When I was a boy, we lived in the country. That is, we lived five miles from the nearest town (Canby) and 25 miles from the nearest city (Portland). We were surrounded by farmland. Life was quiet. Pastoral. Bucolic.
The road we lived on was especially quiet, with very little traffic. Even from a young age -- five or six, I think -- I was allowed to walk the quarter-mile to visit my grandparents. (My father's parents lived "next door" to us, but next door was across a large field.)
Visiting grandma and grandpa was fun. As quiet as life in the country was, life at their house was even quieter. There was a stillness in their place unlike anything I've experienced since. Their home seemed stuck in time.
Part of this stuckness stemmed from the things they owned.
They lived in a little white farmhouse built in 1920. My grandparents moved there in 1943 -- two years before my father was born -- then remodeled the place. Sort of. (Like all Roths, they left the job undone — for more than forty years!)
During the 1970s, when I was young, they still owned and used many of the things they'd purchased when they moved in.
- They still had a big, white Kelvinator refrigerator, for instance, with a moving door handle and hardly any space inside. They called it the "icebox".
- They listened to hymns (sometimes) and radio sermons (daily) on an imposing wooden console "hi-fi" system as big as a couch.
- They owned a long pink-ish, purple-ish "davenport" with scratchy, well-worn fabric on which grandpa would nap every afternoon after "dinner" (which was lunch).
- They used a black bakelite rotary telephone on a party line.
My grandparents themselves were very much like the things they owned. They were old. (They were in their seventies when I knew them.) They were calm. They moved slowly during the day, and even more slowly at night. One of my fondest memories is sitting with them in the evening, watching as they sipped "sanka" and played Scrabble while a fire roared in the nearby woodstove.
For children, time always moves more slowly, but it seemed to me that nothing every changed in my grandparents' world. Their home was frozen in time. It was stuck. It was still. It was silent.
It was comforting, and I liked it.
"Oh good," Kim said when I rolled out of bed yesterday morning. "I’m glad you’re up." She gets up at 5:30 for work most days, but I tend to sleep in. Especially during allergy season.
"Huh?" I grunted. It was 6:10 and I was very groggy. My evening allergy meds kick my butt. Plus, I hadn't had my coffee yet.
"Something’s wrong with the bathroom sink," she said. "Look. It’s leaking. The floor is soaked." She wasn't kidding. The bathmat was drenched. When I looked under the vanity, I was greeted by a small lake.
"Ugh," I grunted. This wasn't how I wanted to start my day.
Kim kissed me goodbye and hurried off to work. I pulled on a pair of pants, poured some coffee, pulled out the vanity drawers, and got to work.
I was worried that I might have caused the leak when I replaced the sink's pop-up assembly last month, but no. The problem was obvious: The hot water line to the bidet (which I installed in October) had worked itself loose. (By the way, I love my bidet. Too much information, perhaps, but it's some of the best sixty bucks I've ever spent.)
Fortunately, the fix was simple. I reattached everything, then added a light layer of tape to prevent similar problems in the future.
Note: As a safety measure -- to make sure I wasn't missing anything -- I took photos of the issue and made a trip to the hardware store to ask their advice. They told me everything should be fine.
This might seem like a small thing to some folks but it’s a big deal in my world. You see, I’ve never really been a DIY type of guy. I used to get overwhelmed by home improvement. I felt unprepared, incompetent.
More and more, though, I’m learning that I can do it myself. It just takes patience and perseverance. And the more projects I complete, the more confidence I gain.
In a recent article in The Atlantic, Joe Pinsker shared some thoughts on why many ultrarich people aren't satisfied with their wealth.
There seem to be two reasons.
- First, people tend to ask themselves: Am I doing better than I was before? Do I have more today than I did yesterday? "All the way up the income-wealth spectrum," one researcher told Pinsker, "basically everyone says [they'd need] two or three times as much" to be perfectly happy. It's the hedonic treadmill in action.
- Second, people can't help but compare themselves to others. They ask themselves: Do I have as much (or more) than the people I'm comparing myself with? Do I have more than other folks in my family? Do I have more than my friends? Do I have more than my co-workers? We measure our personal success by comparing what we have to what other people have. This is the proverbial "keeping up with the Joneses".
While Pinsker's article is about the ultrarich, I think these tendencies apply to nearly everyone. Even me.
People in the middle class are just as inclined to hop on the hedonic treadmill. They're just as likely to compare what they have to what their friends have. The same goes for those who aren't well off. Even people in poverty get sucked into the comparison game.
In fact, I'd argue that for the poor and middle class, there's an added element. Time and again, statistics show that folks with lower incomes watch tons more TV than people who earn more. (Also here -- and many more studies.) When you allow yourself to succumb to the "other world" of film and TV, you're exposed to more ideas about how people should and do live -- even if these ideas are baseless. (It's like "The Grand Illusion" by Styx: "Don't be fooled by the radio, the TV, or the magazines. They show you photographs of how your life should be, but they're just someone else's fantasy.")
The rich compare themselves to themselves and others. The poor do too but they also compare themselves to fictional characters on film and television.
The bottom line seems to be that comparing your situation to anyone is likely to lead to trouble. Whether you're comparing yourself to yourself, your family, your friends, or to people in Hollywood productions, doing so leads to a desire for more.
But it doesn't have to be this way.
It's clear that most of you money bosses value quality, but not all of you are willing to pay a premium to obtain it. And some GRS readers don't think it's ever worth paying more to buy the best. (In fact, some folks think this philosophy is foolish.)
One thing we all seem to agree on: It's always best to pay less.
For years, I've argued that your saving rate is the most important number in personal finance. "Saving rate" in the world of personal finance is the same as profit in the world of business. We all understand that a company needs to earn a profit in order to grow and thrive, but what most people fail to realize is that people need profit too.
The greater the gap between your earning and spending, the faster you're able to grow your wealth snowball and achieve your goals.
Last week, the always-excellent Michael Kitces published an interesting article that argues spending rates matter more than saving rates. He writes:
Most households struggle to save because there is no money left at the end of the month to save in the first place. Because technically their problem isn’t a savings rate that’s too low; it’s a spending rate that’s too high.
When I began reading Kitces' article, I thought he was picking nits. After all, saving rate and spending rate feel are two sides of the same coin. Turns out, however, Kitces has a good point.
Saving Rate vs. Spending Rate
Your saving rate -- and note that it's not "savings rate" -- is calculated by dividing your profit (your income less your expenses) by your income.
Your spending rate is calculated by dividing your spending by your income.
As you can see from the equations, saving rate and spending rate are simply the inverse of one another. If you have an 80% spending rate, then you have a 20% saving rate. If you have a 5% saving rate, then you have a 95% spending rate.
Because of this, it's easy to dismiss tracking your spending rate as a needless exercise. That number is implicit in your saving rate!
But Kitces argues that shifting the attention from saving to spending makes sense because saving is, essentially, a side effect. The two numbers you actually control in this equation are your earning and spending. Saving is a byproduct. It's not a primary factor but a secondary one. This observation is subtle but it's important.
This guest post from Kamie is the first in the newly-revived "money stories" feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success -- or failure. These stories feature folks from all stages of financial maturity. Today, Kamie shares her resolution to break her shopping habit in 2018.
Two weeks ago, just before Christmas, I found a New York Times article about somebody who went a year without shopping.
"Why would anyone do that?" I thought to myself -- but I kept reading. The author had some compelling reasons for her experiment:
- It made her more mindful of her "wants".
- It forced her to use things she already owned.
- It helped her appreciate the things she had -- and the things she was given.
- And, surprisingly, it freed up tons of her time.
I read the article, thought it was interesting, and went on with my day. Later that evening, though, I started thinking about the article again. I thought about how much I shop and how much time and effort I put into it. Could I possibly go a year with no shopping?
You see, I worked in high-end retail for a very long time. I went to school for fashion merchandising and was in retail management as soon as I graduated. Everything in my life revolved around fashion and shopping! Working at Nordstrom was my greatest success and worst punishment both at the same time.
As you can see, I learned to shop with the best of them. And shopping became an outlet for me.
Today, I'm 44 with two teenage boys, an amazing husband, and two dogs. I work for our family business, so I'm not exposed to the retail environment on a constant basis. But I still shop -- a lot!
Honestly, I love shopping. Shopping makes me happy. It's fun to have new pretty things, whether it's clothes, shoes, accessories (for me or the house), makeup, furniture, or even a new car. You know: anything.
Now, let me tell you, our family isn't rich by any means. We have to budget just like everyone else. Sometimes it sucks. But we're trying to teach our boys (and each other) what it means to save money, even if we're not the best at it.
In reading the New York Times article, I could relate to much of what the author said. Shopping made her happy too, but she decided there were enough benefits to a year without shopping that she wanted to give it a try. I decided that maybe I wanted to give it a try.
When I told my husband about the idea, he looked at me and smiled. He told me that he'd be incredibly proud of me if I could actually do a year without shopping. Because he and I are very competitive, we love to challenge each other. I gave it some more thought and realized that this was a challenge I wanted to accept.
Although I fly several times per year, I'm not a sophisticated traveler. Many of my friends are top-notch travel hackers, but I'm just a beginner. Still, I'm getting better.
On my recent trip to Florida, for instance, I booked both my initial hotel and my rental car using travel miles. That's a big step for me! And it saved me from using actual cash, which is in short supply around these parts lately.
I didn't do such a good job with my airfare. I booked my flight for January 4th on December 5th. I paid cash. Luckily, thirty days in advance turns out to be in the sweet spot for finding cheap airline tickets, so I got an okay deal -- even if I didn't book the trip with points or miles.
"Time is money," my father used to tell me when I was a boy. He didn't like how I dawdled with my chores. I didn't understand what he meant back then. To me, time and money were two very different things. As a kid, I had lots of time but very little money.
Now, as a nearly fifty-year-old man who has written about personal finance for the past twelve years, I get it. Dad was right: Time is money — and money is time.
This notion is the central lesson of Your Money or Your Life, the personal-finance classic by Joe Dominguez and Vicki Robin. "Money is something we choose to trade our life energy for," they write. "You are the one who determines what money is worth to you. It is your life energy. You 'pay' for money with your time. You choose how to spend it."
The authors say that because you spend time in order to earn money, you're also spending time whenever you make a purchase. This has some powerful implications.
- When you treat time as money (and money as time), you can better evaluate how to allocate your dollars and your hours.
- When you know how much your time is worth, you can decide when it makes sense to "outsource" specific jobs.
- When you spend less, you can work less. In a very real way, frugality buys time. But on a deeper level, frugality buys freedom — financial freedom, freedom from worry, freedom to spend your time however you choose.
Because of the time factor, Dominguez and Robin argue that you don't earn as much as you think you do. You may be paid $33 an hour, but your real hourly wage is less than that. Possibly much less.
This guest post from the Frugal Jerk is part of the "money stories" feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success -- or failure. These stories feature folks from all stages of financial maturity. Today, the Frugal Jerk -- who has asked to remain anonymous for now -- shares the first half of his story about going from internet entrepreneur to busted and broke.
You might know me. I’m a blogger and entrepreneur. I've had tens of thousands of customers during the last decade, so it's very possible that you've purchased something from me in the past.
I've been read by millions of readers on my own sites and I’ve appeared as a guest writer on popular websites you’ve surely heard of. I've also been featured in New York Times bestselling books that may sit on your shelf. At my peak, my income was $300,000 per year. By many accounts I would be considered successful. But I’ve made many dumb mistakes with money.
We’re not going to bury the lede: At a certain point, because of a perfect storm of mistakes and problems, the smartest move was to foreclose my home. This move may have even saved my life. This is that story.
What's interesting about all of this is that I grew up fairly poor and conservative with money. If I couldn’t pay for something in cash then I didn’t buy it. I didn’t make stupid financial decisions. Those decisions were for idiots. I was no idiot! (Reality check: Everyone is an idiot sometimes.)
Buying the Hype
When I bought my home, everything was going great. In the run-up to the U.S. recession, houses wouldn't stay on the market for long. If you remember those days, you know that you could go to a first open house and the house would often be sold before you got there. It got to the point where houses were regularly selling for more than asking price. Bidding battles were not uncommon.
This should have been a warning. But I was young and dumb and flush with cash. I had a business generating almost $1,000 in profit per day. Mostly automated. All online. What to do with all that money? Home values always go up, right? It’s always smart to “Buy! Buy! Buy!” isn’t it? We all heard it daily. (You might still hear it regularly since the economy has improved lately.) Plus, it’s the alleged American Dream. Quite literally everybody around me told me to buy, particularly those who knew my income. Parents, friends, the echo chamber in the media. I didn’t hear a single dissenting opinion. (Besides my own, which I steadfastly ignored.)
So I bought a home.
One of the main reasons Kim and I decided to move from our condo to this quiet country cottage was to save money. We were spending far too much living in the city.
Simply moving made a huge difference to our budget. But now that the dust has settled, it's time for us to look at other aspects of our spending to see where we can save. As part of that, I've been reviewing our recurring expenses to see what I can cut. Yesterday, I canceled our subscription to The New York Times (savings: $5/week or $260/year). Today, I'm reviewing how much we spend on TV and movies.
Cutting the Cord
In March 2007, my then-wife and I canceled our expensive TV package and moved to just basic cable. Our monthly bill dropped from $65.82 to $11.30. We supplemented our viewing with Hulu (free at the time), Netflix, and by purchasing shows from the iTunes store.
I've been cable-free for a decade now. I haven't missed cable even once. Some folks are amazed when they hear I don't have cable. "How do you manage?" they ask. Yet I am amazed that more people haven't made the leap to a cable-free lifestyle. It's easy.
One of the biggest objections I hear is, "What about live sports?" People pay big bucks just so they can have ESPN. Honestly, there are plenty of ways to watch live sports without cable. Sling, for instance, offers a package with ESPN, ESPN2, and ESPN3. Plus, Kim and I have found that if we really want to watch a game, we'll just head to a local sports bar where we can join the crowd over a burger and a beer.
In 2007, I calculated that Kris and I were spending $27.90 each month to watch television. If we added in our Netflix subscription, that total rose to $44.89. Not bad.
Reviewing our current expenses, however, I see that Kim and I currently spend $83 per month in subscription fees -- plus whatever we spend to buy individual movies and TV shows on iTunes. Holy cats! How did that happen? We've experienced a bit of lifestyle inflation in the TV department.
Let's review the different services we use -- and how much we pay for them. Maybe there's a way we can save some money.