Shouldn’t The Joneses Be Keeping Up With Us?
Ahh, the old keeping up with the Joneses.
Such a popular and well-known part of our vernacular, it actually has its own Wikipedia page:
“Keeping up with the Joneses” is an idiom in many parts of the English-speaking world referring to the comparison to one’s neighbor as a benchmark for social class or the accumulation of material goods. To fail to “keep up with the Joneses” is perceived as demonstrating socio-economic or cultural inferiority.
I’ve written before on why we shouldn’t keep up with the Joneses, even if you’re replacing your physical neighbor with a virtual neighbor in the form of a blogger that’s maybe financially further ahead than you are.
But I think that not only should we not try to keep up with anyone or anything other than ourselves and the best we can possibly do, but perhaps the Joneses should be trying to keep up with those of us living below our means and slowly achieving financial independence.
What’s More Luxurious Than Setting Your Own Schedule?
There was a commercial on the television the other day, advertising an entry-level luxury car. You can score a lease for only $399 per month. Of course, that’s assuming you part with a few thousand dollars upfront and also shell out the necessary money for the gas and insurance.
All said and done, you might end up spending $700 or $800 per month (or more) on what amounts to a long-term rental.
What I noticed was that the word “luxury” came up at least twice in the commercial. What’s more luxurious than a BMW 3-series or Audi A4? Don’t you owe it to yourself to sit on fine leather while you drive around in a metal box on shiny wheels? Life is too short to drive around town in anything other than a luxury car, right?
Well, I don’t disagree that life is too short. But I do disagree on the definition of the word “luxury” and what’s truly luxurious.
The same goes for luxury homes, luxury clothing, and luxury jewelry. Luxury anything, really.
But I’ve already found the ultimate luxury: Setting your own schedule.
How can you compare owning one metal box on wheels to another? What makes one more luxurious than the other? Marketing? Perception? Society?
Does owning a luxury car or luxury home really improve your life markedly over owning a lesser car or home? What’s the difference in quality of life between driving around a Corolla versus a BMW? They both get you from Point A to Point B, correct?
What about a bigger home? Would renting an apartment twice the size of the 900 square feet our current abode occupies really make us that much happier? Vacuuming twice the amount of carpet and cleaning twice the space? No, thanks.
Stainless steel appliances? Do they somehow cool and cook my food any more efficiently than appliances that aren’t as shiny?
However, what kind of improvement in your quality of life could be had if you set your own schedule? Wake up when you want. Go to sleep when you want? Work when you want? Have fun when you want? Eat when you want?
Is that not the ultimate luxury?
Imagine you could go to a store and buy the ability to set your own schedule. What would you pay for that? Would that not be the most desired luxury of all if it could be purchased?
Forget a fancier car or bigger home that come with drawbacks like additional bills, additional maintenance, and additional time spent to maintain that lifestyle.
Setting your own schedule comes with no drawbacks. You control your own destiny by controlling your days. You do what you want, when you want. How fantastic is that? And how can that be compared to a watch or suit? They’re not even on the same planet.
Wake up when you want or lease a luxury car? Is that a serious question?
What Asset Could Be More Valuable Or More Impressive Than Your Time?
I don’t own many material possessions.
I’ve got a small wardrobe. A few electronics, including the computer I’m writing this article on and an iPhone 3G from 2008. Some furniture. A book or two. Personal effects.
That’s pretty much it.
I don’t own a car. Or a home. I have no garage where I can store a bunch of stuff I don’t need.
But I’ve got it where it counts.
I own some serious equity in more than 60 high-quality businesses. And each and every one of these businesses pay me to own them. They send me my rightful portion of their profit. And since they all tend to be more and more profitable over the long run, they send me bigger and bigger checks.
Those checks, by the way, should add up to about $7,200 this year.
This passive income allows me to own some of my own time – I’m a good deal along the spectrum of freedom now. Perhaps more importantly, I’m on pace for financial independence before 40, whereby I’ll own all of my time. And is that not the most impressive asset of all?
How fancy is a Ferrari in the garage of a McMansion if the owner is too busy to enjoy the car or the house? What good is a large house if you’re never there to spend time in it? At what point does an object own you rather than the other way around?
In fact, I think the question of whether or not someone owns their own time should be the first question you ask when they start talking about the new car they bought or the big house they just dropped a few hundred grand on.
Why would the ownership of your own time not be the first thing you “show off” to friends, family, and co-workers? It should be the basis upon which to judge someone’s fanciness or station in life.
I’m not saying there’s anything wrong with owning or buying fancy stuff. Far be it from me and I’m not one to judge. But I think owning that fancy stuff before owning the fanciest thing of all – your own time – is a huge mistake.
Choose to own a bunch of fancy stuff that will likely end up instead owning you, and you’ll be making it all the more difficult to eventually own your own time and set your own schedule… if you go after the material possessions first.
But by switching the order around and choosing to buy your time before a bunch of stuff, you’ll be putting compounding in your favor at a very early age. You’ll then be able to own far more fancier stuff than you otherwise could have had you did it the other way around, and you’ll still be free.
But by then you’ll probably realize that stuff doesn’t really make you happy.
What Better Boss Than You?
I work from home, and have been doing so for more than a year now.
And it’s as wonderful as it sounds.
Sure, there are a few very minor drawbacks, and I hope to write about those at some point.
But those drawbacks pale in comparison to my old job working down at the car dealership for 60 or whatever hours per week – and now being able to set my own schedule is certainly not one of those drawbacks.
I remember waking up when way earlier than I wanted to, doing work I didn’t want to do, eating when I was told to, and working around people I probably wouldn’t if I didn’t have to.
One of those people that I worked around was my former boss.
I’m sure he’s a great guy after work is out, but his primary job was to keep me toeing the line. That naturally results in friction.
However, I’m now my own boss.
And I can tell you this: I love telling myself what to do.
I can’t imagine any boss being better for me than me.
“Hey, Jason? You mind if I take the day off?” I ask myself on a given day.
“Sure. No problem. Just means you have to work that much harder the next day.” I respond to myself.
It’s a pretty good relationship! We see eye to eye on a lot of things. Go figure.
Now, just imagine being your own boss.
If you’re financially independent, you can choose to work or not work. If you become financially independent at a relatively young age, you may well find yourself in a position where you continue working; work and financial independence aren’t mutually exclusive.
If you decide to never work a day again, great. You’ll own your own time and be able to set your own schedule. You own the greatest asset of all and the fanciest luxury I know of.
But if you do decide to continue working, you’ll be doing it on your terms.
Sure, you might have a “boss” of some sort if you’re not running your own business and/or work from home. But let’s be real – that’s really just a formality. After all, you don’t have to work anywhere. You’re really your own boss once you own your time. When you own your time, you are the master of your universe. How can some boss at some job possibly outrank that? How can a boss tell you what to do when you don’t have to do anything at all?
If the relationship doesn’t work out, so be it. On to something else. But if you’re in a situation where you can work anywhere and do anything at all, the odds are great that you’re going to pick something that fits just right. You’re not going to take a job you don’t really like when you’re financially independent and able to do anything, anywhere. Not going to happen.
At that point, you’ll always be your own boss. You make the rules.
Conclusion
Maybe I’m impervious to marketing these days. Not sure. But I just find the commercials of luxury goods silly.
But who’s going to advertise the ultimate luxury of being able to set your own schedule? Who’s going to tell you that the most impressive asset in the entire world to own is your time? Who benefits from that besides you?
However, that’s exactly why you have to be an independent thinker. Think outside the box so you don’t end up in a box.
Maybe the Joneses won’t all of the sudden aim to keep up with us freedom fighters. But I’d argue they probably should. They probably don’t know what they’re missing because they’re too busy working to afford their “luxury” goods, missing out on the greatest luxuries known to man.
Luxuries like autonomy, flexibility, and freedom trump any material luxury you can possibly buy. But attain the former quickly and you’ll be in a position to afford all the latter you can possibly want later down the road.
What do you think? Should the Joneses be trying to keep up with us? Is setting your own schedule the greatest luxury of all? Can anything be worth owning more than your time?
Thanks for reading.
Photo Credit: graur codrin/FreeDigitalPhotos.net
I’d feel even more pressure if my name was Jones.
Great article DM,
I have been very privileged that I have been free for a long time and I do prefer it. When I have worked, it wasn’t for the money. On luxuries, we do have a nice car, its the only car we have I prefer going in comfort, whilst my wife drives. I own an iPad 3, Mac 2012 and I phone 4s. I like to keep thing of good quality for a long time and in case of the car, until the wheels drop off.
The main problem with luxury stuff is when you are sucked in to replacing it with the latest model.
I think it was Henry Ford who said “ the bitterness of poor quality, lingers long after the sweetness of low price has been forgotten. Good luck in you investing as I take note of your every move.
Louis
Jason,
I echo that, especially on cars. My Civic works just fine! I’ve been seeing a Mazda commercial on TV talking about a guy who essentially goes through 5+ cars (it never says if his wife has any) in like 15 years, of which only one is used. That is insane.
Thinking to roughly my time frame which is similar, I’ve had 2 used cars. 1 was driven into the ground, 1 was given to my cousin because the car she was getting was stick and I had an automatic. So that switch-a-roo is kept everyone even and her car is still going. My old stick shift finally had massive engine problems and so now I have a Civic, and the plan is to keep it running for 15+ (all things going well of course). I cannot imagine in that same frame of time, running through essentially 2 more cars, with them all being new. Living on someone else’s borrowed can normally crappy terms is lame.
– Gremlin
PS, I have thought about dressing as Indiana Jones for Halloween. Big fan.
When I was walking the last week in a shopping mall in Munich Pasing, I was really surprised: I saw a poster with: Unexpected shopping ! A nice girl was on the poster with brand new cloths. I thought to myself: When I´m in a shopping mall, how can shopping unexpected? Ok, I went forth and after a hundred meters I saw a different poster with “unexpected shopping”. Marketing at its best.
I looked at google and I found a lot of different “unexpected shopping”, here you are:
http://www.google.de/search?q=unexpected+shopping&biw=1024&bih=574&tbm=isch&tbo=u&source=univ&sa=X&ved=0CCoQ7AlqFQoTCJWu2r-o7MYCFaq_cgodnvwGTw
OK, after looking at this, theres another nice slogan: Unexpected christmas
Hm, christmas is only unexpected if you drink too much or like smoking nice cigarettes….
But now I´m thinking completly different on these slogans. For hell, I like unexpected shopping. I love to buy unexpected shares. And hopefully I have a lot of unexpected christmas: dividends are christmas presents hehe.
So my slogan is, when going next through this shopping mall:
Lets do as often as possible “unexpected shopping” to provide a lot of “unexpected christmas” and do with the presents more “unexpected shopping”. But I doubt if the shop owners are really getting happy with me….
Thanks for the article Jason. You’re definitely got a point. People got it backwords. It’s okay if you like nice things but you have to be able to afford it or have the ability to generate passive income to pay for it so you don’t get owned by these possessions.
My little brother recently bought a Mercedes SUV for over 70 k. I of course don’t like to say anything mean or bad because I don’t want to ruin our friendship but he has no assets / income producing stocks or anything…. Backwords for sure. Hopefully, I’m being the change so one day he’ll understand.
Thank you my friend for sharing and keep up the great posts. Much love to you Jason.
Hi Jason,
Nice article thanks for writing! Have you thought about what you will do with all the excess capital you are going to have years after you have completed your journey to financial idependence? You have mentioned travel and sure that takes money but are there other things you’d like to use your money to? Thanks for sharing and keep up the great work!
Nice article, Jason.
Its amazing how most ppl think that the world owes them an easy and luxurious life. If one has bucketloads of money and you have enough to burn, by all means – go ahead and splurge on a luxury car…but most ppl think that they owe it to themselves to spend the money they dont have and live under the burden of debt. I see time and again that most ppl who spend more money on their cars are really not that financially bright. Its a sad state of affairs, and that person who is driving an old tin box next door is probably doing much more than ok.
Same goes with the McMansion houses too. My wife and I bought a house last year and we are happy with a decent sized home staying close to the city center – rather than going out to the burbs and buying a huge house. We cant imagine how much we would spend on furniture to fill a bigger house, and cleaning, maintaining, heating and cooling a bigger house, not to mention the higher taxes would be a killer in the long run.
I thoroughly enjoyed that read…you keep cranking out these awesome articles 🙂 Keep up the great work!
R2R
I agree wholeheartedly that owning your time is your biggest luxury. Whenever I see those car commercials my jaw drops by imagining paying that much “to own” a vehicle. Warrent Buffet once said something along the lines that he would give half of his fortune to keep his time when asked what would make him sacrifice his fortune. We understand how important owning our schedule is and that’s our primary goal. Thanks for posting another great article! Mr. E.
Jason,
I couldn’t agree more; it seems ludicrous that people are willing to slave away for years of there lives in order to a possess certain goods. Certainly, some people can afford these items without much more work but many people are constantly spending up to their cash & credit limits to have stuff they can’t afford and do not need by any means.
I believe you are right that the ‘Joneses should be keeping up’ with savers. I believe this would truly help solve a lot of problems related to our social security system and overall quality of life in old age… but that’s a discussion for another day.
Great write-up!
Best,
Dividend Odyssey
Hey Jason,
Nice article again!
When talking about financial independence, my family have other opinions.
They think you should spend it all on vacations, to create memories instead of money.
While I agree that memories are more important than money, I don’t think you should spend it all.
Fortunately I’m in the position to be able to go on holiday while still maintaining roughly 30% saving ratio. That’s definitely not enough to retire in 10~12 years, but I’m still young. Most of my relatives have to choose between saving or holidays, because of limited income. From that point of view, I can understand her feelings.
How do you create these memories with family & friends, while maintaining your amazing savings ratio?
Best wishes!
DfS
Dear Jason,
Interesting article from you as usual. It takes some amount of courage to live a life to a bare minimum as practiced by you day in & day out.But the good thing is you yourself are practicing it first instead of just preaching it.I do agree that human beings should be in control of the situation,at least the things which provides us physical comforts rather than the other way around.But sometimes we have to maintain our social status infront of our so called well wishers & the entire concept of frugal living & high thinking goes out of the window.Any how most of us I hope are the believers of dividend income & lets see how much we can incorporate your philosophy in our practical life.Best of luck.Keep writing.May god bless all of us.
With regards,
Venkatesh
I can say that I love the optionality of being your own boss and having enough passive income to cover your expenses. It just takes all the pressure off your shoulders. For me the fun I get out of working is the new experiences as I just changed jobs / industries / fields just 9 months ago. You are right, the biggest drag is having my schedule set for me but often I find that being “pushed” into something gave me a new experience that I may have missed out by opting out. On balance, it’s definitely a positive.
However I know that over time things can change and it’s good to know that lack of financial freedom would keep me stuck in a job / venture that I didn’t enjoy.
Nice article, Jason.
-Mike
I’m still waiting for the commercial that asks if you want the luxurious BMW for $399 month, then gives you step by step instructions on how to lease this vehicle with the amount of time spent.
So $399 month when making $25/hour or about 50K year will cost you 16 hours a day before taxes, so times 1.25 after taxes is about 20 hours a month, but wait you still need to come up with 4K upfront to actually be able to lease the vehicle. So make sure the 160 hours of work before tax and 200 hours after tax is set aside because we are not giving that money back. So for the 2 year lease we need 680 hours of your working life which is 17 weeks of your paychecks over the next 2 years or about 2 months a year. Sold! Am I right?!?!
Don’t forget gas, insurance, and maintenance those will also be part of your calculations. So I’m guessing you will be taking the 2 year lease? Wait you don’t want to give up your time and your life so you can drive around in a fancy car? I guess they should stick with the luxury commercials, they have no chance with this one:)
Mike,
Indeed! 🙂
Take care.
I agree on most “luxuries”. Although I tend to disagree on home ownership. McMansions are for the birds, but I believe owning home, well below what you could afford (i.e. a McMansion) makes good sense and also is a form of fiscal discipline. In my own case, I have roughly calculated it to be a wash versus renting, but home ownership does have its benefits, beyond just financial–I have seen first hand crappy apartment buildings or homes with the omnipresent repairs, dealing with discourteous neighbors, etc., that get done when they get done. In sum, I believe owning a home that provides shelter, builds equity, and provides intangible benefits fare outweighs just throwing money down the rent hole. Cheers!
Louis,
Nothing wrong with owning luxuries as long as you can easily afford them. The issue lies in owning a bunch of luxury goods before you own your time. Switch it up and the results should be far more enjoyable.
And I agree on quality. My iPhone 3G is still rocking for me. Not sure how long it’ll last, but I’ve gone through cheap cell phones much quicker. And high-quality goods tend to retain their value better than the cheap stuff.
Cheers!
Completely agree. When you realize what the most important things are in your life you priorities will change. Its like the saying that no one ever said on their deathbed they wished theyd worked more or spent more time at the office. The ultimate luxuries in life are time and family.
I agree completely with the shiny box on wheels not being worth it. I also think a lot of people don’t consider financial freedom from a long term perspective. Even a lot of us savers poor money into our 401ks and IRAs not realizing that financial freedom is decades away. It’s nice to see big numbers there, but it also means you have to put in another 30 years to get there.
Great post. I especially loved this line: “Imagine you could go to a store and buy the ability to set your own schedule. What would you pay for that? Would that not be the most desired luxury of all if it could be purchased?”
One might say that yes, it actually can be purchased — at a “store” called the bank (or Vanguard, or E-Trade, or whatever your preferred investing platform). I’m making monthly payments on that luxury now!
Gremlin,
Cars are are a tremendous money suck. I know that firsthand both from owning them and working around them. We’ve had cars in our society for how many years, and I can’t tell you how many clients were shocked when they received the estimate on repairs for their vehicle. It’s like they expect maintenance and repairs to magically be unnecessary for their car, as if it’s special or different from the rest.
Cars are an unfortunate burden and necessary expense for most people. But if you can get by without one, you’re in a great position to save a lot of money. If you do have to own one, go with a gently used reliable model and drive it into the ground. A Civic is about as good as it gets. Great choice. 🙂
Best regards!
What’s more luxurious than setting your own schedule?
Indeed! Get up when you want, do what you want, go to bed when you want. That is luxury.
It’s too late for me to retire early, I’m 65 years old. But I am retiring in 93 more work days.
I can’t wait. And I have more than enough, and even have set aside a $25,000 travel fund for us.
olli,
Marketing is funny. I can’t knock advertisers; they’re just doing what they have to do. But it’s really not all that difficult to ignore it and go about your life in your own way. You just have to think outside the box and think for yourself. Being part of the system means you get the system, for better or worse.
Let’s rather hope for unexpected shares. I like that! 🙂
Best regards.
Tyler,
People have to make their own mistakes and live their own lives, unfortunately. I’ve learned to simply be the change I’d like to see. It’s up to others to follow or not. 🙂
Nothing wrong with luxuries. Far be it from me to judge others’ spending habits. I personally couldn’t care less what someone spends their money on. But I’ve had the nice stuff and I’ve also been able to live on the other side where I own my time and set my own schedule. I think you know which one is far more preferable.
Thanks for the support!
Cheers.
I agree with the article. However, believe it or not, some lucky people do love their 9-5 job and would rather be doing that than staying home and establishing their own business/agenda. Some are blessed to be very well paid as well. I say life is about a balance. Do what makes you happy and buy what makes you happy. Some car fanatics, for example, get incredibly excited about the type of car they drive. I don’t believe in sacrificing your future for material possessions, but if you are on track, responsible, and earning the dough, why not indulge in what you love? Balance. Our presence of this earth is very temporary. People will enjoy their time differently. I hope they all do it responsibly though…with their future in mind.
Sampo,
That’s a good question. It’s obviously difficult to say what I’ll be doing in, say, 20 or 30 years. It’s tough to say what I’ll be doing in six months. But I suspect, beyond living the life of my dreams, philanthropy will enter the picture there at some point. Beyond that, I don’t really have any big plans for a bunch of money. Just doesn’t take a lot to make me happy. 🙂
Thanks for stopping by!
Best wishes.
R2R,
Couldn’t agree more.
If you have the money to burn, by all means… But that’s just not the case for most people. I think that mentality where people think they’re owed something comes down to maybe thinking instead that they deserve this or that. They work hard and so they deserve that nice car, big house, fancy X or Y. And maybe that’s not far off from the truth. But they deserve to own their own time and set their own schedules first. Once you can do that, the world is yours.
It’s all about living a life of purpose. One of your choosing. 🙂
Glad you enjoyed the article. Thanks for the support!
Best regards.
Mr. E,
Buffett has it right there. Being able to own your time means you do what you want, when you want… and you get to spend time with only those people you want to. Does it get any better than that? 🙂
Like I’ve mentioned before, I think of my portfolio in terms of time units just as much as money units. If I could update my portfolio and dividend income and use time increments instead of money, I would. Because the money is simply time for me.
Thanks for dropping in!
Cheers.
DO,
Thanks!
Yeah, I see the allure of nice stuff. Don’t get me wrong. I’m no monk living in a monastery, and I don’t have much of a desire to be one, either. But I think people are chasing after the wrong luxuries and assets, and certainly in the wrong order. Doing my best to share the knowledge. 🙂
Take care.
DfS,
Some people argue that experiences are better to spend money on stuff. That’s really an individual call, in my view. Depends on what really makes you happy. But I do think that lasting memories will bring far more value to your life than a material object. Just my take on it.
As far as maintaining a high savings rate while still creating memories, keep in mind that not all memories cost money. It’s free to spend the afternoon at the beach. It’s free to take a nice long walk while chatting. Lots of free stuff. In addition, it’s important to focus on the “Big Three”: housing, transportation, and food. Get those categories low enough, and you’ll have plenty of money for traveling and what not while still maintaining a high savings rate. You can see I traveled to Omaha this year to see Buffett, and I’m still at 50% on the year. So it’s not all that difficult. Just have to want it. 🙂
Thanks for stopping in!
Cheers.
Venkatesh,
I live the life I preach because it’s a far more enjoyable and rewarding life, in my view. I’m more happy now than when I lived like the Joneses. 🙂
Now, I may spend more money down the line. I have no idea about that. But it won’t be out of a desire to keep up with anyone or impress anyone. It’ll just be out of fulfilling a desire and knowing that the silliness is well funded.
But you have to be an independent thinker. Live and think like everyone else and you’ll be like everyone else.
Take care!
Wonderful article, Jason, and we agree. In fact, we are getting ready to sell our CTS and Ridgeline and my wife will drive a Honda Fit to work – because, well, we just don’t need those other vehicles and I work from home, so more than one car just seems…Jones-like.
And we don’t want to keep up with the Jones’. We want to retire in 2017 and travel the country…for good! 🙂
Mike,
There are definitely positives to working, for some people. And I think it could even be argued that the majority of people “need” to work. They just wouldn’t know what to do with themselves without someone directing them for most of their waking hours. That’s probably just a sad truth.
But I don’t need someone directing me to experience new things, meet new people, or learn new things. But it’s great to have that option. Agreed on that. That way you can choose which path to take at any given time. Want to switch paths when one is no longer meeting your expectations? Not an impossible task. You can even go back and forth, if you really feel like it. And once you’re in control and don’t need the money, the opportunities you take on will naturally fit with what you enjoy.
Thanks for dropping by!
Best regards.
evensteven,
Yeah, it’s unfortunate. I don’t think most people really think about what they’re signing up for when they get into something. That 30-year mortgage on the big house, the two cars, the big yard, this this that and the other thing. Before you know it, your time is sold off for decades to come.
Switch up the order and go after your time/schedule first and you’ll probably find that the material stuff isn’t all that impressive anymore. 🙂
Cheers!
wtd7576,
“…just throwing money down the rent hole.”
Couldn’t disagree more.
What hole does the money for your property taxes go into? Maintenance? Repairs? Insurance? Upgrades? Real estate fees coming and going?
I’m a very happy lifelong renter, and financially better off for it. It’s funny you bring this up, because a fellow blogger was just doing the math on how much money they “made” (wasted) on real estate:
http://www.gocurrycracker.com/how-i-made-102k-in-real-estate/
Now they rent and travel the world. I suppose it comes down to priorities, but, financially speaking, I’d be poorer for owning my own home. And, besides, nobody “owns” anything. You’re just living there as long as you pay your property taxes and you’re alive.
Take care!
JC,
Absolutely. Funny how the word “luxury” can mean something different to different people. I prefer the really impressive luxury of being able to set your own schedule. 🙂
Do what you want, when you want, and only with those people you want to spend time with. Or a… big house? Not even a comparison for me.
Best regards.
DD,
Yeah, maybe there should be a “store” where you get to see people who are already financially independent. You’d get to see what life is like when you control your time, scheduling, work, and everything else. That’d probably change up the motivation pretty quickly. 🙂
Cheers!
Robert,
Indeed. I enjoy asking people that question. And they always say they’d love to be able to buy something like that. Well, what would you pay? Hundreds of thousands of dollars? You would? Then you had better get to saving and investing now… 🙂
Thanks for stopping by!
Best regards.
Kenneth,
You’re on the cusp over there. And, based on life expectancy now, you’re still quite young. Enjoy it! 🙂
Cheers.
Chris,
Sure. In a perfect world, it would all go down like that. But we don’t live in a perfect world. You can see the statistics for yourself. Most people aren’t financially savvy and end up heavily in debt, mortgaging away their future time for material possessions in the now. People work hard in jobs they don’t like and make up for those emotional shortcomings with material goods, not knowing that they’re just making the problem worse by having to run even faster and longer on that treadmill.
The surveys always seem to indicate that something like 10% or so of people actually like what they do:
http://www.forbes.com/sites/susanadams/2013/10/10/unhappy-employees-outnumber-happy-ones-by-two-to-one-worldwide/
“In other words, work is more often a source of frustration than one of fulfillment for nearly 90% of the world’s workers.”
If you’re in that 10%, that’s fantastic. Although, I would still argue that financial independence has merit:
https://www.dividendmantra.com/2014/02/its-not-about-hating-your-job/
Either way, I’m still writing for the other 90%. 🙂
Take care!
Steve,
Ha! Exactly. Who wants to keep up with the Joneses and go to some job they probably don’t like when they could be traveling around the country? Someone forgot to give the Joneses the memo. 🙂
2017 is just around the corner…
Best regards.
Hi Jason,
Nice write up. Most say time is money but for me it is actualy money is time. Nothing is better then be able to do what you want whenever you want. A friend of mine got a nice sum of money last month because his parent sold their rental. Saturday he turned up with a brand new Audi… And he was already complaining that his old car was expensive to maintain. If he invested that amount of money wisely he would get enough dividends to make a nice trip each year.
Cheers,
Jason,
I enjoyed the short dialogue between “worker jason” and “boss Jason.”
I bet one of the difficult issues is to remain disciplined and motivated. I could see how it would be easy to take a few days off in a row and begin to get complacent. Also, no one can really cover for you on a “sick day.”
However, those are some minor tradeoffs for flexibility and freedom.
Curious if you sat down with someone about to buy a brand new Lexus and gave them this talk, if they would still purchase it or not after knowing the long-term impact.
Hi Chris/Jason,
@Chris
Agreed. 110%. I like you am one of the lucky ones who does what makes myself happy.
I think Jason nailed it here,
“I’m not saying there’s anything wrong with owning or buying fancy stuff. Far be it from me and I’m not one to judge. But I think owning that fancy stuff before owning the fanciest thing of all – your own time – is a huge mistake.”
@Jason
The media constantly tells people this “luxury stuff” will make them exponentially happier. It doesn’t.
The fact I can spend as much TIME with my 2 young children as I want and can take them on vacation whenever I like consistently makes me happy.
Jason, thank you as always for the inspiration.
Not many people have the luxury to set their own schedule, but almost everyone can get a luxury car. Being your own boss and owning your time is much more exclusive than driving a luxury car.
I like nice luxury car, but I value financial security much more. That’s why I drive a modest car and live in a modest home. The Jones need to smarten up and distinguish between needs and wants. They will be much better off for it, but then who would drive our economy? We need the Jones to spend all their money so our stocks continue to do well.
Why can’t you have the best of both worlds? Have the Ferarri, be financially independent and enjoy what you do fo a living.
There are plenty of people and business owners who love what they do, FI, and have the Ferrari.
Louis,
Good point on quality – but you can’t possibly buy better quality than a Toyota Corolla! Sure there are more comfortable cars out there, but they should not be confused with quality.
DM,
Great article idea and good execution!
All the best,
Patrick
Even though I love my job, I still can’t wait till all my time is my own. The thought of being able to do whatever I want to, whenever I want to, is just too incredible.
It amazes me how many people just don’t get it. I feel bad for them as they show off their new car one day and complain about all the bills they have to pay the next. And if you try to explain to them what you’re doing, the first reaction is “oh, that won’t work for me”.
Awesome post. Thanks for reminding me what I’m aiming for.
Geblin,
Absolutely. We hear about the time value of money all the time, but what about the time value of time? How much is our time worth? I value mine quite highly. 🙂
Maybe your friend will see the light one day. Most likely not. But it’s his life. Choices and consequences. I just feel great that I’ve made certain choices over the last few years that have led to really wonderful consequences.
We’re slowly making our dreams come true!
Best regards.
RTR,
Ha! We have little conversations all the time. He thinks he’s getting what he wants, but I’m really winning all the battles. 🙂
Yeah, that motivational factor is one of those drawbacks I’ll probably write about at some point. But, like I mentioned, it pales in comparison. And if you’re really the type of person to get yourself in that kind of a position, then you’re likely a highly-motivated individual anyway. So it’s almost a Catch-22 that results in no drawback at all.
As far as your question there at the end, they’d still likely buy the Lexus. Preconceived notions are really powerful. Perception is reality. And if someone perceives that they’ll live a better life with that Lexus, then they’re going to buy it. A few of my old clients knew what I was doing, but that didn’t stop them from running that treadmill. Such is life.
Thanks for dropping by!
Best wishes.
TDE,
I agree with you. I’m typing this response from the window seat of a local coffee shop. All I see is the blue sky and palm trees. I’m on my schedule, doing what I love. And I only answer to myself. It’s an incredible luxury that I hope more people get to enjoy at some point in their lives. I’d feel selfish, otherwise. 🙂
Some people are in a great spot where they do what they love anyway. And I think that’s great. But I don’t think it makes the concept of financial independence any less valid or exciting. You might love your job, but your job might not always love you. Life can change quickly. Better to be flexible and free than not.
Thanks for sharing!
Best wishes.
Joe,
Definitely. Couldn’t agree more. You’re in a very, very exclusive club if you own your time and set your own schedule. And that’s exactly why it’s so fancy. It’s incredibly rare. Meanwhile, anyone with decent credit and a willingness to sell away their future time can grab a luxury car.
I don’t necessarily think that we “need” others to spend so much money. It’d just be a different world if everyone lived like us. There wouldn’t be the need for 50-hour workweeks anymore, that’s for sure. Maybe we wouldn’t have large portfolios, but we probably wouldn’t need them, either.
Thanks for adding that. Glad to be a burgeoning member of a very exclusive club. 🙂
Best wishes!
Daniel,
You and I must live on different planets.
Plenty of people and business owners love what they do and have Ferraris? Let’s see… Ferrari sold about 7,000 cars last year. There are more than 7 billion people alive. My calculator doesn’t allow for that many decimals, but maybe yours does? Or perhaps we have different definitions for the word “plenty”?
“Plenty” of people are actually in debt, living beyond their means, and unsatisfied with work and their lives. That’s the unfortunate truth. But there is a better way. And I only say that because I’ve seen both sides of the coin. It’s not for everyone, but I think you only end up here on this site because you’re interested. Otherwise, it’s a big world out there and certainly a big internet full of other websites. 🙂
Take care!
Patrick,
Thanks so much. Glad you enjoyed it! 🙂
Cheers.
Jason, the dialogue between you and yourself as the boss and employee gave me goosebumps: it made me excited to reach financial independence, with a mix of frustration that I’m not there yet. Your posts are always a sweet&sour thing for me 🙂
SR,
I’m with you. I enjoy writing. I love what I do right now. But who’s to say I’ll still love it in 10 years? The freedom of doing what I want, when I want is absolutely too incredible to pass up. That puts you in control.
It’s a shame that most of society is sucked up in that system. It’s like the Matrix, I suppose. Maybe ignorance is bliss. But we took the red pill, right? 🙂
Best regards.
StockBeard,
I only mean to inspire you. I can see how it can be frustrating, though. But I feed off of frustration. Gets me to where I want to be so that I’m not frustrated anymore. 🙂
Every day is an opportunity to get that much closer!
Cheers.
Timely blog entry. In planning my goals, I find most of them do not involve having “things” as much as they involve me having free time to hike and travel. There is no way I will ever be able to keep up with the Jones where I live based on the amount of wealth display I see daily anyway. So why even concern myself with going there?
Loved the article and your book! I have been following the site for a month or so now. They actually made a movie about this. It’s sad but true how trying to keep up with the joneses can ruin relationships and financials. Less is more for me now! Thanks for all the work you do writing articles.
Mark,
Definitely wouldn’t concern yourself. On the contrary, they should be concerned with trying to keep up with you.
Yeah, I couldn’t imagine setting goals based on material possessions: By 25, I want the biggest house on my block; by 30, the nicest car in my neighborhood; by 35, the nicest wardrobe; by 40, the most debt. But people get wrapped up in that stuff, even if their dreams and goals were far, far different. Such is life.
Best of luck reaching your goals, though. Sounds like a lot of fun!
Best wishes.
JT,
Thanks for the support. Really appreciate it! 🙂
Less is more, indeed. I’ve seen and lived through both sides of the coin. And I know which one is better for me.
Never actually heard anyone say, “I hate all this money and all this freedom. This sucks!” But I have witnessed a lot of people miserable with their lives, even though they look like they have it all.
Cheers!
I guess it is a bit harder to compare ones portfolio to another. Sure you could compare the dollar size of it, or the income it produces, or current P/L on the paper capital gains/stock appreciation. Quality also comes into play. Do you have that ‘luxury’ bank stock that is safe, growing a dividend or do you have a super high yielding stock that issues debt and sells assets to keep the facade going with steady payments.
Although I think sometimes having that bigger apartment could be nice, if you just need a bit more room to move around, or like changing rooms while you write, think or talk on the phone. Or just for hosting a few more friends/family for a party. But certainly wouldn’t want all that extra room at the expense of becoming house poor. Just take the comforts where you need and want them, put the rest of your cash into freedom! 🙂
I’m sorry but as a fairly new homeowner, the myth that it is somehow a great investment needs to finally go and die. Instead, it keeps pushing young people into houses because they think renting is wasting money. Let me tell you about wasting money. Every month I need to pay taxes, the mortgage (lots of interest there!), hydro, gas, insurance. If you keep the house long enough, you’ll have to pave the driveway, redo the windows, upgrade the furnace. This is big cash. A house is a lifestyle choice, not an investment choice. My wife and I put 30% down and are paying it off aggressively, its close to family and in a good neighborhood. We think it was worth it.
But lord knows my house doesn’t pay me cash, or keep paying me cash more and more.
On another topic of cars, I was speaking to a coworker who is mortgage free, 50 years old, small savings for retirement. He plans to buy a car that is twice his gross yearly income. That’s just the cost of the car, amortized over 8 years. So roughly $800 a month. Could you imagine the end result if you DGI that amount of money for that amount of time? You would have a nice little portfolio waiting for you when you get towards retirement! To each their own though.
We dream of setting our own schedule and doing what we want with our time. We talk about not owning a house or a car and talk about what a luxury that must be. We are just at the beginning of our journey but hopefully one day…
True about the taxes, but I would be willing to bet the value proposition for owning is head and shoulders above renting in so called cheaper areas of the country. What I mean by this is excluding the 2 coasts and maybe parts of FLA, it is much cheaper to own versus rent, and then you get the kicker of equity build up. If one is fortunate to have the down payment and buys right (not at the top of a cycle) it is hard to go wrong. I think real estate offers a very safe (relatively speaking ) way to build wealth, in addition to stocks of course.
DW,
Absolutely. Unless you’ve got someone else that was born at the same time, has the same exact income and expenses as you, and has the same exact goals as you (basically comparing yourself to you), it’s a fruitless exercise to compare your portfolio/dividend income to anyone else. Everyone’s different. Different means, different objectives, different lives. That’s why I only compare myself to the best I can possibly do and what I want out of life. As long as I’m giving it 100% and on track for what I really want, I’m all good. 🙂
Cheers!
Very true, and what is so surprising is that most people never make the connection. I live in a high end neighborhood, and most of the big, well manicured homes are empty most of the time! So even when they have something luxurious they are too busy to enjoy it! I think MMM captures this best in his posts about being conscious with money. Many folks don’t equate the tradeoff, because they don’t see the opportunity cost when making financial decisions. It also takes a lot of willpower, because marketers continually bombard us with messaging that makes this feel normal. There’s no money behind promoting the joys and peace of thrift.
Being FI gives me a an added piece of serenity that no luxury car could muster.
Steve,
You’re preaching to the choir, my friend. Agreed that owning or renting really comes down to a lifestyle choice. I think renting is often cheaper than buying, but I’d prefer to rent even if there were a premium involved. The benefits are worth it to me. But, again, that’s just a lifestyle call. Depends on what’s important to you. For some, the ownership premium is worth it.
Your co-worker is likely going to rely mostly on Social Security (and whatever meager savings they have) for retirement income. I wouldn’t want to be in that position, but to each their own. 🙂
Best regards!
Mrs. Crackin’,
On the same page 100%. Some might look at a big house or fancy car as a luxury. I look at it as a noose around my neck, keeping me chained to something I might not want to do. I’ve seen true luxury and it’s amazing. 🙂
Best of luck to you guys over there. The beginning of the journey is really exciting. But it gets even more exciting the further you go!
Cheers.
wtd7576,
I guess we’ll have to agree to disagree.
Part of it is really the financial/quantitative side. Some areas of the country might marginally beat out renting, but it also might not be a great market to live in in the first place. Back home in Michigan I know of cities around much of my family where you can buy a decent house (without too much work necessary) for around $75k. But you can also rent a small apartment for $400. So there you go.
The other part of it is the qualitative side, and that’s the lifestyle choice. Even if renting were more expensive where I’m at (which it’s not), I’d pay that premium. I’d much rather write articles/sleep in/manage investments/watch a movie/read a book/do anything than cut the grass, fix things, upgrade stuff, etc. Just a personal call there.
“I think real estate offers a very safe (relatively speaking ) way to build wealth, in addition to stocks of course.”
If building wealth is a ~0% real return over the last 100 or so years, then a home is a great way to build wealth. But not even close to the same universe as stocks. That’s why I rent the former and own the latter.
Cheers!
JayP,
“Being FI gives me a an added piece of serenity that no luxury car could muster.”
Absolutely. Couldn’t have said it better myself. 🙂
It’s a shame that most people don’t make that connection early in their lives. It would really give them the ability to have the best of both worlds, if they so choose. I’ll one day be able to buy a Ferrari in cash and not even feel the pinch, if I really wanted to do that. But since I know it would be nothing but a hassle, I won’t. That’s the great thing about this lifestyle. You eventually realize that you’re not missing out on anything at all.
Thanks for sharing!
Best wishes.
It’d definitely be nice if more people competed to live below their means. We’re far from perfect, even without accounting for the gazillion (give or take) doctor appointments. But we’re still far more mindful of our expenses than a lot of people. To the point that it’s disheartening, really.
Hi DM
The other great aspect of your philosophy is the fact that you aren’t reliant on one pay cheque. There is nothing more devastating than when your employer tells you that you aren’t needed any more. The stress involved in losing that solitary pay cheque is unbelievable. The pressure to find a job to make sure you can provide for your family is huge.
Use a DGI philosophy and one company decides to cancel your pay cheque for any reason you have numerous other pay cheques to ensure that you can remain stress free.
another great article
What a great article. I like most people seeking financial independence love talking about finances and I’m often asked how I can afford to do thing’s. My boss tells me she’s certain I’ll be retired before her (I’m 25 and she’s around 40) and I tell her she’s absolutely right. The “Jones” usually know that living like us is possible and even respect it but almost all say they couldn’t and they look for the reasons they can’t rather than the reasons they can.
I’ve personally battled with the “keeping up with xyz” mentality. All my friends had nice cars, I had to have one (like it was my birth right)!! Everyone got a brand new phone every 2 years (welll I had to have that too). Going on vacation – twice a year (yep, thats on the list). Drinking every weekend (and weekdays too), i’ll be there… Wait a second, why does my CC bill say $8,000…… oh SH*t !!!! My oh shi*T moment came about 2 years after realizing I was out of control, I feel bad for the people who try to “keep up” for longer than that then learn their “oh sh*t” (if they ever learn at all).
Rich
I like reading your blog but I do think you’re simplifying things a bit. Buying a more expensive house usually means living in a more desirable area (assuming space is the same) with more amenities, better safety etc. For someone who doesn’t own a car this would certainly improve their quality of life. Going to free concerts and shows with transportation to take you to more places in less time definetly improves the quality of one’s life.
Furthermore, the freedom you achieve from financial independence is still limited to the income you earn. For example, you can’t just tour the country or travel because your income isn’t high enough to support your lifestyle.
You can supplement it by working or tell yourself that you’re free because all your basic expenses are covered, but in reality, you’ll be free to do things that don’t cost money in a walking radius around your apartment. Even something as simple as hiking would be very difficult without the budget for a car, gas etc. So while it sounds great on paper, the reality for most people is that the things they do enjoy in their free time still cost money and unless your passive income covers those things, freedom will allude you.
seattlegirluw,
Hey, nobody’s perfect. But if we can find a meaningful and purposeful way to live our lives and construct them in such a way that maximize our happiness and well-being, that’s about as good as it probably gets. 🙂
Thanks for dropping in!
Take care.
DF UK,
Absolutely. I wrote about that some time ago, basically asking which was better: 50 paychecks or one? I think we all know the answer to that question. 🙂
The more you diversify your income, the less reliant you are on any one source. That puts you in an amazing position where you basically can’t fail.
Thanks for the support. Glad you enjoyed the article!
Best wishes.
Tyler,
Yeah, that’s a shame when there’s that realization that the path someone is on is unsustainable, yet they continue down the path anyway. I had my realization a few years ago now, and decided to do something about it. I’m so glad and fortunate I did. I couldn’t imagine still being at the base of the mountain, looking up. But every day is a new opportunity, a chance to be better versions of ourselves.
You’re in a great spot being aware/conscious of your situation/lifestyle/money at such a young age. I’m sure you’ll retire before your boss. 🙂
Cheers!
Rich,
I know how you feel over there. I used to be that way as well. Tough not to get sucked into that lifestyle when everyone you know is sucking you in.
Doing what I can to expose what’s possible if you think independently, live below your means, and invest your excess capital intelligently. True luxury awaits. 🙂
Glad you came to your moment and decided to do something about it. The future you is reaping the rewards.
Best wishes!
mike,
Sounds like someone still stuck in the system to me. Not that that’s unlikely. We’re a rare bunch around here.
Maybe I’m simplifying things. You could argue that. I don’t think I am. But I think you’re overcomplicating things.
I don’t own a car. I live in a walkable area. It’s safe. There are amenities here. We pay $925 per month for our two-bedroom apartment. Making excuses to buy/rent a more expensive place because “it’s safe” and has “more amenities” is fine, but just realize you’re making excuses. Living below your means and living well is very well possible if you think about it and put effort into it. I know that because I’ve done it for many years now and am still doing it. Doesn’t make it right for everyone. But I think the rewards are obvious for those interested.
“…but in reality, you’ll be free to do things that don’t cost money in a walking radius around your apartment.”
Wrong. We can take a bus an hour away for $1.25. I can go to the beach, which is free. I can go downtown, which is free. I can hit the local farmer’s market, free concerts on certain Friday nights, or enjoy the park that surrounds the beautiful bayfront. Assuming that having fun must be expensive is just false. It sounds like you either don’t read the blog or don’t agree with anything I write about. Again, that’s fine. But we’re coming from two totally different directions, so we’ll never agree on that.
Best of luck with your lifestyle and expenses. 🙂
Take care.
http://www.mymoneyblog.com/alternative-view-keep-up-with-the-other-joneses.html
Who copied who?
Chuck,
I hadn’t come across that article. But I wrote this article more than a week ago. And I’m not sure any of the content matches up well, besides linking the Wikipedia page. That article is really only a couple paragraphs long and doesn’t touch on anything I touched on.
Edit to add: Most topics in personal finance have been touched on by someone, somewhere. I bet you could find articles on most blogs that are similar to articles elsewhere. None of this is new. Googling for “Keeping up with the Joneses” yields more than 700,000 results. I just try to put my own spin on it, using my own background and experiences. Those experiences can’t be replicated or “copied”.
Cheers!
Dividend Mantra,
Great post with great points. Keep in touch!
LOMD
LOMD,
Thanks so much! 🙂
Best regards.
Dividend Mantra,
Interesting article. I work with 3 people who have BMWs. Two of them halve family and houses and the other rents. I personally take the bus, as I do not make as much as them and I would rather by income generating assets instead.
I also have a relative who bought a pool, but complains that they have to go to work.
Right now in my life, I would rather take the bus and invest in assets. It is a hell of a lot less stressful.
This is a great article – very motivating. Only wish I had read it earlier in life (Im 8 years older than you). But you can only act from where you are in life, since life is lived forward. I’m in a great position right now inasmuch as I don’t hate my job, but certainly not having to work if I choose not to would be the way to go. I prioritized all sorts of material things early on and spent more money than I would care to admit on homes, cars, dates, etc. If I had only saved some of that (and didn’t pull out all my money from the stock market in 2008) I would certainly be more than retired now.
For me I agree with everything you said. The only addendum I would add in my case is that what is better than financial independence is health. Maybe that goes without saying, but without your health, all the amount of financial independence in the world won’t mean a thing. So for me, I really don’t skimp at all when it comes to my food since I personally believe that great food is great medicine so I try to maximize quality. For exercise I do at home workout dvds like p90x + such since it’s way more cost effective and as long as you’re self motivated, solo working out is great.
I also have a great situation in that I just switched jobs, and so I’ve rolled out of my 401k into rollover IRA so I now have an extra $22k to go shopping with. So many options it’s really hard to know what to do. I’m currently doing a hybrid dividend growth/ total return thing and am heavily weighted into tech with a lot of money tied up right now in GOOGL (which just popped 16% recently which was something to behold). From a dividend growth perspective what would you spend this money on if it were you? Certainly we have different situations and your portfolio is different than mine but just curious if you had any tickers you could recommend to start researching.
IP,
“Right now in my life, I would rather take the bus and invest in assets. It is a hell of a lot less stressful.”
Absolutely. It’s funny that this lifestyle isn’t just incredibly rewarding, it’s actually easier. 🙂
I was just on the bus earlier today. Feels good to get chauffeured around town for $1.25.
Best regards.
dzogen,
Can’t change the past. But we can change the future. And that’s pretty fantastic, I’d say. 🙂
I agree with you on health. Poor health makes for a very low quality of life, which can make even financial independence miserable. Though, I’m not totally on the bandwagon that believes that food is where most of your health emanates from. I’ve met a lot of people in great health that eat poorly and I’ve met a lot of people that eat poorly and were in poor condition. Disease is something that tends to strike you whether or not you eat your daily serving of broccoli and all that. Exercise, genetics, and stress are all at least as equally important as your diet. Luck plays a role as well, or else Steve Jobs would have certainly outlived Warren Buffett based on diets alone. But I moderate my diet and limit my portions. I exercise three times per week. I take a multivitamin. And I have a lot less stress now than I ever have before. Life (and health) is good.
As far as stocks to look at now, I’d be looking at everything I’ve already purchased lately. Can’t make a stronger recommendation than that in which I’ve put my hard-earned capital to work. I see UTX fell quite a bit. And Apple and MSFT will likely make for solid opportunities tomorrow if you’re after tech. IBM as well. EMR looks very attractive right now. And TRV just had another great quarter. Canadian banks are also quite cheap. Lots of opportunities out there. Far more than I have capital for.
Thanks for sharing! Let’s keep it rolling.
Best wishes.
This was always mind boggling to me and still is to a degree. What I really find so ironic is that I could go to a Porsche dealership tomorrow and buy almost any car there, yet I don’t, even though I used to always want a 911. It reminds me of a good professor of Economics I had in college. He told us how growing up he always wanted a Corvette. He went to law school, got out, started making good money, bought a house, etc. He then had enough to buy a corvette and yet did not. Instead he bought a rare GM electric truck and just saved his cash. He taught I think more because he loved it and less about the paycheck. In a lot ways, he was my hero. Time is always more important than material possessions. By keeping it simple, I find life is far more enjoyable. Good stuff, thanks for sharing.
– HMB
You might be right on the health part. Warren Buffett eats garbage and candy all day and he seems to be doing swell. I did actually stop eating so much meat, since that is where a lot of my food bill went.
Thanks for all the recommendations and motivation. I will look into it. Thanks.
“If you’re in that 10%, that’s fantastic. Although, I would still argue that financial independence has merit”
No argument here for sure. Obviously people still need to plan for their future and save along the way (even if they intend on working into their golden years). That is why I mentioned being responsible (saving for the future). As hard is it is for even me to comprehend, there are people (a minority) that love their job and want to do it until they die, or as long as they physically can. I was simply stating that some folks don’t have the desire to quit their day job because they love what they do and the people they work with. Again, this of course does not mean that saving for the future is less important.
I agree with your stance on saving for retirement, but not everyone desires (or has the discipline) to be their own boss. In fact, most small business owners I know have told me that they work 3 or 4 times harder in establishing and operating their own business than they ever did working their old 9-to-5. The tone of this article seems to be more so about being your own boss or creating your own work schedule rather than being about achieving financial independence (in general). That’s all I was trying to say.
All this said, I am definitely in agreement with you. I can’t wait to retire. The sooner, the better.
I doubt the Joneses will ever want to try and keep up with you – it’s waaay to hard for them! Much easier to go out and buy something shiny and new, it takes absolutely zero effort, and immediate reward!
Of course, even if they really wanted to try keep up with you, they would probably just tell themselves that they love their fancy new car / clothes / jewellery much more anyway! Living in accordance with what you truly, deeply value is really the only path to take, one way or another.
Cheers,
Jason
Making do with less now for the promise of more later seems to be a difficult concept in general for people to grasp, whether it’s time, money, or anything else. Upfront, there can be a lot of time lost in the FI lifestyle. Coupon clipping or researching prices. Traveling to multiple stores for the best deal on necessities. Waiting for the bus (I have a 3 mile commute. It takes 45 minutes–exactly how long it takes to walk, but is better on rainy/snowy days and nights since there are no sidewalks or shoulders), waiting another 30m when it’s late or decides not to show up that day, booking in long shifts on mandatory overtime… a lot of days it really sucks, but the vision of not having to abide by other people’s schedules is usually enough to get through.
It took us six years to find the holy trio of 1) a place we could afford 2) within walking/busing distance of 3) a place that would offer a job where I didn’t LOSE money by working (net minus student loans that popped out of deferment, bus fare, uniform expenses, bag lunches substantial enough to get through a 12-14h shift, etc.). One was always out of whack. Even here, good luck finding any transportation past 8 pm or on a Sunday. We could find lots of places with 1&2, but 3… yeah not so much. The goal is clearly to get that out of consideration altogether but in the accumulation phase it is a chronic problem.
It has been nice, though, to see that despite unrealized losses with the recent market drops, my portfolio’s market value keeps getting bigger with each little dividend payment. Very reassuring.
HMB,
Thanks for sharing that.
That really goes along with what I’m saying here. Once you have enough money to buy the “luxury goods”, you might not actually do so… and that’s because they start to become a lot less attractive once you gain exposure to the real luxuries.
We’re in the same position. I could go and buy a brand new Porsche 911 in cash tomorrow. And I’d still have plenty left over. But why in the world would I do that? Would that improve my quality of life one iota? Doubtful. But I’d sure sacrifice a major boost in the quality of life that the freedom that that money provides in exchange. It’s just not a sensible trade-off.
Sounds like you had a great professor over there. 🙂
Best regards!
Jason,
“Living in accordance with what you truly, deeply value is really the only path to take, one way or another.”
Absolutely. And there’s nothing wrong if you truly, deeply value material possessions. That’s just fine. But be honest with yourself and make sure you’re willing to work for the majority of your life to afford that lifestyle. Take an honest inventory of your happiness and make sure it’s up to snuff. If it’s not, then it’s probably time to shift gears.
I was asked not too long ago on a podcast what it means to me to live authentically. And that was basically my answer: Align your values with your actions. Those values may not mirror mine or anyone else’s, but they should be genuine to who you are. And you should make sure your actions correspond.
Thanks for stopping in!
Best regards.
Jana,
Yeah, I agree. Delayed gratification is a difficult pill for some people to swallow. Although, I’ve argued before that I’m actually hastening gratification by going after what I actually find gratifying. So it’s not really a sacrifice at all to me. And, if it really is this big sacrifice to live below your means, then you have to ask yourself what the bigger sacrifice might be: living below your means or working for the vast majority of your life. I know my answer. 🙂
The bus system isn’t particularly robust where we live – Sundays can be difficult. But we make do. I sometimes think about getting a little scooter again, but the bus works well enough. And you can’t beat the price. Getting chauffeured around town for a couple bucks is pretty sweet. Who needs a Bentley with a private driver when you can just hop on the bus and be whisked away while you work/read/write/sleep/do puzzles?
Keep it up over there. Every day is a new opportunity!
Cheers.
Regarding, “…a virtual neighbor in the form of a blogger that’s maybe financially further ahead than you are,” I have always stated that we are all on the same journey headed in the same direction just at different points along the same path. Too often, in our western society we compare and value ourselves to others. As you stated, it may be in the form of a “luxury” car, large home or fancy clothes but nevertheless many compare themselves to others. I would venture to guess that most, if not all, in our little online community do not care nor compare to others. I do think that we give each other financial juice and encouragement to follow our own FI path in whatever form it may be.
DM
I have a rich neighbour who retired from a lucrative job with an IT company in his early 50s who has blown $125k in depreciation by buying three Ferrari cars and selling two!. Think he must be going through a mid life crisis. I wouldn’t like to think how much the depreciation has dented his net worth even though he is a millionaire!!.As for me, I have no real interest in owning a Ferrari and would rather become a millionaire through investing. I have not owned a car for the last 25 years and live in a place where because everything is so close by, I don’t actually need a car and just use a taxi and trains as well as walking instead.So much more relaxing to be driven by someone else. Incidentally it is estimated that petrol, road tax and repairs alone costs the average English car owner $3,000+ per year and then there are monthly car loan/lease payments on top!!.
In England thanks to insane property prices which show no sign of slowing down, it definitely makes sense to own and not rent a home. I think of paying down small lump sums off the mortgage to be like increasing my net worth.I will have the consolation of not paying any rent when I am retired which will save a lot of money, once the mortgage is cleared. This will mean more income in retirement for me to spend on travelling instead.
Regards
Mark
Being my own boss truly would be the ultimate luxury. There’s a LOT of material things I’d give up in order to obtain that — other than my book collection, of course!
Great article, Jason!
Perhaps it’s time for a new American Dream. One’s measure of success has always been measured by a certain checklist: Marriage by this age, owning a home by this age, having a child by this age, etc. It’s always been about hitting those metrics in order to be considered successful (no wonder we drift so naturally to 9-5 jobs; even our lives resemble one). It doesn’t matter that some of these things will drive us into debt and force us to work everyday until we’re 65; the nice house with the white picket fence and the 2.5 children and the nice car are all the American Dream and you’d better work to achieve that dream if you don’t want to be different.
It’s good that we all seem to be striving for different.
I’ve actually read multiple articles about how Millennials are rejecting the success metrics of old and not replacing them with new ones. Young people are rejecting homeownership and children and there doesn’t yet seem to be a standard replacement to make up a new American Dream. Maybe, despite the whining and crying of aging Baby Boomers might make you think, we do have a generation of independent thinkers. One can hope. I wonder if we’ll be seeing a surge in the FIRE crowd.
Sincerely,
ARB–Angry Retail Banker
Haha, I love this one! Definitely autonomy, flexibility, and freedom are life’s true luxuries.
Go ahead, Mr. Jones, treat yourself to a little freedom. You deserve it
Well said. I consider myself financially independent at 65 and probably have enough money to make it to my 90s. I am still an active DGI investor though and appreciate your blogs. My condo is a small 575 ft. one bedroom, I drive a 2000 Civic and the only new clothes I bought this past year were for hiking. At my annual check-up the other day I told my doctor I live a happy stress-free life because of my low-cost lifestyle. She laughed and said she sees many people with high incomes and high levels of stress, and that a low stress life is much better. I’ve become immune to marketing too and am about to cut the cord with Verizon and go with a less expensive wireless service provider. Americans in general seem to be terrible consumers unable to make wise choices and instead following the herd. I get all my entertainment for free from the library, so I might not be current with the latest popular TV show but it doesn’t matter, I’ll see it eventually. Keep up the good work, Jason, and keep inspiring us to make prudent financial decisions about investing and lifestyle choices.
Being able to call your own schedule is more powerful than anything else. Love the post.
This is one of your better articles, thank you very much.
I like the idea of flipping the saying around. Financial independence would be a great thing to strive for as opposed to a fancy car. Savings rates would increase all over the place!
Keith,
“I would venture to guess that most, if not all, in our little online community do not care nor compare to others.”
You’ve obviously had a different experience than me.
I wrote that article a few months back because I’ve received so many emails over the years where readers were either lamenting the fact that they weren’t as far down the road as me or were asking how they could get to my spot with certain input. And I’ve always told people that I shouldn’t be anyone’s measuring stick. The only measuring stick you should use is your best effort against where you want to eventually be.
But I do agree that we offer encouragement to each other. We mutually inspire each other toward our individual aspirations. And I think that’s wonderful. 🙂
Cheers!
Mark,
“So much more relaxing to be driven by someone else.”
Absolutely! The bus should come with a premium around here. Instead, it’s substantially cheaper than driving yourself around. I quite like that. Just another form of arbitrage, in my view. 🙂
Keep up the great work over there!
Thanks for stopping by.
Best regards.
fyoumoneyblog,
I’m with you. I can’t think of any material possession that trumps owning your own time, setting your own schedule, and being your own boss. If you can attain all that early in life, however, then you can likely buy whatever you want down the road. But once you’ve attained true luxury, everything else will pale in comparison.
Best wishes!
ARB,
Thanks so much!
Yeah, the Millennials are an interesting bunch. Not sure if it’s going to be a whole generation of independent thinkers, though. Every generation is young and “different” at one point or another, but they all eventually grow into their creature comforts and end up like everyone else. I’m not saying that’s a bad thing, though. Just depends on what you want out of life and what you’re willing to put yourself through.
I’ve read similar reports on home ownership, but that, too, seems to be changing. I think the biggest reason why a lot of Millennials have delayed some things (home ownership, marriage, etc.) is because of high student loan debt. But as that debt gets paid down, I think they’ll settle into fairly “normal” routines.
However, I have noticed an increasingly friendly climate for these discussions/topics. When I first started writing about early retirement/financial independence/frugal living/dividend growth investing, the community was somewhat small and the people writing about it (like me) were considered kind of strange. But that has changed over time. I’ve noticed far more interest, both here and at other sites in general. And even the mainstream media has been somewhat kind to the topic. So there is hope! 🙂
Thanks for dropping by.
Best regards.
Jeremy,
You’ve been enjoying true luxury over there. Life is good! 🙂
Cheers.
sohokatkay,
You’re living the life, my friend. Happy, healthy, and truly wealthy (where it counts).
I can only hope to be so wise in about 30 years. You’re truly free… of wants, society’s demands, debt, stress, and certainly any boss. Sounds like you’re having a great time over there.
Thanks for sharing that! Looking forward to many years of such happiness.
Best regards.
Tawcan,
Appreciate it. Glad you enjoyed it! 🙂
Best regards.
pacific222,
Means a lot to me. Hope you found a lot of value in it.
Take care!
Vawt,
The Joneses are a tough group. Doubt we’ll see them follow us in droves. But I won’t be able to say I didn’t try. 🙂
Cheers!
You touched on something that the Joneses need to think about: the fact that they are too busy preoccupying themselves with the aquisition of unnecessary crap to think about other possibilities. Most of them are just following mainstream programming mindlessly.
I’m not sure about wanting stainless steel applicances, but sometimes I wish I had a quiet fridge =).
Jason,
I agree wholeheartedly about the importance of gaining and keeping control of one’s time. Time, like money, provides positive benefits and these benefits compound over a lifetime. Improved health and fitness, stronger relationships and enjoying higher quality experiences immediately come to mind for me.
Anyway thanks for posting!
David
Hello! I am thoroughly enjoying your blog, and watching you attain your goals is so inspiring. I have a question for you: do you plan on buying your own house one day? I know you like to keep your expenses low by renting, but do you have a desire to own your own home in the near future? Some people view that as a dream, while some others may view that as a burden. Just wanted to know your thoughts. 🙂
I’m interested in this question as well. Would it be worth only paying home insurance and taxes (aka rent) if you didn’t have a mortgage? Would having the stress of living in a house be worth the stress of owning it? Obviously, if things go bad, it is your loss, but insurance and taxes probably amount to a little less than rent (certainly in my area)
Spoonman,
Sorry about the noisy fridge. That would probably bother me, too. 🙂
Mindless is a good word. And I don’t mean that in a bad way. It’s just one of those things where you’re either an independent thinker or you’re not. Maybe ignorance is bliss, but I remember being quite miserable with it. Very, very happy these days.
Thanks for dropping in!
Cheers.
David,
Absolutely. When you have time, you have control. Time is far more valuable than money, in my opinion. It’s our most valuable possession of all, and it’s slowly dwindling away. The fact that so many people sell it cheaply is really crazy to me.
But it takes time to cultivate relationships, stay in shape, enjoy experiences, etc. If you have no time because you’re working for most of your waking hours, you’ll be very limited in terms of what you can do there. And that’s why true luxury awaits those that see through the fog. 🙂
Cheers!
LPI,
Appreciate that. Glad you’re enjoying the blog!
That’s a question I get asked often enough that I should probably just write a post on it. The problem I have with the question (and why I haven’t written extensively on it) is that a lot of people don’t like my answer. I’ve noticed people tend to get emotional over homeownership, which is strange to me. It’s like some want to defend it, as if the home is some dainty princess that needs a knight to ride to the rescue.
I’m not personally interested in ever owning my own home. From what I can see, the finances tilt in the favor of renting far more often than not (when factoring in EVERYTHING). And those areas of the country that would probably make ownership look more attractive are also areas of the country that I wouldn’t want to live in. That’s the quantitative side.
The qualitative side is a lifestyle call. I’d much rather write/read/watch a movie/manage investments/spend time at the beach/go downtown/do ANYTHING other than cut grass/perform upgrades/repair things/maintain a home. Even if renting were more expensive (which it’s often not), I’d gladly pay the premium (assuming it were reasonable). I just quite enjoy the carefree lifestyle.
There are a lot of things I don’t like in life. I don’t like being cold, so I moved to Florida. I don’t like working for 50 hours per week, so I don’t. And I don’t like working on a house, so I rent. It’s just aligning your actions with your values, as I alluded to above.
Hope that helps!
Best regards.
Erik,
I did my best to answer that question above.
Keep in mind that residential real estate tends to return an annualized real 0% or so over the long term. Stocks, meanwhile, return somewhere around 6% to 7%. So I’d much rather rent the former and own the latter.
The lifestyle choice is far more personal. That’s really up to you. I know what I like, though.
Cheers!
Hi, thanks for your honest thoughts! Appreciate it. Though it is an absolute pleasure (for me) to own my home and enjoy the lifestyle that comes with owning in a good neighborhood with good schools, etc, like you mentioned above, you are absolutely correct in saying there is a cost to pay, and that’s a little maintenance and upkeep.
However, just wanted to point out one thing. I live in Los Angeles, in a good school district. To rent a house in my neighborhood today, we’re talking $4200-$4500 per month. My payments (PITI) are only $2700 per month, just because we bought when prices were low and my interest rate on our loan is 2.5%. We’re almost done paying off our home.
We’re thinking of renting our home, therefore turning it into an asset, and using our rental income along with our portfolio income to help make our payments on a second home. Maybe we’re wrong in thinking along these lines, but my point is that to have two or more sources of passive income is perhaps safer than having just portfolio income alone. Like you, I also believe in making my money work for me, and not working for my money. Sorry, cliche, I know!! Anyways, this is just a thought, we still need to run our numbers carefully before making a final decision. Keep up the great work on your wonderfully inspiring blog! 🙂
This whole rent versus buy decision has been a huge talking point in our house for the last couple weeks. I definitely know where Jason sits on his decision. I can’t argue that with him because that is what is right for him and works for his family.
We have been of the opinion for years that renting is throwing money down the drain. I think unless you live in a high growth area, minimize what you do to your home, and finally buy and sell right at the right times, renting and investing the difference may be financially better. My own numbers are beginning to tell that story that renting may be better for me.
I think home ownership also has be to contemplated from the emotional aspects that it will provide. If you are a person that does not like moving, loves to work on you home and yard, and feel renting is not for you, then perhaps owning is the way to go. We are trying to figure that our for ourselves now.
Sometimes I wonder if people really figure out the cost of a purchase?
I would like a Corvette. Just found a nice one, 2013, for $60K. A lot of money for a toy! But that is not the “real” cost.
Taxes are close to $10K = $70K
Plates an extra $250K per year
Insurance $1K per year
Gas is a non issue as you drive one car or another
Maintenance is a quasi non issue as again it is one car or the other so you extend the life cycle/maintenance
Lost income from investments. This is a bit tricky as I would have depleted them over five years. Never the less, the investments were bringing in approx $3.5K per year.
Lost income from 401K as I would have to draw down on it at an earlier age and therefore deplete it sooner
I figure my $60K Corvette will cost me close to $100K
Minus the re-sale value when I am too old and decrepid to drive – value uncertain. But you still have all of that lost investment income up front
So, do you really want that Corvette, yacht, motorcycle, four TV’s, etc etc,? They just may cost you more than you think overall. Having said that, money is made to be enjoyed, just don’t squander it.
How many people really sit down and figure out the actual cost.
RICARDO
Ricardo,
Absolutely. There is almost nothing on this planet that comes with no ancillary costs. Even a bag of chips will probably cost you a little more than the sticker price just in terms of possible negative health effects, when compounded out over many years.
And you’re preaching to the choir here about the Corvette. The very first thing I did when inheriting money back about 12 years ago was go out and buy a C5 Corvette – torch red. I loved it. But guess what? I didn’t factor in everything else. Gas, maintenance, insurance all added up pretty quickly on that thing, especially insurance for a 21-year-old. If money were unlimited, I’d probably own a nice car or two. But I know, deep down inside, it’d just be a silly waste. Unfortunately, money is quite limited for me, and so I very much prefer going after the greater luxuries in life.
Cheers!
Love the new post DM! This post brings to my attention an investment idea/thought… one in which we are already currently doing but should perhaps look into further. If this lifestyle of living below your means, reinvesting the rest, only buying the necessities in life continues to grow like it has over the past 3 years I have been reading your blog, then the companies I’d be most interested in would be ones that sell consumable items. Think about it, if people realize they dont need an Iphone to survive, or a new BMW to get to work in or all those toys like go karts, boats, motorcycles etc… what do you have left… Toilet paper, Toothpaste, food, and a few others. Of course, this is why PG, CHD, KMB are such great performers when the economy is in dire situations but over the course of the next 5-10-20 years if people start to embrace this life, then that is what they will truly need. The growth of AAPL, NFLX, GM, F, etc could slow dramatically. Interesting thought…
Anyways, I love not keeping up with the Joneses! My bank account, retirement account and lifestyle of living to the fullest by being with family and friends is a million times greater than the new car in my driveway!
Great post,
ADD
ADD,
What if everyone lived this way? An interesting thought, but not much more than that. A hypothetical that I consider more unlikely than nuclear war. Just the nature of civilization. The odds are about 1,000,000 times greater that consumerism increases over time as many third world countries improve conditions for their middle classes. All of the companies we invest in are doing pretty incredible considering that only a fraction of the world’s population actually spends heavily.
On the off chance this lifestyle catches on with 80% of the developed world, I like our chances. I addressed this a couple years ago, but we all tend to invest in products/services that even frugal people use. I’m pretty frugal, but I still use products that the likes of PEP, KO, JNJ, and PG manufacture. And, of course, energy will always be necessary as well.
But I wouldn’t mind seeing what the world looks like if it went the other way. Our portfolios wouldn’t be as large, but we wouldn’t need all that passive income if the economy were based around less demand for stuff and less work to pay for it. Maybe Keynes’s prediction would come true then. 🙂
Take care!
Dividend Mantra,
I agree a lot with this post. Owning nice and luxurious goods is not necessary a bad thing if you can afford that lifestyle and still stay on track. Many people complain about not being able to save for retirement and generate the income they need. They blame other people, their low salary, and many other things. The problem is the majority of them only have themselves to blame because they refuse to give up the overpriced items that hold them back. Not saying it is bad to own expensive things, but it don’t make a lot of sense to give up freedom for it. These people always are trying to chase away the debt until you are the normal retirement age and still working.
With that said school costs for hurt me for awhile, but I hope it pays off for me in the end.
Do you still plan on going to FinCon in Charlotte in September?
SWAN,
Agreed. I’m sure some people just have bad luck. Health problems, accidents, and a rough upbringing (I would know a lot about that) can set people back, sometimes permanently. But the majority of people that are fortunate enough to be born in a first world country are generally looking at a lot of abundance and opportunities. So that just sometimes requires a hard look in the mirror. I had to take a good look at my own situation a few years ago and be honest about it. Tough to admit that you’re to blame.
I wish I could make it out there, but it’ll probably have to wait until next year. I had the Omaha trip earlier in the year. And we’re also going to Central America for Christmas this year, so that’s probably enough travel for me. But maybe 2016!
Thanks for stopping by.
Best regards.
Hi Jason,
Very well said .”I love telling myself what to do”.This is the motivation for me to achieve F.I.I wake up everyday with the thought that I am 1 step close to attaining F.I.I have been guilty of wanting material luxury so far but once I realized F.I is the ultimate luxury like you mentioned I have changed for good.
What I have noticed in my 6 month of journey to F.I is that life’s perspective changes.What previously seemed that you need it badly actually has no place in your life now.
Now I read your blog and I imagine how good it feels to own every second of your day.Hoping to reach that state one day myself.Keep up with your good work.
Regard,
Venkatesh iyer
Call me selfish, but I want people to spend, spend and spend some more without breaking the bank or going into bankruptcy. I also want people working and being productive in life, doing well in their work lives as well as their private lives. Plus, in order to enjoy their down-time, they should be buying those fancy RV’s or cars to take fancy trips, maybe even lease those fancy cars? All of this is great for the economy, and enable some of those companies to pass those earnings to us shareholders, and maybe enable a few of us to buy that fancy car off lease for the price of a Honda : )
On a side note, we had this boss that was absolutely crazy, I MEAN CRAZY. He would yell and scream, curse, slam the phone down, throw things. He was just a horrible human being, I saw him outside of work a couple of times and all I can say is that a leopard does not change his spots.
Good article man,
Raymond
That’s partially why I have a higher allocation to Consumer Staples than any other catagory. Also because I understand the businesses and the products, that helps too. But nobody can make an after shave balm as good or as cheap (if need be) than PG. All the big consumer staples have the ability to really punish anyone trying to enter their market and I like that ability in my companies. I use Harry’s razors, because they are cheaper than Gillette and work fairly well, but don’t think PG couldn’t hammer out an old Mach 3 value version that works better and costs less. They haven’t because they don’t need to, but they would if they had to and nobody would be able to do a thing about it!
Jason,
For selfish reasons you should hope that most people don’t follow you advice. If everyone did, it would not work!
I’m sure you know what I’m saying, but I’ll give a quick example. If everyone updated their iPhone every 10 years instead of every 2 years (or less for some), then the value of Apple would drop like a rock. Apple would cut, or eliminate it’s dividend
If it just happened to Apple, then it’d not be that big a deal for you, but I could go through each business you own and show how more saving and less spending by the general public would hurt them and your dividend as well as your online income.
Now for non-selfish reasons, I do believe that most people do not save enough. While I don’t believe a overall savings rate of 50% like you do would be good, I do think that anyone saving 0% or less are not acting in their own best interest. Even if it hurts my dividend a little I wish they would save a little more.
Anyway, I don’t want to get too philosophical, but it’s only because of mass consumption that you can do what you do.
IB
Jason – have you read the book ‘How I Found Freedom in an Unfree World’ by Harry Browne? It’s my absolute favourite book and I think you would enjoy it. It’s also available for free online as a PDF.
Just bought CAT @ $77.6. Its yielding at almost 4%. Can’t pass on that.
I live in an extremely modest home for where I live (Boulder county). On the other hand, I don’t need to own although the rent vs. own calculation shows owning to be the better option.
I drive an extremely modest car (1999). On the other hand, I don’t need to own a car.
I’m moving in the right direction, but it’s a matter of how committed I am to the cause of being free!
Wallet Engineer
Venkatesh,
The perspective does change. I remember back when I thought living in my city without a car was “impossible”. Not only is it possible, but I’m actually thriving without one. So it’s just a matter of knowing what you really want, aligning your actions with your values, and then going all out.
But freedom is all it’s cracked up to be. I’m not even completely free yet, and my life is significantly better than it used to be. I can only imagine how much better it gets down the line. You’re still you no matter where you go, but the rewards come in little bits along the way. Adds up to something pretty spectacular, in my view.
Keep it up!
Best regards.
Raymond,
Yeah, I don’t look at the world that way. It’s only in our current version of society that saving and investing is necessary as a form of escape, as a form of arbitrage. If that wasn’t necessary anymore, then life in general would be far different. I imagine it’d be something similar to what Keynes predicted. And I wouldn’t mind that state of existence, where everyone works like 15 hours per week all along. You’d probably never build up the urge to escape if the work-life balance never got so out of control in the first place.
But you’re right in that, for the most part, people don’t change. And it’s because of that that we don’t really need to worry about the world changing much. 🙂
Cheers!
Keeping up with the Joneses is a terrible thing. As you know I am fond of Charlie Munger, and I think he says it best:
“The idea of caring that someone is making money faster than you are is one of the deadly sins. Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley? ”
Cheers!
Steve,
Agreed. That’s where most of my exposure is at too. Simple business models and products that are mostly recession-proof. Secular growth – both in terms of underlying operations and dividends. And I like that, especially as a measure to offset some of the cyclical holdings.
Best wishes!
IB,
I disagree. The world would likely just be different if most people took this path. Supply and demand would be far different, and so would prices. Again, I think it’d be something in line with what Keynes predicted. It’s truly unnecessary for most people to work 40 or 50 hours per week anymore. There wouldn’t be the arbitrage opportunity anymore, but it also wouldn’t be as necessary. Would I have wanted to escape my path if I were working 75% less? Maybe not. A more attractive work-life balance might be easier to swallow for most people anyway, rather than a plan where you’ve got to work hard, save a really high rate of your income, invest intelligently, and then wait for 10-15 years. An attractive lifestyle right out of the gate isn’t a bad alternative, in my view.
But it’s all just hypothetical. I find the odds of something like that happening so low that it’s a complete waste of time to even think about it. 🙂
Cheers!
iain,
I haven’t. I’ve heard of it at some point in my life, but never come across it. I’ll definitely take a look! 🙂
Best regards.
AJ,
Agreed. Nice move there. I don’t think there has been any other time besides the financial crisis where you could have picked up CAT with a ~4% yield. I’m not interesting in going too heavy on CAT, but I wouldn’t mind doubling my position if it continues on like this.
Glad to be a fellow shareholder. 🙂
Cheers!
WE,
Definitely. It’s all about finding a balance that works for you. For some, extreme measures are attractive. For others, that’s crazy. I tend to find my comfort zone down below what others are willing to do, but that’s just me. Just depends on how much you want something. 🙂
Take care!
DGI,
Good stuff there. All pain and no gain. Couldn’t agree more.
It’s a stupid and pointless exercise to compare yourself to anyone, in my opinion. And that goes whether we’re talking about cars or portfolios. If people worried more about what they’re doing and less about what everyone else is doing, I bet they’d find themselves a lot happier.
Thanks for adding that!
Best regards.
If I was to compare my kitchen to the neighbors- I would probably need to start renovation!
My neighbors always seem to be blowing money on something- Backyard Pool/ new cars every 2 years/ Solar Panels/ Renovation. I just smile and nod- The key is to lead by example and not to point out their wastefulness directly.
By the way- I just got our water bill yesterday – the average use in our neighborhood is 11,000 Gal/month! We only use about 2,000-I figure most of the extra must be going to watering the lawns- every day for at least 20mins I see their sprinklers on. On the news yesterday they said the aquifer is going down 1/2 foot every day and they estimate 50% is from people watering their lawns.
Great post by the way- Chef
Jason,
I have not been following the market like you have so I’m coming you for advice.
I recently sold a rental property and I have some money to invest. My dad actually purchased this but it’s in my name. He was going to purchase another property and rent it out but I suggest that it’ll be easier to invest in dividend stock. After a few weeks he agree with me. I inform him I will use the income generated to help pay for his property tax, Insurance and various bills. I have about 100k to invest. What do you suggest that I invest in to get a stable dividend stream?
Chef,
Appreciate the support. Glad you enjoyed the post!
Definitely agree with leading by example. That’s why I do what I do and write what I write. I think you need to be the change you want to see. If others join in, great. If not, great. Financial independence isn’t dependent on others also becoming free, but I’d feel guilty if I kept all this to myself. 🙂
Thanks for stopping by.
Best regards.
Hi Jason,
I think you are spot on that buying as house vs renting is an emotional subject. My guess is it is due to the fact that it is one of the largest financial decisions in a person’s life. Purchasing a home is often the largest purchase a person will make or if they rent then that is often the largest annual cost they incur. There are Pros and Cons for both sides. Ultimately, your answer “its a lifestyle choice” is the best answer here. I don’t think the economics of the decision should play into the discussion at all (once you decide to buy or rent, then and only then should finances come into play as there is no need to buy or rent an overly luxurious place that will prevents you from meeting your financial goals/happiness, etc.)
Here comes my need to ‘defend’ my choice to buy :). I don’t think pointing out the real rate of return being close to zero so you prefer to rent that asset vs buy it is an effective financial argument. Unless you are able to obtain free housing, the comparison shouldn’t be between buying a house vs buying income producing stocks. It should be the cost of buying a house vs. the cost of obtaining shelter through other means (renting). You say that it is often cheaper to rent. I don’t know which option is cheaper more often than the other but it certainly can be cheaper to rent or buy depending on location and time (economics of buying/vs renting tend to ebb and flow in either direction). For me, it was a lifestyle choice to purchase my home. The cost of buying vs. renting wasn’t as important in my decision. Once the choice was made, it was then purchasing the right house and thats when other factors were then considered (cost, commute, school system, crime rate, etc.). I could have bought a bigger more expensive house but would not have made me happier and FI would have been pushed further down the road.
Unless it is an extremely rare case where the economics are crazy tilted in one direction or the other, I do not think it makes sense to make the decision to buy or rent based purely on which is cheaper. I think it is better to make a lifestyle choice and then find the appropriate purchase/rental for your needs (size, finances, etc). These types of conversations too often focus on the costs of buying McMansions when I see plenty of very expension luxurious condo rentals that are always full with tenants. Don’t buy or rent more than you need.
Now that I have disagreed with that one point, let me say…Loved this article! 🙂
Bill,
Congrats on being in a great position over there. $100k is, as you know, a lot of capital. However, it’s impossible for me to recommend stocks to others. Not only logistically since we all have different risk tolerances, objectives, income needs, circles of competence, interests, and time horizons, but also because I’m no financial advisor.
However, I think there’s no stronger recommendation than that in which someone is putting their own hard-earned cash to work. My recent purchases can be explored, as well as my portfolio. 🙂
Best of luck over there. Fantastic spot to be in!
Take care.
Awesome post Jason. I sometimes wonder at the choices some of my colleagues make (leasing new luxury cars, taking trips they can’t afford, eating out multiple times a day) while they’re happiness levels remain the same or even decrease. Creating more time and money should be the name of the game, and you’re right leasing a luxurious leathery luxury car will not get you either.
Buy assets, sell liabilities and become happier. To me, it’s as simple as that.
RD,
Thanks for adding that. This discussion has gone way off topic, though I’ll quickly add:
“I don’t think pointing out the real rate of return being close to zero so you prefer to rent that asset vs buy it is an effective financial argument. Unless you are able to obtain free housing, the comparison shouldn’t be between buying a house vs buying income producing stocks. It should be the cost of buying a house vs. the cost of obtaining shelter through other means (renting).”
I agree with you, though I think the stark difference in terms of returns is part of that equation. You have to look at the opportunity cost on the money and extrapolate that out over the life of your residence (as long as you live, really) as part of the calculations. But I’ve compared buying to renting when looking at everything – PITI, taxes, maintenance, repairs, etc. against just rent – and I’ve found renting to be far often cheaper. Like I said, there are some areas of the country (especially certain parts of the Midwest) where buying can be cheaper, but, again, I wouldn’t personally want to live in many of those areas.
And that’s really what it all comes down to. It’s a lifestyle call.
“Unless it is an extremely rare case where the economics are crazy tilted in one direction or the other, I do not think it makes sense to make the decision to buy or rent based purely on which is cheaper. I think it is better to make a lifestyle choice and then find the appropriate purchase/rental for your needs (size, finances, etc).”
Agreed 100%. And I think that’s the point I was trying to make, if it wasn’t clear. Too often I see people make all these crazy calculations, which can probably tilt in one direction or another if you’re biased enough to make it work, but then totally ignore the qualitative side of it, which, in my view, is way more relevant to the decision. It should really be a lifestyle decision. Your shelter will always be an expense. So it makes the most sense to figure out what type of shelter (own or rent it) fits your lifestyle and then, from there, go with housing that is most cost effective. That’s what I’ve done and I’ve been 100% happy with that choice. Sounds like you’ve done the same. That’s the perfect solution to it. 🙂
Thanks for sharing that!
Best wishes.
Syed,
Thank you!
We’re definitely on the same page. We have all of these incredible opportunities to maximize happiness. It’s a shame that most people squander that in favor of flashy material possessions that don’t have anything to do with that, but such is life. Doing my best to spread the good word. 🙂
Thanks for dropping by.
Best regards!
Who?
I would say it is hard to set a one size fits all rule to home ownership.
As an anecdote here is my experience.
I moved to Houston 5 years ago and rented a apartment with my girlfriend at the time (now wife) which cost $1200. It was a nice apartment but East of downtown in an area then considered not the best (it has since improved slightly).
For the three years we stayed there the rent went up $100 a month, or about 8% annual.
After the second increase I contacted a real estate agent apartment locator. After telling him what I was paying and where he seemed flabbergasted and told me there was no way I would get a better deal anywhere else, I had gotten lucky only having my rents increased almost 10% a year while they were going up faster for new residents.
This is what got us to look into purchasing a home.
We have lived in said home for a year and a half now and its value has appreciated approximately 20%.
Like with dividend paying stocks the value isn’t a huge deal at the moment as I am not planning on selling it but it is nice to see upward movement as opposed to downward.
When we left the apartment it was running $1450 plus utilities.
The mortgage is currently $1496 plus utilities after a small uptick in property valuation.
This weekend we are starting a renovation of the garage which will result in a rental unit which we plan to market for $800 a month. This will go a long way towards financial independence for us. If we are successful we could then rent out the remaining portion of the house (where we currently live) and have about $2000 in monthly rental income which obviously will could come in handy.
So I am just saying that ignoring real estate completely is not necessary even if one is pursuing financial independence.
You have slightly less control of the expenses of an apartment. I can contest the property taxes at the county office but would have no such luck with a landlord.
Where is the ~0% real return number coming from? All real estate is local and just like stocks, you make your money when you buy, not when you sell. You seem to think that real estate at any price just doesn’t work. Real returns from real estate are astounding because of pricing power. If you rent long enough you’ll come to understand this.
Alternatively, the universe of stocks you’re using had better not have any survivor bias or you’re kidding yourself.
The Curry article is good but the conclusion you’re drawing is off base. He bought way more house than he needed and stayed in it way too short of a time to be worthwhile. If you want to travel the world on a whim, real estate may not be for you. But let’s not confuse that with investment analysis.
Normally I like your balanced responses but this one has me scratching my head.
Moniker One,
That’s an interesting anecdote, but you’re only telling something like 10% of the story and only looking at one conclusion. You could have just as well moved into a cheaper apartment. Instead of contacting a real estate agent apartment locator (that’s really necessary???), I can go on craigslist right now and pull up the map to Houston. I found a dozen apartments east of downtown for right about $1,000 per month. That would be a lot cheaper than your house. Furthermore, you’re completely ignoring all the other costs of homeownership. Looking at a mortgage payment alone and comparing that to rent is incorrect. Rent is rent. That’s it. But the mortgage is just a start to owning your own home.
My rent has gone up from $900 to $925 over the last few years. So it depends on your local market. But I think you would have been financially better off just finding a cheaper apartment (they seem to be plentiful). You were going to move anyway.
“You have slightly less control of the expenses of an apartment. I can contest the property taxes at the county office but would have no such luck with a landlord.”
Disagree 100%. My rent is fixed from year to year. If I don’t like it, I can move. Home expenses are far from fixed. You’re responsible for everything, and anything can pop up at any given time. If something breaks in my apartment, I make a call and it’s fixed. You can’t contest a leak or a furnace problem.
Cheers!
Ugaboog,
“Where is the ~0% real return number coming from?”
The Case-Shiller index, which tracks real home prices since 1890:
http://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index
Per Robert Shiller:
“From 1890 to 1990 the appreciation in US housing was just about zero. That amazes people, but it shouldn’t be so amazing because the cost of construction and labor has been going down.”
We’ve seen a recent bubble, but that’s the long-term trend.
Housing is a poor “investment”, if that’s even what you want to call it. It’s really just an expense, but I’m uninterested in continuing this discussion because people don’t want to look at the facts. Furthermore, this is way off topic. People commenting on the blog for the first time ever, ignoring the content of the article, and just debating buying vs. renting is just something I’m not interested in.
Take care!
I am a huge culprit of this i have the big house nice truck etc… i like to enjoy my money but i try and do it responsibily. I am not a frugal investor rather I pay myself then with my remaining money I like to enjoy myself now. I just turned 27 and have only been working for 3 years so I plan to work for quite some time yet! But i deffinantly do spend more money then required but again I dont spend to keep up I just enjoy certain nice things.
Cheers,
Pat
Pat,
Hey, there’s no “right” way to live. As long as you’re happy and fulfilled, I think that’s what’s most important. And that’s really what this is the pursuit of. Freedom, flexibility, and autonomy are all so attractive because they generally maximize happiness, far more so than material possessions.
Stuff is great. I get the appeal. But the “work hard, spend hard” mantra tends to wear itself out when you hit your 40s. And if you haven’t thought about that future you, you might find yourself in trouble. And while you might enjoy working now, you might not enjoy it so much in 10 or 20 years. Furthermore, your job might not enjoy you at some point in time – a lot of people tend to find that out the hard way (it’s happened to me).
What I find far more appealing than a bunch of stuff, however, is that which I laid out in the article. A fancy car seems nice. But owning my own time is way nicer. And once you own your own time, you’ll likely be able to afford anything you want anyway. But by then you might find that all that glitters is not gold.
However, you’re in a great spot because you’re also saving and investing in addition to the spending, which gives that future you a fighting chance. 🙂
Thanks for stopping by!
Cheers.
Excellent post as always, Jason. Don’t know how I missed this last week!
You’re absolutely right. I always think of my student years. I had little in terms of material possessions (never have done) but had time. I pushed myself to work harder than any boss could have got me too. And I was happier for it. Financial independence is really just to get that for a greater period of time. What’s not to like!
Great advice! And don’t get me wrong, I work hard, Invest hard and spend is thrid!
Cheers,
Pat
TDD,
Thanks so much. Glad you enjoyed it! 🙂
Yeah, that’s a great analogy there. I think many people look back to their early college years with fondness. What we might have lacked in material possessions during that time, we more than made up for with relationships, experiences, and the ability to live our life mostly on our terms. Then you graduate to the rat race and wonder where it all went…
Best regards.
Ah another great post Jason 🙂 Yes of course I my self trying to decrease my needs. I suppose it only when you do not need new Iphone, new car, new TV, pc ect. only then you can start saving a lot 🙂 Otherwise you will feel sad when your not getting what you want and force your self into saving. I even started going to work on foot, not using my car.
I will try to do extra cheap holiday this year 🙂 Just bought two tickets to Italy for 45$ each, now waiting for best return offer, and we will search for a hotel when arrived not booking it on booking.com or other sites. I had some experience that you can find really nice family hotels for only 20$/night for 2 persons and even with breakfast (!). So i’m planing to spent only 350-400$ for 1 week 2 person holiday this year. If you will book hotels in advance this amount would increase to 600-700$ and if you buy it from holiday agent it will even double. Simple smart ways to save money 🙂 You can have things that rich people do (holiday in Italy, Greece, Spain) but 2,3 of even 5-10 times cheaper 🙂
fuidolt,
Right. They key is to separate wants from needs. And then also deciding what real sacrifice is. Is sacrifice living below your extraordinary means (which still results in a lot of abundance) or working your entire life to pay for insatiable wants? That’s the real question. 🙂
Keep up the great work over there. Your future you is likely richer and happier with every dollar you’re saving and investing.
Cheers!
Couldn’t agree more! Controlling one’s own time is the ultimate luxury, at least for me. I want to have time to pursue what interests me. When I see the sort of advertisement you’ve referenced, I don’t think about how impressed my friends and neighbors would be if I owned [fill-in-the-blank]; I think about how much time I’d have to give up to pay for the thing!
Ferrari owners usually are too busy to drive their car. I talked to one guy who owned one and hated it. He said it’s a “Point A to Point A” car. You can’t leave it unattended or else you’ll just worry about it. You can’t park it most places. The attention gets annoying. It can only be driven when the weather is nice. Every mile you put on it means it is worth quite a lot less. Etc. I don’t think I’ll ever want a Ferrari.
I agree! I gave up car ownership 2 years ago and it was the best thing I ever did for my health and happiness… not to mention for my wealth!
Kurt,
I’m with you. I actually sometimes feel bad for people driving around in luxury cars, knowing that, based on stats and odds, they’re likely spending most of their time working to pay for their lifestyle. That’s a shame. But such is life. Doing my best to at least show people there’s another way. It’s then up to them if they choose to walk that other path or not. Not saying one is better than the other. But I’ve lived both and it’s not even comparable to me. 🙂
Thanks for stopping in!
Cheers.
Will,
That sounds like a lifestyle where material possessions own you rather than the other way around. You’re imprisoned by your lifestyle and choices. That’s my nightmare.
Life is so good for me these days that I sometimes think I’m dreaming. But to each their own. I could buy a used 360 and still have plenty left over. But I couldn’t imagine a bigger waste of money. One more Ferrari in the market for those that really want that lifestyle. Not for me, though. 🙂
Cheers!
simpleisthenewgreen,
I’m with you all the way. The financial benefits are easy to see for anyone willing to pick up a calculator. But I actually think the health/lifestyle/intangible benefits are far, far greater. 🙂
Thanks for sharing!
Best wishes.
Cars are my weakness. I don’t care about houses and am generally quite frugal. However, I’m hoping to purchase a car sometime this year. It’s something I really enjoy and will actually keep me on track to financial independence as I am very frugal with everything else. Or perhaps I am just telling myself that 🙂
Iain,
Hey, all that matters is that you’re happy. If you truly derive lasting joy and happiness from ownership of a car and you’re willing to work for it, then that’s the right call. There’s no “right” way to live. But the statistics point to the fact that most people don’t enjoy what they do for work, are indebted, and not free. And then you can see that those who rate themselves as happy are those with plenty of freedom, flexibility, and autonomy. But it just depends on what you really want out of life. 🙂
Best of luck with the purchase. I hope you grab something you really want!
Cheers.
Good article.
Unfortunately for most of us, we have already taken a road (car, house, kids…) that have put us in a difficult path to eventually being able to accomplish what you did in short term.
In a sense you are privileged.
On my side I can only focus on planting the seeds and make sure that past mistakes won’t happen again.
LD,
Thanks. Glad you enjoyed it!
I don’t think past decisions like buying a house, car, or even having kids will necessarily hold you back much. Houses and cars can be sold. Lifestyles can change. Children don’t need to endlessly consume. I see people that travel the world with children. I see others, like MMM, that retired at 30 with a child in tow. All depends on what you’re willing to do and how you see the world. If you see the world as this narrow spectrum where you have to live a certain lifestyle, then that’s where you’ll end up. Like I wrote, it takes thinking outside the box so you don’t end up in a box. 🙂
I’m far from privileged. I just align my actions with my values.
Best regards!
You are right.
I just believe that you have make some very good decisions in the past 5 years that have put yourself in that privileged position to enjoy your time.
Glad for you.
Keep on the good work and continue to help us to find the right path 🙂