Saving money is great because it hopefully means you are purchasing the same utility without unnecessary overhead. Strangely enough, not enjoying a daily premium latte might be less frugal in the long run. You'd have to consider the utility of pleasure experienced over the years versus a few extra grand for your coffin.
It adds up faster than you would think: ditching your daily $3 latte saves $91.25 dollars a month. Investing that into a S&P index fund that traditionally has an average 7% annual return and 1.12% variance for over 50 years compounds into... $446,368.
Forgoing a latte a day over 50 years means I essentially have to make 18250 decisions in order to save this money. But, on the other hand, let's say I decide to forgo, say, a $60k car and instead get a still very nice $45k car. If I invest that $15k in your hypothetical S&P index fund, and deposit no new additional money, after 50 years I'll have... $441,855.
So basically with just one, single decision I get the same benefit as someone that had to make 18250 decisions.
The small shit really doesn't matter very much. If you simply focus your frugality on a few simple things (namely housing, auto, and education) you will always be light years ahead of someone who is constantly worrying about their lattes or avocado toasts or whatever small daily bringers-of-joy.
I don't think so. When I quit smoking, I had to consciously make the decision not to buy cigarettes every time I was at the checkout in a super market. That went away after about two weeks. For a few months that followed, I'd stand there thinking "and buy some cigarettes" and then I'd realize I didn't smoke anymore.
I doubt that getting off of the latte-habit takes longer than getting off of cigarettes.
Another question is whether small sugary treats are a good thing in general. Again the cigarettes as a comparison: cigarettes are the best when you haven't smoked for a day. But that's because you're suffering withdrawal, not because they're that great.
That joy is mostly relative, the joy you feel drinking a latte is not greater than the joy a poor tribesman feel eating a piece of fruit. You will almost always feel it just for different things.
A good example is sweetness, if you quit eating candy you will find that much food is very sweet, and if you stop eating industry created food you will find that many vegetables and other things are actually quite sweet. So you don't lose the joy of eating sweet things, just that what you consider sweet changed.
But more importantly, I'd much rather spend small amounts on simple daily pleasures that I enjoy. The lattes definitely bring me joy, and it's not like they are somehow taking the place of quality time with my loved ones or bringing joy to other people.
Then we want the same thing. Genuine happiness. But try to see it our way: that coffee money could go to working 5 hours less a week in a decade. That could be quality time with your family. One the other hand, two years into that latte — you're hitting withdrawal by 3:00pm. So maybe your just as happy overall as when you started.
Does anyone else have difficulty understanding why anyone would pay this much for a car? $45k is an order of magnitude more than I've ever paid for a car. Granted, I don't even like cars or driving, but the cars I've owned have been perfectly functional and any mechanical problems they've had still didn't add up to more than $10k.
Let's list some of the features that modern cars have which significantly improve the utility of them to most drivers, and which are considered (by the market) to be worth 45k+
Blind spot monitors, rear/side cross traffic alert, auto-dimming mirrors, digital mirrors (for when you have tons of cargo blocking mirrors), Backup/360 Panoramic Cameras, Parking Sensors, heads up display (massive safety benefit), Satellite Radio, lane keep assist, radar cruise control, pre-collision and collision mitigation systems (active breaking), improved design / additional weight for safety in collisions, more and better airbags. Better seats, better audio system, Nicer infotainment systems with Carplay/Andriod Auto, Hybrid/PHEV/EV powertrain, better reliability (if you pay Toyota/Lexus/Honda/Acura tax), semi-autonomous driving (Tesla)
I'm forgetting a bunch of stuff, but having recently purchased a 42K car with nearly all of these features and upgrading from a life of being driven in shitty base model kias, I find the utility gained from purchasing an expensive car to be MASSIVE. Driving went from being a frustrating chore to a pleasurable experience.
The risk of death dropping by an order of magnitude is alone worth the money, let alone the massive comfort improvements.
Don’t you feel like you answered your own question there?
It’s like asking why anyone would spend money on tasty food when some cheap foods are all you need to survive.
Not really. I mean I've never spent that much on a car and I'm not sure I ever will, but I did spent $5000 on a computer one time. That's an order of magnitude more than most people pay for computers, and while nice, it sure isn't 10x better than a $500 computer would have been. But I spent the $5k, because a) I had the money and b) I really really realllly wanted that computer.
EDIT: In case anyone is curious about the $5000 computer, it was this one back in 1999, and no, it was absolutely not worth it in the end: https://everymac.com/systems/apple/powerbook_g3/specs/powerb...
For instance, if you buy a 3090 Nvidia GPU with 24 gigs of VRAM, you are capable of training AI models that are eminently more capable of getting publications accepted than an owner of a 3080 would. (Yes, distributed training is possible, no it is not always an option). Sure, it's nowhere near 10X in gaming or flop improvement, but the relative capabilities offered by a top of the line computer can become exponentially more useful compared to a significantly cheaper computer.
How fast a car can go is one, how many people it can transport is another, how few emissions it creates is another.
Someone might be willing to drop big bucks on a Tesla Model X to haul their family around rather than a used Dodge Caravan ... not because it'll get them between Point A and Point B more quickly or because it can carry more people, but because it doesn't emit CO2.
Point being that we don't all value the same things, and while I wouldn't make the same decisions as other people much the time, I can certainly understand how people come to (sometime vastly) different decisions than me.
EDIT: I have an uncle who is an emergency room doctor, and I guess after seeing all of those car crash victims, his car-buying decisions have always been based entirely on safety. So he's driven an otherwise unlikely progression of cars, some luxury, some not, based on whatever seemed to be the safest new car available.
Not saying it’s rational but like you said, there’s a lot of different dimensions to utility
https://everymac.com/systems/apple/powermac_g4/specs/powerma...
- because they were gorgeous!
So, where can I get that crystal ball that lets you know the impact of any action? That'd make a fortune and infinite boredom all a possibility.
The one good thing in the article is that it shows the power of saving more as a burst. It actually limits many types of risk, but then you can only actually do that if you have a rich job... (It does not address existential risks enough. There are a few important ones it should as they're related to investments and reasonable saving rates.)
The advice to save on latte presumes you can actually afford it in the first place. Otherwise you're not saving, you're just not overspending.
I liken it to the advice that you should buy stuff used to save money, when you need it. There are many caveats to that.
I don't disagree that sitting down and having a latte with someone (or even by yourself) is sometimes social/a break/a chance to work with some WiFi/etc. But for a lot of people it's just part of a morning ritual.
Also, you cant invest your saved 90$ to investment fund. Those require higher initial capital.
Or maybe none of this happens, and annual 3% inflation cut the real value by roughly 75%, and you had to pay 20% taxes on top of that. You're left with around 90k of value, of which ~36k is your investment return. In the meantime, you gave up 18,250 lattes.
Over time you'll build up tolerance and that cup of coffee isn't worth the same for you. Now you're burning cash for energy that would have been there without caffeine. And to think you could have paid for your kids college instead.
But even if you are correct, that person ditching the latte isn't going to be spending that 446,368 in old age either because it isn't "frugal". If they have a decent income they just end up dying with 446,378 in the bank.
Can you spend ~$1100 in one instance, at the end of every year, that produces the same total utility of pleasure you would have experienced from a daily latte? I'd probably drop the latte but, everyone is different. I would still argue that there are plenty of times when splurging is worth it in the long run.
I never got into the habit of buying Starbucks coffee so lucky for me I guess?
I switched to more expensive SUVs, and all these are anti frugality:
1.Car parts are often smaller (such as wheels) and less sturdy. And more prone to fail.
2. When an SUV is being built, the price premium allows the manufacture to build it using higher end components.
3. SUVs have more space to move and pack things
4. Better odds of surviving a crash vs a car.
5. Higher seated position means a better view of oncoming traffic.
And so on ...
I think frugality needs to be subservient to "form factor". Something that you are going to be using a lot, needs to be reliable, comfortable, and practical. A price premium is often justified in achieving these.
I could probably go on. But the cheaper option is inferior.
Top gear did a report on this years ago. They were four times as likely to roll in a crash as a saloon car. The stopping distance was quite a bit longer as well.
There is also the issue of what happens when you run into a pedestrian.
I guess that's not relevant to parent's analysis from the perspective of maximizing his/her utility.
It is hard to diversify as an individual unless you have significant capital to invest.
But we never know when that day will come. So a more nuanced perspective would be to treat the now as your finale, and the future as your encore. That way, no matter when death knocks, you leave on a high note.
If you put everything into your eventual encore, it's going to be one helluva encore if you get one, but incredibly bitter set piece leading up to it gets cut short, that chance never comes, and you realize just how flat your set piece ended up being. But it'll likewise be bitter if you pour everything into your finale, but end on a low note when you realize it's time for your encore and you've got nothing left for it.
So avoid both extremes, and enjoy today while hedging for a potential tomorrow. As long as you keep that in mind, and consciously attempt to not invert it (i.e. maximize for a theoretical future by sacrificing your certain present), you'll generally be in a good place no matter when death knocks.
Wait, there was inheritance in the Soviet Union? How did that work? Genuinely curious.
My grandparents participated in it and after decades of saving a few percent of their earnings each month the total from both of them was just enough to buy their grandkids 2 pairs of shoes :)
The way I see it, frugality should be "I don't need 10 pair of sneakers, I can probably do 2 quality ones, and take care of them so that they last" and not "Let's buy a couple of those cheap $10 sneakers from HnM". Spend where it matters, but don't spend because you can or because you want something impulsively.
You know the $20 shoes won't be great, and sure, it's possible the $200 shoes will be better than the $20 ones...or they could be exactly the same.
It mostly came down to examining the stiches and seams for quality, which is what I always do now when buying clothes. Look for unraveling, loose or missed stitches, not-straight stitching, etc. Pull the seam apart lightly and see how it holds up.
Also things like zipper quality (YKK is a top brand, and would be stamped on the underside), or how well stripes are lined up. Do the button holes look well stitched?
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness."
I am living the life that I want, not the life someone else envisions.
If you have reason to believe that getting a new job is trivial, then sure. Take some time off if you can afford to.
If, on the other hand, you have no idea if you can get an equivalent professional job in one or two years and may involve moving (as is the case with MANY people in tech in spite of what people in the bubble may believe) then looking for a job immediately makes a lot of sense.
Taking some time off may still make sense but it's always going to be a bit of a calculated risk.
My parents had close to zero savings because they didn't really have any money. A $100 purchase was something very carefully considered. While they were frugal, they didn't live a life of denial. My dad had a canoe & kayak, both purchased used. One thing they waited on, even though they could have made it work financially, was taking a trip to Europe together.
My dad passed away at 46. That trip to Europe will never happen. With almost no savings, the only thing that let my mom live with basic needs met was his life insurance policy.
I'm 45 now and that experience has shaped my approach to saving and spending. From day 1, I've contributed to my 401(k) and increased the percentage saved each year and now max it out. When my son was born, the 529 savings started immediately. Balancing that, I have no problem spending money on things that I find value in, whether other people find them frivolous or not. I do carefully evaluate whether I'm getting value from the money spent, and use that as a firmer guide than the actual amount of money involved.
However, frugality needs to be balanced with living a life worth living. Saving now for later assumes there is later, or even that well-being and health later are given. My mum said to me, shortly before she passed away: “Maybe we saved too much. Maybe we should have lived more.” That’s something I think of now when making decisions.