prices, property taxes, etc.
My gut about my wife and I is we will find we can live on about $40,000 income a year (meaning that is a grossed up sum including taxes we’d have pay on the income) once the children leave home. We see our Social Security, if the jerks in Washington/Wall St. don’t completely ruin it, as being quite generous for our lives.
Thank you again for your insight and advice.
MMM’s $237/month health insurance is talked about here. http://www.mrmoneymustache.com/2012/11/01/our-new-237-per-month-health-insurance-plan/
And they live in Boulder, Colorado
: )
This was beautiful. MMM is as poetic and efficient with his words as he is with his money. Thank you!
I love the article on the Washington Post website.I hope it changes a few people’s minds about how to live.
I am so thankful that you post a few times a week, MMM. You always “bring me back”; I need the reinforcement after getting bombarded by our society’s (and my neighbors’) screwed up values.
Absolutely LOVED the Washington Post article. Wow, man! How did that happen!?!? What a cool week.
We could ask the rich to “save lives” via their checkbooks and that would be quite logical, but it’s too disconnected to be a real diversion for the well-to-do.
I would like to see the rich take the challenge of reversing urban blight: purchasing crummy properties then financing construction of good buildings and the startup of good businesses or nice housing. It would be like real-life Monopoly for them, a game of exerting their financial might on the side. By doing it primarily for show and not primarily for money, the development would not be strangled by bean-counting or fast-profit temptations.
The aforementioned Paul Allen did this in the South Lake Union neighborhood in Seattle.
What was dilapidated buildings, meth labs, and a generally dirty and unwelcoming neighborhood is now one of the most walkable and beautiful in the city. It has one of the best parks in the city, beautiful environmentally friendly mixed use buildings, and the headquarters of Amazon.com.
Paul Allen is a fine example of a person who has used some of his wealth to improve our city. Yes he is wealthy beyond anyone who posts on this board. I think it’s very difficult for any one of us to imagine our lives if we were in his financial shoes. If you want to get an accurate picture of the man I suggest you read his book: Idea Man
He has survived two bouts with cancer, and did not grow up wealthy although he did have the advantage of having a first class education at the Lakeside School, which his parents sacrificed for he and his sister to attend.
Jeremy, thank you for mentioning his work in the SLU area of the city.
I would FULLY agree with Mr. Money Mustache here. It’s all about having time and freedom to enjoy your life rather than being a slave to someone elses schedule to buy more stuff you don’t need which puts no added value in your life. I would add, however, that those of us who think this way represent only a small fraction of the population, 1 percent at the most.
I think it’s as important to think about how much happier you could be getting rid of some of your stuff. Having a bit more space, in home and mind, for something (anything!) else is really great. Growing down into a smaller house will become more popular, I believe. Maybe we’ll grow from ~1% to 5 or 10%, and we’ll actually be visible to the mainstream.
We’ve done it. Yacht isn’t exactly the right word to describe our home, however, it’s more like just a boat. We can jump off the boat and kayak, surf, snorkel, swim, walk on the beach, eat cheap tacos, etc. all within sight of here. It’s never cold and not too hot. We bought the boat for about that a nice used Toyota pickup costs, sold all our crap and left. The three of us lived in the boatyard in a small RV for several months while we got the boat into serviceable condition and we sailed away.
We keep our spending down because 1, we don’t have room for any more stuff, 2, cool shiny new stuff is super expensive here, and 3, we prefer life at anchor to life in an expensive marina.
We supplement our income fixing boats here & there, building websites here & there, and mostly by not consuming.
I learned this one early on in this adventure. Electricity isn’t free. It’s expensive to make on a boat. What’s the cheapest way to generate adequate electricity? Consume less!
Well written and balanced post: Thanks.
I am on the same path as you (financial, joyful frugality, renting out real estate, doing same type of building jobs) it is remarkable. You in the middle of US I in the middle of Europe. Are cultures coming together?
As soon as our youngest leaves for college my fiance and I intend on hitting the road full time in our 1986 motorhome that we paid cash for three years ago. This is our lifelong dream and we cannot wait. We have discovered that nothing will curb your shopping faster than the question “Where will we put THIS in the RV?” We have been downsizing every month since we met three years ago. The youngest of our combined six children is 11. It is taking absolutely ALL of my self-control not to take him out of school and teach him on the road.
When the New Yorker talks about his lifestyle, he talks about physical things first — expensive meat, taxis, etc. If he mentions their value to him, they’re “absurd” and “why the hell not.” He sounds like he has stuff, but is searching for meaning to it.
I think he realizes the point in caring about spending is to save money *second* and to improve your life *first.* He identifies fun as a motivation to care. MMM usually talks about freedom and happiness. So caring about spending is a means to an end of freedom, happiness, and fun.
The kicker comes at the end of his passage — he and his colleagues hate their jobs. Hate — probably the most powerful word there. For someone who can afford anything and is looking for meaning amid absurdity, I bet fun, freedom, and happiness make frugality attractive.
I would suggest instead of asking why spend a few minutes to save $20, why submit yourself to a job you hate forty hours a week (more like eighty with bankers I know) so you can save those few minutes?
As a West Villager with an Ivy MBA who declined that lifestyle, I know he can enjoy 90% of its benefits working about 20% of the time through caring about what you spend, replacing what he hates with things he can love. He can do that now, not just hope for it in the future. I still live in the Village, travel the world, eat great food, stay in great shape, and party with people like him — only I don’t hate any part of my life. He can too. It’s not just about retiring early. It’s about loving every part of your life now.
Good article! Keep in mind that these people that live extraordinarily inefficient lifestyles are living this way not so much to have “fun” (though they probably do) as much as to broadcast to others whom they want to have influence over that they have the means to “get things done” and thus cultivate influence amongst a specific group of people. In many cases, this kind of social advantage can, in the end, far exceed the initial outlay in luxury goods and conspicuous spending.
It’s one of the main failings of Mustachianism (one of the few for a true believer like myself!) is that it does not take into account the social capital you can earn from conspicuous consumption and how that can be used to accomplish major community and personal goals. Part of financial independence is having the freedom to realize your life goals, and an unfortunate circumstance of the world we live in is that people respect and take direction from people who display enormous wealth. Nothing moves people to action faster than money, and if they believe they can get it from you in spades, they’ll be quick to jump on whatever pet project you have brewing, and gladly.
If your life goals are small, then you can dress however you want and generally do whatever you feel like… but the bigger your goals are and the more people you need to help, the more of that green lady you need to get it done.
As someone who’s worked in the service industry for all of my working life…bullshit. People will jump through hoops for you if you’re NICE to them. If you’re rude, F you and your money. I know very, very few people (perhaps it’s my area?) who are willing to work harder for someone just because that person is rich. Often, you’ll find that it’s the people who “look” wealthy who are the biggest tightwads anyway.
If I have to throw around money just to appear wealthy to achieve my life goals, then I need new life goals. Those goals which require the appearance of wealth won’t make me happy.
You misunderstand… I didn’t say anything about being a rude or unlikeable person and compensating for it with money. I’m talking about people who are generally good and helpful people already who have big plans and big dreams. People are attracted to wealth regardless of personality, but if you’ve already got the personality AND you have the wealth on display, your potential is limitless.
That’s what the conspicuously wealthy pay for when they throw money into “wasteful” luxuries. It’s an investment in social capital and all the benefits thereof.
As an aside, you might find Thorstein Veblen’s (father of the “Veblen good”) “The Theory of the Leisure Class” an interesting read if you want to know more about why the wealthy pursue wasteful luxuries.
There are lots of ways to earn “social capital”, as you put it.
Sure, you can use money, getting people to dance to your tune that way.
You can also volunteer at your kid’s school, help a neighbor build a deck or move, watch his or her kids during either of these processes or write a blog that slowly changes the world.
The time you spend *with* people – helping them – is at least as important as the money you’re willing to spend *on* them (or just to show off *to* them).
While I agree that people like us, who are middle to upper middle class and tend to live in socioeconomically homogenous areas can gain a lot by being a “good neighbor” and building up a store of “favors”, it really is an entirely different scale of measurement for the people that MMM is talking about in this post. We play the same game as the very wealthy, but the stakes are much, much lower.
For the people that spend enormous amounts of money on wasteful luxury goods and services, they aren’t doing it for leisure. There is a very specific utility they are expecting from this type of consumption, and has more to do with power, influence and class than it has to do with leisure. In fact, leisure is very much secondary and is only a byproduct of the drive to maintain and build status with influential people.
The problem I think a lot of Mustachians have is this image of false equivalence; that the value system of the blue and white collar wage servant class is equal to and on the same scale as the upper and leisure class. It offends our sensibilities to see that kind of wasteful wealth on display, but for the people engaging in it, it is completely rational and the most effective means of building the influence and expected status of someone of their means.
So, I am far less critical of these people for a couple reasons:
1) We are all victims of the biologically ingrained propensity to lifestyle inflation. There are well studied and understood evolutionary and sociological reasons for this. It takes superhuman effort, the higher you go up on the class hierarchy, to deflate excess spending. If any of us were in such a position, I would challenge you to do so and see just how difficult it is. The more meager your means, the lower the stakes and the easier it is.
2) We all work for these people. Their consumption of extraordinarily large amounts of goods and services both by themselves and the people who are directly dependent on them (vicarious consumers) are the engine of modern economies.
I support Mustachianism because it breaks the cycle of servitude to the leisure class, but we shouldn’t be under any illusions that as we find ourselves moving up the food chain, the lifestyle inflation required to build social status becomes more onerous. None of us are immune to it, and knowing that helps us gain control over it.
I. Love. This!!!
I just discovered your blog and it’s filling me with joy to read! So refreshing. So amazing!
We have very wealthy family members who live in another part of the country. Every once in a while we get to experience life among the 1% when we visit them. Over many years I’ve tried to come up with benefits of living a life of luxury 24/7. All I can think of is that I guess it’s an interesting concept to not have to look up the price of a good or service. But looking up how much something costs takes seconds so it’s not something I mind doing.
However, there are so many downsides to a life of overconsumption and designer everything. There seems to be an intense need to keep up with what equally wealthy peers are doing or buying. This involves constant shopping and churning of stuff in and out of multiple residences. We all know how incredibly wasteful this is, not to mention time-consuming.
After our trips I’m always very happy to return to my little house with the beat-up old car outside and second-hand treasures inside. I feel terrible thinking about the waste, pressure, and craziness that are the byproducts of overconsumption. I feel even sorrier for folks who go into insane levels of debt trying to aspire to elements of a life of luxury. Over the years I’ve felt like acquiring so much crap is just not something we’re physically or mentally equipped to handle. Reading Dr. Peter Whybrow’s excellent book American Mania confirmed that – excellent book and highly recommended – http://www.peterwhybrow.com/books/americanmania/about.html .
Bloody marvelous article! Especially liked the last paragraph.
Hey MMM, I just noticed that the Post article made it to the Google News Spotlight section – #2 link under Most Popular on the right. Here is the link as of right now, the content probably changes constantly though: https://news.google.com/news?pz=1&cf=all&topic=ir&siidp=d16a081670c83c3960faffba51ba796856f8&zx=z7exv6b7lor6 .
A description of the Google News Spotlight section, according to Google: “The Spotlight section of Google News is updated periodically with news and in-depth pieces of lasting value. These stories, which are automatically selected by our computer algorithms, include investigative journalism, opinion pieces, special-interest articles, and other stories of enduring appeal.”
Congrats and thanks for sharing so much great information with us!
You make great points about trying to be frugal while rich – and I agree with them but find it hard to implement them.
The core issue is that there are other motivations for both making and spending money that people with different psychological profiles don’t understand. I grew up different, being made fun of, wasn’t very athletic or good looking, but I had an above average level of intelligence and worked hard in school. My motivation for doing so was so I’d have more and be better off than my peers – and that was when I thought the world evened out for people like me.
Spending money on nice things makes me more confident as I naturally feel insecure in my own skin. If I’m wearing nicer shoes and watch than the next guy, it naturally gives me confidence. A frugal lifestyle implies that you differentiate on god given traits and the inherent goodness in your personality. If you don’t have very much of the first, and the second doesn’t make you feel a whole lot better about yourself, then you naturally turn to alternatives.
Is that so you can drive to your high school reunion in your new Jag, trophy spouse at your side and thumb your nose at the douchebags you used to know?
Because, while that can be very motivating, it might not get you to a place where your own life is as good as it could be.
You might want to look towards taking a different turn, like going to your reunion all laid-back and telling the douchebags you don’t have to work anymore because you made your millions already.
Not that you’re terribly likely to ever actually go to such a reunion.
Hilarious.
Almost certain that the person who wrote you the second letter is referring to myself.
Just because you make a lot of money doesn’t mean you have to blow it all on yachts and other things that waste your valuable time that could be spent learning.
I love reading posts like these. It shows how monry isnt happiness, that joy isnt that hard to attain, and you dont need a million dollars to have a good life.
I used to live in Colorado, so I can speak personally of the beauty waiting for you just outside your doorstep. I, too, value happiness and experiences far more than money, although I still have a long way to go on my path. Excellent post!
Dear Mr. Money Moustache.
I just love your blog, philosophy and insights. Wow, wow and wow. This is now the third post I have perused with a giddy pleasure as it shows that another way to navigate life’s roads is good and well.
Again, thanks for your Blog,
Birgit
Love this post, MMM, it put a big smile on my face this morning, thank you for the pleasant reminder about real happiness.
I am a Wall St type too. Although I don’t hate my job.
Hating your job makes you miserable everyday. I have been there, done that. If people think I can do something and are willing to pay me for it for a certain amount of time, I will gladly take their money.
However, as you mentioned in the post, so many of us quickly forget how inefficient our lifestyles are. So many of my colleagues, and including myself sometimes, buy unnecessary things like the next big TV, expensive suits, flashy cars, often dining at expensive restaurants, etc.
Anyways, I hope to keep reading your blog to remind myself to think about the future, 10, 20, 30 years from now, and save for it, so that I too can go and live a simple, efficient life away from the mindless drones.
Keep up the good work!
One issue that comes up frequently is the critique that if everyone lived like you, then the economy would tank. There is a difference between living below your means and living within your lowered means because you don’t have a choice.
I don’t think one has an obligation to consume just because, on a macro level, the economy would tank. However, I would be interested in your opinion on this issue. No doubt it has come up before with respect to other posts.
This question comes up a lot, but I have an optimistic perspective on it: http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/
A good way to save up in spite of being rich would be remind yourself everyday about the chances of destabilization of economy..