A new friend asked me how I save money for travel. I get this question a lot, in different forms: how did I buy a Ducati? How can I afford not to work (people assume that because I don't have a job that I don't work)? How do I travel constantly?
These questions stab at the situation, but don't quite skewer the meat of the issue. A more useful question would be: "How do you manage your finances such that you're able to do whatever you want?"
The reason this question is a lot more meaningful is because it takes into account both sides of the invisible see-saw. People notice the things that I spend money on, but it's easy to ignore the things I don't spend money on. Let's dig into a few:
- I don't buy clothes. I bought an $89 pair of pants last month, which replaced the single pair of pants I've owned since 2009. I have two t-shirts and two pairs of underwear. That's my wardrobe. Years ago I went clothes shopping almost weekly, rarely leaving without at least one hundred dollars worth of clothes (usually Cavalli jeans or shirts). Even if you're not a total idiot like I was, your bottomwear budget is probably higher than $44.50 per year.
- I don't buy alcohol. I'm told that most people spend hundreds of dollars per month on alcohol. I find that nearly impossible to comprehend, but so many people have corroborated it, that I'm resigned to take it as fact.
- I have no debt. Servicing debt makes no sense at all. If you can't afford to buy the car you want in cash, then you shouldn't buy it. It's a depreciating asset. I'd rough it on the bus for a couple months while saving money and then buy a motorcycle or crappy $1000 car.
- I have no TV. The purchase price of the TV is mostly irrelevant, but I understand that monthly cable/satellite costs can be upwards of one hundred dollars.
- Oh yeah, I don't pay (much) rent. I actually do pay for a parking spot for the RV now, but that costs me only $275 per month.
These apparent occurrences of thrift clash with other ways I spend money. I pay $110 a month to be a member of a spa in San Francisco, because RV showering leaves a lot to be desired. I travel nearly constantly (10 countries in the past month, for example). I'm seriously contemplating the purchase of $1000 headphones. I have a nice motorcycle.
In other words, I polarize my purchases. This is because I choose what to buy with value and utility in mind. Most people buy things-- subconsciously, at least-- in order to create a coherent image of status.
Think about it-- a middle class family generally has middle class everything. Middle class cars like Hondas or Fords. Middle class clothes like Gap and Abercrombie. Middle class houses. Middle class restaurants.
How can this possibly make sense? Is there some mysterious phenomenon that causes people to exclusively lap up middle class goodness as soon as they get their first taste of it? Of course not-- devoid of any serious thought on the subject, people slide into convenient socioeconomic molds.
If Middle Class Marvin wants a Ferrari, he won't figure out how to buy a Ferrari. He'll think he has to raise his ENTIRE living situation up to the level that would normally count a Ferrari amongst its trappings. That's a seriously heavy ball and chain to drag around.
Instead, it's better to ruthlessly cut away expenses that aren't important to you, and allow yourself to spend money on things that do matter to you. That means that, if necessary, you give up on the "nice-to-haves" in favor of the "desperately-wants".
My "desperately-wants" are mainly travel and technology. I consume in those categories far above average for my relatively-low income bracket. When faced with this, people assume that I must be rich. But they don't realize that I have one pair of pants and have never bought an alcoholic beverage. If you were to nix, as I have, all of the items that I listed above, you'd have an additional $1275 per month to spend on things that you actually care about (clothes: $50, alcohol: $300, debt interest: $100, TV: $100, rent: $725).
How you acquire these "desperately-wants" is important, too. Fellow passengers on a recent two-week cruise couldn't fathom how five youngsters could afford to pay, and I quote, "three thousand dollars for a cruise, plus drinks". We didn't; each of us paid less than seven hundred dollars and only one of us bought drinks.
We shop efficiently, trying to make our "desperately-wants" purchases the lowest possible price for the best possible item.
When I shopped for my first motorcycle, I ended up buying a 2003 Ducati Monster 620. Since Ducati is sometimes considered the Ferrari of the motorcycle world, people wondered out loud how I could afford such an expensive motorcycle. What they didn't realize, until I told them, is that I waited a month looking for the best deal on it, and paid only $2500. Most entry level bikes that couldn't keep up with the Ducati, and wouldn't turn a single head, cost more than that new OR used.
If Todd hadn't reduced my sweet motorcycle into a metal abstract-art sculpture, I could have sold it for at least a thousand more than I paid for it. That's the benefit of buying premium items at discount prices-- they actually end up being better than free because you pay under-market value and they end up holding their market value well, due to their quality. Six months ago I bought an $875 lens for my camera; yesterday I sold it for $885.
So, to get back to the initial question: how do I do a manage my finances to do whatever I want? I do it by making sure that my finances are only obligated to things that I REALLY want, and I give those purchases the consideration and patience they deserve.
Special free thing for IWTYTBR readers: Get an invite to my beta social productivity web app, TaskSmash. Just email me a link to a comment you've left on Ramit's site (to iwtytbr (a@t) tynan.net ) and I'll reply with an invite good for you and a friend.
As Will Smith once said, "People buy things they don't want, with money they don't have, to impress people they don't like."
Great Article thanks for publishing it. I am with you on knowing your purchases. I have owned 15 cars in 15 years and made significant money on selling 5 of them, broke even on after taxes on 6 of them, and lost on 4 of them. But the gains cleared the costs of the losts and I got to enjoy everything from classic muscle cars, jeeps, trucks, and vette's (of course the waste of gas has kept me out of this for a while now) - love my 2002 Insight as my motorcycle can't even get that good of gas mileage
Great Article thanks for publishing it. I am with you on knowing your purchases. I have owned 15 cars in 15 years and made significant money on selling 5 of them, broke even on after taxes on 6 of them, and lost on 4 of them. But the gains cleared the costs of the losts and I got to enjoy everything from classic muscle cars, jeeps, trucks, and vette's (of course the waste of gas has kept me out of this for a while now) - love my 2002 Insight as my motorcycles can't even get that good of gas mileage
People generally don't understand what their money actually does to their state of mind, and perspective of reality.
Here's what really happens when you buy things: http://two.cedonulli.com/2011/08/the-biggest-con/
wow I finally got it, all of it Amazing
Read the game. tried the moves to absolute success
live the life of truth. and complete non inhibition.
gave away posessions now have a fishing boat and a full life, like waking up for the first time.
looking forward to experiancing the best part of this lifetime.
Thanks TYNAN for the small but hugely significant part you played
one of the best posts so far, i dunno how people use up this much money on stupid shit. other points
- alot of people leave there ac or heater on for too long, ac and heater consume a shitload of electricity.
- automobiles and gasoline i must say are HUGE. buy a used car from 4 years ago, and you can eaisly get similar quality for more than half off, its crazy, as for gasoline, driving at 40 miles per hour on the highway DOUBLES your mpg on most cars.
by far the biggest is debt. seriously DONT buy things you can afford, its stupid. like honestly its not worth it EVER and i mean EVER. for example for college to get a loan for 25k and pay 250 dollars a month i would have had to pay over 40k!!!!!!in interests WTF??? seriously that is stupid. debt is by far the biggest killer.
also tynan yes, ive done the math, if u take 14 day cruises for 500-1000 dollars a trip it is by the most affordable luxury lifestyle, its pretty amazing. I love cruises for this reason. As for alcohol most cruises offer a 20-40 dollar a day coupon for infinite drinks under a certain value. Which is amazing if you DO drink. also on cruises most of the excursions are overpriced.
my tips to saving money.
Bike, no seriously, bike. In most cities there is soooo much traffic during comute times that biking is equaly fast, sometimes faster. Also biking( i mean with pedals) is good for your health and as u get better you'll only get to where you want to go faster.
"what about when i want to go somewhere far" rent a car, renting a car is very cheap imo, espcially if ur not travelling inter state very often, also if u use american express u get full insurance( at least at hertz i believe) which saves u even MORE money. furthermore, usually you don't go far alone, so you can split the cost with friends/family, or use a friends/family' members car.
don't leave in downtown or somewhere expensive. Its stupid, just living 5-10 blocks away from city center you can save upwards of 20%, its pretty crazy.
last but not least the biggest one is tynan final point. Just cause one aspect of your life is "upper class" the rest doesnt have to be. If you like eating in gourmet resturants (like i do) you don't have to live in a big house, have a nice car, or dress with nice clothes.
I enjoyed your post, I too am frugal with owning "stuff".
"Own only what you can carry with you; know language, know countries,
know people. Let your memory be your travel bag." - Alexander Solzhenitsyn
I've been reading through loads of your material over the past day and I'm sold on trying the RV lifestyle. But in everything I've read you haven't mentioned laundry!
Do you use a combo of coin laundry and family/friends? With only four shirts I imagine you're doing laundry at least once per week. Thanks!
No one is going to tell you an easy way to make money
In the beginning days of my gambling thing, it was very easy to make money. The system was basically foolproof and anyone with a credit card could make a good yearly income. I wasn't making money through any sort of skill, I was essentially exploiting a loophole. But here's the thing about loopholes: no one is going to tell you how to do them, especially not someone you don't really know personally. Because if too many people find out about a loophole, it closes. So if you want to make "easy money", you're probably going to have to stumble upon it yourself. If someone IS trying to share a loophole with you (especially aggressively, by email) it's probably a scam like a HYIP or a Forex trading scheme.
Most of the people who were gambling like I was now play poker. You can play poker online or in casinos and make six figures a year. But it's not a loophole, so it's okay to tell everyone. The barrier to entry is a few years of exhaustive practice, thousands of dollars to lose while learning, and the ability to sustain that lifestyle while you struggle to break even.
When I was five years old, my classmates and I used to all love writing stories. We’d be given assignments and we’d try to outdo each other in the eyes of the teacher. There was no formal grading, but there were red ticks and comments, with “very good” topping “good” etc. In general, more pages appeared to offer superior results, so quantity was mistakenly tied to quality in our toddler minds. I suspect those writing more were the ones who also spent more time thinking about how to make their story stand out. I laboured and I toiled to fill those pages with creativity.
Doing good work was rewarded very rarely with a gold star. Oh how we coveted those sparkly awards. Months could pass without anyone in the class seeing a single one. I think stationery may have been limited. But these stars paled into insignificance for creating exceptional work: a trip to the headmaster’s office. Normally the ultimate punishment (I was up there a few times for that, too), these visits meant the highest authority in the school would personally take a moment to stick a really shiny gold star on your work. Look, it was a poor school, okay?
Fast forward 20 years and no one’s giving me a gold star for my work. But I’m cool with that, because I learned a lot since then. Quantity rarely trumps quality, although this is not the truth for all situations. Most people like quantity in their bank account. So where do we put the quality?
Getting the gold star: being the master of your own head