Before the pandemic, the personal saving rate in America hovered between 5% – 6%. Post pandemic, the personal saving rate in America shot up above 25% as people freaked out about their future. Today, the U.S. personal saving rate is hovering around 3.6% as Americans revenge spend like there's no tomorrow!
We already know the main reasons why people go into debt are due to greed, stupidity, entitlement, desperation, and insecurity. The debt article offers five solutions on how to eventually become debt free.
Based on a recent social experiment on Financial Samurai I've managed to figure out how to make you severely curb your spending to the point of absolute monk-like frugality. Before I show you how, let's get a snapshot of the overall US personal saving rate in America to put things into perspective.
The Personal Savings Rate In America Could Be WAY Better
As you can see by the chart above the US personal saving rate is roughly 3.6. At a personal saving rate of 3.6%, it will take someone 29 years to save up enough money to replicate one year's worth of income. That's pretty pathetic. At least the 3.6% is an improvement from the 2.5% figure seen between 2005-2007!
It took a colossal financial meltdown to scare Americans into tripling their savings rate for several years. Now it's back to spending all we have thanks to the bull market.
It's my hope that every single reader saves at least 20% of their after tax income every month by maxing out their 401(k)s and IRAs where available.
If there's still disposable income left over after general living expenses, save even more in laddered CDs or open an investment account with Empower, where they automatically build a low cost, risk-appropriate portfolio for you.
Build Your Savings Muscle
My mission is to get people to build their savings muscle as large as possible. You don't want to look back 20 years from now and kick yourself in the face for being so undisciplined. Let's all encourage each other to increase the personal savings rate in America. The more people take control of their finances, the better for everyone.
You may have all the enthusiasm in the world for your job after graduation. But trust me when I say your enthusiasm will fade after 10 consecutive years of work. Now it's time to demonstrate how you can join me in saving a ton of money with this one strategy.
How Financial Samurai Saved Me Over $100,000 In A Day
In a post entitled, “The Cure For Financial Hoarding” I listed out several items that I've been thinking of buying but can't get myself to pull the trigger because I suffer from saving for retirement while in retirement disease.
The Want List:
- Range Rover Sport = $83,000 after tax.
- Panerai Submersible watch = $13,500 after tax.
- Pair of Prada shades = $270 after tax.
- New Macbook Pro 13″ with retina display = $1,560 after tax.
- More vacation spending = $10,000 extra a year.
Total: $100,000+
I thought by being open about some of the things I'd like to buy, the community would give me permission to go ahead and splurge. My current car is 13 years old with lots of electrical and mechanical problems. My laptop is from 2007 and I'm on it for 2-4 hours a day as a blogger. I'm very much into diving now and haven't bought a luxury watch in five years. Meanwhile, I just need a new pair of shades in sunny California since my $15 cheap ones are falling apart.
But instead of receiving the green light I was hoping for, I got one big stop sign!
Take a look at some of the comments:
“I understand what you are saying about enjoying your life but Frugality isn’t a disease. Yes, I save money for financial security. But a frugal life also comes from a place of morality. Using fewer of the planets resources, finding happiness in yourself and other people instead of in material things, maintaining humility and empathy in face of desperate poverty throughout the world, etc. No matter how “hard” I work, I’ll never feel like I deserved my wealth more than anyone else struggling through our laps around the sun. Profligate spending like $10,000 for a watch will always seem extremely wasteful to me.”
“Spend your money on a off-grid Hawaii house with a killer media room if that’s your thing. Start an emu ranch or a non-profit of your choosing. Live a life that your time and money afford, not a life of buying silly status symbols. Cruises are a great example of how to spend tons of time and money without looking outside the middle-class world as almost everyone blows money on cruises.”
“My suggestion is be honest about what you’re buying with a $12,000 watch that “will last forever”. Sure, it’ll last a long time, but you’ll want to replace it before then… These are status symbols. I have no judgement there, it’s just the truth. We people like to justify these purchases with technical excellence (7,500′ water resistant!), but that’s what the marketing folks have taught us to do. A great book on the subject is called “Spent” and changed my view of items for life.”
“I tried not to sound judgmental, but it’s tough not to come across that way with a topic like this involving watches that cost more than a year of minimum wage income!”
More Feedback About The Low Personal Saving Rate
“When I have the feeling that I’m not splurging on myself enough, I usually ask myself what I want, then compare that to alternatives. The alternatives are usually a) save this money for my future family or b) donate this money to a good cause. When you look out how many people out there are living with less, the idea of buying $300 sunglasses seems a little silly.”
“A $12,000 watch? I’m rethinking this. Why would anyone want a $12,000.00 watch? Why not something cooler and more meaningful? You will gain more pleasure from experiences over stuff! When you are on your deathbed, would you really care about a watch?”
“But Frugality isn’t a disease. Yes, I save money for financial security. But a frugal life also comes from a place of morality. Using fewer of the planets resources, finding happiness in yourself and other people instead of in material things, maintaining humility and empathy in face of desperate poverty throughout the world, etc. No matter how “hard” I work, I’ll never feel like I deserved my wealth more than anyone else struggling through our laps around the sun. Profligate spending like $10,000 for a watch will always seem extremely wasteful to me.”
“Your examples are foreign because I see no added value to expensive shades or new BMW over used Ford? Interesting that your examples put you in top 1- 5% AFTER retirement. Rare circumstances I'd guess.”
I wonder how many of the critics actually save more than the personal savings rate in America. What do you think?
Analysis Of Comments
I love these comments! Every comment makes a judgement as to why buying anything on the list is a waste of money. Making price comparisons of the items to yearly salaries, poverty, status symbols, morality, and charity is thrown in to make me feel guilty for ever spending money on something I want. Shame me good baby!
Not one comment used objective mathematics to calculate affordability. For example, nobody broke down the actual annual cost of ownership of a Range Rover if resold in five years compared to an income to get a better picture of cost. I decided to write a whole 1,500 word post on how you can deduct a SUV as a business expense to highlight a potential 30% savings off sticker, but the feedback was still mostly of disapproval.
Despite still saving 50% of my after tax income in retirement, a rate that is 10X the national average, I'm still being judged for being wasteful and amoral. I presume my critiques must at least also save at least 50% of their income, otherwise wouldn't that make them hypocrites? There is an infinite amount of comparisons I can point to where your spending is considered amoral and wasteful compared to another as well, but I don't.
So it got me to thinking several questions:
- Can we not help but judge people for their financial choices even if we don't know the full extend of their finances?
- Will we always think that our way is better than others?
- Why are people so judgmental?
- Shouldn't we all buy generic?
- Why are people so quick to come to conclusions about others?
- Is there some kind of frugality competition where whoever can live like a pauper the best, wins?
- Should we all be ascetic monks? If so, why aren't there more monks?
- If you are so righteous about your spending and savings habits, why don't you donate more to charity or make charity your full time work?
- How can any of us ever spend money beyond basic food, clothing, and shelter when there is so much poverty in the world?
- Why don't more people decide to start a blog and share their words of wisdom if they want to find a cost efficient way to give back to society?
- Perhaps the US personal savings rate is much higher than 5% since it looks like nobody spends a lot of money and I'm being criticized for spending money even though I save 50% of my after tax income.
- Does America have a conscience since we save so little and eat so much?
Conclusion To The Low U.S. Personal Saving Rate
It's impossible NOT to force our way of thinking onto others, especially if we think they are doing things wrong. Religion is probably the most gruesome example of “my way or death.” Even if someone is making $800,000 a year, we will feel they are elitist for sending their kids to private school since we make only $50,000 a year.
Even if someone lives in an area of the world that is almost always warm and sunny, we think it's a waste to spend $270 on a pair of shades because we wouldn't even dream of spending such an amount living in our cold, dark, and dreary place.
Thanks to these comments from my “Financial Hoarding” post, I've decided not to spend any money at all on the things I've been thinking of buying. Instead, I've earmarked $100,000 to lower risk investments. Buying $100,000 worth of stuff that will depreciate to $65,000 or less over five years doesn't seem like a good financial proposition.
Invest Your Savings And Grow Richer!
Why not invest $100,000 in something that has over a 90% chance of appreciating by 5% a year for the next five years to $128,000? A $60,000 gain is huge! Then I'll have even more money to invest to make even more money to save the world. I promise during this time period I will also stay in ideal shape so as not to ignore the plight of millions who are starving.
The lesson learned if you want to save more money is this: Tell as many people as possible your desires and let them thoroughly judge you. The more they make you feel bad about your spending desires, the more inclined you will be to save and invest for your future. When you can roll hundred dollar bills as toilet paper, you know you've got it made!
Invest In Real Estate To Actually Get Richer
The best way to get rich over the long term is to invest in real estate. Real estate is the best asset class to build wealth because it is tangible, generates income, and has steadily outperformed inflation over the past 100 years.
Check out Fundrise, my favorite private real estate platform. Fundrise runs private real estate funds that predominantly invests in the Sunbelt region where valuations are lower and yields are higher. Its focus is on residential and industrial commercial real estate to help investors diversify and earn passive returns.
Fundrise currently manages over $3.5 billion for over 500,000 investors. I've invested $954,000 in private real estate funds since 2016 to diversify my investments and make more money passively. After I had children, I no longer wanted to manage as many rental properties.
Another private real estate platform to consider is CrowdStreet. Crowdstreet is a marketplace that mainly sources individual commercial real estate deals from various sponsors around the country. This way, you have more customization to build your own select private real estate portfolio.
Make sure you diversify your portfolio and do your due diligence on all the sponsors. Look up their track record, their management, and whether they have had any blowups before. Although CrowdStreet screens the deals, you have to do your screening as well.
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The U.S. Personal Saving Rate is a Financial Samurai original post.
Haha! Love reading your posts and this one made me laugh:) So very true tho! People love judging and that’s perhaps why people tend to socialize with others in their socioeconomic class so they can buy their Range Rover without feeling like an awful human being! I have to find your post on cleaning ladies though I always had one when my husband and I were working crazy hours from 5am to 8-11pm in NY and often on weekends. Came down to economics. Our opportunity cost was higher…even at above market rates we paid our cleaning lady we could make significantly more spending another hour at work (or honestly resting so we could be awake at work) and we were providing work/pay to another so seemed ok on that front too. Now that we no longer live in the New York (whew) we have more time and less stress and decided to clean ourselves!
Have you checked out this post? The Unfair Advantage Of The Wealthy: Being Genetically Frugal
When was this article published?
Definitely hit the nail on the head with “why are people so quick to judge others.” It’s all relative, or as the great Carlin once said – anyone who drives slower than you is an idiot, and the ones who drive faster are maniacs.
I try to follow Ruiz’ “4 Agreements” in my life, one of which is “Don’t Assume”. Most judgment of others is because you are projecting your beliefs, experiences, and needs onto them. The faster you can let go of that judgment the faster you’ll be able to be happy with yourself.
Well then, Carlin is a genius!
Spending $13k on a watch is not greed. It’s a donation to a deserving watchmaker in Switzerland who should have a good life for his amazing skills :)
There ya go! Great attitude!
Sam,
I think there will always be those who are frugal and simply can’t see that there is a forest of trees. Some people are more extreme than others, although I think Jacob Lund at Extreme Early Retirement has to be one of the farthest towards frugal extremism – and I cannot fault him for that since that is his own personal choice.
Tell you what, give me $13,500 and I’ll buy you a $20 watch that is submersible in water but it won’t look as nice if that’s ok with you. :-)
I think that one should change their mindset as they approach a level of equilibrium in their finances. Don’t go on a huge spending spree after saving 50% of your income for years, but if all your ongoing bills are paid for in perpetuity I see no reason to not spend any of the extra in a “frivalous” way.
I’m just wondering why folks still quote Jacob from ERR. He was essentially an unemployed blogger for two or three years during the financial crisis. He justified his frugality through his post graduate non working phase which is great and went back to work two years ago as a quant analyst in finance!
Thank you for going over the feedback from your original posts. I typically go through the same thought process when considering a major purchase (what could this money do if I saved it). It can be debilitating at times and makes it a difficult decision. Your statement about turning that $100k into $128k in 5 years sounds great in investing terms, but at what point does everyone give the “Approval” to make those large purchases (whether it be watches or vacations)? Interest and returns are rewarding, but at some point your accumulation exceeds your required lifetime necessities. Thoughts?
I think the answer is NEVER, so long as you reveal your desires to enough people. There will always be enough people who will make you feel bad for your desires or spending habits.
Hence, if you want to buy something, never let anybody know.
Honestly, I read these types of articles with a combination of jealousy, regret, motivation, and probably a little bit of judgement. I’m not to the point of saving 50% of my income, and still have debt. I’m not even close to a 6 figure income. And I recently purchased a car that is 20x my current net worth (which is very, very low). I think it’s all relative. I couldn’t tell a $12,000 watch from a $300 watch. But then, I could care less about watches in general. I’m not into fancy cars, but I’m also a little snobby about cheap cars too. And I like a little luxury when I travel, although I rarely travel. Nothing extravagant, but you won’t see me at cheap motels or hostels either.
In my opinion, if you’ve earned it, you should feel free to use it in whatever way makes you happy (echoing a prior comment about not clubbing baby seals and all). If you invest, that’s growing businesses, and growing your wealth. If you spend, well, that’s providing people with jobs. And if you give, it’s helping people in need. I see no problem with any of those. Sure, some choices may be better than others. But there are no absolutes. You could give freely, only to create dependence. There are no perfect solutions.
I hope you can focus on the motivation feeling. I purposefully go jogging around the mansions of pacific heights to get motivated. I don’t get jealous because those folks took risks, worked hard, and deserve what they have.
I can’t deny being jealous of what others have. But it’s not in a “they don’t deserve it” sort of way at all. I think that anyone who took risks and/or worked hard definitely deserves what they have. It’s more of a “Damn, why didn’t I figure it out sooner?” kinda jealousy. Maybe call it a motivational regret? It’s spurring me to get my ass in gear, so I consider it a good thing!
Great idea! I hope they really do donate their computers and laptops to underprivileged people around the world. I’m happy to help get the word out if one of the critics wants to put in the effort to make this a reality! One love.
The ‘Cognitive Egocentrism’ and ‘Identity Trap’ apply to this concept of OLPC (One Laptop Per Child). It is a cool idea to give kids laptops. But with no clean water, no electricity (25% of the world pop. has no power at home), no internet access, poor medical, literacy and education deficiencies, etc. in a few months the kids wind up using the laptop as a breadboard. Different priorities. Still, it is a great write-off for all those first-world producers to dump their outdated hardware, software, semi-conductors, etc. for a nice tax advantage at year-end close, and solve a first-world e-Waste problem, too!
Make it a point to put money in your savings account every time you receive a check. Only you can determine how much of your paycheck you can afford to save, but the key is consistency. Even if you can only place 10 percent in savings, do it every time. Those small savings will add up.
Minor correction here…there is a difference between the terms savings and avoidance in financial use. You actually avoided 100K, not saved 100k.
But yes, you have every right to go ahead and spend as you see fit. No judgement here. Aloha!
Is a penny not spent a penny earned and a penny saved?
To counteract your argument, the $60,000 spread is another savings differential:
“Thanks to these comments from my “Financial Hoarding” post, I’ve decided not to spend any money at all on the things I’ve been thinking of buying. Instead, I’ve earmarked $100,000 to lower risk investments. Buying $100,000 worth of stuff that will depreciate to $65,000 or less over five years doesn’t seem like a good financial proposition.
Why not invest $100,000 in something that has over a 90% chance of appreciating by 5% a year for the next five years to $128,000? A $60,000 gain is huge! Then I’ll have even more money to invest to make even more money to save the world. I promise during this time period I will also stay in ideal shape so as not to ignore the plight of millions who are starving.”
People can have very different interests and tastes and thus totally different preceptions on how to spend money. I know someone who splurges on LV handbags. I think that’s crazy because I have no interest in owning one but I don’t criticize her for it. I spent several hundred dollars on scuba equipment which I’m sure other people think is dumb or weird. To each his own if one has the means to afford it.
With all of the holiday shopping mania I admit I’ve had many temptations to but stuff for myself. I got a few things but I am going on a hiatus for personal shopping while I deep clean and declutter my house. I’m not buying anything for myself until I’m done and have done a full inventory of what I already have. I’m also going to try and just make a wish list for Christmas and hope I get some of those things instead of buying them for myself. I don’t want anything expensive luckily. Some new slippers, a knit hat, a Greenpan medium size pot, and some new clothes would be nice. I like practical stuff. :)
Happy Thanksgiving!
To each their own indeed. The $150 knock off LV bags are actually pretty sweet! Easy to fake since the materials don’t cost much and there aren’t many moving parts.
Greenspan medium size pot.. oki doki. Thanks for the idea!
If we might all live a little more like Gandhi’s words: “Live simply so others may simply live.”
For sure. Why do you think Americans are the anti-Gandhi since we save so little and are so out of shape?
I am confused. What’s the purpose of having money if you don’t spend them on things you really like/want?? Money is not the end-goal, if you save enough for the future the rest should be spent.
To have toilet paper rolls made out of $100 dollar bills!
No one will ever be able to tell me how to spend my money. There are too many idiots out there to project their opinion on you to realize that their opinion is only an opinion. Nobody knows your situation or your full financial breakdown.
Reasonable people will always be able to balance spending and saving, but saving for the sake of listening to other’s opinions is not very reasonable in my opinion!
I really love to read and hear other people’s opinions. Perhaps this is why I like to blog so much and banter around various topics with different spins.
I truly don’t mind the feedback from the community which I’ve highlighted in this post. If the community can inspire me to write a post, and come up with a solution to save, all the better!
Holiday Greetings,
I thought I might add my perspective. Although I could buy nice things, I rather like being the guy with the $30 Timex watch. When I look down at my wrist, I know the time, and smile quietly knowing that the savings I have buys me much more time doing what I want. No fancy watch adds more time to life, but frugality adds the power of financial independance, that too me adds much more time to do what I want, and not chase dollars to buy things to validate myself to others. I much rather a cheap watch and security, then an expensive watch and the look of a sick oyster at low tide when I realize I have to go to work to pay for said watch.
Greetings! But what if you’re already financially independent while saving a good chunk of your income already?
In response: I think you hit escape velocity to FI at a relatively young age .
Your risk of unexpected change is higher due to your long time horizon
In semi retirement. So I would spring for good wheels but keep my powder dry
On the new watch. Personally, having had a Rover, I like all wheel drive BMW
For a busy city and yet just fine for mountain and poor weather.
I agree about the unexpected change, hence why I’ve got about 25% of my net worth in risk free assets. Ya never know!
Sam, you have my full permission to buy the Range Rover, just to shove it up your neighbor’s living-rent-free, wife-and-kids-having, restaurant-cooking, luxury-vehicle-driving grown son’s @$$!
The Harry Browne ‘Identity Trap’ is similar to Freud’s ‘Cognitive Egocentrism’. This results in doomed approaches such as negotiating with terrorists, trying to convince drug addicts they should stop getting high all day and instead get a minimum wage job, Congress will voluntarily reduce their spending and pass a budget, etc. This posts reminds me of two quotes, first in relation to your “saving $100K.”…
“I stopped a rape yesterday. I changed my mind.” – The Unknown Comic (Murray Langston)
…and expecting supportive feedback without a commenter’s personal agenda…
“When someone asks you to tell them the truth, do not believe them. They really want a reinforcement of their own self-image.” – Albert Camus
Just elaborating on my last point, those commenters with agenda are attempting to make themselves feel better, not you. I would bet, without exception, they are unable to purchase a $12K watch or $75K Land Rover cash. Their comments make it appear that they have ‘made a choice’, but FS is the one who is actually faced with the choice. Nice to have choices.
For myself, some of the biggest mistakes in my life have been making my desires and goals known to others I thought were ‘on my side’ but instead they were threatened that somehow I might accomplish something they wouldn’t/couldn’t. They were much more comfortable telling me all the reasons I would fail or waste my time. In those cases, it changed the relationship forever, for the worse. Well, like telling people how much money you make, sharing personal desires publicly is a bad idea.
I think you make a good point. There’s a post I wrote a while ago called, “Only The Super Rich Or Poor Say Money Doesn’t Buy Happiness” which eludes to this. If you don’t have money, it’s better to say that money doesn’t really matter to help feel better. If you have a lot of money, then of course you take money for granted more than the person who has to work all day for it. It’s like being all for raising taxes when you got mega millions already in the bank!
I think the best way to save is buy much less house than you qualify for. 10% of your income instead f 28%. Allows me to invest in rentals.
Good idea to put on one’s oxygen mask first.
It is an interesting concept if EVERYBODY was financially independent, would there be any need for charity?
I hope that by regularly writing about personal finance, more people will be aware of the importance of personal finance and improve their financial situations over time. Fight on and never surrender!
I posted this on someone else’s blog, and it seems appropriate here:
Without a dream, there is nothing;
without a plan, it can only happen by chance;
Plan to realize your dream, and live a happy life.
It sounds to me like you enacted a plan to realize your dream, but your dream somehow changed along the way. Rewards come in many ways, and material things are not the only kind. We as humans need to feel we’ve accomplished something, stamp that we have met the milestone of sorts. What good is just accumulating? What is the reason for your accumulation obsession. Seems to me you need to redefine or refocus to YOUR dream, the reason you do what you do, otherwise the happy life will be elusive as you fight the internal conflict of how you satisfy your internal need. Reward your efforts, whether that is splurging on a high end something you’ll feel proud to own, or whether you donate 4x the annual income of a local charity in one shot and bask in the smiles on the recipient end of your generous donation. Satisfy the human in you and celebrate your achievement. – Cheers.
I am going to stick with my original comment to “The Cure for Financial Hoarding” which was simply “children”. Of course, I said it jokingly but after reading this I realize that it does add another dimension to what may be an otherwise abstract internal conflict re: consumption v. frugality.
When you have children/family all priorities change. All unnecessary expenses seem frivolous in the face of providing something greater for your children.
That said, live it while you can/feel good about it Sam!
I think you’ve inspired me to start writing about my own financial life. My thinking is that by recording and reporting on my savings rate, expenditures etc. I will be more likely to not only stay on top of things but to also be more proactive. Keep me honest kind of thing.
Would be wonderful to publish one of your posts here if you begin the writing journey. It’s fun and very rewarding, but you will have to grow a thick skin and super strong finger muscles.
This post had me howling with laughter. But I think what made it funny is that it is tinged with truth
Then my job as a writer is complete. Cheers!
I’m amused that with the first post you got tons of comments telling you not to buy the stuff you wanted. And now with this post you got tons of comments telling you to buy. You are wicked awesome at reverse psychology, man! I must learn this master blogger technique…
Takes about 10,000 hours of practice. But you’ll get there!
One guiding light is to always believe in a POSITIVE outcome. Although I was shamed from the comments, the positive outcome is discovering that such a strategy of revealing your desires helps CURB your desires!
Money has the same objective value, regardless of how much YOU make. That is the whole point of money. It is a mistake judge the cost of an item against your personal earning or savings rate. A $12,000 watch is ostentatious and wasteful, regardless of whether or not you can afford it. $12,000 holds a power and value that does not depend on you. That money can pay a kid’s college tuition, or feed a family for a year. That does not mean we should feel guilty for spending money, or live like paupers while we give all our hard earned dollars to charity. There is a middle ground somewhere. That middle ground is nowhere near $12,000 watches or $80,000 range rovers.
Humans are notoriously bad at understanding value. We like to think of percentages and ratios. We compare items to other similar items. This is a mistake. Paying twice as much for a $80,000 car is not the same as paying twice as much for a $1,400 laptop. $40,000 is a significant amount of money in our society. $700 is not. Maybe neither are significant in your yearly budget, but that is not the point.
Is there a Value Handbook out there we should all follow? If not, how does one determine value? How much in dollars do you save and give to charity? Thanks!
There absolutely is! Money is one of the few things on the planet that holds a completely objective value. There is nothing wishy-washy about it. One dollar has an absolute value. There are minimum wages. There are defined poverty levels. There are tax brackets. We have spending data. We have cost of living data. We track inflation.
When we think about budgeting and personal finance, money becomes a percentage of our own income. It is important to remember that that same money also has an intrinsic value that exists outside of our own budget.
Cool. So what is the Value Handbook say about what we can spend on certain items such as a car, house, etc.
Right now you are just talking in fluff. I need some specifics on how much to spend.
Also, what are you doing specifically to help society?
Thanks.
Isn’t this the holier than now attitude Sam is referring to in this post where you project your morals onto someone else, yet you don’t say how or what you do to give back? All you are doing is saying that people with money who spend are not as good as people who don’t have money.
NEWSFLASH: People with money pay way more absolute taxes than people with little money. These taxes use to help the community and social programs.
Don’t be bitter.
I understand what your are saying Animal, but really it is about percentages. I think it is absolutely ridiculous for parents to put their 8 year old kids on travel soccer teams that cost them with all the expenses $7k a year when they only make $100k…but they obviously get enjoyment from spending their money that way … Especially crazy IMO when they are not maxing out their 401k. So hey as a percentage society does this a hell of a lot more often and it’s accepted as normal, but I buy an expensive six figure car(s) for cash and it is offensive to people when it is less of a percentage hit on my income than them paying for little jimmy with two left feet to go get his participation ribbon. Don’t judge other people regardless!
$7,000 and $100,000 are not the same thing. Regardless of what your income is, the two figures are vastly different. When people see your expensive car, they are not judging you, thinking you can or can not afford it. They are angry to see that money go toward inflating your own ego instead of helping your community.
The more wealthy you become, the more this becomes an issue. As your spending increases, it starts to have a larger impact of other people. Large sums of money represent large amounts of economic power.
When trying to accumulate money, we like to think about amassing “our” money. We try to grab as much of it as possible. We work hard to obtain money, and we think we own it. It is hard to get out of this mindset when spending money. When you spend money, it is no longer yours. You are now influencing the world. You have collected power, and now you are exerting that power on the world around you.
Will you use your power to buy a fancy car or watch that showcases your wealth? Or will you use your wealth to help make the world a better place? “I have money, therefore I am better than you?” Or, “I have money, therefore I can help you.” Which one makes you an asshole?
Reminds me of Dennis Kozlowski, the infamous Tyco CEO that ended up in jail. It seemed that it was his lavish lifestyle spending (including a $13,000 shower curtain and million dollar birthday party, with an ice sculpture peeing vodka) that did him in. Societies have a funny ‘conscience’ when it comes to displaying wealth – that it’s OK up to a point, then suddenly it’s an issue. However, I’d be surprised, in real life, if spending 100k/yr would get you into much hot water in SF. I’ve been on a bit of a spending spree and people raise their eyebrows, figure that you’re in debt just like them, then move on, although I’m actually growing my NW while spending. Makes me wonder what CEOs and entertainers think when they make a million a month (or much, much more). Kozlowski is probably still wondering what he did wrong…
Dennis’ conviction probably has something to do with his $100 million worth of unauthorized bonuses, artwork for personal use by company, and kick back fees to former employee for banking deal.
He is the anti Stealth Wealth movement.
The one thing I recall about that birthday party for Kozlowski’s wife, was that he paid a $1 million appearance fee (plus travel expenses) for Hulk Hogan. If you have ever seen Hogan party, it was actually a great deal.
Great topic, Sam! I love the negative comments, personally. I mean, there are the douchebags who will never be agreeable (just delete those) and then there are people who disagree and have a valid argument that can actually help you make a better decision. None of us are perfect and sometimes getting someone else’s perspective can give us a better path for ourselves. It’s important that we learn from others, even when they’re criticizing us.
I do enjoy the disagreements with great arguments. I welcome different viewpoints all the time.