Your brain goes into autopilot. Unfortunately, this also means it becomes hard to make changes.I think the key is to be selective about where to make the cuts. Where are the places where you can change the habits and actually improve your life? The $4 latte may be worth it to you if that's how you get yourself out of the house and into a public place where you encounter other people and moderate loneliness into manageable solitude. A month of daily lattes might correspond to one item of clothing that gives you a moment of manic elation but then gets lost in your closet amongst scarcely dissimilar items.
But different habits, while being equally effortless, tend to add up in a good way over time. If you have a $50,000 take-home pay but are in the habit of living on $25,000 and investing the rest, that will put you ahead by about $350,000 every 10 years after compounding. A habit of biking instead of driving can keep you lively and fit into your 80s while saving you hundreds of thousands of dollars as well.
The key thing to remember is once you establish the habit, it becomes effortless and even pleasant to stay in the groove — even while your friends think you are some kind of unimaginably frugal bike-riding superhero.
Also, I'd say: Wake up and pay attention. I love normal, routine days, but the pleasure of ordinary days is lost if routine equals "a collection of unconscious habits." Be conscious and notice the experience of the things you do habitually. Live. If you do that, you should notice the components of your routine that aren't worth having. Where are you spending money out of proportion to the good it does for you personally?
The linked article is about a personal finance blogger ("Mr. Money Mustache") who "retired" at age 30. What does "retirement" mean"?
According to me, retirement means you no longer have to work for money. You then proceed to do whatever you like, without regard for whether or not it earns you money.Some of what you do can be called "work," but the point is, you're not doing it for the money — and that kind of work is especially satisfying. You know you're doing it for its intrinsic value.
So where will you cut back? It seems to me (and to Mr. Mustache) that eating out and traveling are highly questionable activities. Like us, he largely eschews restaurants and does big American road trips for vacationing.
पोस्ट्स
३५ टिप्पण्या:
"I was ironing my 20 dollar bills and keeping them in a photo album, just because they seemed like such powerful and intriguing little rectangles."
It helps a lot to be a certain type of person. I'm sure financial problems are rare among the bill-ironing crowd.
If you can develop the discipline to live on 75 to 80% of your after tax income overall you will do well in life . Especially if you start doing that young.
I disagree about travel Go out see the world experience other cultures. Do it when you are young, middle aged and old.
Who cares if I have money in the bank when I'm old and decreipt.
Anyone who irons $20 bills has money to burn.
Excellent book "Habit" by Charles Duhigg, discussed on the equally excellent website "Barking Up the Wrong Tree" here.
You can’t kill bad habits but you can replace them.
A habit has three parts: the cue (what makes you crave a cigarette), the routine (smoking) and the reward (feeling relaxed.)
The secret is keeping the same cue and reward but replacing the routine. (Replacing smoking with meditation, exercise or, as many inadvertently do, food.)
You have to believe change is possible. The chances of success are greatly increased if you have a supportive group around you with the same values.
The $4 latte may be worth it to you if that's how you get yourself out of the house and into a public place where you encounter other people and moderate loneliness into manageable solitude. A month of daily lattes might correspond to one item of clothing that gives you a moment of manic elation but then gets lost in your closet amongst scarcely dissimilar items.
Brilliant!
I love you Ann.
One great habit I have is to always make the first step in anything I do or am asked to do, is to ask question: "Is this really necessary at all?".
The "bike instead of drive" pitch has always failed to recognize that (1) time has a value, and in almost every case, biking takes longer and(2) biking in the cold is, for most people, unpleasant.
I would agree, in general, that most Americans don't have a handle on their finances. But I once watched (or read -- can't remember which) a report about a family in financial trouble that tried to solve their problems by cutting back on lattes and other small purchases when they fundamentally were spending way, way too much on a mortgage payment that they shouldn't have taken on.
You know what I think one of the biggest contributors is to Americans living paycheck-to-paycheck? The near-absolute requirement (except in a few large cities) that to be middle class,
you must raise your children in a single-family home. To live in -- and, God-forbid, rent -- an apartment with children is a clear marker that you haven't achieved middle-class-ness, and it's almost shameful, which means people spend more on housing than they really should with responsible money management.
This is wise advice. Live frugally. I wonder why nobody thought of it before.
Anyway, it was a rather sensationalist headline. "Retired at 30!" Most people think of retirement as margaritas on a Mexican beach. For this guy it means a passive income that covers his family's living expenses. Less sexy. I am curious how he nets $25,000 a year off one rental property, paid off or not. He must rent to suckers. Unless his rental is in California and he lives in Tulsa. That would cover it.
But it's good advice. At least I think so because I have the same temperament. I hate waste and love squirreling away monies.
BUT! I hate the tone people take when flippantly describing what's wrong with other people, and if only they did what was right they'd be happier. Bike to work and you'll be fit and lively and rich when you're 80! And if you hate biking? Well tough shit. Bike anyway. I bike, and look at me!
I would never presume that other people should value things the way I value things, and if they don't they're wrong. That's why I'm not a liberal. I think it's fine that some people find shooting ranges more edifying than a liberal arts degree. Now that I have a liberal arts degree, I can say I would have been happier spending that $20,000 on ammunition and a gun or ten.
Anyway, about routines: God's creation is the stage of our routines, and it's wondrous and beautiful in infinite combinations. I walk or bike to work every day. Ostensibly, that's repetitive. Truly, it's awesome. I take my camera with me and look for new, intriguing things to shoot. And they're everywhere! On a course of 4 miles, I will never exhaust the spectacular things to behold. I think Thoreau said something similar, in case you don't believe me. Just before I get to work, I look down the avenue and see Pike's Peak. Some days it's covered in snow; other days. clouds cascade down its face. I have seen it a thousand times and it's never looked the same.
God set the earth on auto-pilot around the sun so that we can enjoy the ride. Take a moment one night to behold the heavens and marvel. And if you don't like stars--that's okay. You may prefer smoking cigars and shooting pool. There is structure in the smoke that is beautiful. And constellations on the felt whose movements are no less wonderful than the stars, and whose order you may never see again.
Oh, and there have been several reports lately about people spending so much more on cars than they can afford that they end up with 5 or even 8 year loans to get a manageable payment. But it wasn't clear how much of that is people aspiring to BMWs and how much is the cost of an ordinary car outpacing inflation, or the damage that Cash for Clunkers did to the used car market.
One of the things I learned during my failed foray into the life insurance scam was what I dubbed "the Starbucks Maneuver." It goes like this:
You're trying to sell a prospective customer an inexpensive policy that would cost him $35 a month. When you go for the close, the customer looks away from you and mutters "I'll have to talk it over with my wife."
You don't respond directly to his statement. Instead, almost as if you were just musing aloud, you say "You know, $35 is about what it would cost to get a latte from Starbucks a couple times a week." What you hope for is that the customer thinks to himself "I certainly wouldn't ask my wife's permission to go to Starbucks a couple times a week, I guess I don't need her permission to buy this policy."
I tried the Starbucks Maneuver three times during my abortive "career" and each time it failed completely. From what I gathered in talking to other agents in the office, it never seemed to work for anyone.
[I am dead serious when I say this: I would sooner suck d*ck for money than go back to life insurance. At least I'd keep some semblance of dignity and self-respect.]
Peter
I agree with Jane (and I say this as someone who is habitually overextended on housing.)
The problem is that "you know, this was dumb, lets get a smaller mortgage" is seldom a practical answer. Yes, we've moved "down" a couple of times (sold in California... bought in Fargo) but with this last pinch it would really not be possible to sell the house.
Most of my effort (as it is) is focused on drumming the message into the kids to live below their means, as far below as they can bear. Hopefully the message sticks.
As for daily routine and habit... my husband and I have switched to a paleo-type diet so no lattes anymore, no breakfast burrito from McDonald's on days we're in a hurry. It's actually been pretty easy.
What hadn't been so easy is figuring out how to manage my homework for school.
I don't know about anyone else, but I've found necessity makes it very easy to change.
Going from work to out of work and back to work again isn't that hard. The routine is the path of least resistance.
[I am dead serious when I say this: I would sooner suck d*ck for money than go back to life insurance. At least I'd keep some semblance of dignity and self-respect.]
That's only serious. Dead serious is if you'd sooner do it for free.
If you jog five miles, you finish with an exultant feeling, similar to the one you get when you've just accomplished something difficult or done something virtuous. I was addicted to jogging for many years. It freed me from the hassles of accomplishment and virtue.
Here is a quote from that blog, in which the blogger criticizes a yacht owner's enjoyment of his yacht:This is an inefficient way to have fun.
And with that he lost me. First of all, fun and efficiency have little to do with one another. Also, who the hell is he to determine what is appropriate fun? He sounds like just another Puritan killjoy posing as a financial advice writer. I'll enjoy my steak before going to a night at the opera instead, thanks.
I save/invest first and then live on the rest. That way I don't have to think about cutting back and being miserly and frugal.
Bike-commuting to work isn't frugal if it costs you your life.
At 25k with at least one kid, those of us who pay taxes will be providing his health insurance through a subsidy next year.
If I retired at 30, I would feel useless and very quickly get depressed and possibly suicidal.
I save/invest quite a bit on my educator's salary (not half a mill by any means). Someday I will want to retire, or phase to part time/seasonal, or volunteer work, or redeploy wherever I'm needed in the family.
I don't call that benchmark retiring, I call it the crossover point, where my investments could support me for the rest of my life if needed. There is a psychological freedom to that point, where the indentured servitude ends. I won't have to put up with anyone's shit. One day, if necessary, I could say, "Go fuck yourself," and walk out, leaving the miserable people behind to wallow in their shitsty. That is why I have been debt free for years and save/invest at a hefty rate. I wants to join the GFY Club.
Way too young to tell me a fucking thing
This one never gets old. Well actually it does. This guy'll die with $100,000 in a shoebox under the bed after being featured in an episode of "Hoarders".
I'm sure there's a good lesson here that we can be happy without a lot of the material things our society values. Still, someone who "retires" at about a third over the US poverty level is not an exemplar that many of us will choose to follow.
Still, if Obama reads about this guy, he'll call him wealthy and try to raise his taxes.
"The "bike instead of drive" pitch has always failed to recognize that (1) time has a value, and in almost every case, biking takes longer and(2) biking in the cold is, for most people, unpleasant. "
You can add (3) if you work in an office with a formal dress code, bike clothes do not overlap with work clothes; (4) in many urban areas, a woman who chooses to bike to work would be taking her life in her hands, especially after dark; and (5) plenty of adults have health issues that preclude powering a bike several miles uphill just to get to work.
With all the good advice that's out there about how be frugal, I don't understand why this one got to be so popular. I'm not 10 years old anymore. Don't tell me I have to climb on a bike in order to start my day.
Sorry the life insurance gig did not work out for you Peter. However your lack of success may have been cause by your never figuring out its value.
Sorry the life insurance gig did not work out for you Peter. However your lack of success may have been cause by your never figuring out its value.
Failing in life insurance doesn't bother me because the failure rate is well in excess of 90%. What's more, the few agents who do succeed usually do so not because they're so highly skilled but because through their past activities they've developed large numbers of contacts whom they can use for sales and referrals.
If anything does bother me, it's that I stayed with the scam too long. Anyway, I'm doing something much better now, something where I actually earn a salary rather than being dependent on commissions.
Peter
I keep waiting for this biking-to-work thing to turn me into a millionaire. At least if I work until I'm 80 I'll still be healthy.
Here's an interesting fact about our tax code. You can get a pretax deduction for hundreds of dollars of parking and public transit costs. Or you can get a pretax deduction for something like $20 of biking costs. And the people driving to work and parking still try to kill you.
The bike thing: I didn't own a car until I was almost 30. I used public transportation and yes, a bike. Then I got a job on Route 128 where public transportation would've been an endless hassle, and I got a car. Immediately I identified with those old Chevy (?) ads, "It's not just a car, it's your freedom."
The biking thing could work if you don't work too far from home, if you live in an area with a mild, consistent climate, and if you don't have any kids. There is no way I could haul home groceries to feed 3 teenagers on a bike. And how would we get them back and forth to school? Sure, teens could do a 3-5 mile bike and it wouldn't kill them, but would you impose that on an elementary-school-aged child? I wouldn't.
@Joan -- Interesting. I work in Cambridge and ride a folding bike that I can take on the commuter rail. The bike gives me a great deal of freedom I didn't have as a straight public-transit commuter.
My wife and I finally bought a second car when we moved from the city to the suburbs. I can get to the rail station on my bike, but everything else we do now requires driving.
If my employer ever moved to the 128 ring I'd probably change jobs. That's generously a hideous commute and I don't want to waste my life in traffic.
Another lecture titled:
Life: you're doin' it wrong.
1 This guy lives down the road in Longmont. I had a couple rentals in Boulder that went for $2500/month each. That was $500 a bedroom, and was a good deal for the renters as well as for me. It allowed me to put an extra $1100 a month to principal, per house. So his getting $2000 clear per month from one house is not improbable. If I could have tolerated tenants (CU students) a few years longer, I'd have been clearing that much from each house.
2 He does real health insurance - $10K deductible. The point of insurance is taking care of catastrophe, not expecting to be compensated for seeing the doc about the sniffles or your "anxiety disorder."
3 Kentucky Liz is right. You have to aim the money into investment first and unconsciously. After that comes the frugality. Get better at the frugality, raise the automatic investment. It mounts up as fast as the guy says. You have to do both. One of the saddest financial counseling sessions I went through was with a woman who had reached 40 living exactly and precisely on her income. She used store coupons, sought bargains, haunted garage sales, all that chicken-feed pointless shit that is only pointless because she never invested a cent of it. She had reached 40 with a net worth of $0.00. Still time to change at 40, just barely, but she did not change.
4 Over the years I bike-commuted various distances, 1 - 6.5 miles one-way. It seemed to me that you owe your heart 45 minutes every day, and you have to get to work. Why not accomplish both simultaneously? It got me to work full of cheerful anticipation. It got me home with all the day residue washed out by endorphins. I loved it. But. The course record was 6.5 mlles at -10F. Unfortunately that broke me. I still love to bike, have bought spare houses in Moab, etc, etc. But NOT under 60F. Wimps is I.
5 This guy seems to be able to subdue himself to his own ends. It's striking how few do, and how much vituperation they attract.
In reply to Simon Kenton, MMM won't have the $10,000 deductible option next year under the Obamacare exchanges, but he will qualify for a hefty subsidy if he only has $25K in income. I'm thinking of doing the same since they're taking my options away.
I did like alot of his ideas, and I do like bicycles, but this year in St. Paul showed me you can only count on six months of the year, unless you are really a diehard.
> I'm sure financial problems are rare among the bill-ironing crowd.
Back when $20s were a huge deal for me, I took very good care of them.
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