No Desire To Spend

41 points by leeHS 13 years ago | 84 comments

patio11 13 years ago |

I spent more than a few years scrimping to the bone earlier in my twenties. The notion has an intrinsic appeal to me. Just so you know the context when I say:

For what it's worth, if you're a HNer, I'll tell you something Ramit Sethi says often which would have been useful to internalize, oh, five years earlier: it is very hard to cut expenditures in such a meaningful fashion that your financial situation qualitatively changes. (There's only a few big wins there, and lattes or "stop buying books" do not qualify.) By comparison, the amount of impact you can have by moving your salary up is quite substantial indeed, particularly because there's just a crazy dynamic range in our industry and, well, most of us by default do not make choices which tend to land us on the top tiers of that range.

Seriously: I get people who email me on an almost weekly basis saying they got $5k ~ $15k a year just by asking for a raise. You know how many trips to the library it takes to move your financial situation by that much? You won't accomplish it in your lifetime. And that's between a few hours of work or, literally in some cases, minutes.

SageRaven 13 years ago | |

I think much of the utility of frugal living is the mindset it ingrains in you. It becomes a valuable life skill that has a much wider impact than simple finances. You gain a reflexive ability to determine the true value of a purchase, both in the now and in the future.

Say you have 2 people earning $30k/yr. One is trying to live frugally, the other is not. Suddenly the latter gets a $10k/yr raise "just by asking". I'd wager that the person with the deliberate, frugal mindset will still have more discretionary cash the day before payday than the one who got the raise.

jiggy2011 13 years ago | |

Good point, to an extent is a vicious cycle.

If you want to get that salary raise, at some point it has to be backed by somebody actually buying something.

If everybody becomes super frugal then the economy shrinks and unemployment gets worse. I guess this is because we're at a point where we don't need anything close to 100% employment to cover everybody's 'basic' needs.

leeHS 13 years ago | | |

This is a REALLY good point. The benefits of being frugal are increased when the majority is not. It's sort of the same thing with the birth rate. Our economy will grow as long as we keep replacing the workers.

leeHS 13 years ago | |

If you can get a raise, that's fantastic, and congrats! My experience however is that without asking "why do I buy the things I do", people tend to raise their spending to their new salary level. Why not two or three latte's per day? That's what $15 per day, or about $4000 per year.

debacle 13 years ago | | |

> Why not two or three latte's per day?

Because that's close to 900 calories.

itmag 13 years ago | | |

I question how effective the Ramit Sethi tactics would be here in Sweden. Has anyone here tried and gotten a raise?,

Cass 13 years ago | |

It's certainly easier to make an extra couple thousand by asking for a raise than by scrimping on lattes, but I'd argue that a frugal mindset is every bit as important. Unfortunately, spending every cent of $200,000 a year is exactly as easy as spending every cent of $50,000. There are plenty of people whose approach to financial management is to simply... spend their money. Doesn't matter whether that's a little bit of money or lots of money. If they make 50,000 a year, they spend 50,000. If they make 200,000, they spend 200,000. If they come into an inheritance, they spend the inheritance till it's gone.

I'm a student who's never had a full-time job in her life, and I have more money in savings than many well-paid professionals I know, simply because I actually put money into savings.

SatvikBeri 13 years ago | |

Just to add to this, I spent roughly the first two years of my career with 80% of my attention on reducing expenses at 20% on earning more. I got about the same amount of money from both. Later on I shifted that ratio, and significantly increased my income over the next two years. I did increase my expenses, but I'm saving much more as both a percentage of my income and as an absolute quantity.

It's also helpful because the same technique that helped me earn an X% raise has worked over and over again, with roughly the same results. So when you learn to negotiate, you're changing the rate at which your income grows, as opposed to a one-time increase in income. That has a massive effect in the long term.

zurn 13 years ago | |

On difficulty of cutting expenditures: It also means it is very painful to shift down to a lower salary and more satifying (or less stressful etc) job. Income lock-in.

debacle 13 years ago |

"The people who generally have their financial shit together don't usually realize when it's pay day."

Seems like a pretty specious argument. If you pay bills, then you know when bills are due and you know when payday is. That's finance in a nutshell - managing your AR and your AP.

"Do you live within biking distance from work? No? Then move closer to work."

I live in one of the better school districts in the area and pay a premium to do so. Why would I move from a better school district to a worse one?

I realize that this is Hacker News, and that many people here are younger than I am (and I'm young myself), but this person is trying to give advice about something he may not be quite old enough to understand yet.

ZanderEarth32 13 years ago |

"It goes like this. The people who generally have their financial shit together don't usually realize when it's pay day. Those who live pay-cheque to pay-cheque always know, and will remind you as well! I once received an email from a colleague who signed off with Happy Payday!. It's a very telling test."

I've got my finances setup pretty well and I still know when payday is and enjoy it very much. No, I don't need the money to get through the next two weeks but it's still fun to receive money. I'd almost argue that if you don't know when payday is, and when money is coming in and out of your account, you don't have your financial shit together.

Besides that, this article doesn't really provide any tips or advice that a generic "save more money" article on MSN would offer. Some examples from the authors personal financial "hacks" would have been helpful.

cperciva 13 years ago | |

I'd almost argue that if you don't know when payday is, and when money is coming in and out of your account, you don't have your financial shit together.

My impression is that the usual cause of payday unawareness is when people have enough liquid funds that "getting paid" doesn't have any significant effect. There's an argument to be made that such people probably have too much liquidity and should be more aggressive about investing their wealth, but that's certainly a better position to be in than not having enough liquidity.

ZanderEarth32 13 years ago | | |

Well, having too much liquidity is one of the reasons I know when payday is. If you have direct deposit, do you just let your check sit in your checking account (or where ever it is desposited)? I don't have funds automatically moved to various accounts, I do it by hand because sometimes things come up and funds need to be re-appropriated. That is probably why I know when payday is, I have banking to do!

spking 13 years ago |

It's also worth pointing out that for many people, servicing debts is one of their biggest monthly expenses. Credit card debt and car payments especially will sap your ability to save in any meaningful way. If you have debt, the #1 goal should be to pay it down as fast as humanly possible.

jiggy2011 13 years ago | |

Yes, this is what I am doing right now. I find that what helps is to do the math and then mentally mark the price of everything up by the amount that it would cost not to put that money into paying debt instead.

dagw 13 years ago |

Do you live within biking distance from work? No? Then move closer to work. This has three huge benefits...

It also has one huge downside the article neglects to mention. If your work is in the center of town (as many offices are) you often either have to greatly increase the amount you spend on housing or greatly decrease the 'quality' of the housing.

For disclosure sake I do live in an apartment in the center of town, but in doing so I'm sacrificing things like a garden and a my daughter getting her own room. It's a price I'm willing to pay, but I'm fully understanding of people who aren't.

legulere 13 years ago | |

Does the quality of the housing mean space? Living a more minimalist life also means having less stuff. The reason why we build everincreasing houses is that we need space for our stuff.

dagw 13 years ago | | |

Sure it can mean space. I disagree that the only reason to want more space is to hold more stuff. I want more space so that I can have a room that I can close the door on and call my own (and by extension let my daughter and girlfriend have their own rooms as well). I'd like rooms with dedicated functions like a workshop for me to build things in and a room where my girlfriend can paint. I'd like a guest room so I can have friends stay the night without being forced to sleep on the couch in the living room. I'd like a small garden so I can grow food and cook outside.

Now as it stands non of these wishes have become important enough for me an my girlfriend to give up the city, and they are all 'problems' that can be worked around, but there are more reason to want space than simply to store things

Lasher 13 years ago |

If your income exceeds your expenses you're in good shape. For too many people that involves an endless game of chasing more income when the 'expense' side of the equation can usually be brought under control with less effort and right now, not "sometime in the future after my next promotion/job change".

hkarthik 13 years ago |

"The people who generally have their financial shit together don't usually realize when it's pay day."

This. I've lived this way for the past 8 years and it's been a breath of fresh air. To me, this is the definition of "living within your means."

Although I think it's not for anyone. Some people actually enjoy pinching pennies or spending frivolously while watching their bank account constantly in either case. I can't really identify with that, and it would drive me crazy.

romain_g 13 years ago |

Coursera has just announced a class : "Fundamentals of Personal Finance" (https://www.coursera.org/course/financialplanning)

jiggy2011 13 years ago |

The big problem, at least in the UK is that cost of food and other essentials has gone up by a lot while wages have remained stagnant. This can make even a frugal budget fall apart because at the end of the day you still need to put some food in your face.

It's easy enough to stop buying consumer stuff that you don't need, but you do need some way to entertain yourself and if you want any social or family life at all eventually you're probably going to end up in some pretentious bar with overpriced drinks.

dblock 13 years ago | |

I think one should some hard math on how much food costs vs. some of these other expenses that the article says to start cutting _first_. TV is 100$, which is easily 5 days of food in New York City if you live on a budget. A car is 500$, which is a month worth of food. Even if food prices were to go down, it wouldn't be by 50%.

jiggy2011 13 years ago | | |

I agree, don't buy stuff you don't need if you are buying stuff you don't need then stop doing that.

My point is more that this is trumpeted as ground breaking financial advice but actually in many cases you can still have financial problems even if you aren't buying crap you don't need at which point trying to cut expenses gets exponentially harder.

eli_gottlieb 13 years ago | |

This has been happening for 40 years in the United States.

johnrydell 13 years ago |

Here is my own piece of financial advice that I learned from a wise man 20 years ago: You have to double your income in order to improve your standard of living by 10%. Many people get a raise or a new job and they think they are now rich and can spend like crazy. You can't. Double your income and you'll honestly only see a 10% lifestyle change. Don't forget it. Keep saving. Limit spending. And give a percentage of your income back to charity.

debacle 13 years ago | |

While it sounds like a compelling anecdote, it's complete bullshit. If you are just squeaking by at 30k, and you get a raise up to 60k, you suddenly have an extra 30k per year to play with.

That can mean many things - for every year you work, you could theoretically retire one year earlier. You could now afford a car that doesn't cost more in maintenance than gas each year. You could now afford to double your extremely tight grocery budget and spend more money on healthier foods.

"Lifestyle" and "standard of living" are unquantifiable, which is why this is a compelling factoid, but the reality is that, ignoring inflation, a 10% increase in salary is a 10% increase in disposable income.

Now obviously if you have more disposable income than you need, a 10% increase doesn't mean much. If I was pulling down 200k I wouldn't move for 220k if I was happy where I was at, but if I was pulling down 40k I would move for 44k in a heartbeat.

dblock 13 years ago | | |

"While it sounds like a compelling anecdote, it's complete bullshit. If you are just squeaking by at 30k, and you get a raise up to 60k, you suddenly have an extra 30k per year to play with."

That is if you live in a tax-free zone :)

jiggy2011 13 years ago | | |

You do have to take taxes into consideration if you are in a country with progressive taxation.

I think it might better to think that if your income doubles you should only increase your lifestyle by 10% or so.

You should put as much of the extra income into investment , savings , getting clear of debt etc.

zurn 13 years ago | | |

> "Lifestyle" and "standard of living" are unquantifiable

Happiness can be quantified, then there are things like the Human Development Index, Satisfaction With Life Index etc.

kamaal 13 years ago |

Follow what patio11 is saying. But follow what the OP is saying too.

If you are a ordinary working class citizen, you are not likely to make it big unless you save and invest when you are having it good. I've seen a lot of people who didn't save and invest only to be saying later, If at all I had done so...

Saving money cannot increase your income by drastic size. But not saving, can sure decrease it.

That's the whole point.

Robin_Message 13 years ago |

If you like this, you'll love http://mrmoneymustache.com (no affiliation.)

leeHS 13 years ago | |

I'd recommend this too. It's a financial blog by a married 38yo former software engineer. If you're into hacking your finances and living a less consumer driven lifestyle, I'd check it out.

tomp 13 years ago | |

Please explain why, otherwise it still looks like spam.

awavering 13 years ago | | |

It does? MMM has tons of great articles on personal finance - you might disagree with him, but it's not spam.

Robin_Message 13 years ago | | |

I kind of see what you mean, but what more could I have written that wouldn't look like spam desperately trying not to look like spam? I wrote "no affiliation" to indicate it was not spam; since I am the only Robin Message on the internet, and I suspect the whole world, my word is my bond ;-)

engtech 13 years ago | | |

I've read a few of the MMM articles that have landed on HN before, and I think the original article was very reminiscent of the tone and style of MMM (but without the details and examples that MMM would have included).

engtech 13 years ago |

I'm always surprised that more people don't bike to work, if they can do it in a reasonable amount of time and safety.

legulere 13 years ago |

This article sounds a lot like minimalism (not design but the one similiar to simple living). There are lots of other people out there with a similiar mindset.

e.g. reddit.com/r/minimalism http://zenhabits.net/start/

cslacasse 13 years ago |

I wouldn't forget what day I get paid any more than I would forget what day of the week it is. Being cognizant of the details of your life says nothing of your financial health.

jacobr 13 years ago |

Limiting your expenses also gives you more freedom. You can quit your job, take a lower paying job if it's more inspiring, or just afford to work fewer hours on your day-job.

logn 13 years ago |

I found one easy way to save is to think of it like spending. Like, sweet, I just bought $500 in stock, cha-ching.

debacle 13 years ago | |

My wife and I have found this type of investing really fulfilling. Instead of investing in larger but more infrequent chunks, we'll buy stocks 50 or 100 at a time to add to our portfolio.

Since we've started, we've increased our annual allocation to long-term savings 100%. Investing is also a lot more fun.

engtech 13 years ago | | |

How is that working out with brokerage fees?

Are there only fees for selling?