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The art and science of spending money

collabfund.com

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Re: The art and science of spending money

#11

Post by darkwater »

Loved this article, very spot on.

> Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase.

This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on holidays 60km from home. They died with over 600k euros just in savings (plus 2 apartments). Does this make sense?

Re: The art and science of spending money

#12

Post by 63 »

I've been struggling with knowing how to spend money now that I have it. I don't even have that much, just slightly above a median salary but that's so much more than I've ever had before. I spent all of college wondering if the current semester would be my last and now I can just pay off my loans in a year if I really want to. It's incredible but also really unjust because I know so many people are experiencing what I experienced but here I am with a bunch of money sitting around not helping people with it. I want to make sure I can really justify every purchase and investment because I know how much the same money could mean to someone else. At the same time though, that's a stressful worldview to have and I also need to make sure I'm living a quality of life that my loved ones are comfortable with. It's a hard balance.

Re: The art and science of spending money

#13

Post by rofo1 »

> All success is simply relative to someone else – usually those around you. That’s important for spending money, because for so many people the question of whether you’re buying nice things is actually, “are your things nicer than other peoples’ things?” The question of whether your home is big enough is actually, “is your home bigger than your neighbor’s?”

This is pathological behavior. Unfortunately, it's ingrained in humans. We are improving the world in a faster-than-ever rate, and the objective difference between wealth classes was never lower than it is now. Not even remotely close. (see the book "Factfulness" for some interesting data)

Yet due to the way the world stopped "being huge", due to social networks and everyone being "approachable" (low degree of separation or whatever), the level of envy is at absolute maximum. This problem was always present in humans and is perhaps the primary reason (well, if we can make the jump or at least connect envy to evolutionary pressure for procreation) we have achieved so much in this world. Not knowing when is "enough" is unsolvable problem, even though philosophers wrote thousands of books on this topic.

People cannot stop being envious even if it leads to unhappiness, almost always.

For myself, if I don't have to worry about bills, buying healthy food, having shelter and I don't have to work 14 hours a day, I consider myself on par with anyone in the world money-wise.

Re: The art and science of spending money

#14

Post by kerrsclyde »

My three children all have completely different attitudes to money despite being very close in age and being raised together. Two spend freely now they earn their own money, my middle daughter saves almost all she earns and knows the price of everything.

Re: The art and science of spending money

#15

Post by looseyesterday »

halhen wrote: post #10
looseyesterday wrote: post #5

Not enough people critically question their day-to-day spending and life assumptions. I find the easiest way to save money is to avoid competition. Everyone wants a 2 bedroom house within commuting distance of work. I bought a 1 bedroom flat within walking distance of work, converted the kitchen into a second bedroom (moved kitchen to living room), couldn't happier.

Picking a neighborhood where you are relatively well off seems to usefully calibrate those assumptions. Maybe it has to do with status, which is relative. Earning well and living in a regular middle class neighborhood of teachers, carpenters, and office workers, I don't feel stressed about keeping up with the Joneses I'm surrounded by. I can afford enough relatively (to my surroundings) nice things. My social circle…

Yes living below your means is a key to happiness. Too many people end up pushing what they can afford without planning for tougher times.

I think one of the biggest positive impacts on me was my parents deciding to raise me until 16 in a developing country. They had a middle class income, but my country of origin they could afford to put me in the best schools and pay for plenty of out of school activity. That changed my mindset of what was possible. By the time I came back to Europe, I went to a free school, but performed much better than my peers, I believe mostly due to my own expectations for my future.

Re: The art and science of spending money

#16

Post by IanCal »

A fun article.

> If you develop an early system of savings and living well below your means – congratulations, you’ve won. But if you can never break away from that system, and insist on a heavy savings regimen well into your retirement years … what is that? Is it still winning?

Those two things aren't quite connected though.

If you build a good life living below your means, you can absolutely carry that on into retirement (which you get to do sooner) and that's still winning.

The disconnect is in having two distinct phases - one where you are saving and one where you finally get to be free and spend. If you have this I wouldn't count it as winning, for precisely the reasons the article explains.

I think this is often reflected in peoples unhappiness either within the FIRE community or those looking at it from outside.

> 5. The joy of spending can diminish as income rises because there’s less struggle, sacrifice, and sweat represented in purchases.

This, imo, makes it all the more important to avoid equating being paid with having value and try and make the money side blander. Find this type of joy in other pursuits, the fact you can't just buy being good at the guitar makes your progress more valuable. You can also think about how transactions in a pay-to-win game reduce the value of your effort (is beating this really only worth 50 cents?).

A relevant quote from Arnie:

> A well-built physique is a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it. You cannot hold onto it without constant work. It shows discipline, it shows self-respect, it shows patience, work ethic, and passion. That is why I do what I do.

Re: The art and science of spending money

#17

Post by iammjm »

Two money aspects that I find useful, which weren't mentioned in the article:

Price per use: if I buy X, how much/often will I use it vs. it's price

Time sacrifice: considering my current hourly wage, how many hours of my life do I need to spend in exchange for this item?

Re: The art and science of spending money

#18

Post by IanCal »

burgerzzz wrote: post #7

I’ve sort of adopted the mindset that money comes and goes and we should spend it on things if we reckon we will get enough value out of it. Now, I’m having a daughter soon and feel a bit immature about it all despite earning a decent salary, but I can’t help not wanting to feel like a slave to money especially knowing how many people with far less get by just fine.

> and we should spend it on things if we reckon we will get enough value out of it

This is totally true, but I think you just need to broaden what you mean by getting value out of money. Money saved provides safety, time, and options.

Money saved is just money to be spent in the future.

> but I can’t help not wanting to feel like a slave to money

Once you're in a regular pattern, you're not. I have regular things that go out, a budget under my income and don't need to check on things all the time. Not spending everything I have makes me less tied to income and outgoings.

Re: The art and science of spending money

#19

Post by BLKNSLVR »

kerrsclyde wrote: post #14

My three children all have completely different attitudes to money despite being very close in age and being raised together. Two spend freely now they earn their own money, my middle daughter saves almost all she earns and knows the price of everything.

I have a feeling that the friends your children make have an underestimated influence on their behaviours, and what they consider worthwhile to spend time and money on, from their mid-teens until they work out their own life plan (which is sometimes never).

The lessons parents can teach them about life only seem to be learnt if they're relatively immediately applicable. I didn't care about 'saving' until well after I realised I was earning enough to be worth saving - in my early 20's. Prior to that, I never had any money worthy of 'considering my future' beyond a new skateboard deck or fashionable pair of shoes so, you know, take your advice about saving for the future and stick it because it doesn't apply here.

Re: The art and science of spending money

#20

Post by harvey9 »

darkwater wrote: post #11

Loved this article, very spot on. > Frugality inertia: a lifetime of good savings habits can’t be transitioned to a spending phase. This is my first thought when faced with the FIRE community, and even when such a thing didn't exist yet, there were always people like that. A personal example: my uncles. They lived a very humble life, no kids, had a total of 2 small cars in the 30 years I knew them, went 15 days on ho…

Depends. Do you think they were happy with their lifestyle?

I have a friend who is happily collecting his pension, has plenty of cash in the bank, but still works because he chooses to. He's a bit less frugal than your uncles but still lives well below his means.

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