Looking for some actionable advice on this thread to limit lifestyle creep, a very real phenomenon as we start to earn more in our careers.
I'd consider myself pretty frugal as I still live with roommates, use public transit, cook majority of meals, and resist materialistic items. A lot of people in my age group are obsessed with levelling up and flexing on social media but I try to stay focused on long term goals. Being disciplined about personal finance is one thing but being aware of lifestyle creep is another.
Following
Focus on limiting the big 2, housing and transportation. Keep it simple.
For me, I walk whenever I can, which saves serious $$$ and keeps me in shape, and I live inside my midtown SEX DUNGEON, which means that my housing and entertainment costs are combined.
My philosophy has always been to save 100% of my bonus which is typically 40% of pay. I’m okay with spending the entirety of my after-401k base salary but never end up doing so.
In finance the only way I could see someone living above their means is if they’re running a meaningful deficit each month. Maybe this can happen when you have kids in nyc... OP what’s the scenario here? If you’re single idk what you’re doing to spend the entirety of an IB / PE associate salary
I'd consider myself in good shape as I have no debt, pay off my CC monthly, and save about the same amount you do annually. I'm also VERY single and my frugalness actually gets in the way of my social life and relationship development. Right now I am considering stepping up my living situation in a high COL city (rent or buy as things deteriorate, idk yet) and think I am falling victim of this type of trap. In the meantime, I am moving in with a friend in a shitty area and reducing my rent check to less than 10% of my pay.
I'm more looking to understand why lifestyle expectations naturally increase and how to avoid it... I guess we ask ourselves why we're working for a paycheck and then how to spend it.
If your frugalness is getting in the way of your ability to have a social life/be in a relationship/connect with other people, then I think you’re doing it wrong. You can be frugal and still do all of those things, especially if your own lifestyle is already cheap and you are making what you are.
Read The Millionaire Next Door by William Danko and Thomas Stanley. Great book on the idea of living below your means.
One of the worst books I've ever read. Was waiting for someone to bring it up. Garbage analysis and unhelpful advice.
Living below your means is great, but there is something to be said for quality of life as well. The point of being on this earth is not to amass as much money as possible (despite what some of your fellow WSO monkeys might intimate). No, don't go into massive debt in order to fund a lifestyle you can't afford. But maybe it's worth another several thousand a year to live in an apartment that doesn't have leaks or roaches, or maybe eating out a couple times a month is better than having boiled rice for dinner every night. Everyone is different so there is no magical formula, but anyone who says (as someone upthread did) that "frugality is stunting my social life" needs to reexamine their priorities/their social life.
In my opinion, the main point of the book is to break down the perception people/media have created of millionaires. A part of society views millionaires as people flexing on everyone, blowing endless cash at Saks 5th Ave, fancy cars, houses, watches etc. and living an expensive lifestyle. What the book highlights is that a majority of millionaires are really just developing steady wealth, and living below their means. To me, that's the value of the book.
you asked for actionable ideas, well here you go. this was me early on in my career, not because I was retiring early, because I was making dogshit and still needed to have a social life at 24.
1. skip happy hours & going out all the time, always have something going on. maybe it's a volunteer engagement, maybe you have a standing workout and everyone knows you're too disciplined to skip a workout. you can do Friday beers with the team and keep your going out to that plus maybe a sunday brunch/football outing. I found that going out was my biggest expense in my 20s, so set a budget and stick to it there, skipping happy hours and going out every friday/saturday is one way to do it
2. don't be the guy that has to have the newest or nicest anything. I'm not saying you need to keep your iphone 5s from however long ago, but you do not need the newest phone, new shoes all the time, etc. skip Kiton for suit supply, skip Diesel for Vans/Chuck Taylors, skip $200 khakis for $30 goodthreads from Amazon or $60 five pocket pants from Levi's. and before anyone calls me a schlub that's lucky he's not single, I still go out with friends on guys weekends and wear outfits that cost 30% of some of my friends and get more female attention. girls want a guy who's confident, in shape, and wears clothes that fit. my biggest hits have been $15 H&M shirts that are form fitting with some black jeans and vans I've had for 5-10 years (I rotate, they look relatively new).
3. unfollow/mute your friends who flex on social media. you are what you repeatedly do (or something like that Aristotle said) and I'd go further, you are a combination of the people you surround yourself most with.
on the single bit, do an inventory, why is that? are you a shut-in (before Covid I mean)? are you out of shape? do you lack game? did you just get out of a relationship with Medusa? what is it? I started to write a bit more, but if you could expand on the single aspect of it, that'd be helpful, because it sounds like that's the real issue - how do you compete when everyone wants to level up and you're just trying to get that money
To add to your n.2, always shop during sale seasons or black Friday-like occasions. Internet makes it even easier to keep an eye on good discounts. There's no reason not to buy perfume online at 30/40% discounts either.
Same with groceries. You want Fage 0% fat Greek yogurt? Next time there's a 50% discount, check the expiry date, make your calculations and buy for 6 weeks or so.
I don't even have Prime because I think it spawns careless consumption. I live with some people with horrible discipline in that regard. Don't get me started on people that use food delivery apps.
Honored to have @thebrofessor on this thread. I read a lot of your stuff and hit you up for advice before on a diff account. I'd say that I follow the themes that you mention.
Not to turn this thread onto my dating life, but I'm a six foot white guy with average game, chill demeanor, and decent at connecting with people (pretty much what I do for work so I hope so). However, since COVID, I have had 0 luck dating in the online dating format as I don't really have a great social media presence and just don't care enough to put in the work. I only mentioned that because in my age group, spending money and dating/socializing goes hand in hand. House parties have come back a bit but it remains tough to organically meet new, likeminded and inspiring people.
I'm uninspired and probably lonely right now and haven't spent my money on anything meaningful this year besides a few trips, a car, and a peloton.
Am I bored right now and just want to spend money on something to fill some type of void? Am I a sheep consumer if I feel that way?
you could be bored. I'd argue you're missing passion about something, you said it yourself you don't care enough to put in the work to get a great social media presence so I'm guessing you're not entirely dissatisfied with your dating life (unless you really do care, you're just lazy, sorry for the tough love).
what are you passionate about? if you lack passion, you'll fall into these holes every now and again, you've got to have something to look forward to. if it's not your job, spouse, or a vacation (fuck you, Covid), find a hobby. set a goal. do something, anything that sparks that passion again.
on spending, I tell my clients all the time, and I see people like you worth many millions way before they're ready: "if it's not taking away from other goals, it's not a bad purchase," which basically means after you've hit your savings goal (you've likely surpassed what is needed), you have emergency funds handy, and debts are taken care of, don't beat yourself up.
you're only a sheep consumer if you constantly look around you and find that you hate everything you own and you've taken away from other financial goals to increase your spending
I have an S/O that I'm very happy with - and I've still felt this way at times throughout this whole mess. Between COVID and the election environment - it's draining. I totally get it.
I've tried to look at this as a rare opportunity where you can focus on yourself, your goals and really understand what makes you tick. It's a great time to shed bad habits (i.e. eating poorly), build new disciplines (i.e. working out consistently vs. sporadically) and potentially pick up some new things that you can do yourself. Read more, start drawing, learn how to cook, etc. They aren't sexy - but let me tell you what, if you come out of all of this as a better, more well rounded person - that 6 foot tall frame will have plenty of hearts to break.
When it comes to money or lifestyle creep - I've tried to be intentional about what I buy. My S/O often jokes that I worry over small purchases (i.e. $30 dollar french press) but will without hesitation buy a larger ticket item (i.e. exercise bike). And it's true! But what I've realized is that your gut is really, really good at helping you buy things that really matter and avoid those that don't.
Another thing that helps - delay purchases for a day or two. Don't impulse buy something, just sit with it for a bit. If it's still nagging - then buy it. And to be clear - these are things where you have the money, and simply aren't sure if you want it or not. This isn't financing a peloton because I can't afford to buy it outright - we can argue over the merits of cash flow, etc. but that's how I draw the distinction.
The last thing - and this I still struggle with - don't count other people's money. The majority of times I've kicked myself for buying something or spending something it's because I'm either measuring myself against someone else, or letting their spending habits dictate mine.
Or buy your Kiton NoS from reputable sellers and enjoy brand new kiton at 80%+ off :)
I figured you'd comment on that point! I've still got your fashion hacking thread bookmarked, appreciate that advice more than you know
Link to fashion hacking thread?
I'm a sunglasses whore (like, I have a half dozen $200 pair of sunglasses), and the one for which I receive most compliments is my $20 pair I got off Wish or something.
The biggest culprits of lifestyle creep are what a poster above said: housing and transportation. Think about it this way, going from paying $2k a month to $3k for an apartment equates to $12k a year. It's pretty tough, if you're disciplined, to spend $12k in other means (food, going out, entertainment, etc.). Same with owning a car past when you are still paying it off, etc.
For me, as long as I limit my housing and I don't own a car, I'm good feeling a little more free on the rest of my life (groceries, dinner out once a weekend, etc.). I still try to be disciplined in those areas but I really do subscribe to avoiding the old saying "penny wise, pound foolish."
The flip side is that housing is a place in which it's worth it to spend more. No, don't live in a shoddily built McMansion when you're 24. But if I work 12 hour days, living in an apartment building with a doorman and an elevator might be worth $500/month as opposed to a 3rd floor walkup. More likely to be clean and habitable, you have someone to sign for packages, you don't have to wearily troop up 3 flights every night when you get home... those are nice amenities to have, and not necessarily "wasteful". It's hard to draw a hard and fast rule, of course, but just saying "cheaper is better" when it comes to transportation or housing isn't helpful either. Maybe saving 15 minutes on your commute each way is worth spending an extra few bucks on a couple times a week/month.
Just live with your parents forever bro
All of the advice above is wrong. Lifestyle creep comes from one thing and one thing only long term: women. Just say single.
This
Women are expensive.
I've found that this varies. If you're in a long-stable relationship with someone who shares your mentality, then long-term costs go down. If you're single you'll end up spending a fair amount between coffees, meals and drinks just to sleep with someone.
"Hookers aren’t cool, but remember, the free ones are a lot more expensive." - GSElevator
Agree with the above, women are very expensive and time consuming.
Look the real solution here is to focus on making more $ rather than limiting your spend. There's a limit to the latter but not the former. I live below my means but to the point that I can just barely deal with it. I try not to make myself too uncomfortable by not spending $. If there's something I want, I buy it. If there's money to be spent to save time etc. I spend it. I free myself to focus on making cash.
Dating is another issue and I think it's due to the COVID environment. Again, focus on where you get most leverage right now, the world will normalize soon.
100% agreed. There’s only so much defense you can play. You can only limit your housing costs so much (beyond living under a bridge). Eating 2-3 meals a day still costs some amount of money. There is a limit to how little you can spend, but there is no limit as to how much you can make.
I disagree quite a bit about the comments re: woman. My girlfriend has been huge in helping to control my spending and much better about budgeting/taking care of micro things like getting rid of subscriptions etc... than I was on my own. My living costs are lower than they ever have been too because we're basically 50/50 on expenses.
One thing that helped me avoid creep was just getting good at buying the things I like. I love watches and have a pretty chunky collection, but I bought all my pieces at prices I'll make money on and am net positive on the collection. I love nice clothes too, but bought all my clothes tactically to get them at ridiculously good prices. IE brand new $3000+ Isaia suits for ~$300 - $500. It can be a fun game.
SB'd
I was about to comment the same view re: women. My girlfriend is a massive positive influence on my frugality.
Yeah well, welcome to WSO.
Women are only expensive if you use money to attract them. Leading with your income means you'll mostly find people who value you for your paycheck, and spend accordingly. It always amazes me how few people grasp that.
I saved a ton when I got a girlfriend because end stead of late nights with huge bar tabs I now enjoy cooking at home and watching a movie
Sensible frugality goes a long way if done right. Whilst I agree that the big things (e.g. transportation and housing) impact your bottom line the most, cost cutting in other areas that appear negligible can also go a long way. Eating lunch out every day (pre- and post-COVID that is) may cost like $8-10 per day? That's $200 a month assuming ~20 working days in the average month. Preparing your own lunch can cut that in half. That's an extra $1,200 a year! Public transport is a huge thing as well, but you can take it a step further. If you live in a relatively bike friendly city, bike sharing schemes cost $100-150 per year compared to 10 times that for metro and buses. Granted this is highly dependent on local infrastructure, but if you're lucky enough to benefit from this then take advantage of it. Drink coffee at home or at the office - any coffee shop will charge maybe like $4 per coffee which is nuts compared to having free office coffee or cheap home coffee. Even if you're a coffee snob, having a high quality brew at home will cost at most $1 per coffee.
There are hundreds of other ways to cut costs here and there. One thing I will say is, allow yourself to enjoy the things you really really cherish. I'll happily bring my own food to work to avoid spending $10 on a meal, but if there's an amazing restaurant I want to try then I'll try it. Even if I know I might spend $100 per person. As long as these instances are very occasional, you should be good to go.
Lol what! $2k a month. That’s $200/month...
Number slip haha - good catch
What sort of filling lunches are you able to prepare with only $4 ???
Mate, you can make delicious pasta, rice and legume-based dishes for that much. Maybe hit $5 with some ingredients, but if you meal prep and portion control you can easily achieve that
I've had success by maintaining a pretty detailed budget/model of my life. Set a target for % savings rate (mine is 60% of net income, incl. bonus) and track your monthly (or even weekly) spending against it. I have a complex about money=success, so the 60% doesn't feel like I'm saving enough fast enough, but that's another story for my therapist.
I've budgeted 30% of net income (before bonus) to rent, then 15% for misc. spending - 5% each for food, fun (no fun during COVID times unfortunately), and utilities/general - for the month. I've had months where I go way bigger, but having the budget sheet / forecaster and checking it monthly has helped. For example, I've had a few months where I was saving like 10-15%. Seeing the $ signs next to it, tracked in my model, helped me nut up and stop wasting money. Most of that spending was on dinners, clothing, shit for my apartment (good picture frames get fucking expensive). It works for me because every month it gets updated, and if I start to stray too far from the 60% goal, I really clamp down on spending. Seeing the 'lifetime' spending amounts (only been doing this for ~2.5yrs) compared to lifetime net income amounts is... motivating. I've spent a metric fuckton over 2.5 years.
It also goes without saying that you should be maxing out whatever automatic savings mechanisms are available to you - HSA, 401k (RRSP/TFSA for the Canadian friends), Roth (if you're eligible), etc. Deduct shit above your net income line and you can't spend it.
The following may be controversial, but does it really matter to max out your 401k?
My employers match is a paltry 3% (I believe) of total cash comp. So we're talking about $6,000 or less per year. Sure it's free money, but I'm locking up at least the same amount in gross income to get the employer match in the first place. My real beef is that the money can't be touched until you're 60.
Don't know about you guys but
1) As of now, I'm not expecting to retire on 401k/social security...the goal is to reach MD at my firm and also build up equity in my firm. Think of a corporate pension.
2) I have no intention of waiting until 60 to retire. I'm on track for 50, but aiming for 45. It's not that I won't work, but it will be totally up to me. I would probably work for performance-only comp.
3) Just because I'm not taking advantage of 401k match doesn't mean that I'm not saving or investing on my own obviously. Doing it with more flexibility and access to more asset classes (e.g. direct real estate/multifamily rentals).
Am I doing it all wrong? Haha.
First things first: I am not a financial advisor, nor am I giving financial advice, I'm not a fiduciary, blah blah blah blah
Answer (my $0.01):
Does it really matter? Not necessarily. Your beef is valid and I share it. I don't think it's controversial.
My employer doesn't match mine at all but I still maxed it - $19.0k last year and $19.5k this year. I chucked that in and have my 401k set basically to act as a cash interest savings account at the moment - It's in some lame 2-3% yielding fund. I really should change the settings to be higher risk. Similar situation in my HSA. In my PA (~90% of my assets) I invest as actively as my firms' compliance policies allow.
I don't intend to retire at 60+ either (Hoping to FIRE honestly), but I sort of view the 401k/RRSP as a bit of a contingency system. If for some reason I fuck up and can longer be in such a high-paying career track, I'll have that amount building up over the next 30~ years until I'm old. It's forced savings. It helps reduce income tax in the present day.. However, this can come back and bite - If you're relatively early in your career, you are not at peak earning years yet. What if you want to withdraw 401k funds early (take a penalty to do so), and say when you're 10 years older earning a much higher tax bracket? It's not efficient in this case. In my case, the 401k amount is such a small component of my overall asset base that I probably don't think about/optimize it the way I should.
My recommendation to max it is based on the original request in this thread - Actionable ways to reduce spending. You take $19.5k out of your income for this year and put it into a forced long-term savings. You can't spend that $19.5k on unnecessary material items if it's coming off the top line of your paystub.
Not that I'm qualified to comment on it, but I don't think you're doing it wrong at all. Sounds like you've put lots of thought into allocation and savings so the "Max your retirement accounts" advice is probably not meant for somebody like you. If you do make MD, its certainly inefficient to be prioritizing 401k today. I'm similar in that I prefer to have the flexibility and liquidity, but I still contribute the max amount as a longer term 'contingency plan'. Like I said, it's a very small part of my overall asset base and gross income so perhaps I don't think about it on as granular a level I should.
Whats your marginal tax rate?
The math for a 401(k) is stupid good. Very few cases where it doesn't make sense
for me, I read a lot of books from the stoics and that weirdly put me in a minimalist mindset. I used to follow 'the minimalists' blog too. then there's books like rich dad poor dad by Robert kiwosaki. and plenty of Reddits and YouTube on this which I brainwashed myself with. now I save 60%+ of my salary I think, and 95% during covid.
I am all-in on the minimalist approach and want to actually reduce what I own than accumulate. Materialism is a drug.
agreed. once your'e in the habit of being minimalist, its easy... initially it's difficult beat down your ego, getting rid of your car when all your friends are getting top of the range Audi's and Mercedes. what really annoys me is brainless consumerism, the people that buy $1000 sneaks just because they're caught in a comparison trap on social media. I have to admit though, I do buy expensive suits once every so often.
I watched a YouTube video called "the cult of materialism" a few years ago and it really resonated with me. I think thats its title.
Here's what I do. And this is from the perspective of a small business owner who pretty much gets all of his cash flows during the first week of the month, paid all the biggest expenses during that same week, and then has a trickle of expenses as the month goes on. I also comingle business and personal funds like crazy, but I have it under control so it's gravy. But that's another story.
I focus on paying off debt and investment. And I try to increase the amount I save/pay off every month. So let's say all my incomes come in by the 5th. Like 50% or whatever goes to paying my fixed expenses. All my incomes are in a spreadsheet so I don't lose track of money I'm owed, so I know when most of my money is in for the month and I sort of know where I stand. Once the expenses are paid. I put money into my savings money market account. The purpose of that account is to hold money that's being saved for real estate investments. Or any other investments I feel like making theoretically. But so far, I'm all in real estate and some equities.
The money that gets saved, and that's before any discretionary spending, has to increase every month. Even if it's by $10. Just has to go up. That's logged in the spreadsheet too. I've only been making decent income for like 3 years, so all my shit is mortgaged. I try to pay a lot more than is due on that. I know TVM and all that shit. I don't care. I just don't like debt. I'm not trying to maximize ROI all the time. Once all the expenses are paid, all my incomes are in, and money has been saved, I can kind of just spend it on whatever. I do spend money on shit a lot of people would probably scoff at. But I'm also really frugal in a lot of ways. I'd never blow money just to blow it. I'll just start buying stocks for fun if I feel like blowing money.
So theoretically, your "healthy outflows" increase as your inflows increase and eventually, you'll run into a wall where you're tight to save the amount you wanna save that month. And then you re-evaluate, I suppose. I haven't gotten there yet.
Really appreciate everyone's comments. This isn't meant to be a budgeting, personal finance exercise as there are about 1000 different threads on that.
Instead, I intended to ask how to develop the consciousness that naturally our quality of life expectations increase over time then how to remain disciplined on a month to month basis. I consider myself pretty self-aware and I am just always thinking about what I net and how to improve. I haven't read it yet and it might be trash but it seems like Gideon Drucker's new book captures what I'm focused on:
You're earning a great six-figure salary and living comfortably but you're still not getting any closer to buying that first home or planning for your children's college. You're living in a nice apartment, are able to travel and eat out as often as you want, but you feel stuck in the same place you were at three years ago. Well, you might be suffering from H.E.N.R.Y. SYNDROME(®). If you're earning great money but still on your parents Netflix account (don't lie!) you might be a H.E.N.R.Y. And if you spend more on Seamless than you contribute to your 401(k), you're most likely a H.E.N.R.Y. And you're certainly not alone.
I have booked several trips this year and consider it money well spent esp. in the covid era. I prioritize meaningful life experiences over being a local at the bar in my city and that's what I meant by saying my social life has been hindered by my personal finance approach.
The idea is to maintain savings momentum and fatten margins like what Goldie said.
Good topic. Looking forward to more comments.
Lifestyle creep comes from our friend group. If my best friend is going on vacation with his family and invites me, am I really going to turn that down? It's only a few grand right....? Starts to add up obviously when/if kids enter the picture. Charlie Munger quote here was interesting:
Hopefully during covid this is easier for you, especially if you're in a state with restrictions on bars/clubs/restaurants. Eating out/going out is usually the biggest suck on cash, especially since if you're making more and more you convince yourself to dine or hang out at nicer and nicer places. One thing I've truly reveled in during the pandemic is how incredibly cheap groceries are compared to seamlessing/caviaring a 20buck meal which realistically comes out to 35 bucks after fees/tips. Honestly a 100-150 trip to TJs or whatever your local grocery store is can supply you with a healthy breakfast/lunch/dinner for a week, as tempting as getting thai delivery every other night can be.
The other one is material items, as others have mentioned. For me as well it's really fun shopping and indulging in clothes/whatever but learning to put a stranglehold on that is just so important given once you start buying unnecessary nice shit, you end up not having enough and going down a slippery slope.
I'm a proponent of dishing out a bit more on your apt given you'll be spending a ton of time there and it's nice to come back / work out of a nice home which you enjoy spending time in but obviously be reasonable and don't spend more than half-third of your bi-weekly pay on rent if you can help it (tough for the young earners here I know)
Pretty funny you mentioned that- my grocery bill (for my wife and I) is $100-150 a week. Breakfast lunch and dinner for 7 days a week. Occasionally we’ll order food on a Saturday or Sunday, but you can have a lot of healthy variety from groceries. Doesn’t all have to be boring either.
Totally agree. The lady and I can survive on the same unless work gets particularly difficult for us and we don't have time to cook but at the same time, we get a few wraps / microwavables from TJs or WFs (granted they aren't the healthiest) if we don't really have time to prepare anything. Much cheaper than loading the seamless or caviar with sweetgreen or whatever obscenely priced healthy dish is available lol
... just be comfortable with yourself bro
Thanks for the MS.
No worries bro you earned it!
Lmao love all the guys here saying their gfs are net saving them cash... Good stuff
so true lol
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