Is frugality for the rich?

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BRUTE
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Re: Is frugality for the rich?

Post by BRUTE » Fri Jul 20, 2018 8:26 pm

to be fair, DLj is living on ~$7,000 plus a paid for house. $7,000 with no paid for house is probably much harder.

jacob
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Re: Is frugality for the rich?

Post by jacob » Fri Jul 20, 2018 9:22 pm

No, just different. I'm current $6.5k in an owned house. I was $7k in a rented 1bd/1ba apartment in Chicago (Ravenswood), $6k in an RV in SF east bay, $6k in a rented house in Indiana, and $6k in a room in Switzerland. Single, not single. It goes back almost two decades. This has been discussed before: viewtopic.php?f=3&t=7870 also see http://earlyretirementextreme.com/frequ ... -questions

IlliniDave
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Re: Is frugality for the rich?

Post by IlliniDave » Sat Jul 21, 2018 5:57 am

jacob--even though I've been around here for a few years now, I am still just a step short of being in complete awe of those numbers. At work I have a reputation of being an eccentric cheapskate (meant in a good-natured way) which makes me feel good about myself. Then I come here and am reminded that I am a wanton spendthrift. :lol:

7Wannabe5
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Re: Is frugality for the rich?

Post by 7Wannabe5 » Sat Jul 21, 2018 6:30 am

I think "live like a 19th century prairie pioneer" and "live like a grad student" and "live like an immigrant" are all valid strategies, but there are critical assumptions regarding resource bases and access inherent in each of these strategies. The "pioneer" model requires a certain amount of capital/cash and skills, the "grad student" model requires a certain amount of brains and previously acquired educational capital, and the "immigrant" model requires a certain amount of family/village/tribal capital.

IOW, living like a "pioneer", "grad student" ,"immigrant", "starving artist" or even an "aging nerdy vagabond permaculturist sugar-baby" on $7000/year is not the same as living like a pregnant 17 year old runaway from abusive household on $7000/year or living like a middle-aged manual laborer with a back injury and an IQ of 80 on $7000/year. For instance, an ANVPSB can even afford French Vietnamese Au Laits, massage chair pedicures, and any new book she wants to read, on less than $7000/year :lol:

Conversely, a good example of "hidden" positive capital would be Jacob's observation that a kid who becomes interested in computer programming at the age of 10 might already have 15 years of experience by the age of 25. Another example would be that back when I lived in married student housing with my ex, there were 3 young single mothers living in the same complex, with whom I traded a bit of babysitting and math tutoring. One was beautiful, one was reasonably intelligent, and one was neither. The first managed to climb 2 rungs, the second managed to climb one rung, and the third dropped out.

IOW, not everybody is starting at the same starting line if/when they have net financial worth of $0, and "household" is increasingly becoming almost a useless economic descriptor.

Mister Imperceptible
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Re: Is frugality for the rich?

Post by Mister Imperceptible » Sat Jul 21, 2018 6:35 am

jacob wrote:
Fri Jul 20, 2018 12:22 pm
“Eating a strict diet of lentils, rice, and beans might not be everybody’s thing.”

CASE DISMISSED

:roll: :lol:

classical_Liberal
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Re: Is frugality for the rich?

Post by classical_Liberal » Sat Jul 21, 2018 8:47 am

@7WB5
What you're pointing out is different forms of capital. Anyone able to functionally grasp Wheaton Level 6 can understand what you are saying.

Your point that each person is born with/acculturated into certain ability levels to use varying forms of capital is valid. However, just like systematically altering some personality traits, it's possible to habituate oneself into more useful and functional capital use models over time.

My experience with upper-lower class and working class folks in the US is they tend to operate at much higher level of "pioneer" (in the sense of self-building, repairing, trading skills) and "immigrant" capital use than the middle to upper-middle class. They do so out of necessity, and probably don't really realize they are using different forms of capital. But, it doesn't change the fact it's happening.

The problem being many (most) of the FIRE personalities really don't grasp this concept. They are viewing the world through an upper middle class lens. Hence, we get the bare bones 200% poverty level budget. How could anyone possibly live on less? woe-is-them. WRONG! Plenty of the functional 30K, 2.5 households are doing just fine. They rely on trading expertise with friends and family, social support systems for child care, self learned practical skills, are used to living in tighter living quarters, etc.

The best (ie quickest way for average person) to ER is learning to make the income of middle to upper-mid class, but alternative capital use of upper-lower class. This is possible for almost anyone w/in one standard deviation of IQ/EQ. The problem is most people tend to live or die by one system or the other, they refuse (or think it's impossible) to learn and use both systems simultaneously. Folks further to the right of one standard deviation IQ/EQ can use other, more inventive ways to reach goal. Like your ANVPSB :lol: or JLF type grad student.

In any event, the average middle class person in the US utilizes alternative capital sources so poorly, virtually any effort increasing efficiency in this realm will have immediate and quantifiable results in the form of decreased financial capital use (ie needing less than 200% poverty).

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Re: Is frugality for the rich?

Post by jacob » Sat Jul 21, 2018 11:14 am

classical_Liberal wrote:
Sat Jul 21, 2018 8:47 am
In any event, the average middle class person in the US utilizes alternative capital sources so poorly, virtually any effort increasing efficiency in this realm will have immediate and quantifiable results in the form of decreased financial capital use (ie needing less than 200% poverty).
http://earlyretirementextreme.com/man-s ... nking.html

oldbeyond
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Re: Is frugality for the rich?

Post by oldbeyond » Sat Jul 21, 2018 12:05 pm

If one takes a casual glance at the FIRE-sphere, 7k/capita is still pretty rare, even on these forums. 15k/capita seems to be achieved by a lot of people and seems to be were we strategically enlightened but tactically soft souls end up ;) And then there’s a couple of levels in between.

So the 2.5 persons, 50k/year crowd would have to manage 10k/capita to maintain a 50% SR(not that it’s a perfect definition of FIRE but it seems a decent approximation in the context of this discussion). While not jacob it’s still pretty badass, but not unachievable.

7Wannabe5
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Re: Is frugality for the rich?

Post by 7Wannabe5 » Sat Jul 21, 2018 12:48 pm

classical_Liberal wrote:Your point that each person is born with/acculturated into certain ability levels to use varying forms of capital is valid. However, just like systematically altering some personality traits, it's possible to habituate oneself into more useful and functional capital use models over time.
I don't disagree. I guess what I am thinking about has to do with my notions of quality of life vs. standard of living, which I also brought up in earlier thread which Jacob linked above. It seems to me that both the poor, illiterate little guy I tutor, and my uber-wealthy, highly intelligent old guy friend have difficulty with maximizing quality of life. One day the little guy was telling me about a pop-star he admires who live in a mansion with an indoor basketball court and an elevator. Another day my old friend was telling me that he doesn't know what he would do with himself if he retired. It is beyond my abilities to suggest a path "forward" towards pop-star mansion for the little poor guy or a path "backward" from fretting about estate tax consequences of every decision for the old wealthy guy. Neither of them fully owns or is allowed/allows himself many simple amenities or pleasures.

IOW, I am coming to the realization that the ability to transform capital into other forms of capital and qualities (or qualia? -lol-see "Consciousness" thread) of life is perhaps even more important than total capital of any or all forms.

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Re: Is frugality for the rich?

Post by jacob » Sat Jul 21, 2018 12:58 pm

7Wannabe5 wrote:
Sat Jul 21, 2018 12:48 pm
IOW, I am coming to the realization that the ability to transform capital into other forms of capital and qualities (or qualia? -lol-see "Consciousness" thread) of life is perhaps even more important than total capital of any or all forms.
Uh, yes. The transformation of stock is flow. Perhaps to some extent also the definition of being alive. Money is only worth something insofar it can be transformed. Such transformations are often limited. For example, the Easterlin paradox stipulates a diminishing return in terms transforming money into happiness.

IlliniDave
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Re: Is frugality for the rich?

Post by IlliniDave » Sat Jul 21, 2018 1:12 pm

7Wannabe5 wrote:
Sat Jul 21, 2018 12:48 pm
IOW, I am coming to the realization that the ability to transform capital into other forms of capital and qualities (or qualia? -lol-see "Consciousness" thread) of life is perhaps even more important than total capital of any or all forms.
That flexibility would be good to have, especially if it was a universal converter. As it is, I'm fairly limited when it comes to capital in the realm of "what I can convince other people to do for me". Part of that is capital-I introversion, and part, maybe the larger part, is not having much to offer from the perspective of others aside from being a potential source of financial capital. I'm okay along the axis of self-reliance, but that is something that time will likely shut down.

BRUTE
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Re: Is frugality for the rich?

Post by BRUTE » Sat Jul 21, 2018 2:11 pm

jacob wrote:
Fri Jul 20, 2018 9:22 pm
No, just different. I'm current $6.5k in an owned house. I was $7k in a rented 1bd/1ba apartment in Chicago (Ravenswood), $6k in an RV in SF east bay, $6k in a rented house in Indiana, and $6k in a room in Switzerland. Single, not single. It goes back almost two decades.
living in a normal-sized house allows DLj a "normal looking" (from the outside) lifestyle. living in a trailer park in the east bay, not so much. DLJ (and brute) is probably "blessed" with a certain autistic disregard for societal norms that most humans do not possess. being perceived as not-normal or trailer trash is worse for them than working an extra 30 years.

so living on 1 jacob in Indiana, or in Chicago with a paid for house, is probably conceivable for many humans, but in the Bay Area it isn't, because it would require breaking societal norms and becoming "trailer trash".

almost all FIRE bloggers actually seem very proud that they still project a "normal middle-class lifestyle", and that their neighbors and friends often can't tell that they're doing anything differently. this sets DLj strictly apart from them - DLj does not seem to care much about perception. brute believes that this is rare in humans.

7Wannabe5
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Re: Is frugality for the rich?

Post by 7Wannabe5 » Sat Jul 21, 2018 5:12 pm

jacob wrote:Uh, yes. The transformation of stock is flow. Perhaps to some extent also the definition of being alive. Money is only worth something insofar it can be transformed. Such transformations are often limited. For example, the Easterlin paradox stipulates a diminishing return in terms transforming money into happiness.
Right. I was kind of being Ms. Obvious, but I was thinking more about how we all suffer from personal roadblocks to efficient transformation. Easy to see it in others. More difficult to be self-aware.
IlliniDave wrote:That flexibility would be good to have, especially if it was a universal converter. As it is, I'm fairly limited when it comes to capital in the realm of "what I can convince other people to do for me". Part of that is capital-I introversion, and part, maybe the larger part, is not having much to offer from the perspective of others aside from being a potential source of financial capital.
I think maybe you just need to alter your perspective or social boundaries. For instance, maybe you sometimes like to elicit giggling behavior from your grandchildren by bouncing them on your knee- toddlers have no clue about net worth. And there are other social contexts in which you could likely trade on your appearance absent net cash flow for variety of "benefits" ;) (Of course, a little bounce on the knee might help seal that sort of deal too- see my excellent advice to Suo on his thread :lol: )

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Re: Is frugality for the rich?

Post by jennypenny » Sat Jul 21, 2018 5:24 pm

Are other types of capital more valuable than money? Or is it just that developing other types of capital helps to limit the amount of financial capital that needs to be spent?

The latter would explain some of the difference in how frugality works for different income groups. Someone with a lower income uses other types of capital to avoid spending money. If they have a problem that they can't solve with alternative capital though, they can't whip out their checkbook to solve it like someone with a larger income could.

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Re: Is frugality for the rich?

Post by classical_Liberal » Sat Jul 21, 2018 5:37 pm

7Wannabe5 wrote:
Sat Jul 21, 2018 12:48 pm
It seems to me that both the poor, illiterate little guy I tutor, and my uber-wealthy, highly intelligent old guy friend have difficulty with maximizing quality of life.
Part of the human condition is wanting what we don't have or wishing for the choice we didn't make. This has been effectively researched, paradox of choice is real. Part of the issue is knowing or understanding what improves quality of life. What makes people in general, or myself specifically more content? Too many choices, advertising, and "entertainment" in the form of TV, movies, and social media have skewed the ability of the masses to accurately predict happiness inducing capital uses.

I just moved for the upteenth time in the last 4 years for work. Sure, I can afford to pay a moving company to transport my very limited amount of stuff, but instead I asked some friends to help. Not because it saved me money, but because spending a day with friends, who care enough to help me move upteen times, makes me happy. Just knowing they exist and seeing they are willing to help creates contentment.
BRUTE wrote:
Sat Jul 21, 2018 2:11 pm
DLj does not seem to care much about perception. brute believes that this is rare in humans.
There have always been subcultures w/in societies that take pride in doing things differently. I believe tech workers van dwelling in the bay area is a pretty obvious current example. All one has to do is seek out a desired subculture. Perception is far less a problem than you think, at least, not caring or purposely being different is not rare in humans.

7Wannabe5
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Re: Is frugality for the rich?

Post by 7Wannabe5 » Sat Jul 21, 2018 7:36 pm

jennypenny wrote:Are other types of capital more valuable than money? Or is it just that developing other types of capital helps to limit the amount of financial capital that needs to be spent?
There are obviously many things that an individual might want that are more difficult to purchase with cash rather than other capital. For instance, eager dance partners, article published in science journal, seeing your play performed, finally being able to do a pull-up, eating pie baked with apples from tree you planted, or hug from an old friend.
classical_Liberal wrote: Part of the issue is knowing or understanding what improves quality of life.
Absolutely agree. One of the first books I read that touched on systems theory was on the topic of designing gardens in alignment with human psychology. Most humans are best able to relax when they have something like a wall behind them and an open vista before them. So, for instance,I don't believe that my uber-wealthy friend is maximizing his quality of life when his dining room table is so cluttered with dusty Costco boxes that he can't even see out the doors to his backyard. It's like he knows how to make and save money, but he doesn't know or has forgotten how to live.

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Re: Is frugality for the rich?

Post by Fish » Wed Sep 25, 2019 9:31 am

Many of you have seen this data in another form earlier in this thread, but I found this visualization particularly interesting.

Image

Observations:
1. It’s not viable to be below-average in both income and frugality. Furthermore, disadvantage in one dimension is generally compensated by equal or greater advantage in the other.

2. Income is generally the more important dimension for FIRE (here defined as FI in <15 years). Using % as shorthand for percentile, 50% income requires 90% frugality to FIRE, while 50% frugality is still FIRE-viable with 80% income.

3. For FIRE, is no margin for error when below the median income. 30% income (=30k aftertax) requires 95+% frugality to FIRE. Whereas income is more forgiving: 30% frugality (=60k expenses) can be offset by 90% income. Which is why fatFIRE is part of the lexicon but poorFIRE is not.

4. Income and expenses are correlated (probably a lot more tightly at low income) and most individuals should fall near the “typical expenses line” (omitted) which is the line segment connecting (0,100) and (100,0). At higher incomes it’s practically impossible not to save. Those that live paycheck to paycheck at 90+% income and have the misfortune to blow up are sometimes ridiculed by the media (and the FIRE community), while it’s all too common at lower income levels and therefore neither novel nor funny.

5. It is most efficient to move perpendicular to the gradient of the contours, presuming return on effort is linear and equal in both dimensions. It is not, but it is still insightful to assume it is. For a typical person near the middle of the graph, a trajectory about 30 deg above the horizontal is optimal (1 unit up for every 2 units to the right). This seems to line up with conventional PF advice, and mainstream FIRE bloggers typically advocate a “do both” strategy.

As one approaches either extreme, the Pareto-efficient action is to concentrate on the direction of relative strength. This may explain why ERE is obsessed with frugality and WSP focuses on income. I think the respective bloggers would agree that there is practically no barrier to getting to 95% frugality (15k/household) or 95% income (~200k pretax) if motivated.

Both are also quick to note that almost no one is motivated.

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Re: Is frugality for the rich?

Post by jacob » Wed Sep 25, 2019 10:29 am

I think this is the clearest visualization yet. Also the physicist in me appreciates the observation about feeling the pressure along the gradient.

I took the liberty of plotting some examples. If anyone has more numbers/coordinates, PM me and I'll include them.
(It was kinda hard to hit the right spot and I'm too inept with this graphics program to move text around?!)

Image

It's interesting to note that there has been a tendency to move to higher and higher incomes as FIRE has adopted people from closer and closer to the mainstream. Likely one can draw a chronological line from the beginning to the end and it would match up nicely with the Wheaton levels; suggesting that in order to increase the size of the movement [at a fast pace], it has to expand in the direction of lower Wheaton levels which then necessitates going to higher and higher incomes.

One can presume that the followers of a given entry is about one Wheaton level down for all entries.

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Re: Is frugality for the rich?

Post by 7Wannabe5 » Wed Sep 25, 2019 10:33 am

Very interesting. My "ex" who was pretty typical millionaire-next-door variety frugal (80th percentile ??) used to argue that it was impossible to save money until your household income exceeded $40,000 year. I guess he was looking at this visualization :lol:

It's also interesting to note (observing perpendicular to top left gradients) that it would be more efficient for some members of this forum to go live in a tree in the National Forest than get a full-time job flipping burgers :lol:

Tyler9000
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Re: Is frugality for the rich?

Post by Tyler9000 » Wed Sep 25, 2019 10:59 am

Fascinating chart!

Just curious -- what's the source of the two "kinks" in the lines at about 60% and 84% frugality percentile?

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