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My very first "business" was buying and selling used Palm Pilots and Apple Newtons. I would negotiate back and forth over the smallest increments of money, both on the buying and selling side. When I first started, my inventory was one Apple Newton, so it was important that I get the best price possible.
After making a little bit of money buying and selling these things I had some savings and could start buying things for myself. As you might imagine, I used the same principles in buying those things and still tried to save the most amount of money possible.
I started all this in high school and college, and a lot of my peers were frugal, though often in different ways. I noticed that most frugal people care about absolute price rather than value, whereas I only ever cared about value.
As I grew up, though, I noticed that most of my peers stopped being frugal entirely. Frugality was a response to not having enough money, not to wanting money to buy them more utility. Once they had enough money to buy things, the frugality switch turned off.
To some degree, that makes sense. I used to scour the internet to save a few dollars on a purchase, but now I'll just buy most inexpensive things on Amazon.
On the other hand, I still apply some ingenuity to all big purchases. I've never bought any car that was newer than 15 years old (except for a shared van in Hawaii that was 10 years old). I've split 4 different properties across the world with 6-10 friends each, but besides splitting the cost I did a ton of research on each one to find incredible deals. The average purchase price per property across our island and apartments in Vegas, Tokyo, Hawaii, and Budapest was around $75k (not per person, total).
Those are some of the biggest purchases, but I also do this for medium level purchases. When we bought solar panels for our house I got on the phone with all of the well-rated shops in town and negotiated the price. The price we paid to have our floors redone was 1/2 of the first quote I got. I wanted a solid wood door so I watched Craigslist until I found an awesome one for $80, instead of paying the $500-1000 a good solid wood door would cost at home depot. I waited to find the exact hot tub I wanted on OfferUp and got it for $500 vs $3000.
If you're thinking, "yeah, but the whole reason I make money is so that I don't have to save a few bucks here and there", you're totally missing the point. Frugality when you have money isn't intended to make ends meet, it's to multiply what your money can do for you.
If you develop the habit of trying to maximize the value you get for your money (above a certain threshold), you can have an incredibly luxurious life for less money than most people spend for a very average lifestyle. Or you can have an average lifestyle but save enough money that you can retire decades earlier.
How do you actually do this? The first is to think about purchases in terms of value. How much better is a new car than a car that's 10 years old? It's better, sure, but is it 3x better? If it's not, then why buy it? Is it worth 10x the real estate prices and an extra income tax to live in California? If you can make 10X the money there than it probably is, but if you make the same money elsewhere, it may not be.
Next, be willing to put a little bit of time and effort into finding deals. The effort should be proportional to the value you will get out of it. The value of owning a private island was, to me, almost infinite, so I looked at every single island for sale within my price range. If I'm going to buy a pool pump and can save a maximum of $200, maybe I'll put in 15-20 minutes.
At first finding deals feels like a hassle, but once you get good at it, just like most things, it becomes fun. I actually have to stop myself from going down rabbit holes to save small amounts of money because I enjoy it so much.
Many people follow the fallacy of "I make $X/hr at work, so anything that saves me less than that isn't worth it". While it's true that you shouldn't take an hour off of work to save half your hourly wage, that's usually not the trade-off. Most of us have some underutilized time that could be spent saving money and dramatically increasing our lifestyles. For me the trade-off is more like, "Is it worth looking for deals or researching a big purchase instead of reading Reddit or Hacker News?"
Any time you're making a big purchase, think about its value and what you could do to either increase its value for the same price or to lower the price you have to pay. Take pride in being frugal not because you have to be, but because it enables you to live a better life with less stress.
I just got back from Cabo, Mexico, where we got to go whale watching. This is the closest I've ever been to a whale and it was really cool.
I know many people are cursing 2020 and are glad that it's over, but the older I get the more I realize that any time is good time, and that what we do with what we're given is more important than what we are given. So I'll just come out and say it: 2020 was an amazing year, and while it was obviously significantly worse in many ways, it was still overall the best year of my life.
Last year I wrote that it felt like such a dense year, with almost every day being packed and accounted for. This year was mostly the opposite, with long stretches of empty time with not only nothing to do, but very little I could do.
While I wouldn't want every year to be this way, it was really refreshing to have such a big change and to take on the challenge of adapting to it.
As usual, here are the highlights of my year:
There are several different difficulty levels on which you can live your life. They are ascendingly difficult, though the difficulty is really mostly in switching to that method of living. Once you get to the next level it actually becomes far easier. An analog would be financial investing-- it's hard to save a lot of money when you don't have much, but doing so makes it easier for you to live later and also makes it easier for you to save more and invest better.
Most people will use a combined version of several of these levels, so you may not find that you are entirely described by just one.
The easiest level is to do the wrong thing. For example, if you eat garbage food, do drugs, and play video games all day, you never really have to challenge yourself. Most people are resourceful enough that they will figure out a way to survive in this situation, but they will probably not find that their lives become better over time.
The decision making process here is a simple and likely unconscious, "what would give me the least immediate pain?". Ironically the avoidance of immediate pain usually generates (with interest) future pain. Avoid the pain of being healthy now and you are likely to be plagued by disease for decades.
I wasn't planning on writing about this because I don't think it's all that interesting, but so many people have been surprised and asked why we moved that I guess it warrants a post!
Five years ago I bought an apartment in Vegas. It cost $50k, was in a great location, and had two bedrooms. I didn't know what I was going to do with it, but it was just such a great deal that I figured it was impossible that I wouldn't find some good use for it, whether it was renting it out or using it as a crash pad (at the time I visited Vegas every month).
During the renovation I spent more time in Vegas than I ever had, and lived more like a local than a poker-playing tourist. Through that process I discovered that Vegas is the best place to live in the US (unless you need a local job or good public schools), and ended up moving into the apartment full time. Eventually I even sold my RV.
My apartment here was great. I assumed I'd keep it forever, so I went crazy with renovations, doing things like putting heated black marble floors into the bathroom and building a tea room. Once my wife and I decided to move in together, though, it became clear that it wasn't going to be enough space. Luckily the apartment next to us went up for sale, so we bought that one too.
I live in two "bad" neighborhoods. One is my apartment in Vegas, and the other is our shared apartment in Hawaii. The way I'd define both areas is that they're among the cheapest housing in their respective cities, and they're bad enough that when an Uber driver understands where you are going, they feel comfortable saying things like, "Oh wow, that's a really bad place". A guy in Vegas whose job is working with homeless people said encouragingly, "Don't worry... you'll make it out of there some day."
In both cases, my primary motivation was the location, and in both cases the apartments are a handful of blocks away from some of the nicest areas in the city. I've also found that "bad area" usually means "non white people who aren't rich live here" a lot more than it means that the place has problems. I'm sure that there are places I could live in other cities that would be actually dangerous or materially bad.
In both cases, there are a few neighbors that are disruptive. They're loud at night or they argue loudly or they crank their car stereos as they leave for their jobs in the morning. I tend to get along with them okay and have never had any sort of confrontation. Our old downstairs neighbor in Hawaii seemed to probably be on meth and argued pretty loudly with her boyfriend. She also grew a really nice garden that we could see from our window and was really nice to us, so it was more of a disregard or lack of awareness around social norms. Or maybe it's just drugs and alcohol.
There is probably also a slightly higher chance of being the victim of theft, though probably not any other crime. I think the actual chance of being a victim of these things is far lower than the perceived risk, though. The areas seem sketchy, but they tend to not be big targets since it's assumed that if you live there you're poor. The worst thing that happened was a few blocks away (in a much worse looking area) in Vegas an abandoned house became full of drug addict squatters and some subset of them launched a crime spree on our neighborhood. Our house was broken into, as were six others. According to the neighbors who had been there for decades, no one had been broken into there before. That isn't entirely true, though, because someone reached under my gate once and stole my shoes.
This year's gear post isn't all that different from last year's (can you guess why?) but there are enough new cool things that I think it's worth doing one. Hopefully travel becomes a little more normal in 2021 and I have the opportunity to test out some more gear.
Wool and Prince Button Down
I've talked about this button down for who knows how many years now, and I still love it just as much. I still haven't replaced the shirt that I bought two years ago, though a lack of travel this year definitely contributed to not needing to replace it.
Usually in my annual gratitude post I write about people in my life. My family and friends are an easy source of unending gratitude. This year, though, I want to write about something a little bit different.
This year I'm grateful for my country, the United States. This has somehow become a slightly polarizing sentiment and sometimes interpreted as being partisan, and it's become en vogue to bash our country and focus only on its faults. And, yes, our country has its faults, both at the highest levels in government down to all of us as individuals. But we can be grateful for something even if it isn't perfect.
I'm grateful that we live in a country where a good life is possible for most of the population. Opportunity may not be distributed as evenly as we could aspire to, but we have a country where people can visualize a life they'd like to live, whether urban or rural, frenetic or peaceful, tropical or in the desert, and can work towards getting that life. I like that we have so many states that are so different, and that we can window shop between them and choose the one best for us.
Congress has an abysmal approval rating, and our president's rating isn't too impressive either. And yet, government functions enough to keep us safe and stable. Often as Americans we take this for granted, but if you look at what entire populations in many people in other countries have to deal with, we have it quite good. I'm grateful for the system that we have which has held up remarkably well to the challenges of our current times, and to all the people who work in government, often in unseen positions, who are the gears that keep our society moving.
As far as I can tell, money has two valid uses: stability and utility. It has a lot of other uses as well, like signaling and scorekeeping, but these are poor uses of money and focusing on them will reduce your ability to use money for better uses. Most people do a fairly poor job maximizing for either of these things.
Using money for stability enables you to decouple your lifestyle from your income and expenses. If you make $1000 per month and require exactly $1000 per month to live, you probably have very little stability. Even one unpaid day off would throw your month into chaos, as would a small unexpected expense. Building up a buffer of savings allows you to be unaffected by such things, as does having an income that is several times greater than your expenses.
Utility is simply converting your money into something that provides a benefit. Buying food counts as utility as does giving a gift or renting a car.
If someone derives a lot of stability and utility from their money, they are set! These two elements alone create a good personal finance ecosystem. Focus on them when allocating your money.
Why are some people secure while others aren't? Is it because they deserve or don't deserve to be secure? There are enough obvious counter-examples to that idea to dismiss it immediately. Is it genetic? Maybe partially, but many people have switched from being secure to insecure or vice versa. I'd argue that being secure is a practice that anyone can implement.
A friend of mine once told me, as if the idea was an obvious one, that he constantly suspected that people didn't really like him very much and invited him around to be polite. This idea completely blew my mind, because he was one of the core members of our friend group and I'd never once heard anyone say anything bad about him. It made me realize that insecurity is usually an error of perception.
Pickup transformed me from a very insecure person, who basically thought that almost no woman would really want to get to know me, to a very secure person who now assumes that basically everyone will like me and see my value.
The biggest thing I learned is that people will like you for who you are. This sounds obvious and simple, but for years I just figured that there were one or two "very likeable" archetypes, and I wasn't one of them. Media and pop culture set this trap and it's an easy one for anyone to fall into.
If you've read my blog for a while, you might be surprised to see a post that's about video games. I've never written about video games before because I have never really played them. A couple years ago I had the idea that I should find a fun video game to play on airplanes just to pass the time when I'm too tired to work, but I couldn't find any that held my attention. In other words, I am not into video games at all.
However, I am REALLY into VR. Seven years ago I got to be one of the first hundred or so people to experience VR with full positional tracking, and it blew my mind.
For the past few years I've had a gaming PC and wired headset just for VR, but I haven't recommended it much because the cost of a gaming PC + headset are pretty steep for occasional VR use.
However, the Quest 2 from Oculus/Facebook changes all of that. I've had one since launch date last month and am absolutely blown away by it. I've pushed a bunch of friends to buy one and the universal reaction is something along the lines of: "Wow, I had no idea this sort of technology even existed."