Earlier this month, they had a show on the true cost of car ownership. It’s a good take on what ends up being a fairly huge expenditure over a lifetime. In fact, they estimated that someone who simply drove their new car for fifteen years before getting a new vehicle, instead of replacing it every five, would net roughly $750k in an investment account over a 45 year period. (Presuming, of course, that this hypothetical car owner actually made the investments for forty-five years, once they had that extra wiggle room in his budget.)
And the math is fairly incredible. Convincing even, when you consider how conservative they were with their assumptions. But they lost me on this quote:
“Don’t be stupid. You bought a car: like it, drive it, get your use out of it….Bare minimum there, now at least drive that sucker for at least ten more years. The point of your life should not be to have the nicest car in the neighborhood. It should be to retire in your forties. Right?”
Financial bloggers and podcasters lose me when they take it to this place: outright calling someone’s specific spending decisions “stupid,” presumably because everyone else ought to follow the same path that we early retirees are. (And man, they love using that word “stupid”.)
For one, what you choose to spend your money on is actually immaterial and arbitrary. Spending $300 more than your frugal neighbor on a car is, literally, no different to your bottom line than spending $300 more on rent, or $300 more on travel, or $300 on charitable giving. (Note the lack of posts or podcasts that outline the opportunity costs of giving hundreds to their church every month.)
More to the point, all that truly matters is your savings rate. It doesn’t matter what I spend my money on if I have a 50% savings rate (and, gasp, still spend a whole $3,600 a year on a vehicle payment) and some supposedly frugal dude only has a 45% savings rate. I can throw handfuls of singles onto a strip club stage every Friday, and drive there in a leased car, too, and I’m still getting to FIRE faster than the guy who’s only saving 45%…even if he does so while riding a fixie in flannel.
There are some easy targets in the FIRE community. The low hanging fruit seems to be cars (God help you if you drive an SUV or a truck), meals dining out, nice clothing, cell phones, and subscription television.
There are also a set of sacred cows: things you can spend a strangely high dollar figure on and still end up getting praised by the devotees of frugality. Want to spend thousands on a bicycle? Go for it. Like spending thousands on vacations? No problem: just hack your way to some nearly free airfare and be sure to call everything “an experience”, because you’re allowed to spend what you want on those.
I’ll note that you’re not going to see that many of the same arguments regarding housing. Very few of us bloggers are going to tell you that you should move to a two bedroom apartment, and have the kids share a bedroom, so that you can save $300 a month. And yet, you’ll have the same three quarters of a million at the end of forty five years as you would if you saved $300 a month on your car.
Why are some purchases stupid, and others seem to be fine, even when they’d have the same impact on our finances?
I suspect it’s because we’re a fairly homogeneous group in the FIRE community, so we have patterns in our thinking. We’re also a bit of a subculture, so it’s natural for us to develop some sort of common criticisms of the consumer mainstream. Look at these fools talking on their $100 a month cellphones, from the cushy seats of their $500 a month SUVs, on their way to some fancy restaurant, no doubt. Don’t they see what they’re missing out on?
And while a criticism of rampant consumerism is perhaps warranted, there are some pitfalls with this approach.
First, this line of thinking doesn’t allow for enough diversity in our approaches. For many, and me included, a car is purely utilitarian. My Toyota just brings me from point A to B, even if I like shifting the manual transmission and turning on the air conditioning. For others, driving a high performance car is a enjoyable experience, on par with playing a sport or jumping out of an airplane. That is to say: something that brings joy. Why is that activity a target for our criticism?
More importantly, we in the FIRE community are falling into the same pitfall that those on the outside of our community do when they judge us on one singular part of an early retiree’s lifestyle, missing the overall picture in the process. Just take a look at any case study in the mainstream media that shows an early retiree’s path to financial independence. Someone on the other side of the divide takes a quick look at one part of Mr. Money Mustaches’ life (like that bike the guy rides everywhere), and uses that one piece of information as a heuristic to criticize the entire approach he’s taken to early retirement. “I could never live like that: biking everywhere like some teenager, never eating a nice meal out, and hanging his clothes outside to dry on a clothesline. That’s stupid! What kind of retirement is that?”
How different are we acting when we take a look over in the next lane, see a nice car, call it dumb, and assume a whole host of other things about that guy’s financial situation?
Now, I’m picking on Brad and Jonathan, as they’re clearly just trying to give some helpful, actionable advice to people who want to cut down on costs. And I should admit that I am probably even more prone to shame others for their purchases than they are. Just the other day, I got into an argument with a friend over the fact that some craft beer snobs will actually pay $150 or $300 for a single beer. Like, one bottle, of “rare” beer. I came right out and called that stupid, too.
But I knew nothing about that beer drinker’s financial situation. And I don’t really need to, because it doesn’t matter if he spends a few hundred bucks on a beer, or on organic groceries, or on lap dances, or on a car payment. It’s the same money, it’s fungible, and the only damn thing that matters is your savings rate.
Get that right, and whatever you choose to spend the rest on is cool with me.
Or at least it should be. But if you show me a $300 beer you just bought, I might smack it out of your hands just to see the look on your stupid face.
*Photo is from Damian Morys Photography at Flickr Creative Commons.