With summer here, we’re all kinds of busy with random activities. I wasn’t going to post today, but there is something gnawing my behind that I have to talk about.
Humans just aren’t wired to think into the future. It goes back to our caveman days when we didn’t have to be concerned about living to 40, much less retirement. The only thing that mattered was staying warm, finding the next meal and avoiding the random saber-toothed cat. All of those things are very short term concerns. Never mind next year or even next week, finding some food was all that mattered.
We’re much better off now. If you live in a first world country, you can expect to live to a ripe old age in comfort. No need to worry about finding food when the grocery store is just down the road. If it gets cold, we fire up the furnace. Big cats with big teeth are no more*. However, our brains are still wired to think like our prehistoric predecessors. I can think of all kinds of examples, but I’ll concentrate on money issues. Here are two conversations I have had recently with young folks.
Conversation #1
- Friend: We just had several rooms in our home redone. <the friend went on to explain the projects>
- Me: Oh crap, you should have called me. I know how to do all that stuff and could have helped you out.
- Friend: Oh, I already know how to do all of the work. I’ve done it before. This time, I just got lazy.
- Me: If you don’t mind me asking, how much did the job cost?
- Friend: It was only about $10,000. We paid $3,000 for the materials and the labor was only $7,000.
Conversation #2
- Friend: I’m going to buy a new Porsche Cayman!
- Me: Cool car. Is your current one breaking down?
- Friend: Nope, it’s fine. I just want a Cayman. You should get one too.
- Me: That’s a pretty big cash outlay. You know I love cars, but that is just too much money.
- Friend (getting agitated): Dude, life is too short! You need to treat yourself once in a while.
- Me: Maybe some day, not right now though.
Let’s talk about both of these examples a bit more.
The first friend “only” paid $7,000 in labor. However, he is making the mistake about thinking about money in the present term, not 20 or 30 or 40 years out. Take a look at my fine artwork below to see what that $7,000 could have become in 30 years. He stated he was “too lazy” and just paid the $7,000. I wonder if he realizes how hard he’ll have to work to get that future money back?
Of course, the Cayman friend is a much more extreme example. Just the money that car will cost could fund the retirement of some individuals.
Both of these folks are thinking like cavemen and I wanted to tell them so. However, despite my caustic rants**, I’m a mellow person in real life. In both cases, I just let it go***. If I thought that there was even the slightest chance at teaching a lesson, I’ would have gently posed some questions in an effort to bring them around to my way of thinking****. In both of these cases though, I knew the effort would have been futile, so I just let the conversations run their course and then changed the subject.
Before I let you go, I have one more thing to say. In the second conversation, my friend said this when I resisted his attempts to buy the car:
You need to treat yourself once in a while.
I’m giving myself the ultimate treat; the treat of time*****. I still don’t know how I’ll use my expanded retirement, but whatever it is, it will be mine. I’d rather spend my time on my own terms than drive a Porsche to work.
*Unfortunate I say!
**This blog/writing is therapeutic and is my outlet.
***Crap, now that song is going through my head. You know what I’m talking about if you have kids.
****I find the best way to win an argument is to convince your opponent that the idea is theirs by guiding their brain to come up with the idea themselves.
*****I’ve told this friend about my early retirement dreams before and his response is always the same: ‘I probably won’t live to an old age, so I’m going to spend it all before I go.’
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Your rants crack me up! I get told “you need to treat yourself” all the time–people don’t seem to understand that new shoes or ice cream or porsches (porschei?) are road-bump opiates! They make you feel good in the moment but screw you in the long-term and are ultimately not fulfilling (in my opinion). I try to just smile and nod during these conversations, although I do start to overheat and/or sweat in the face of particularly ridiculous displays of squandered money.
Mrs. Frugalwoods recently posted…12 Ways to Get a Steal on Craigslist
“Porschei!” Love it!
“Road-bump opiates!” Love it even more!
Yes, I completely agree, these things make you happy for a day or a couple weeks, then they wear off and you need another fix. Shop, shop, shop til’ you drop and your credit card goes pop!
As someone who is allergic to dairy, I say “eat the damn ice cream once in a while!” 😉 I developed the allergy as an adult (yes, it happens) but I have fond memories of going out for ice cream when I was a kid. (Homemade ice cream, waterfront park, watching the bird as the sun goes down…)
It was an occasion, and a relatively inexpensive treat compared to what some people think the need to reward themselves with.
I love Thursday rants and your artistic abilities! With friend #1…I’ll be honest, I am not handy at all and sometimes I’ll prefer a professional. But you’re right…a lot of people just think about the present…hence the YOLO attitude.
Andrew@LivingRichCheaply recently posted…If it’s too good to be true…
“With friend #1…I’ll be honest, I am not handy at all and sometimes I’ll prefer a professional.”
In this case though, the guy knew how to do the work. Attitudes like his drive me a but nuts.
Opportunity costs are staggering when you consider the lifetime value of any potential investment. Great post!
Done by Forty recently posted…Hotel Soaps and Externalities
Yes! And the younger you are, the more difference it makes. If you’re 90, go crazy! Not when you’re 20 or 30 or 40 though.
Mounatin Lions (cougars) still exist… they have teeth and are pretty good sized…. just saying.
I find your rants hilarious! I am guessing that his projects must have been pretty simple and didn’t require specialized knowledge/tools or a huge time outlay.
I’d also rather just drive a Porsche for fun than to drive it to work.
I live in mountain lion country and I agree that they do have big teeth, but nothing like the extinct cats!
You might not want to hear this, but I agree with them, well sorda……I think it’s the size of the treat or work that can be the problem. When I treat myself, I buy a 6 pack of my favorite beer, not a porsche. There is a $59,989 difference, beer can get expensive and taxes in Chicago, that’s $11!
Even Steven recently posted…What I Learned Working for Michael Jordan
Ha, I do want to hear this because fine beer is one of my treats too. It’s all relative, you know? I wouldn’t even mind if someone treated themselves to a Cayman, but they should have a couple million in the bank first.
Get the idea but you’d never get 10% interest on that money over here in the UK. I’m probably in the middle ground on this, a treat makes life bearable but sadly I am not in the position to spend 7,000 on home improvements much less ever afford a Porsche
Hmmm, I admit that I know nothing about investing in the UK. I was just going off historical returns and what I’ve been able to achieve with peer lending.
I love your rants and I know what you mean about that song. I use to like it but now if I hear somebody even humming it, I want to put my head through the nearest window. Or even worse, punch the cute little kid who’s singing it! Thankfully, I’ve resisted the urge so far.
MrsFinancialFreedom recently posted…When Life Gives You A Great Big Slap In The Face
Yes! Frozen needs to go away for a while. A long while.
I just bought a terrible ice cream bar from the ice cream truck that taunts me everyday. That $2 would have been $40 in 30 years. Sure hope he likes that Porsche.
Mr. Grump recently posted…What do you do all day?
Ahhh, the summer siren call of the ice cream truck. It taunts my children as well.
I hope he lets me drive the Porshe, at least one. I also hope I don’t crash it.
Bills haunt me every single day….I think we have too many bills and spend too much. Can’t imagine spending more by having more stuff….It just is too dumbfounding crazy for me.
SavvyFinancialLatina recently posted…Save, Save, Save
Ahh, don’t worry SFL. One day, you will wake up and those bills will all be a memory. Keep on living like you do after that and you’ll be sitting pretty soon after.
I like to treat myself, but it’s usually to a cup of frozen yogurt or something. I really don’t need at $60,000 car to enjoy my life, but to each it’s own I guess.
Aldo recently posted…Spent: Looking For Change (Documentary)
Oooh, frozen yogurt. YES! This is an almost weekly occurrence for me. $3 is a lot better than 60K. Tastes better too.
Hahahaha, your drawings were priceless! This is one of my favorite rants in awhile. You’ve got better will power than I by keeping your mouth shut. I would’ve mouthed off about their bad decision making, even if it would’ve fallen on deaf ears.
Broke Millennial recently posted…Perhaps I Should Move to Germany?
Oh, it is very hard for me too. In my mind’s eye, I pull out a whiteboard and start drawing compound interest calculations in a screaming rage. Maybe this is what I’ll actually do when I get old and crazy.
I think it’s relative. We feel like we spend quite a bit on treats and toys for ourselves, but try and balance that with a healthy savings rate. If we really wanted to deprive ourselves we might hit FI a couple of years sooner, but that’s not the kind of life we want to live in perpetuity. We want to keep the levels of treats and toys that we have now for the long haul… so we know we need to work a little longer to make sure that’s doable. =) And, ya know, because Mr PoP still needs that NSX someday.
Mrs. Pop @ Planting Our Pennies recently posted…He Said, She Said: A Big Oops
It is all relative, you’re exactly right. For example, you’ll probably buy an NSX some day, but it will be a small fraction of your savings. As I said in another comment, I’d have no issue with my friend buying the Cayman if he already had a couple million in the bank. However, I know he doesn’t even have $7000 in the bank (despite a 6 figure income), so it’s completely ridiculous.
We like our treats and fancy vacations too. Just like you said, we’ll have to work a little bit longer too, but that is our compromise.
Your rants are funny and educational. Please keep them up!
On a side note: I just read The Story of the Human Body: Evolution, Health, and Disease by Daniel Lieberman, and he explains our health from an evolutionary biological perspective. It seems we don’t think of our future when we eat either!
You rock those house repairs, 1500s. I think you two are awesome!
Tammy R recently posted…Not a Beginning or an End, Just Living
Yes! We eat Big Macs with little consideration of the havoc they’ll wreak on our bodies 30 years later. People also commit crimes for small gains, even though they’ll face a long sentence in the pokey when caught.
I’m temporarily sick of the repairs! Of course, my motivation is inversely proportional to the how good the weather is. It happens to be very good at the moment. Riding bike >>> swinging hammer.
FI is a treat, for sure. My husband and I were talking earlier today that since I am not in a position to be a stay at home mom (plan A), FI is plan B. It should have been plan A all along, of course, but I only really discovered it after my original plan A was out the window. At least when we get there, it will be ours to share.
FI is the ultimate treat in my opinion. However, I also admit that I’m a bit tweaked from growing up almost poor. I have money security issues, so having money probably means more to me than it does for most others.
You are still young, so there is still plenty of time to change the road you’re on (shout out to Stairway to Heaven!). Think of all of the people who don’t figure it out until they’re 50 or 70? I believe that most never figure it out.
Ugh. I cannot fathom buying a $60000 car. I hate to ask — is that before or after the interest on the car loan? Though to be fair, if the guy needs a car, then it’s not like the whole $60000 would go to investments. Some of that money would be used to buy a reasonable used or new car. (But still!!!)
Because I haven’t been blessed with a spouse or kids, people seem to think I should be spending all my money on myself. I hear “you should treat yourself one in a while” way too often. My other favourite is “you can’t take it with you when you go”. Maybe I can’t, but I’d prefer to leave money behind for my family than risk poverty in retirement.
The answer is “before.” So, it’s probably like 80 of 90K with interest. 60K doesn’t get you much either. It’s easy to drive the price up to 100K with option.
I hear that one too. I just say that I have no plans to take it with me, just to start using it a lot earlier than most, so I’ll need a bit more.
Wow. Just… Wow. I guess if you’ve got money to burn rather than money burning a hole in your pocket…
As to the other… I think people mistakenly believe that I’m not “living” because I don’t spend on the same things they do. I’m mostly content with what I have — and things I want are things money can’t buy anyway.
I suppose another way to look at the $7000 investment is to consider what else they could be doing with that time. If they come up with a business/passive source that generates just $62 per month, they are at break-even. (If anyone has any good ideas they can share, let me know!)
As for the Porsche, I would have to agree–Caveman thinking.
I drive a new $90k Mercedes, have a housekeeper clean the house twice a week and pay talented tradespeople for projects around the house all the time.
Having a stroke reading that? Wait a sec, household income of $400k. Net worth over $3m in our early 40’s. We love what we do, work 30 hour weeks and take tons of time off with our kids. Will retire early 50’s with conservative target $100k after tax income with under 3% withdrawal rate.
10%? Easy to beat it recently but might be tough long term. My low cost passive ETF portfolio will hopefully average 6% over the next 40 years and if it does we will have a great retirement.
It’s possible to have a few luxuries while still living beneath your means if you have the income to do so. It’s about priorities. Yeah I have a very expensive car but spend less on clothes than 99% of people with my income. We don’t eat in restaurants, buy many trinkets or toys and always max all our investment accounts in January every year before budgeting for any wants over needs.
I don’t disagree. Luxuries are OK as long as you’re taking care of business first, which you seem to be doing.
I admit that I’d like a nice car too (NSX) and some day, it may happen. However, it won’t happen until my money situation is all set.