Is frugality for the rich?

[classical_Liberal]

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[bryan]

@Campitor, thanks for taking the time to post to clarify.

It seems you were speaking averages (which I sill found "ridiculous on the face"). The reason I say this is that in the system we live, the relationship (correlation or causation) between an individual's work and income is less and less linear-like as they become "rich" ("exponential returns, leverage, financial structures, economies of scale, monopolies, having resources to take advantage of market gaps.."). I think that is the main source of my misunderstanding of what (I thought) you were saying (or implying).

Another thing is how we define, categorize "rich" or "work".

For instance, the first link you shared

http://www.businessinsider.com/common-m ... ple-2015-6:

The guy defines it as $160,000 or more and a liquid net worth of $3.2 million or more, and "poor people" as those with an annual income of $35,000 or less and a liquid net worth of $5,000. And in the second link you shared (https://blogs.wsj.com/wealth/2010/09/30 ... an-others/) seems to actually just be picking on high-income earners ($100k+) and not so much the wealthy (high networth).

The first link is from a guy trying to sell a book and not a statistical study, analysis (more of a survey + selection/survival bias); not to say it's not useful, in some way. I couldn't find any of the survey data or meta-data.

[Campitor]

@classical_liberal

I'm not sure what you mean by "should be a consideration in the easy vs hard scale". How and why should it be a consideration? In life, regardless your current financial station, there will always be people who have it harder or easier. So why dwell on it or give it one iota of consideration? It's better, in my opinion, to keep the focus on ourselves and what we can do to improve our means of moving up the income ladder. Focusing on others does nothing but harvest envy unless the primary aim is to get ideas on wealth generation for the purposes of cultivate skills within that stream.

@ bryan

I'm not sure why you find averages/aggregates ridiculous. While we are all unique with unique circumstances, our behaviors fall within certain aggregates that define how we live. What is my definition of work? I subscribe to Merriam's Webster's definition of it: a : to perform work or fulfill duties regularly for wages or salary works ; b : to perform or carry through a task requiring sustained effort or continuous repeated operations ; c : to exert oneself physically or mentally especially in sustained effort for a purpose or under compulsion or necessity.

For this discussion I will focus on sustained effort, mental or physical, for a purpose. While the poor may be working hard physically - I know because I was poor. Food stamps, government cheese, working at minimum 30+ hours since I was 13 yrs old so I could help put food on the table and clothes on my back, etc. But the difference between "poor" and the wealthy starts to separate in regards to the sustained mental effort and the sacrifices/choices that are endured to better one's life. Even "ERE" requires sacrifices and additional work that most are not willing to engage in.

the relationship (correlation or causation) between an individual's work and income is less and less linear-like as they become "rich" ("exponential returns, leverage, financial structures, economies of scale, monopolies, having resources to take advantage of market gaps..").

This ignores the long slog it takes to get to exponential returns - you can't discount this in the work harder category. Just because one is resting at the top of the mountain doesn't discount any of the work or sacrifices required to get there. So yes - the rich worked harder to get to where they are. In aggregate they made better decisions, more sacrifices, and spent more time dedicated to thinking and working on wealth attainment and maintenance than those who are less wealthy.

All of my statements need to be put into context. My perspective is aimed at healthy individuals who live in modern Western democracies who don't suffer from any kind of mental impairment.

[bryan]

I'm not sure why you find averages/aggregates ridiculous.

Sorry, I'll re-phrase for clarity:
>> I guarantee you that the rich, especially the ultra rich, are putting in more hours of work than anyone else.
> I find it ridiculous on the face, even if you are speaking of averages.

I don't think math is ridiculous.. I already mentioned that I misunderstood you a bit before so my own "guarantee" isn't as sure. My current understanding of what you said is: for all humans (maybe only in the US or "modern Western democracies"), you can graph some rolling average line of "richness" versus "annual hours worked" (you point out that actually the "hours worked" should be "lifetime hours worked", sure, why not) and it will turn out that the line will never have a negative slope (akin to Fish's sweet graph!). This is quite the guarantee and I'm not aware of good/accessible enough data or analysis to show that. It doesn't make sense intuitively given "the large system we are in now...". After all, "the first million is the hardest".

Maybe we can use a metaphor for our discussion: rockets and physics! A greater distance from sea level (0) being "richer" and "hours worked" being the "time of thrust ON" and the rocket representing some ranged set of data with average values. From what I understand of what you are saying, you would suggest that a rocket that is farther from 0 (richer) is guaranteed to have had a greater duration of thrust than any lagging (poorer) rocket. This only makes sense mathematically and physically if you hold so many variables/conditions constant/equal. Change some variables and it doesn't hold. For instance, you can have two rockets with the only difference being "thrust ON" function over time. One rocket will end up farther than the other, despite them both having equal total "thrust ON". I'm not sure the law of large numbers (or.. whatever.. the stuff that might get baked into the transform of humans' data -> rocket characteristics) guarantees a never-a-negative-slope line fit.

Becoming rich is breaking free from certain inertias, difficulties.

[Clarice]

Anyway.... just sharing and am curious re your thoughts, especially since many people here have quite impressive savings rates, and not always with high incomes.

I keep on thinking about this subject. For whatever reason, it kind of fascinates me... Here are some of the thoughts I would like to share:

1. Frugalwoods' frugality is pretty. That's why there are so many pictures on their blog. The narrative that goes with the pictures is very alluring as well: wholesome bulk foods (assumes access to cooking facilities and ample storage space), a cute baby dressed in awesome hand-me downs (assumes a rich social network), free winter fun (assumes access to such a pristine snow and, thus, a car). The frugality of people with impressive savings rates on low income is not pretty. Participation t-shirts look ugly after a few cycles using self-made detergent. Reusable handkerchief that you are using while having a cold is meant for tell, not show. Daniel Suelo's teeth looked bad before some dentist fixed them for free. The real choice the people on low income face is being free and in peace with the fact that many aspects of their lives do not look presentable or being presentable slaves. Presentable frugality while reaching FI is indeed for the rich.

2. Free and not presentable looks very good if you compare it to true poverty. Poverty is a trap (described well in the book of Barbara Ehrenreich Nickel and Dimed). If you get into this trap you then need to be very cunning to get out of it. Most people don't make it, but some do. Their stories would not lend themselves to a quaint blog.

[Farm_or]

I don't know what to make of that? Like watching the Disney channel and somebody changed it to Fox news?

It sounds a little bit like form over function? Or fear of failure? Or confusing frugal with poverty?

I can close my eyes in a Toyota Celica and imagine that I am riding in a Bentley. The only people that know the difference are the snooty ones watching, but I don't care much for their definition of "style" anyway...

[Campitor]

This only makes sense mathematically and physically if you hold so many variables/conditions constant/equal. Change some variables and it doesn't hold. For instance, you can have two rockets with the only difference being "thrust ON" function over time. One rocket will end up farther than the other, despite them both having equal total "thrust ON".

This is my exact point. 2 rockets yet 1 goes farther or faster. The variable being time on task versus total time on thrust. One person spends more time optimizing her rocket, picking the best launch site closest to the equator to take advantage of the increase thrust harnessed by the earth's rotational speed. She spends more time analyzing her supply chain to source the best materials as cheaply as possible or she builds it inhouse for more savings in order to be able to build a 2nd rocket or upgrade her existing rocket. When the rocket does launch, she continues working on optimizing her trajectory, maintaining her equipment, and making course corrections as needed in order to minimize duration of travel and increase the likelihood of success.

The other rocket engineer/pilot (poor) makes suboptimal choices. He spends more on equipment and launches further north which increases his fuel costs, etc. Once his rocket is in space, he is full speed ahead but with little thought to travel optimization as he wastes time watching reruns of Lost In Space in his flight cabin.

Both pilots are are in their respective rockets the same amount of time (24 hours) but only 1 pilot is spending time maximally/efficiently in order to achieve a better or quicker result. This is what I mean by "working harder". All faculties, mental and physical, are expended - no time for watching Lost in Space reruns or getting disgruntled about which rocket had it easier - the focus is 100% on task for a greater percentage of a 24 hour day. This is the essence of working harder.

And to get back to the is frugality only for the rich, I say NO. I came from poverty and the only way I managed to crawl out of it was being frugal, maximizing my dollars, and working 2 jobs (70+ hours). There was no time to envy the rich or lament my station in life. It was all about working harder and smarter.

We are all chained to fortune: the chain of one is made of gold, and wide, while that of another is short and rusty. But what difference does it make? The same prison surrounds all of us, and even those who have bound others are bound themselves; unless perchance you think that a chain on the left side is lighter. Honors bind one man, wealth another; nobility oppresses some, humility others; some are held in subjection by an external power, while others obey the tyrant within; banishments keep some in one place, the priesthood others. All life is slavery. Therefore each one must accustom himself to his own condition and complain about it as little as possible, and lay hold of whatever good is to be found near him. Nothing is so bitter that a calm mind cannot find comfort in it. Small tablets, because of the writer's skill, have often served for many purposes, and a clever arrangement has often made a very narrow piece of land habitable. Apply reason to difficulties; harsh circumstances can be softened, narrow limits can be widened, and burdensome things can be made to press less severely on those who bear them cleverly. - Seneca

[Clarice]

It sounds a little bit like form over function? Or fear of failure? Or confusing frugal with poverty?

NO-O-O! What I am trying to say (very clumsily as it's turned out ) is that there are various levels of difficulty in achieving FI depending on one's starting point. One is better off being aware of them. Frugalwoods' starting point has made their blog very attractive and their journey - relatively easy. In reality, their situation applies to a very narrow group of people. However, their audience is quite large. Many of these people felt cheated when they learned their true circumstances. The vast majority of people need to adopt much more extreme measures than Frugalwoods to achieve FI. Since the starting point of this debate was referring to a blog I've mentioned the parameters of the blog itself - it does have an attractive form. I did discuss challenges and had no idea that it would evoke associations with fear. The biggest challenge is starting from the position of poverty. Let's say your mom in her attempt to feed you as a teenager impersonated you and took loans in your name, which she did not repay? Well, fear not! FI still can be done, the very hard way.

[jennypenny]

I would say the difference between 'easy' and 'hard' is the number of paths available to someone to achieve whatever the FI goal is. The better start you get and the better decisions you make, the more options you have, but capitalizing on them (or screwing it up) is more a reflection of the individual than circumstances.


Is the ability to choose the only difference between frugality and poverty?

[Farm_or]

@Clarice - thanks for the clarification.

Could be a nagging problem of my own? The powers of perception. Not just me, but the appearance projected on my loved ones.

Self esteem is very important. Although we may be at a different level, I worry about others being negatively impacted by outside influences. My grandma taught me very early that there is nothing wrong with being poor, but that was in no way excuse for being slovenly.

[jennypenny]

@Farm_or -- Have you read Empire of Things ( discussed in this thread)? I think it ties back to whether frugality is for the rich. Consumer items were used as a way to improve one's station and standing. I don't think I appreciated the extent of that and the positive effect it had on poorer and marginalized groups until I read the book. Taking that into account, frugality is a luxury the rich have because they have already achieved status and acceptance in other ways.

I keep posting short answers here because I haven't had time to give it more consideration, but I'll try to soon. I think some of the points in Empire of Things are relevant. Again, I'm not implying that frugality/ERE can't be achieved by anyone, and many wealthy people struggle to understand the point of ERE (that whole 'eye of the needle' thing). I'm only saying that the wealthy have more flexibility including how early they can start the process. A poorer person might have to be a bit spendy to get themselves into a position where they have better options for achieving FI/ERE.

[Clarice]

Is the ability to choose the only difference between frugality and poverty?

The difference between frugality and poverty is analogous to the difference between strict avoidance of sugar and diabetes. The latter is a horrible beast that requires a lot of skills to live with and affects every single aspect of your life. The former affects a much more narrow set of circumstances, is quite forgiving to your occasional digressions, and easier on your mind. It is much more fun to drive a beat up Toyota Celica if you, in fact, CAN shell out $200K+ on a Bentley and remain solvent. It is very inconsequential begrudgingly succumb to your aunt's pressure and nibble on a piece of cake at your cousin's wedding, UNLESS you have a diabetes. From a true poverty to FI is a rare journey and very few, if any, people on this forum are experts on this one. If you are poor the ability to choose is still with you. It takes a lot of courage to pick the best bad option. I imagine a true poverty as sitting in a motel room, on which I've spent my last money, thinking about my child in foster care, and calculating how to handle a sleazebag of a manager at my new job at McDonald's.
Also, frugality is often a personal act aimed to offset the iatrogenic effect of money. At my job I often observe iatrogenic effects of medical intervention. I am very interested in iatrogenic effects of money as well. Maybe a separate thread?

[classical_Liberal]

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[jennypenny]

@Clarice -- I asked because I'm really curious about the definition of frugality. I'm having trouble with it. It's obviously not simply a definition of behavior because no one would equate the low-sugar diets in your example because the motivations are different. It's not only about the motivation though, because someone saving money on a yacht or buying it used isn't 'frugal' in the same way as someone foregoing a car or large house. Or can they?

I'm curious too if the 'choice' factor is an american thing. We like to feel like we have choices.


@C_L -- not sure what you mean by exposure


I'm not knocking frugalwoods. I'm only pointing out that some people start the game in a better position. If you look at it like a video game, some people start the game with higher stats. Poor people might play the game better but it's because they've had to -- they don't have as much HP/PP/inventory and will get bounced much more quickly. Rich people can play poorly for a long time before they have to worry about upping their game (and many have the $$/connections to respawn).

If you look at it strictly from an FI perspective, it's hard to judge people who eschew frugality if they have more than enough money to cover their lifestyle. If you look at it from an ERE perspective though, resource use is an important factor so frugality is required and should be defined in a more absolute fashion IMO.

[jacob]

If we go with an operational/pragmatic definition then whether frugality is absolute or relative depends on who you hang out with/run into.

Privately and within a limited socioeconomic group, frugality is relative. You can be the frugal one in the yacht club as you spend $10,000 on a suit of used racing sails instead of having them special ordered from North Sails and only using them for half a season before ordering new ones because they got too stretched.

On the internet, there's a good chance you'll eventually run into everybody, especially if you get popular or randomly exposed to the mainstream or some well-intentioned fool shares something you wrote on facebook afterwhich it went viral. In that case, frugality as well as pretty much everything else is absolute. As a blogger/author/facebook/twitter-poster, one will learn this sooner or later, either the easy way or the hard way. Ha!

When you're blogging, you're definitely swimming in the latter sea. Since I deliberately try to spend as little as possible (on both the absolute), I've been accused of being a "poverty tourist" when skirmishing with mainstream commentors.

It's definitely helpful to understand what Clarice points out that there's a big difference between living on $7k/year and being $7,000 in debt while having creditors knocking on your door and living on $7k/year and having $700,000 in the bank readily to tackle any emergency or jump on any opportunity (like flipping new racing sails?!) that might come along. Those are two very different games. I called them 2a and 2b above. Add a third game with 7k in expenses, 70k in income, and 700k in assets.

The only thing these three actually have in common is the spending level.

Lets torture a boxing metaphor(*). Lets assume that there weren't any such thing as weight classes and everybody fights against each other. Then weighing 220 pounds would be easy mode---that's like being 7ft tall in basketball or having two-sigma IQ (H/T c_l). You don't have to make wise and experienced decisions because you can rely on height or smarts. Weighing 180 would be average mode. And weighing 140 would be hard mode. If you're 140, you have to train very hard and make boxing your life mission, but if you do, you can do well against a 220 pound average/half-ass. That's hard-mode. If you're 220, all you need to do is to train for a year or two and you can do quite well again all the light-weights and fairly well against your own. That's easy-mode.

(*) Which should work well, because it's not that easy to move 80 pounds up in weight class.

[jennypenny]

I understand Clarice's point that they aren't the same. I thought my point made that clear but apparently not.

I think I'm just hung up on language as usual. Frugal is a word like 'sacrifice' that people toss around to mean deliberately doing without something (regardless of value or need), and that drives me nuts too. I'll let it go.

[IlliniDave]

I have a nephew who is poor, he does not work on a regular basis, but he has a lot of nice things (compared to say, me) via a combination of borrowing money and nefarious skill at emotionally manipulating my dad and mooching off him (e.g., basically moved in with him the day of Mom's funeral). I have another nephew, the aforementioned's younger brother, that is poor. He works more steadily than the other. He is careful with his money, lives within his means, doesn't borrow money, does not mooch off his grandfather nor anyone else (is always the first to show up and help when there is work to be done while his deadbeat brother always has a "conflict"), and maintains his own residence and transportation, etc. Overall a lower "standard of living" than his brother despite higher income. In other words, one is frugal, the other is not; and in principle they both are exercising a choice regarding frugality. My younger nephew is not on the path to FIRE via frugality, largely due to his income level being well below median, but frugality is still a choice.

[7Wannabe5]

@jp: Maybe frugality could best be defined as Maximization of Quality of Life/Resource Allocation? Of course, QOL is a much squishier metric than even SOL, so kinda gotta "A loaf of bread, a jug of wine, and thou.." it.

Obviously, I am on the slacker privileged party girl path to ERE/FI, and will likely only be able to pull it off by my self-assigned end date in some manner similar to how I managed to get into a decent university even though I went AWOL from 10th grade (SAT scores, flirting with AP chem teacher,, etc.) Also, I am currently totally mooching off of my elite American male BF likely due to either my fantastic skills at emotional manipulation ("Please, Sir, may I have some more?" form small bowl with hands, bat-bat eyelashes) OR my weak boundaries at maintaining my preferred running free like a chipmunk in the woods lifestyle (lured into captivity once more by some old man in the park holding a bag of nuts-sigh.)

So, I am not by any means speaking about challenges faced by myself when I note that this week I was engaged in the attempt to educate a five year old who was sent to school hungry (I witnessed him eating 2 full lunches, two bags of fruit, and 4 slices of banana bread in the course of a couple hours), and wearing no socks or underwear, and another 5 year old who was tested at the functional level of 16 months. I would further note that I just accepted a new job tutoring in a neighborhood which is so much worse than average, I am being offered an additional $8 an hour (enough to pay minimum wage to another worker) over standard to try to help educate the children who live there. I am employed by a privatized segment of the educational system, so this pay hike necessary to get somebody with my level of competence on the job is market or below market pricing (they were fairly desperate to get me on board), so consider the difficulties that would be faced by a child trying to get out of such a neighborhood.

IOW, there are some individuals who face HUGE upward slopes right from the get-go, and there are other individuals in our society who will never be able to care for themselves, let alone achieve ERE/FI. So, as individuals, or members of society, we have to decide what constitutes reasonable and rational attempt to provide fair playing field or reasonable level of humanity in providing care for those who are less fortunate. If you think everybody has equal opportunity and was dealt equal resources at the beginning of play, then it seems to me that you must not get out and about much.

[Farm_or]

A lot of this is coming around to freedom of choice and awareness of cause and effect.

In a free society, we have to tolerate others making bad choices. The self inflicted poor and the diabetics (strangely are often the same). The flip side for those making the right choices, is unlimited rewards - great health and prosperity.

I came from immigrants. I know a lot of immigrants of different races. I grew up next to a reservation. I have witnessed all types of poverty.

I have seen the conquest of the human spirit in a free society. Many immigrants from all over the world risk life and limb just for the chance of success in free society. So many tales of rags to riches - all using frugal philosophy. That's my hang up with "frugality is another luxury of the rich".

[suomalainen]

I dunno. I may be an outlier here, but for me hard vs easy is determined more along the relationship status dimension than on the income dimension. Single = easy. Married = moderate. Married with kids = hard. Frugality to me seems easy when there's no need to compromise. I suppose it is true that I'm assuming a lack of poverty.