Each passing day bring with it small new understandings into human nature and even bigger new puzzles. Ever since I remember myself I’ve had the good fortune of ranking in the top 10th percentile. Whether in SAT’s or GMAT or in terms of household income I’ve always found we averaged somewhere on the border between the 9th and 10th percentiles.
Still, ever since I remember myself we never had a brand new car or never ate in fancy restaurants aside for birthdays. Even now, when I’m relatively well off after having bought an apartment and finished renovating it, I couldn’t manage a new car on our household paychecks alone (it’d take us about 3 years of savings to get to a new car right now).
I often find myself amazed at the number of SUV’s, 4x4’s, BMW’s, Mercedes, Porsche and what not driving casually around almost taunting me with their sparkling new look. A new car is not in my list of top 10 desires but serves as a good metaphor.
It doesn’t end with cars. All around people are living in new homes, wearing top brand clothing, dine in fancy restaurant, and take expensive vacations and many other luxuries I simply can’t afford.
I realized two things this passing week which I have yet to understand in a conscious matter up until now.
The perception of money (or lack of) varies greatly
As a kid I used to wonder if everybody sees the same color of blue I do. I still don’t have the answer of course but the principle remains unchanged through life. Perception varies from person to person.
The feeling of insufficiency I feel when I save $500 a month may be a completely other feeling in other people. I’ve known people who simply couldn’t handle a positive balance on their account and had to go buy something. For them words like emergency funds and long term savings are completely strange. Aside from what savings they have embedded in they pay they simple ignore the concept of saving all together. Everything will turn out for the best is their lead motto.
My wife and I have managed to save $7,500 in an emergency fund in the past year. With the upcoming Jewish holidays in October nearly all my colleagues at work have arranged vacations and will literally leave the office empty through October. I had deliberated in length whether to go on a three week vacation with my wife or not. Such a vacation would most certainly eat away our entire emergency fund.
I’ve discussed the matter with friends at work. Nearly all of them didn’t even think about leaving the money just hanging there. I’ve often mentioned my dislike for extreme frugality and I constantly wonder whether I’m missing out on life just because I love money so much.
There’s a deterministic factor at play here. My parents have never been frugal about anything and belong to the first type of people I’ve mentioned above which simply enjoy their money. I’ve developed a taste for growing positive balances in my different accounts and act accordingly.
I could have been driving a new car right now paying 20% more through monthly installments but the overall utility I’d gain would be negative. The pleasure I’d get from driving a new BMW would be dwarfed by the feeling I’d have repaying the loan. It’s just how I am.
There aren’t as many people living the good life as we are led to believe
Perception isn’t only heterogeneous. It’s also biased. There really aren’t as many people living the good life as we are led to believe by both our brain and advertisements.
Human nature, in what seems to be a remarkably ingenious ploy of nature, leads us to always aspire to more than we already have. Naturally we look up to things rather than down. We will always notice a new shiny object we don’t have. We will forever look up to a passing by Porsche until we own one.
The other side of it is never realizing what we already have. We accumulate and gain much but we never bother to look at the more shabby cars driving by admiring our own. Again determinism comes to play: It’s just the way we’re built.
Advertisers do their best to make us think we’re missing out on something and we’d better tag along. Everyday couples (especially young couple in their 20’s and 30’s) are portrayed in situations some of us can only dream of. How can they possible afford it, you ask? They can’t. It’s staged. They’re just selling one more can of cola.
The dilemma of whether to save or consume is genuine. Group pressure doesn’t make it any easier. Still, the rough times ahead make the decision a bit easier. I feel more a bit more secured and reassured knowing we’ve got three full months of unemployment budgeted for.
I’d like to dedicate this post to one of my favorite personal finance blogs and to a mentor I’ve one-sidedly adopted: The Digerati Life. I’ve learned much on proper writing from reading the practical, extensive and exhaustive posts of The Digerati Life. Not many people truly appreciate the professional effort required to produce such quality posts.
Related posts:
- Coming To Terms with Never Getting Rich – A Look at the Pre-Requirements
- Working Weekends - Free Professions Have Become an Ironic Oxymoron
- This Time of the Month
- Outsourcing Our Chores - Do We Overvalue Our Spare Time?
Image by: drumsnwhistles
11 comments:
I liked reading the post because it speaks to me. I find myself in a similar situation as you do. I can't keep up with the Joneses, or rather, I don't want to keep up with the Joneses. and like you, it bothers me to have debt. I feel like I am losing my financial flexibility if I have debt. All this does not mean that I don't enjoy myself. I just like to enjoy myself within my means. Are you and I in the minority? Are we not carefree enough to enjoy life?
One piece of advice for the vacation you were thinking about. It's the same as the utility from the car. If you would be thinking about blowing your emergency savings fund the entire vacation you won't enjoy yourself.
Start a separate savings fund for a vacation.
Dorian,
Thank you for giving us so much to think about and to reflect on. As humans, we always strive for what we don't have, and for that, we cultivate ambition and skills to try to reach our goals. But our desires (fueled by temptations around us and chinks in our resolve) sometimes get the better of us and we don't know when to stop "wanting".
I also wonder the same things quite often: how to balance today's wants/needs with tomorrow's. I always put priority in the future and try to fund long-term goals before short-term wants. Just this year, I've skipped on a vacation that would take me away for a month in order to save money and have the time to focus on building my business.
But it shouldn't all be just about sacrifice. I believe in enjoying ourselves in the moment as well, and give ourselves those occasional "pats in the back" and rewards for the hard work, discipline and sacrifice we've done to get where we are.
Best of luck to you, Dorian! I am very touched by your dedication of this post. I really am. :) Many thanks for sharing your site -- I am happy to have encountered the voice of an astute economist in the midst of the diverse pf blogosphere.
You definately hit the nail on the head with this post.
I think that the perception that people are more "well-off" than is the reality is so very dangerous to consumers everywhere. Those struggling to get by still may feel as though they have to keep up with the Jones'. In that case, financial decisions may rarely be sound.
Until the mass population realize it's ok to be who you are...I think debt will long be a problem for generations.
This is an excellent post! I like your analogy to seeing the color blue. I'm certainly much happier knowing that some money is going to savings every month. However, I still have to remind myself that the "wealth" that I see in new cars or other things is often purchased on credit!
Have you read the book "The Millionaire Next Door"? It sheds light on how so many people that have all the trappings of success are living on credit, while those who are living a modest lifestyle may in fact be the "millionaire next door". It certainly changed my perception, hopefully for the better.
Great post and so true.
What you have described can be collectively called 'Keeping up with the Joneses' but who exactly are the Joneses?
Are they one family down the street? or are they a combination of people in our lives?
It is human nature to strive for more - that is what sent men to the moon but at the same time if left unchecked it can be a source of great discomfort.
As someone once said 'there will always better people better off than you and there will always be people worse off than you'
Oh I love this post :)
Funny, I also used to wonder if the colors I saw were the same as the ones others saw....
Regarding the holidays, I`m taking 2 holiday days during the intermediate days of Sukkot (my holiday pay for the year was already paid out and is sitting in an ING sub account) and I get paid for the actual Jewish holidays (all 7 of them in the next few weeks).
So we`re going to our rural home for most of Sukkot (coming back before Shemini Atzeret) but it doesn`t cost us anything more than the gas to drive to and from. Where it gets pricey is if you go to New York or Palm Springs or Jerusalem but you can have a vacation and still not spend a ton of money. It`s even possible to take vacation time and *stay at home*. That way you get a break and yet don`t spend anything more than normal.
Thank you for your comments. We've adopted the policy of "staycations" and plan a couple of local camping trips through the holidays.
It's really about the different experiences and stress lowering activities.
You could easily go on a three-week vacation while still leaving your savings mostly intact. If you can enjoy yourself without being spoiled -- without EXPENSIVE hotels and restaurants and rentals and structured activities and all the other trappings of the stereotypical bank-breaking excursion. If you pick an inexpensive destination (a classic for example is Thailand), you could have a grand old time for a month on only five hundred dollars plus air fare. Maybe less.
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