Maybe “I Can Afford It” is a Shitty Reason to Buy Something

November 2018

Disclaimer: This post features financial transparency on my own part and a pinch of bitchy judgment (toward myself, and probably toward you) since most of us are irresponsible spenders. Read on at your own risk.

I feel like I’m looking at my own consumption habits with fresh eyes ever since I started reading Money Diaries and listening to the ChooseFI podcast.

While it’s not worth it to regretfully shame yourself for shitty money decisions in the past, I’m leaning into the self-loathing a little. I invite you to do the same, you dumb spender!!!!

Money Diaries features (mostly) traditional financial advice. Stuff you’d hear from your friendly neighborhood personal finance guy—the guidelines that are considered normal in United States personal finance culture. Save 20% of your take-home pay, contribute to your 401k up to the match… we’ve all heard this stuff before (hopefully).

ChooseFI, however, is on the far more radical side of the spectrum. If personal finance content were right-wing news outlets, Money Diaries would be NPR and ChooseFI would be Breitbart. (Great comparison, no?)

FI, or financial independence, is a school of thought that encourages people to save as aggressively as possible so they can retire early—like, “35 years old” early.

Yeah. It’s a little intense.

In a very, very simplified nutshell, it all basically hinges on the 4% rule.

If you can determine how much money you spend every year (I did mine earlier this week—if I’m perfectly “on budget,” I spend $30,600 per year), you can do this math equation to figure out how much money you’d need invested for your money to auto-replenish itself with interest for the rest of your life AS LONG AS you’re only spending 4% of it annually (assuming it’s growing at 8%).

30,600 * 25 = $765,000
(your annual spend) * 25 = (how much you need saved to retire)

This means as soon as I can save $765,000 in a portfolio growing at an average of 8% annually, I can stop working and maintain my same spending habits annually. No problem, right?! BRB.

So obviously this is really, really extreme. Especially because I want to spend way more than $30,600 per year!

Let’s do this again. Say I want to pay myself $100,000 in spending money every year for the rest of my life.

100,000 * 25 = $2,500,000

Once I hit $2.5M, I can pay myself $100,000 per year without working.

Make sense?

It’s called “financial independence” because your money is setting you free, playas. No more work for you. Your money is making money.

While I don’t aspire to this (because TBH, I like working), I like to water down their advice to help me save without being single-mindedly obsessed with this goal of retiring in my thirties. A hybrid of ChooseFI and Money Diaries presents a moderately aggressive approach to personal finance.

Here are a few high points (consider this approximately 10 hours of reading and listening distilled into three bullets—you’re welcome):

• When you splurge all the time, your body calibrates itself to that lifestyle and it no longer becomes novel and joyful. Good examples? Buying Starbucks every day. Driving a nice car (more on that later). Eating out for lunch every day. However, you can recalibrate yourself by cutting back—lately I’ve been limiting my ‘restaurant’ & ‘food out’ budget to Friday-Sunday and only eating grocery store food & lobby/work coffee during the week.

• “I can afford it” is a slippery slope. Again, more on that later. But the gist of it is, just because you can make the payments on something, doesn’t make it a smart financial decision. Obviously NOT being able to make payments is worse, but extending yourself to your edge isn’t much better.

• Cars are a colossal waste of money through-and-through and the American approach to automobiles is too wrapped up in status to make any financial sense (especially here in Dallas, Home of the Range Rover and Land of the G-Wagon).

One ChooseFI cohost’s wife is from Zimbabwe and she told an eye-opening story about coming to America. To paraphrase:

“When I first came to America, I thought everyone owned these $60,000 and $70,000 cars because in Africa we don’t have credit to finance things. If you were driving a car, you owned it outright. There was no such thing as a lease or car payment. The only way to have a $60,000 car was to have $60,000. In America, people finance everything from couches to appliances.”

In the Money Diaries book (the more realistic and traditional approach to money), the author mentions your car shouldn’t cost more than 33% of your income. So if you make $50,000 per year, you can technically afford a car that costs $16,500.

How many people do you know who make less than that and drive a car that costs twice as much? The sad thing is, it’s considered normal.

So that’s the “standard” advice about money on the topic.

FI’s take is that cars are such a horrific waste of money that (a) if you can bike to work, you should, and (b) buying a 5-year-old used car like a Honda or a Toyota is pretty much the only way to be even remotely sensible about car ownership.

Which, like, I can get onboard with conceptually—but when I think about giving up my 2017 Acura RDX it makes me want to cry.

It’s something I’ve been grappling with lately.

And here’s why:

1. When you take the American “My car is a reflection of my social standing, not a means to get from point A to point B” approach, car payments become this wildly acceptable thing—and when you only want to spend $250/month on your car but Hey, look what car I can get for only $60 more! then suddenly you’re looking at stuff that’s $310/month because it doesn’t feel that much worse.

2. We all know that cars depreciate ‘the moment you drive them off the lot.’ $300/month (which is, full transparency, the cost of my lease on the car that’s too nice for me) is $3,600/year. I think the FI dudes would decapitate me if they knew I was leasing a car. It’s almost the dumbest thing you can do.

3. Now that I’ve had a super nice car (by my standards, at least), the idea of having a ‘less nice’ car is demoralizing—even though I realized the same razzle ‘n dazzle of luxury titillation that used to tickle me pink when driving in my fancy car is no longer intoxicating. The car that used to be my “someday dream car” became a normal part of my lifestyle that eventually faded into the background. (I still love it, but that novelty has worn off after a year or two.) #CONSUMERISM #IS #A #TRAP

So I was like, All right, KG, when your lease is up, it’s time to walk this big responsible talk. You don’t need a $40,000 SUV. You’re barely 5 feet tall. How about a nice 5-year-old Honda Accord Coupe?

Those are cute cars. Reliable! Affordable! Sensible!

But my internal tiny Dallasite consumer goblin is like… But the BMW X1 is only $XX more…

Y’all, I cannot extricate myself from this concept of cars and status! It is so ingrained in me that a car represents wealth and success that the idea of downsizing to a “lesser” vehicle makes me feel weird—and I’m ashamed to admit that. Especially because I have neither status nor wealth, so it’s an outright lie.

(But most everyone ELSE is lying too!)

A car is a money pit, no doubt, but ultimately its job is to transport you from point A to point B (reliably). Sometimes I think about the upsides of having a car you’re not attached to—park it on the street, get a door ding, spill coffee? Not that big of a deal. It’s just a car, and you’re not sacrificing nearly $4,000/year on a financed plan with accruing interest just to have it.

Aside from rent/mortgage, most people’s second biggest regular expense is their car (and car-related expenses—gas, insurance, maintenance). And for what? To impress the strangers in traffic who don’t give a shit about you?

It’s a little silly when you think about it, and I can admit that despite being someone who used to tape literal pictures of Cadillac Escalades to her electric scooter in 3rd grade (I was doomed to consumerism from day one, people).

Shifting to the “more stuff” mindset in general…

This idea that you become accustomed to the luxuries you acquire in life is an interesting one because I’ve experienced it firsthand in the last year. Starbucks really DID used to be a treat for me. Then it morphed into something I felt I deserved.

You know why? Because “I can afford it.” And it was so normalized! All the other women in my office got Starbucks every day (never to mind the fact they make at least twice as much as I do and are married to equally successful men). Me? I’m just out here in the mean streets of Uptown riding solo with my freeloading cat, S’Neiman Marcus (S’Nemo’s new fancy boi nickname).

The big lesson I’m taking away from both Money Diaries and FI is that just because you can afford something doesn’t mean you should buy it.

I’m trying (and with some success) to embrace minimalism and the idea that less is more, most of the time. The consumerism hamster wheel promises a lot of things, chief amongst them that acquiring new things will make you a more desirable person (that’s the subtext, at least).

I’m trying to remember that (to quote sweet Thomas) every dollar I spend today is a dollar that won’t be compounded.

In a really weird way, it’s kinda fun. I’m re-teaching myself to appreciate and second-guess purchases. It’s turning into a game of sorts—I saw a sports bra at Soulcycle I really wanted this morning for $55. I’m currently selling lululemon on Poshmark and essentially told myself until I’ve sold enough to have $110 in profit, I’m not buying something worth $55.

You know you’re a greedy Millennial when you’ve found a way to gamify saving. Whatever works.

I don’t know if this resonated with you—maybe you’re not as indoctrinated with materialism as I am. I do hope, though, that it’s stirred up something for you, even if it’s just the notion that you could be inadvertently deprogramming your own ability to appreciate simple pleasures by raising your consumer expectation bar with each pay raise.

There’s joy to be found in a little light deprivation (and also, in not having a $400 car payment).

Now let us all get this bread. Y’all made those net worth tracking spreadsheets yet? What’re you waiting for?