Some personal finance blogs and gurus on the personal finance subreddit thrive on answering questions like “How much house can I afford?” and “What monthly payment on a car can I manage?” and “How can I keep my $3,000 per month entertainment budget if I gross only $100,000 per year? Thanks, Obama!”

It’s sacrilege to posit that the problem might lie in the question itself and not in the cruel outside world holding all of us back.

For these Normies, the game of Life1 is all about keeping up with the Joneses. And simultaneously with the Smiths. And as with most games, the highest score determines the winner. Buy more stuff, flaunt it, and earn that high consumption score!

Normies have the entire idea backwards. Happiness comes from freedom, and freedom costs money. Keeping up sets you back.

I’m not here to convince you to consume more. I’m not here to guilt you into consuming less. (Let out a sigh of relief, because pretty much every message you ever see is directed toward one or the other of those two goals.) I’m here to convince you that you should not feel any guilt in consuming, but you should consume less – for your own sake! Here’s why:

Your spending determines how long you have to live without freedom. It’s all about financial efficiency.

We talked in Taming the Hulk about how your savings rate determines when you can retire. Most people seem to be able to grasp that idea, at least in a theoretical “wouldn’t-it-be-nice” sense.2 But non-Vigilantes tend to fall shy of understanding that the key to reaching a good savings rate isn’t making a million-dollar salary. Or even making an average American salary.

Your savings rate is actually affected much less by your income than it is by your spending. Spending drives the equation, as it has a double-whammy effect: Lower spending means a smaller nest egg is necessary for your retirement, and it also means that you approach your lower goal faster and faster whether your income increases or not.

If you don’t want to spend the majority of your life – and all of the most healthy, vibrant years of your life – working 60-hour weeks just to make ends meet and to prepare for a far-off retirement dream that may never come, then you want to target a high savings rate and consciously drive toward it (or, more accurately, bike and walk toward it) every single day. And that target savings rate has to be much, much higher than the typically recommended 5-10% of your gross annual income.

Why higher? A 5% savings rate means you will need to work for 66 years unless you want someone else to take care of you.3 Raise that savings rate to just 30% and your career is reduced dramatically to only 28 years. And I can prove this with a shockingly simple equation, derived from common sense and basic math.

If you spend 100% of your income, your working career is infinite – unless someone else cares for you, you’ll never be able to cover your living expenses using the unmatched power of the Hulk instead of full-time work. If you can spend 0% of your income by replacing it with withdrawals from your investments at less than your safe withdrawal rate,4 then you can retire right now – you already have all of your needs covered without a paycheck. Realistically, though, we’re almost all in between those marks, with the exception of children, welfare queens, and criminals – you know, the ones who really have things figured out.

For in-between-ers, it’s important to understand what compound interest means. It means you earn interest on the money you invested, and then you earn interest on that earned interest. If you aren’t withdrawing from the account, there is a snowball effect in your favor more powerful than that superhero who I keep drawing a pointless analogy to.

Assuming an average of 5% investment returns after taxes and inflation every year and a safe withdrawal rate of 4% of your investments – which is reasonable, as shown by Accountant Hulk5 – and assuming you start with nothing and intend to care for yourself for your entire life, you can calculate how long it will take to grow your, say, 30% annual savings rate into the 25x your annual income that you need to invest to achieve the 4% safe withdrawal rate you desire. Simply take each year’s starting investments, add 30% of that year’s income plus the 5% annual returns to find the end-of-year amount, and continue to do so until your result is at least 25x the income. No matter your income, this answer is always the same for a particular savings rate. If you earn $100,000 and spend $50,000, you will have to work the same amount of time as one who earns $50,000 and spends only $25,000. Mr. Money Mustache created the ultimate savings rate spreadsheet to illustrate the equation, if you’d like to play with it as I did. If not, this graph6 is a helpful illustration of the effects of savings rate on your working career:




But how can anyone save so much?

This is the easy part. Forget everything you “know” about how brand-spanking-new makes your life automatically better – life is better without stuff. Recall from the first Eccentric Millionaire post how your stuff owns you, like Voldemort. Don’t be like Voldemort.7 Remember that we all have limited time in life, and that it takes time to earn money. Every time you say “If I win the Powerball, you’ll never see me in the office again,” you implicitly admit that you would rather be spending your time somewhere else, but you are spending it in that office to earn money. You can avoid that only by earning enough money to – yes, I’m saying it again – tame the Hulk. Your spending costs you freedom. It costs you time. Spending money is killing you.

Think of it that dramatically, and I guarantee you won’t spend frivolously.

Train yourself to see the flaunting of wealth with a big house and luxury car for what it is: a deep-rooted, insecure desire to impress other people and to provide temporary emotional gratification – a sign of immaturity and short-sightedness, forgetting that life is temporary. We all have these weaknesses, but seeking to minimize them is our only means of maximizing our happiness. See the clever use of wealth for a modest home, reasonable comforts, and completely custom use of time for what it is: beautiful, timeless Vigilante wisdom and class.

Follow the Buyerarchy Pyramid of HappinessTM :8

Notice how the bottom provides a strong, sturdy foundation and the top looks like it’s crumbling? That’s to force the metaphor. Buying is bad. It makes you spend more time in the office – it robs you of happiness!

To effectively use the pyramid, you have to use your brain. Thinking of ways to save money costs you nothing – not even time, if you can multitask. Taking a shit? Think about saving money. Work at a job where you have free time? Think about saving money. Triple your efficiency by shitting at work and thinking about money. It’s all about efficiency.

And as assistance, please do yourself a favor and prepare a budget, so you can see which areas of your life are most ripe for cutting. There’s no “right way” to budget, but some helpful tools are located in the Hero’s Toolbox, including The Vigilante’s own personal budgetspreadsheet – which automagically calculates an approximate savings rate9 for any estimates you input, and a link to the powerful personal financial software, Mint and Personal Capital.

With talk of budgeting and cutting back, a lot of people recoil and think, “So, I can make $50k and save half of it by eating rice and beans, never taking a vacation, never owning the latest electronics, and never having any fun. Then, 15 years later, I get to enjoy the same shitty lifestyle until I die.” Understand that it is the opposite of sad – in return for simply not inflating your current lifestyle with your income whenever you reach a minimally comfortable point, you get all the free time you can possibly have within the limits imposed by the universe and entropy.10 All the time you can possibly have to constantly do the things that you would otherwise be working 8 hours a day, 5 days a week, 50 weeks a year (or substantially more, oftentimes) to experience for 2 weeks out of the year. And besides, the argument itself requires you to buy into the Bush Doctrine fallacy, in that the assumption is that there is no option other than beans and rice or extravagant spending. In reality, most spending you see is waste, and there will be a post about this shortly.11

Winning the game of life is about defining your own terms and achieving them. You don’t get to define your own terms if you waste away your life pursuing someone else’s terms. The “high life” doesn’t make one happy – that’s a confusion of cause and effect akin to the coincidence, I think not fallacy. Freedom leads to happiness, and freedom requires saving, no matter what your salary might be. Whoever can spend the least and be happy is the real winner.

And if you’re going to golf: please, don’t use a golf cart. Golf doesn’t take that much out of you.

  1. Sorry, Milton Bradley.
  2. Most proceed to complain that it’s not possible for them, or for the middle class today, or with all the thieves and threats in the world, or with all the communists taking over…
  3. And let’s face it, the prospect of living paycheck to paycheck, spending most of your life doing the same thing every day, and then hoping for the best when it comes to Social Security, Medicare, family members, community aid, etc., is not a very enticing one.
  4. Or, put another way, if you can live the life you want to live through your passive income – money you make by simply existing – and you never require a dollar of income earned through work.
  5. Seriously, please read Taming the Hulk if you haven’t yet, before telling me how ridiculous this is.
  6. Produced via the Early Retirement Calculator at Networthify.
  7. Remember me?
    Remember me?
  8. Sorta TM. Really, reuse this and spread it everywhere until it reaches USDA food pyramid penetration.
  9. It can never be completely accurate due to tax estimations, minor fees like a late library book, and the obvious fact that you’ll hardly ever spend exactly what you predict. But it’s remarkably close for me!
  10. And taxes.
  11. Specifically, about food budgets and how The Vigilante manages to eat like a health-conscious king for just slightly above the food stamp allotment for his household if he were unemployed. Intrigued? You better be!

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