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Maladaptive Frugality

herbertlui.net

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Re: Maladaptive Frugality

#221

Post by jandrewrogers »

bdangubic wrote: post #210
jandrewrogers wrote: post #207

Earlier quoted context omitted.

> being debt assumes appreciation on the asset No it doesn't. The math works out the same regardless of changes in asset value. Paying cash has significant opportunity and liquidity costs. These can often exceed the cost of debt.

I had mortage on a condo for $460k. total money paid to pay it off via debt, little over $1m. I sell 30 years later for $460k I just lost $550k :) (I didn’t, paid it off in 5 years saving myself 100’s of thousands …) ask yourself why “we” think that some debt (e.g. real estate) is great) while others (e.g. vehicle) is bad? it just might ge that one is looked at as appreciating asset while the other not so much. comme…

You aren't making a consistent or coherent argument. The math of e.g. interest rate arbitrage doesn't care whether you are buying a house or a car, you will profit the same regardless.

In many cases the risk is literally zero, the scenarios you are imagining where it has bad consequences don't exist as a real thing that can happen. If you have enough money to pay cash then you also have enough money to pay off the equivalent debt at any time of your convenience.

Many people believe many things that are not based in physical reality. Many popular beliefs about debt are no different and debt has no intrinsic moral significance.

Re: Maladaptive Frugality

#222

Post by jumpconc »

wing-_-nuts wrote: post #194
jandrewrogers wrote: post #165

Earlier quoted context omitted.

> By most estimates, only about 10-20% of US households are debt-free. This needs to be qualified with the fact that it doesn't make sense for many people to be debt-free if they are financially literate. I know many people, myself included, who carry debt they could easily pay off because it would be irrational to do so. Being debt-free would actually make them poorer. This often holds true even when ignoring obviou…

*Cries in paid off 3.25% mortgage...

Minmaxxing your finances is maladaptive frugality. You have something even better than 1% extra interest in your account: you have no mortgage. You can do whatever the fuck you want to your house and your bank doesn't stick its nose in your business to ensure the value of the house stays up. You can do whatever the fuck you want with your career and you don't have to worry the bank will come and take your house back.

Re: Maladaptive Frugality

#223

Post by jumpconc »

freetime2 wrote: post #5

For years I did this with the thermostat - something I learned from my father who always kept the house under 65F (18C) in Winter. I'm somewhat ashamed to admit it even led to arguments with my spouse early in our marriage when I would enter a room and find the thermostat set to a balmy 70F. Eventually I just sat down, looked at how much it costs keep the house a few degrees warmer in winter, and realized we could af…

I think if you want to keep it on the cold side, you can still do that. Builds character, isn't dangerous, and saves a couple of bucks. You can also keep it warm when you feel like being warm. There's something in human psychology about being able to endure discomfort and then come back to "safety".

Re: Maladaptive Frugality

#224

Post by dfxm12 »

mbrameld wrote: post #175
square_usual wrote: post #137

Earlier quoted context omitted.

> After my last job in tech I took about a half a year off before realizing I also felt guilty about not working, and took a job I wanted Well, yeah, that's kind of the problem. If you're the kind of person who can FIRE, you're not the kind of person who'll be happy on permanent vacation at the age of 40. It's nice to have that option, but many people who get into FIRE commit themselves to a lifetime of slight misery…

> I'd rather enjoy my life in my 20s than save money to do nothing in my 40s. I think this is a lie that people who are bad with money tell themselves, that the only two options available are to spend without restraint or live miserably frugal.

I agree. To add a data point, I used to squirrel all my money away, because I was afraid that if I didn't, there wouldn't be any left at retirement. It's like I was inadvertently following FIRE principals.

It wasn't until I created a simple monthly budget that I realized that I can pay myself first, pay my bills and I still have plenty money left over to enjoy today and 10, 20, etc. years down the line.

Re: Maladaptive Frugality

#225

Post by lxgr »

pjc50 wrote: post #88
jimbob45 wrote: post #68

Earlier quoted context omitted.

Having a credit card is like having a video game passive that makes everything permanently 2% cheaper. Everything should be put on a credit card for that discount as well as fraud protection provided you are disciplined enough to never ever ever ever ever ever carry a balance.

This is US-specific advice; EU capped merchant fees, and therefore you don't get a free 2% reward at their expense. The fraud protection and insurance can be useful though.

You get roughly the same level of fraud protection on both at this point. This is both due to converging legal protections in many places and due to market developments (both Visa and Mastercard require issuers to offer "zero liability" on debit cards just like on credit cards).

One advantage of credit cards is that you don't have to wait until the dispute has been at least accepted to get your money back, though.

Re: Maladaptive Frugality

#226

Post by jumpconc »

wing-_-nuts wrote: post #203
mock-possum wrote: post #43

Earlier quoted context omitted.

Exactly the key of mindset that drives me to play through entire RPGs without ever popping a single item. It is essential that I collect 99 potions, and never consume even 1.

I forget what game it was, but I came to a point in the game where there was just an insane difficulty spike. Like I literally could not progress, and I couldn't change difficulties without starting a new game. Then I remembered I had these strong health potions I'd carried through most of the game. I burned through my entire stockpile but I made it! It felt like the devs were saying 'no, you idiot, we put those item…

In many games with increasing difficulty, this will just get you stuck on the next fight, and now without any potions. That's why people don't do it.

Re: Maladaptive Frugality

#227

Post by anbotero »

_alternator_ wrote: post #145
square_usual wrote: post #137

Earlier quoted context omitted.

> After my last job in tech I took about a half a year off before realizing I also felt guilty about not working, and took a job I wanted Well, yeah, that's kind of the problem. If you're the kind of person who can FIRE, you're not the kind of person who'll be happy on permanent vacation at the age of 40. It's nice to have that option, but many people who get into FIRE commit themselves to a lifetime of slight misery…

I think this is a false dichotomy. My wife and I worked through our 20s, but regularly took vacations. We flew to NYC from LA at least 2x per year from 25-30. We had season ski passes. We lived frugally but well. I was in grad school, she was a consultant. Our income was solidly lower middle class for LA, and we still managed to save 25-40% of our income per year. Now that I've got a kid and am in my 40s, I've taken…

Finally!

I've struggled with this... not personally, but watching other people going crazy with whatever money they get and then complaining about not resting enough, not traveling enough, not having fun enough.

They go ahead and ONLY take full 2 weeks vacations, never even trying spreading some of those days here and there, perhaps right next to a holiday to make it a long one, and then complain later that they are burned out...

Most people even with means complain about some of us doing this normally (we don't have to travel the world every weekend, come on), and you talk with them, and if they just stopped "wanting to live outside their means", they could actually accomplish it, even if little by little.

I commend you for living such a life, because even if none of our lives are perfect, some of us enjoy it as best we can. :)

Re: Maladaptive Frugality

#228

Post by lxgr »

basch wrote: post #146
jimbob45 wrote: post #68

Earlier quoted context omitted.

Having a credit card is like having a video game passive that makes everything permanently 2% cheaper. Everything should be put on a credit card for that discount as well as fraud protection provided you are disciplined enough to never ever ever ever ever ever carry a balance.

3% at restaurants is offset by 3% fee to use cards at restaurants. this benefit is evaporating. not an argument for or against cards, but they are becoming closer to neutral than a discount.

Of course somebody is paying your 3%; there's no free lunch. To a large extent it's yourself (via interchange paid as part of the merchant's fees); part of it is however also other people paying cash and often not receiving a discount for doing so.

Regardless of all that, at the individual level, not using a credit card is still irrational. Not quite the tragedy of the commons, but it's pretty close.

The only way out is probably outright regulating the entire thing away, like the EU has successfully done; the market seems too inefficient and consumer behavior too sticky for card-specific surcharges (i.e. "you pay for your own points") alone to solve this.

Re: Maladaptive Frugality

#229

Post by jumpconc »

komali2 wrote: post #18

> I plan to have fun spending my money in the future, so it’s time to start practicing now. The most optimal thing to do in our world is to pick an age, say, 60, and until your 60th birthday, maximize your suffering via frugality to just under the tolerable limit so as to maximize your potential for compound interest. This leaves you with the most freedom and opportunity during the most fun part of your life, when yo…

Most optimal by what metric - length of retirement? Retirement years are worth a lot less than prime years. I think most people in society make this mistake and regret it. Most people on there deathbeds regret the things they didn't do.

Re: Maladaptive Frugality

#230

Post by lxgr »

jimbob45 wrote: post #68
chromacity wrote: post #4

Most people in the US are pulled into living on credit straight out of school. You get a student loan, then a car loan, then a credit card, then a mortgage. You finance vacations, appliances, kitchen remodels, smartphones - mostly to keep up with friends and coworkers who finance their lifestyles too. A lot of people are in non-stop debt from the age of 18 to 55, if not longer. By most estimates, only about 10-20% of…

Having a credit card is like having a video game passive that makes everything permanently 2% cheaper. Everything should be put on a credit card for that discount as well as fraud protection provided you are disciplined enough to never ever ever ever ever ever carry a balance.

Unfortunately it does so at a >2% average cost to everybody. At the individual level it makes total sense, though.
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