Be advised: this thread is not for serious in-depth discussion of weighty topics (we have a link for that), this thread is not for anything Culture War related. This thread is for Fun. You got jokes? Share 'em. You got silly questions? Ask 'em.
- 169
- 3
Jump in the discussion.
No email address required.
Notes -
Those very rich people who are extremely thrifty are not maximizing their money, because their cognition is better spent on their work than on a hundred dollars here or there. But I think what’s going on is psychological: those small moments of spendthriftiness increase the perceived valuation of money, thus increasing their motivation to work harder (even though they already have enough money for multiple lifetimes of satisfying any whim). They go into work after picking the cheapest gas station, then when they see the dollar signs on their monitor it is imbued with salient meaning that is otherwise lost through habit.
I think some people outright enjoy thriftiness, while others not only don’t, but also can’t imagine why anyone would. I’m part of the former group, while my mother is part of the latter. I get actual pleasure out of wearing my shoes until they have holes large enough for me to fit two fingers in, keeping my house in the 50s during winter, severely limiting the number of times I go out to eat, and figuring out where I can buy various food and cleaning products for the cheapest price per ounce. It’s practically a hobby (and fittingly, one that’s free). My mother, on the other hand, cannot stand that I live like this, and it took her several years to realize that I wasn’t just desperately poor. She simply cannot fathom why anyone would voluntarily live in a state of genteel poverty. I imagine those wealthy, thrifty individuals are probably just more like me, while you and most people are more like my mother.
Edit: On reflection, “hobby” isn’t really the right word. There’s just a little warm glow of satisfaction you (or at least, I) get when looking at a thermostat that says “58.” How can I describe it? In my high school accounting classes, we used physical ledger books and wrote everything out longhand. The feeling I got after finishing my calculations and finding that all my mental arithmetic was correct and all the books were balanced is similar. It’s not a hobby, exactly (I’ve certainly never done accounting exercises for fun), but it’s… satisfying. Yes, I think that really is the best term for it.
More options
Context Copy link
Alternatively, people just like saving a buck regardless of their financial position.
I’m thinking specifically about those for whom “where should I get gas” or “what’s the least expensive bag of spinach” is genuinely less productive than spending that same amount of time at work. Even if you make 500k, two minutes of your time is $8. But it’s probably more than that, because decision-based willpower depletion etc
You've made a very common error that people make when discussing this: your time is only worth $x if you would've otherwise gotten paid that money for your time. If I make $1000/hr at my job, and I spend an hour of my free time to save $10 instead of watching TV, I haven't lost $990 because I wasn't going to make that $1000 to begin with. As @Walterodim points out, a whole lot of people earn no marginal income if they spend more time at their job. And you can only "lose" money by way of opportunity cost if you were going to make the extra money to begin with.
But the topic is the very rich, and approximately all of them “would've otherwise gotten paid that money for their time”, either through additional hours related to their position proper or through networking and continual learning. Heck, even just exercising or going on a walk in nature saves more money in the long run for the super rich than nickling and diming. But yeah, you and @Walterodim are right regarding not super rich, salaried engineers or whatever.
As I've written in another comment, I doubt that these thrifty billionaires are really actually anally obsessive about the price of their frozen broccoli. It's a combination of general ascetism and having a detailed mental model of what things cost. f3zinker has covered the latter, and I have a few things to say about the former.
I know people who went into business with the explicit goal of being able to raise their standard of living and maintain it with passive income alone. A thrifty billionaire would be their opposite: he really enjoys making his business grow but doesn't really care about his standard of living.
Like, I could be paying $5 for a haircut, but I pay $30 instead. Is the haircut itself really six times better? No, but neither place really puts a dent in my finances, and I enjoy the more premium experience enough to prefer it. However, I can imagine someone who simply doesn't care about shiatsu massage chairs at the hair washing station, terrycloth vs waffle towels or not having to listen to whatever radio station the barber prefers. Just like I can imagine someone whose life would be meaningfully improved by a brand new royal blue BMW Z4, while I don't really want a new car at all.
More options
Context Copy link
I don't think that even the very rich would otherwise be getting paid for the time you are talking about here. For one thing, their position (let's say a CEO of a megacorp) is probably still salaried and they still get no marginal income from working more. But also, your other examples are all things which don't actually bring in money. Networking and learning are useful, but they are not income streams.
Hmm, I don’t follow. CEOs are paid in stock and packages, their future income is predicated on performance, and networking/learning is simply tomorrow’s income for those with delayed gratification. Do you really think that it’s worth it for someone who makes a million a year to care about where they get gas or the price of the pizza they order? I would still say “absolutely not” except for the psychological benefit of making money seem more valuable.
For some sectors though, I would imagine time spent knowing how much things cost for an ordinary consumer is valuable learning a CEO could do?
e.g. If you are supper out of touch $15 vs $8 a month for twitter blue is approximately 0 difference to you, but it could put you on opposite sides of the marginal elasticity curve.
This discussion reminds me of "Neutral hours: a tool for valuing time and energy" (pdf link) by Owen Cotton-Barratt
Like whether clipping out a coupon is worth it depends on
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
Lots of labor doesn't really have the ability to gain additional marginal income with a couple minutes of work though. Plenty of people are salaried and don't have a straightforward way to earn a few bucks. Doing something like spending a couple hours to figure out how to move credit card points around to save a grand on flights can pretty easily be worth it.
Even in the case of really trivial amounts of money, I think people just gain a psychic benefit from feeling like they got a deal. Should you actually give a shit about a sale on potato chips? Probably not, just buy them if you like them, but it feels better to get the brand that's BOGO.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
I don't think thriftiness is what you are looking for. It's more of a good sense of the return on marginal dollar spent along with knowing what is the return that you want.
I know a "extremely thrifty" 8 figure net worth individual whose behaviors and spending I can comment on. He has excellent clarity of mind on how much anything, any random good or service ough to cost, and won't pay a dime extra simply on the principle of not wasting money. This reads externally as thrifty, but I think as a comment below me mentions, is exactly one of the traits of many successful businessmen, knowing what is worth what and not wasting money even if one could afford it. That trickles down into his business and is one of the main reasons his business is cash positive and profitable in an insanely saturated and high variance field.
I think it is an immature culture that assigns more weight to the mean/deviation of money people spend on things as opposed to how much value is obtained.
On us mortals who don't have 8 figure net worths. I'm speaking about upwardly mobile young professionals.
I have friends with a fraction of my income who have better cars, clothes, gadgets and go out drinking and partying and to fancy restaurants every week. They live paycheck to paycheck and in debt. Whilst I cook most of my meals at home, wear thrifted clothes, still live with my parents, (to save rent and because they are aging) and take a vacation maybe only once a year.
I can tell you the price of any randomly chosen item from the store and how much I would/would not pay for it. They can't. In fact they are not even bad with money in that they spend it recklessly, they literally don't have a model of it good enough to predict how much something ought to cost and if that's worth paying or not, its grim really. And then they complain about being "poor".
I jive with the people that don't have a model of spending money. I certainly don't. If my wife and I earned significantly less we'd be screwed. Luckily our money out is far less than our money in. We have a financial advisor that nags us when our savings account starts getting to ridiculous levels. I have an economics degree. I intellectually know that we shouldn't have boatloads of money in the savings account. I just hate figuring out what to do with it.
We take two or three vacations a year. Sometimes pay for home renovations. Eat out once or twice a week. Own a modest sized home. Most of my entertainment is dirt cheap though. I like reading, I like video games, I like discussions on TheMotte. I'd find it hard to legitimately spend more than $300 a month on these activities. Something like $30 a month is more common (I even sorta pay for TheMotte through a patreon donation).
I do sometimes wonder how much more money we'd have if we were actually careful and diligent about it. But then I think of the effort involved and sort of shudder.
I remember a few years back having friends that make similar amounts of money to me and my wife and they were complaining about money issues. I was mostly left scratching my head. How did you spend that much money? I knew their rent, I knew they didn't own a car, I knew we ate out a similar amount, I knew they also took two to three vacations a year, sometimes less. I thought they might have well hidden gambling addictions. Or were sending a bunch of money to their families.
Set up automated contributions into the s&p 500. This is the greatest return on 10 minutes of effort you will ever have in your life.
More options
Context Copy link
More options
Context Copy link
I have friends like this too. I was talking to a friend of mine recently. Her and her husband make about 50% more than I do combined. They've never had a budget, they have no idea what the other one makes, what gets saved, anything. They have no investments to speak of, just an anemic 401k and a savings account. My wife has a friend very similar, with a 3 income, multi generational household that might be bringing in 80-100% more than we do, which similarly has no savings. Nothing. Nada. Truck breaks down and out comes the credit card to pay for the fix.
I've budgeted, saved and invested my entire life. I've never had a bonkers salary, just a relatively regular middle class income (for my area), that's admittedly rather high cost of living. I have a single income household with my wife staying home and raising our kid. I turned 40 last year, and my net worth hit 7 figures, partially thanks to diligence and 20 years of saving, partially due to getting very lucky on several things. Although the effects of that luck probably accounted for only 20% of that accumulated net worth.
But frankly, it seems that my wife and I are the only people we know who live like this. We don't know anyone else with so much as a written budget, much less aggressive thriftiness and savings. It seems most people just thoughtlessly live hand to mouth, money comes, money goes, who even really knows where.
More options
Context Copy link
More options
Context Copy link
I think thrift is just associated with competence. Having long time-horizons and diligently looking for the best deals gets you a long way in life.
Though it does get ridiculous, optimizing electricity usage to reduce bills is silly for >10 M net worth.
The obsession with turning the lights off to save on electricity bills has always infuriated me ever since I looked up the cost of it. LED light bulbs use about $2 of electricity per year, and they are supposed to last over ten years. You can get them as cheap as $1 per bulb if you buy in bulk.
Forget millionaires, someone living on minimum wage can afford to ignore optimizing electricity for light bulbs. Easy rule of thumb: if you can afford the space you can afford to light it.
Another easy rule of thumb: most actual electricity usage is related to temperature. Heating / AC / Fridges / Freezers / Stoves / Ovens / Dryers.
This is a boomer thing. Yeah, electricity wasn't as expensive back then relative to wages, but lightbulbs pulled an order of magnitude more electricity and could also burn out (not that the cheap LED bulbs you can buy for under a dollar each can't, but they're relatively bulletproof by comparison).
They also have this weird obsession with refusing to use the dishwasher for its intended purpose. Like, just run two loads. Not rocket science.
Ironically, it's much safer for an incandescent lightbulb to just stay on 24/7 than it is for it to be switched on and off several times a day.
Maybe, but the reason certain boomers will never be fully on board with LEDs is that incandescent bulbs were absolutely dirty cheap even if you didn't buy cheap ones.
As opposed to certain Gen Y/Z/As, who notice that the dirt-cheap LED bulbs don't instantly turn on when you flick the switch (you have to buy the 10-dollar ones to get that) and have a hard time being dimmed past certain points (where they just turn off and you blow out your eyes trying to turn them on). Or those who remember what standard lightbulbs are like in terms of color reproduction, since LEDs still can't fake blackbody radiation properly (as that's inherent to incandescence).
Personally, I'm on board with LEDs insofar as you can get lots and lots of light out of them with existing fixtures and they also don't heat up the room; if my fixtures are going to say "100W max" on them, then my LED bulbs are going to be 100W no matter how blatantly absurd that is.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
It's silly for practically everyone outside of big ticket things.
More options
Context Copy link
More options
Context Copy link
I think the legendary thriftiness of Kamprad and Buffett is overhyped. I don't think they particularly enjoy the act of saving every little bit of money, but the same set of psychological traits they possess explains both their business success and lifestyle: they don't derive as much enjoyment from new and flashy things as the average person, they have no innate drive to keep up with the Joneses, and they also run their companies in the same way: boring, safe, relentlessly optimized.
I think they may also have internalized that there is a mental cost to flashy possessions. They attract attention, they send certain messages to people around them, and they can occupy your own thoughts as a focus of concern, where a boring used sedan simply disappears.
Yeah, there's certainly something to be said about the frugal lifestyle as an excellent PR strategy. I wonder how many billions in business Warren Buffett has gotten out of the fact that he lives in an ordinary house.
If you think about it that way, the whole opportunity cost of frugality argument completely flips on its head. A reputation for ostentatious personal frugality and self-restraint is a very valuable asset for a man who manages other people's money for a living, while a few extra bedrooms and an infinity pool seem like trivial frivolities in comparison.
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link
More options
Context Copy link