Never, never, never give up. –Winston Churchill
I don’t want to change the world, and I don’t want the world to change me. -Ozzy Osbourne
One of my friends is months away from graduating with an advanced degree. She’ll be starting out making somewhere around $70,000 per year and has almost no debt. What a great situation! Recently, she asked me for financial advice. I almost jumped out of my socks with excitement! I love talking about personal finance.
The discussion lasted about half an hour. I explained to her how important it was to start saving early. We talked about compound interest and the rule of 72. I told her not to mess around chasing risky stuff; stick to index funds. I told her my dreams of early retirement and showed her how it was possible. I told her to make her way over to Mr. Money Mustache and read every post there. She seemed receptive to everything, but then the conversation took a turn for the worst:
- Friend: I like everything you’re saying, but I want a new car.
- Me: Well, your car is almost new; how many miles are on it and isn’t it paid off?
- Friend: It only has 30,000 miles on it and yes, it’s paid for.
- Me: What’s wrong with it then?
- Friend: Nothing! I actually love it, but I want the hatchback version. It will allow me to carry more stuff around.
<At this point, smoke is starting to come out of my ears.>
- Me. At your age, this would set you back years. Your car has lost over half of it’s value to depreciation. You’re going to take on years of payments that you could have been investing; just because you want a different version of the same car! Also, you still have some student debt to pay off and don’t you want to buy a house some day?
- Friend: But… I just want it!
I’m a calm, introspective person, but at this point, I wanted to run outside and yell vulgar profanities at the top of my lungs while pounding my fists on the ground! In fact, Clark Grizwold pretty much sums up my state of mind here (fast forward to 1:40):
Now, I don’t think my friend is a “sack of monkey sh**,” but I do question some of her decisions. This got me thinking; why don’t people act in a frugal manner? I am no psychologist or money manager, but here are some causes that I came up with:
- Spoiled life growing up: This is part of the problem with my friend. Her parents bought her the car, pay for the insurance and always gave her money. She went on lavish trips while in college, most financed by mom and dad. She doesn’t know what it’s like to really work for money and doesn’t appreciate it. I am frugal because I had none of that. I ate crap food during my college years because I could afford nothing else. Growing up, my dad was out of work consistently. We didn’t have a lot of money and life was miserable at times. At a young age, I vowed never to be like them* in this respect and I am not. I tend to cling to money because I never want to suffer again.
- Long term thinking is difficult: Humans aren’t wired to think long term. Think about it. 100 years ago, we were lucky see 35. Retirement didn’t matter because we’d work the duration of our short lives. Long life spans are relatively new and are still only commonplace in first world countries.
- Peer pressure: If you run around with a group that spends $150 at the bars every weekend, likes to hang out at the malls and drive fancy cars, you’re much more likely to get sucked into their consumer traps as well.
- No financial education: Some folks just don’t know any better. More on this next Tuesday.
All of this got me thinking about what this blog is really about. Part of it is my mission to retire a bit early. More than that though, I want to show people different ways to think about money and how the frugal life is more fulfilling than a consumer one.
In person, I try not to be overbearing. People don’t like to be lectured to. I’d rather lay out some facts or give them a good book and hope that they see the light for themselves and take action. Gentle nudges here and there and lots of advice should they ask. So, the Ozzy quote at the beginning of this post isn’t totally accurate, I would like to give the world gentle pushes in a better direction.
It sure isn’t easy though. Sometimes, I think I’m the Don Quixote of bloggers; getting my butt kicked by big spending windmills. However, I’m never going to give up!
*I had friends who came from similar situations where the family was financially disfunctional. Surprisingly, most of them went on to repeat the errors of their parents. This shocks me. Perhaps the lack of long term thinking goes in reverse too?
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Interesting conversations – best of luck with everything! Great post, thanks for your insight.
This is so good 1500. I often experience the same frustration in my interactions with friends/family.
I don’t understand it either, but there is a chance I’ll get to do research on the behavioral side if I accept the PhD position offered to me. Maybe I’ll find the answer we are both seeking?
-Jacob
Its very hard for me to relate. Maybe someone (you?) should write a book: “Savers are from Venus, Spenders are from Mars.”
Best of luck on your decision!
This is pretty much why I don’t really talk finances with some of my friends. It is like talking to a wall and they are going to do what they want. The part that bugs me is when they get mad because I could afford to take a trip (because I saved for it) or that it looks like I can retire early (on track for that!). Of course I have other friends where we talk finance all the time and it is because we are open to each other’s thoughts.
In the end your friend is going to do what they want because we all have free will. Hopefully they will see the light and realize that buying stuff isn’t what is going to make them happy long term and they will change their habits.
Great rant as usual! Keep it up!
You are a very wise man!
Yep, I get the same nonsense from people. I also get people mad at me because I won’t go along with what they think I should be doing. One friend in particular is always giving me grief for not buying an expensive car: “Come on dude, you need to live a little.” He actually gets upset.
Yeah, I wonder if she’ll actually go through with the car decision. I hope she is all talk.
Thanks for the kind comment!
Love the rant Mr. 1500! It never ceases to amaze me to see some throw money away on a new car. I understand the desire to have a new car, hell, I would love one…but at what cost?! Having only 30,000 on a car means that it should be able to go another 150K at the least if you treat it right. I think a lot of it does come down to the things you pointed out and at the end of the day it’s a lack of looking/planning ahead that’s getting them. They’re in an enviable situation and now should be the time to hit the ground running on saving/investing. Love the working in of Christmas Vacation, it’s one of my favorites.
/stops banging head on wall for a moment
Couldn’t agree more Mr. 1500! I was recently talking to a couple of people about maximizing the free money in life. Both of them have been at their current jobs for a few years, but have never actually taken the matching contributions to retirement and stock option plans. Mindblowing. After explaining to them the need and importance to maximize this free money, fortunately one of them ended up doing something a week later, and the other, still nothing.
I’m happy to have batted .500 in this situation, but still, the fact that someone needs to explain to you that an extra 4-6% of your salary (great matching at both companies) is a tremendous amount over the duration of your employment!
/resumes banging head upon wall
Wow, people who don’t contribute enough to at least get the match? That is nuts. I know people like that too. I always ask why and they each justify to themselves differently (“The stock market is a scam.” “They won’t actually give me the money.” on and on). In my experience, when you get down to it, these people just don’t want to save are making excuses.
Hilarious!
If there’s one holiday movie that I love, it’s Christmas Vacation. I didn’t have to watch the video, because I know pretty much every line of his rant haha.
Even though I write about personal finance as well, the first thing I always tell people that make stupid money decisions is to head over to Mr. Money Mustache. Not just because he has awesome advice, but also because he’s funny and he’s a living example of what could be.
I don’t care what people do anymore. If they don’t want to listen, let them make bad decisions. They can live their life being average. If they really wanted advice, they would be seeking out guidance AND accepting what they’re told.
Christmas Vacation IS AWESOME! That is one of the few that never ever gets old for me.
I generally don’t care either. I used to try to stick my nose in everyone’s business. Now, I realize that most people are just who they are and won’t change.
In the case of the person in this story, she is close to me and I’ve always known her to be very intelligent. It drives me nuts when otherwise intelligent people do extremely stupid things. I feel like I’m on the Titanic pointing the iceberg out to the captain and he’s telling me to ignore it. So obvious.
Yeah I can totally relate. That sounds a lot like my sister. She knows how well me and the Mrs. have done so far, and I give her simple advice which I actively see her not taking via Facebook. Or my mom will call and tell me how bad she’s doing with money. She’ll figure it out though, she’s young, and she went to college for free so at least she doesn’t have to worry about student loan repayment.
The whole thing is a paradox. Most folks don’t realize how they should be acting when they are up there in years. Of course, by then its already too late! I went to an investment class when I was in my early 20s and everyone else was pushing 50.
She has a massive advantage with no debt. I had at least 50K when I came out. That weighs you down for a long time. Good for you for setting a good example for the sister.
It sounds like your co-worker is repeating the errors of her parents.
I have a saying that I like to live by: No complaining about anything unless you also offer a solution. Otherwise, you’re just wasting time.
We have friends like that, but when it comes down to it, it seems like early retirement is not something they aspire to at all. And I’m at the point right now where that’s okay. Long term, they’ll have taken their small savings every year and saved enough to avoid being a pauper when they’re in their 60’s and beyond. But their jobs are something that they identify with so closely that they really have no desire to leave them in the same way that Mr. PoP and I do. They think the idea is great, but they really have no drive or inclination to reach financial independence early in life the way we do.
Thanks for the thoughts Mrs. PoP. I agree that the early retirement is not for everyone. Actually, I think it only works for a very few. As you pointed out, for a lot of people, their lives are tied up in their work. That reminds me of a good story.
One of my first real jobs was working at a large company’s headquarters. Many of the young people working there also hung out with their co-workers in their free time. It wasn’t just a job, but their social life. Layoffs started coming fast and furious and one day, the big hook came for the guy across the row from me. He was one of the ones whose whole identity was the job. I remember they let him come back to clean his cube out and he was crying his eyes out. And that is why I keep work relationships at arms length.
Thanks for reminding me of a different perspective!
Two words. Delayed gratification. You either get it or you don’t.
Right on and most people don’t. Me! Me!! Me!!!
I hope her parents cut her off now and she learns something. Having your parents still take care of you when you are supposed to be an adult does not do them any good.
My sons have student debt, jobs all year long that started in high school and if they can’t budget then they would be really hungry. I cannot afford to help them very much but I am sure they apprectiate everything they do receive.
Yep. I think it actually does a lot of harm. Baby birds have to leave the nest.
I think it should start early with kids too. For example, no matter how much money I have, I would never outright buy then a car. They have to work and contribute something.
I see a younger version of me when I look at my young 21 year old brother who goes to college but wears designer clothing and partys hard every weekend. I try to give him big sister friendly nudges in not to overspend and occur debt like me but there’s only so much I can do. He might have to learn the hard way like I did…
Maybe we just have to reach a certain age before we wise up. Not an easy problem.
Maggie-
Very cool, maybe we’re at some kind of turning point? The issue I see though is that most regress to their previous ways once the pain goes away. Let’s keep fighting the good fight and never give up!