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Why You’re Failing at Frugality

I received these napkins as a gift 9 years ago.

“I’ve tried to be better with money but it just doesn’t work. I was shopping at ALDI, but then I bought some strawberries that were moldy. So I’ve started using coupons. We replaced our weekend night out with take-out so we don’t have to pay a tip. I had to get a car payment because I can’t break down on my way to work. But now I’m saving on gas because the car gets better mileage. Plus I get fuel discounts from my grocery card. And I can’t get out of debt because I don’t want to wipe out my savings. If only I made more money, then I could follow all the financial advice I hear.”

Sound familiar? We’ve probably all heard or made some of these statements. If to err is human, so is to make irrational excuses. Don’t worry, I’ve erred and excused with the best of them. We nursed our student loans for a couple years (and went to Europe, and bought a house) before deciding to decimate them. I withdrew funds from my retirement account after leaving my first real job at age 21. (Doh!) We all make mistakes, and we all have different priorities. But I hear a lot of people who are completely mystified about their financial frustrations because they genuinely believe they are pretty frugal.

So how is it that some people cut coupons, shop sales, eat Meatless Mondays, even give up cable (!) , but just can’t seem to get ahead financially? Chances are, they’re only pretending to be frugal, which is a world apart from pretending to be poor.  In a materialistic culture that masterfully markets the financial fallacy that we save money by spending money, it’s almost impossible to resist the pitfalls of faux frugality. The point here is not to feel guilty, but to wake up and get clarity about our financial decisions so we can take charge. I can’t sit back and let comrades Pretend to Be Frugal, when they should instead Pretend to Be Poor. Let’s explore the difference.

Pretending to be Frugal Pretending to be Poor
Finding less expensive ways to inflate lifestyle Finding ways to deflate lifestyle
Views spending as a way to “save” Views spending as something to minimize; actually puts “saved” money into savings
Seeking luxury, comfort, and convenience at a discount Minimizing luxury while increasing usefulness
Views spending as a game to get “more for my money” via coupons, sales, “freebies,” tax write-offs, etc.  Challenges oneself to increase savings and generosity by reducing expenses
Focuses on small savings areas instead of big ones Ruthlessly prioritizes savings on the big three (car, house, food); continually finds new small ways to save
Lacks consistency in frugal practices Has a detailed plan and focuses on results
Lacks goals and purpose of frugality Focused on financial goals & bigger purpose of frugality—understands why
Makes excuses for lack of savings, blames lack of income Tracks own progress toward goals
Fights with spouse/SO over spending. Competes for resources with spouse A frugal team, work together to find new ways of saving
Stuck in survival mode Generous

So are you frugal or just pretending? Are you simply finding cheaper ways to inflate your lifestyle, or taking concrete steps to deflate your lifestyle? In other words, are you looking for discounts on luxuries, or continually searching for the bottom boundary of how little you can be content with? You are either pushing the upper limits of your budget with excuses to spend, or challenging yourself to spend less and less.

Faux frugality views spending as a way to save. Do your “thrifty” habits belie spendthrift problems? We’ve all been tempted to spend extra to get a “free” gift, “free” shipping, or a tax write-off. But spending $50 to save $10 doesn’t mean you saved $10. It means you spent $50. On a larger scale, someone might upgrade a vehicle to “save” on fuel costs. But many times the cost of that upgrade can’t be recovered by the gas savings in a reasonable amount of time. People even buy houses because the mortgage payment looks cheaper than rent, and fail to consider the hidden costs of home ownership.

Those who Pretend to Be Frugal see spending as a game that consumers can win. If people who Pretend to Be Poor see spending as a game at all, it’s how little they can spend. Not how much crap can I accumulate while shelling out hard-earned cash. Instead, they want to spend in order to secure real needs and carefully chosen wants for as little as possible. I’m thrilled to optimize spending, but I’m not optimizing my money if I’m indulging in discounted luxuries that I don’t truly value. Materialism is a losing game, and I’m out.

Another big distinction between faux and true frugality is a willingness to tackle the big expense areas. The top three cost of living categories are housing, transportation, and food. If you can get these under control you are well on your way to financial progress. Often people stop at smaller areas like clothing or cell phone plans. I believe no budget line is safe from frugalizing. And people often need to start with something smaller and more manageable. But if you’re unwilling to delve into the deepest savings potential, you’re only playing at frugality, and it won’t get you anywhere. You can shop exclusively at ALDI and Goodwill, but if you’re unwilling to get rid of your car payment, slash your $300/month dining budget, pay off your student loans, or stop paying outrageous interest on credit card debt, you will not get ahead financially.

The Faux Frugals also lack consistency in key frugal practices. For example, they may shop at a discount grocery once in a while when it’s convenient, but mostly end up over-spending in unplanned trips to the Big Store. Until you are truly committed to the bigger picture of why you’d Pretend to Be Poor, you’ll lack the motivation to plan ahead and build frugal habits into your routine. Whether it’s hanging laundry to dry, packing a lunch, saving up for purchases, or paying off debt, consistency is key. You can’t practice frugality only when you feel like it; you’ll never see a difference. It’s those who give up too soon who say, “I tried being frugal, it didn’t really help.” The problem wasn’t the advice, but the lack of perseverance.

And this brings us to the issue of motivation. Pretending to Be Frugal has many possible motives. If you find yourself constantly comparing spending to friends, fighting with your spouse about money, or making financial decisions out of guilt, you probably haven’t latched onto lasting motivation. Understanding why you want tosave money is going to get you a lot further than just knowing how to save money.

Why the heck would I wash poopy cloth diapers or go camping for vacation with two tots in tow? What keeps us going is our purpose. Pretending to Be Poor is not about being a miser. There’s nothing actually impoverished about our lifestyle. But we are essentially pretending to have less money than we do, so we can have the flexibility to take opportunities that come our way (like my trip to India), prioritize people, and practice generousity . Authentic frugality increases your usefulness as you learn new skills, get creative, help others, strengthen your relationships, and enjoy it all as a fun adventure.

So stop playing at being frugal. Unless you make a ton of money, if you want to make progress financially, you have to go all-in. That doesn’t mean tackling your entire budget at once. But you have to be willing to challenge any area of spending, one at a time, big and small. You have to quit the materialistic game of spending to “save.” You’ll need to give up some preferences and be consistent. And you must get your reasons in order to secure lasting motivation.

Consider Proverbs 14:23: All hard work brings a profit, but mere talk leads only to poverty.

What other differences do you see between faux & real frugality? What motivates your frugality?

When Frugal Doesn’t Fly

I was born frugal. That’s not to say I’ve never wasted money, but the frugal force is strong with me. As a kid I would eat all the stale, half-portions of cereal left in the bottom of the box that no one else wanted, because I didn’t want food to go to waste. I would pick out each color of crayon from our craft box before school started, because why buy a new box when you already have lots of crayons? (My mom got me new ones anyway.) I read grocery ads from a young age because I just needed to know how much things cost.

I was born frugal, and I’ve had to un-learn cheap. Stingy. Miserly. Because I definitely can be. In college I ate an incredibly frugal diet that only cost about $10 per week—and in retrospect must have been vitamin-deprived. Just this week I felt seriously conflicted over whether to let my kids get ice cream at the school art show. First of all, what does ice cream have to do with art? This is a money trap! And secondly, we have ice cream at home! But when all your friends are eating ice cream together in the gym at a once-a-year event and we can afford it, why I am so conflicted over spending $6?

Of course, I don’t want my kids to feel entitled to every treat we pass by, but they hear no plenty so it wasn’t really about that. It was about the fact that I’d never fall for the school art show ice cream trap as a super-frugal kid. So why do I have to fall for it as an adult?

Because I’ve learned something about when frugality doesn’t fly.

Frugal doesn’t fly when it comes to generosity. I don’t give money to pan-handlers, but I do believe that generosity is the antidote to frugality gone wrong, not to mention it helps others and is a joy to the giver. We plan our generosity ahead of time so we can always afford it, and also so we don’t have to think too hard about every single opportunity that comes our way. We can feel free to say yes or no as we feel led to the requests that we encounter throughout the year, knowing we’ve already prioritized giving to the causes most dear to us.

Frugal doesn’t fly when it comes to friendship. That doesn’t mean we’re picking up the tab every time we go out. But it also doesn’t mean I’m skipping friends’ birthday dinners just because I don’t prefer to spend at restaurants. We go out about once a week with other people. Because that’s what people do. Often we pre-game by eating dinner at home, and just order a drink, side, or appetizer to share. And if it’s someone’s birthday or other special occasion, make sure the birthday person isn’t paying!

Frugal doesn’t fly when it comes to gifts. I’m not an extravagant gift-giver and probably never will be, but I do like giving my kids and husband something they’ll really like for Christmas and birthdays. I also try to be moderately generous for weddings, showers, and kids’ birthday parties (it doesn’t take much too please kids, though). If I can use a coupon or gift card or shop a sale, I will.

Frugal doesn’t fly when it comes to hospitality. Again, I’ll never be the person spending $100+ on dinner parties. I don’t believe in “entertaining” where the focus is on my beautiful home and gourmet spread. But I’ll happily spend enough to make sure guests feel comfortable and cared for. That means we spend more on a food, period. And it allows us to invite people for dinner, playgroup, a prayer breakfast, or evening hang-out. I’ve learned recipes and snacks that please a crowd without being expensive or complicated.

Frugal doesn’t fly when it comes to quality time. As mentioned above, we spend money on our dates and on our marriage in general. This includes the occasional getaway, occasionally buying an attractive outfit, and spending on restaurants and babysitters.

We also aim to take our kids on weekly dates, which usually entails buying some kind of treat like an ice cream cone or French fries. Often we do super-frugal stuff like going to the park or the library or riding bikes. Once the boys went on a canoe trip that was not cheap, but formed a special memory. For a special date I took my daughter to a high school production of Beauty and the Beast. We don’t want to spoil them, but we definitely want to spend quality time alone with each kid on a regular basis, especially since we spend several nights a week away from them with our ministry. And as our family grows it’ll be even more important.

Frugal doesn’t fly when it comes to deciding whether take a family trip or go on a church retreat. We just say yes to these because we highly value them, but again, we still find ways to make it less expensive. We camp, we earn some free hotel stays, we try to avoid tourist traps, and we pack snacks for the road.

Frugal doesn’t fly when quality is a better value. There’s a danger here of thinking you need the best everything. But as we DIY an upgrade for our main bathroom, for example, we won’t be using the cheapest possible materials. We’re willing to spend a little more to maintain our home properly and to furnish it with pieces that will last. And I cannot wear cheaply made shoes.

Perhaps this all sounds very frugal or rather spendy to you. It’s all relative. But to my extremely frugal, borderline naturally stingy self, I wouldn’t spend on any of it. I wouldn’t spend any money on restaurants, and would sit home reading a book while my friends went out. I wouldn’t travel; it’d always be a staycation. I wouldn’t buy extra snacks and drinks to have people over; I wouldn’t even buy meat or treats for my own family! And I certainly wouldn’t buy ice cream at the school art show.

But I’ve learned there are times when “frugal” i.e. stingy doesn’t fly. We all know there is a difference between frugal and cheap, but where we draw the line is somewhat personal. I’d say if it has to do with other people or your deepest values, it’s worth your money. Not all your money, and not spending to the point or debt, but it’s worth what you can afford while also meeting other goals.

Where do you draw the line between frugal and cheap? What areas would you say frugal doesn’t fly?

Extreme vs. Classic Frugality

Gandhi: my idea of extreme frugality.

Low-expense living is trending under the guise of “extreme frugality.” But I call BS on this terminology.

I have no desire to pass judgment on others’ spending since everyone’s situation and values are different. Not many conversations are less pleasant than the who’s-more-frugal pissing match. And the media is probably more to blame for this misnomer than the families it features, who are just trying to live reasonably.

But when did eating at home become classified as “extreme frugality?” Is a year-long clothes-buying ban, perhaps following ten years of over-shopping, actually extreme? Does hanging clothes to dry make you a frugal rockstar?

Again, I’m NOT saying people with a certain habits or possessions aren’t frugal enough. My beef isn’t with anyone’s lifestyle, but with attaching the term extreme to what is nothing more than simple, reasonable, classic thrift. Yes, resisting lifestyle inflation is counter-cultural. But as some of the richest people on earth, can we all agree that most of us are not leading extremely frugal lives?

“Extreme” is Actually Classic

We prefer to view our lifestyle as nothing more than classic frugality–with plenty of luxuries in the mix. Let’s consult historical context to clarify terms. In recent history, we find the advent of modern personal finance/early retirement blogs beginning with Early Retirement Extreme and then Mr. Money Mustache. (For some reason, my 2008 “How to Be Cheap” blog series didn’t make it as big.) MMM has made it very clear that, while his family of three lives on only $25,000 per year, they are not claiming to practice extreme frugality. Their lifestyle is just “slightly less ridiculous than average,” to use his self-description. Laurie at the Frugal Farmer also wrote about this topic in her post When Frugality Was Normal.

Rewind a bit further, and we find ourselves practicing the same money-saving habits our grandparents did, while living in a larger home and owning more cars. For example, Neil’s grandparents grew old in the same small bungalow where they raised five children while owning one car. You’d better believe they hung clothes to dry, cooked from scratch, and bought only what they needed. They didn’t need to employ gimmicks to control their spending. Their whole 95 years on this planet have been a shopping ban.

If we want to talk about extremes, let’s talk about people like Mother Theresa or GandhiDo you think Gandhi was making cash envelopes for “Rice” and “Dhotis”? When he died he owned about ten possessions, including his iconic spectacles. Now that’s extreme.

I’m all for shopping bans or cash envelopes. I just can’t get on board with calling them extreme. To me, extreme frugality means something more like living out of a van, or one-bedroom apartment with multiple kids, dumpster diving for food, and keeping your heat at 50 degrees.

Classic frugality means something more like:

I’m not trying to debate about who does which frugal practice. I’m just saying, this type of frugality is what we’re into, and we don’t view at as extreme. It’s simply reasonable. After all, owning a car or two, living in a multiple-room home, and eating three full meals a day makes us quite spendy by global measures.

“Classic” Is More Motivating

The only “extreme” we’re surrounded by is extreme over-consumption. So I suppose our thrift is a marked difference compared to the insanity of going out to lunch every day, building brand-new 4,000 sq. ft homes, and leasing cars for $500/month. But just because a sizable segment of our population has gone completely crazy with their spending, doesn’t mean we’re living an equally far-out alternative. We’re just enjoying a more lavish version of past generations’ simplicity, and keeping that in perspective is intriguing, contentment-building, and motivating, all at once.

Surely viewing a slightly deflated lifestyle as “extreme” suggests it’s formidable or unreasonable to maintain. If we could embrace simple living as just a thrifty throwback to normal, we may find it much more manageable. And I’m all for sensible views that will fuel our financial flexibility over the long haul.

If our site title seems to suggest we think we’re doing something extreme, allow me to clarify: it’s all relative. We see “pretending to be poor” not as literal, or meant to demean those who are truly struggling to get by. Rather, it’s the only viable alternative we see to be pretending to rich. Either you’ll live on more than you make, or less. And only living on less will allow us to invest both in our future, and in the lives of those in need. We are very much “Just Pretending“and that keeps us going way more than if we thought we were doing something difficult and extreme.

Do you agree with this distinction between classic and extreme frugality? Can you see any other drawbacks to using this misnomer?

Why Financial Flexibility is the Next Best Thing to Financial Independence

I’ve been quiet on the blog because I’ve been uninspired, feeling like I have very little to say about money that I haven’t already said. And I’ve been preoccupied with lots of other things that, to be honest, have made personal finance seem like a trite and irrelevant topic. Of course, I can only say that because we’ve achieved a good measure of financial flexibility. And so I guess that means personal finance is very relevant—what a blessing and privilege not to be worrying about money in the midst of so much else going on.

What’s been going on? Our closest friends and neighbors moved. I got pregnant, and that of course comes with symptoms, appointments, and preparations.  My family of origin is going through some challenges. We’re busy with regular life–work, kids, volunteer ministry, continuing ed, etc.  Plus our bathroom remodeling goal has gone from “probably should” to “high priority” after we discovered the subfloor was water damaged.

Financial flexibility is an accounting term that describes “a company’s ability to react to unexpected expenses and investment opportunities.” We find this concept useful for personal finance as well. What options would open up if you could live on half your current income? How easily could you weather a job loss or unexpected illness? Could you say “yes” to travel, moving, or giving opportunities that come along? In other words, can you touch your financial toes?

Financial flexibility has afforded us the privilege of not thinking much about money during this less than low-key season. We can complete a DIY (with help) bathroom remodel without going into debt. I’ve been able to take care of myself instead of stressing about side hustling to make our financial plans work. We can weather the extra expenses of adding to our family. And our systems of auto-withdrawal for giving and investing can mostly steer our financial goals during a time when we’re not devoting much thought to money.

Our deeply ingrained “frugal” habits also allow us to just continue on autopilot. I suppose it would be easy to start ordering more take-out, shopping for stress relief, or spending more on conveniences or entertainment for our kids. We’ve certainly increased our expenses a bit to accommodate our growing family, but overall our lifestyle remains similar in the day-to-day. And it’s not through some super-human effort, but the sheer power of habit.

We’re far from financial independence–and totally content with that. We’ll get there when we get there, and we won’t sacrifice our values or purpose for it at all. I’ll be home with the little ones, Neil will be turning down work that would take him away from family and friends too much, and we’ll continue devoting nights and weekends to fellowship and volunteering rather than paid side gigs.

We’ll also keep spending on giving, hosting, date nights, and travel.

We will happily “sacrifice” what we don’t deem worthwhile uses of our money: car payments, eating out frequently, gym memberships, new furniture, or the latest fashions.

Everyone’s got their things that they’re willing to spend on, and those they aren’t. Our are just examples. The key is trying to sort out what’s really worth it to you, and limiting that list. Because everything doesn’t have to be your favorite.

If you’re still nowhere near FI, take heart: financial flexibility is a continuum you can make constant progress along. And as you do, you’ll experience real, growing benefits even while you’re still very tied to the day job. Our decisions have become less and less influenced by money, and increasingly tied to our values and purpose. We can say yes more and more. Another mission trip to India? Sure. Another baby? Yes. Home upgrades as needed? Fine. Sponsor another child in need? Absolutely.

And that feels like freedom in many ways.

What the next step along your financial flexibility continuum? What benefits have you experienced from growing financially?

“We Hate Money,” or, We’re Having Another Kid

It’s true, the PTBP household is expecting another member by the end of June! While having another child was anything but a financial decision, we couldn’t help but think through the financial implications. It’s just how our brains work. And it seemed the most relevant aspect to share here. So here’s the breakdown, including thoughts on kid-raising costs, college funds, resume gaps, and when to upgrade to a bigger home or car.

The Quarter Million Dollar Baby?

The average cost to raise a child is widely reported to be $250,000. If that strikes horror in your heart, rest assured. Oh wait, I have no idea how much it costs to raise a kid. My oldest is only 6.

There’s the cost of prenatal care and delivery, which we estimate will run us about $3000 this time.

Speaking of insurance, paying for a family plan vs. a couple is a big hike in premiums. But—it’s a flat fee after that, so get your money’s worth by having more! #ifonly And of course, kids get sick and that costs something, too.

Young-mommy bloggers will tell you how very little kids costs. Indeed, we spent very little on the first five years of child-rearing. Hand-me-downs abounded, and gifts and buying used items filled in the gaps. We found plenty of fun, free activities via the library, metro parks, playgrounds, etc.

Then we paid for preschool: $1200 for a year. Hand-me-downs slowed and we spent a bit more on clothes and shoes for our oldest. We also spend more on food now, because guess what—at some point they actually start eating.

Then there are the birthday parties kids get invited to. And school supplies, fundraisers, and donations for class parties. And sports and swim lessons, and don’t do that stuff year-round. We also pay for the occasional family attraction or event, especially on vacations.

The Income Question

Another big financial factor is that each kid sets the clock back on me returning to the paid workforce by 5-6 years. We decided before having kids that I would stay home with the kids till they’re in school full time. Part-time working from home worked well until #2 came along. Clearly having a huge resume gap is not going to do me any favors, but for us that’s not a determining factor. And I know how incredibly blessed we are to be in that position.

Bigger house?

I’ve heard of families in similar size homes upgrading to make way for baby #3, and I can understand why, but it’s certainly not necessary in our case. In lieu of a larger house, we purchased a used wooden bunk bed ($160) to clear a room for the nursery. I’m glad the kids get the experience of sharing a room, anyway. I could see someday wanting more space as the kids (and their friends) get bigger, but we’ll cross that bridge when we get there.

Bigger car?

Since getting pregnant, I’ve fielded a LOT of questions about when we’ll get a minivan.  Answer: we’ll get a larger vehicle when we need one. Our family car is a 2003 Ford Taurus Wagon. It fits three car or booster seats in the second row, so in my book, we’re golden. But the wagon isn’t going to last forever, or maybe we’ll need more seats for driving the kids’ friends. We’ll see what becomes a problem first, and the next car will definitely need to have third row seating.

What About College?

I’ve heard more than one family say they’ll limit family size due to the cost of college. I understand how very real of a consideration college costs are for families these days. How much/whether to help with kids’ college is a controversial, personal decision.

Our stance is: we will save and we want to help, but we aren’t promising to pay for all of it, either. There are more and more ways of getting college credit without paying top dollar, and we very much expect our kids to explore these options. By offering substantial help, but not a massive sum, we hope to motivate them to make responsible choices, while offering an advantage as they get their start in the real world.

Another approach some people seem to take is resume-loading. Parents will pay for private tutoring, music lessons, year-round sports, and other extracurriculars, all with the hope of their kids getting significant scholarships. I wish there was a way to do the math on this. If you invested (in a college fund) all the money you spent on those tutors, activities, and experiences for your kids that you hope will lead to a scholarship, who would come out ahead? I’m placing my bets on the average growth of regular contributions. And this doesn’t require nearly as much running around.

The Bottom Line

Bottom line, we’re not making family choices based on money. On the one hand, that’s an incredibly privileged position to be in. On the other hand, there is perspective as well as privilege involved. Kids do cost money—don’t let those toddler mom bloggers fool you. But my guess is they don’t have to cost a quarter million each (barring unusual circumstances). We don’t feel the need to buy a bigger house, a larger car (yet), or the greatest possessions and experiences for our kids. We also don’t need to pay for the most  extracurriculars, or float the full cost of college. And this is very freeing, both for our current stress level, and our ability to make family size choices based on other values.

What factors determined your family size? What are some other financial considerations parents face these days?

He Became Poor

Photo by Neil Brooks

Photo by Neil Brooks

Christmas has me thinking about a man who pretended to be poor. He left the wealthiest kingdom of all time to become a simple tradesman. He left the most powerful social status to become a peasant. He left glory to be scapegoated, and left honor to be humiliated. He released the use of divine power to take the form of a helpless human infant.

You know the generous grace of our Lord Jesus Christ. Though he was rich, yet for your sakes he became poor, so that by his poverty he could make you rich. (2 Corinthians 8:9)

He became poor so we might become rich. This phrase has haunted me this holiday season. What does it mean? The love, joy, and peace that comes from knowing Jesus cannot be surpassed by the best investment portfolio, the nicest house, or the most successful career. We owe our family, friends, health, talents, material provision, and so much more to the Giver of all good gifts. We truly have been made rich in every way by the One who pretended to be poor for our sake. He paid the debt we owed Him, that we could never repay no matter how hard we tried. He paid it at great personal expense–becoming poor, and giving His life.

This is why we write about pretending to be poor and sharing with the truly poor:

“He will make you rich in every way so that you can always give freely. And your giving through us will cause many to give thanks to God.” (2 Corinthians 9:11)

We are far from perfect at giving freely. But we will continually the beat the drum of generosity here and in our own lives because we’re forever astonished by the sacrifice Jesus made for us.

Merry Christmas!

Personal Finance Isn’t Math

Have you ever seen someone run down the numbers on a personal finance issue and the math is 100% behind their point, but there’s no way you’d ever follow their advice? I know I have. How about a few examples?

Recently, I read an article on why parents should view childcare as an investment, not an expense. From a mathematical perspective, it’s a great point. Sure, childcare might eat a large portion of one parent’s salary for 5-10 years, but that cost will come to an end, and you’ll have 5-10 years more experience and salary growth in your field, plus no resume gap. Those who write off paying for childcare as “not worth it” will significantly reduce their lifetime earnings by stunting their career as well as forgoing income during their time at home.

I applaud the math, but nowhere does this author consider that some families view raising young children as a real job worthy of full-time attention. And that the reduced lifetime earnings are considered no problem compared with the privilege of being able to raise their kids full time. The math is unequivocal: women should return to work after maternity leave. The numbers are something to consider. But so is the personal side of personal finance, which in this example is about our relationship with the little humans we bring into this world.

Take another hot personal finance debate: should you pay off your mortgage early or invest extra income? Mathematically, you’re likely on average to grow your wealth at a rate of 7-8% compounding interest in the stock market. Over 30 years that can mean tens of thousands more in investments, depending on your property value. Meanwhile, paying down debt only saves you around 4% in interest these days.

However, some people prefer the feeling of freedom and flexibility that comes with being debt free. Others find it ethically preferable to repay their debts as soon as they are able to. Notice, emotions, values, and ethics have little to do with math. They have nothing to do with profitability. But these aren’t small factors for many.

Or how about an example I personally can’t comprehend: buying a new car. Everyone knows purchasing a brand new vehicle means major instant depreciation, yet lots of people do it every day. To them the feelings of peace of mind, safety, or convenience that comes with a new car and a warranty outweigh the thousands they’re losing in the transaction.

If we only look at the math, we can easily become a Scrooge. But if we only consider our emotions, we’ll probably end up broke.

So what does it mean that personal finance is not math? It means you need to look at the math, but also at your feelings and values. Most of us tend to make decisions more logically/mathematically or more emotionally/values-based. Know thyself: which one to you tend toward? Temper it by analyzing the other factors at play.

If you tend to choose based on numbers, consider the human side. Who will be affected by your choice? What might be the long-term implications of those effects? What are you feelings and values about the question at hand? What might you regret later?

If you tend to make choices more on feelings, values, or simply what those around you are doing, run the numbers. Do the math. Use online calculators—there are plenty for almost every personal finance question you could ask. Write down your feelings, your pros and cons, and try to analyze the a bit more objectively with the math in view.

As you read personal finance advice, ask yourself: is this argument more based on objective or subjective arguments? Is it more math or emotion/values? What would the other “side” add to the debate? This is important to think about both for those articles we agree with wholeheartedly, and those we disagree with.

If you are ever asked for personal finance advice, consider where the person is coming from. What is their real hang up? Maybe they aren’t asking you to solve a math problem.

I suspect that more of us don’t look at the math enough, but those who are all about the math tend to gain prominent voices in the personal finance community. We’d all be better off if we acknowledged and considered both in our decisions surrounding money. Try to be a voice of both in real life and online discussions about this wily thing we call personal finance that involves math, but isn’t synonymous with it.

Which side do you tend toward? How do you integrate both factors into your financial decisions?

Handling Holiday Stress

It’s December. Here come the articles encouraging us to relax, simplify, and just enjoy the holidays. We all need these reminders to slow down, remember what we’re celebrating, and take joy in the people we love. At the same time, this advice can come off as yet another stressor, leaving us wondering, What’s wrong with me? Why am I not relaxing and enjoying this enough? Why do I feel sad or overwhelmed?

Sip a cocktail, laugh, and don’t worry about observing any of the trappings and traditions of Christmas, one article advised.

My reality as I read it? Chugging coffee, crying tears of exhaustion, and spending every precious free moment prepping for the holidays.

The truth is, holidays involve family, family involves love, and love involves sacrifice. If any food is eaten at your gathering, someone had to prepare it. If any gifts are exchanged, someone had to shop and wrap. If the setting is festive, someone had to clean and decorate.

It’s not that we should center our holidays around living up to others’ expectations or striving for a magazine-spread Christmas. I believe that holiday shopping, cooking, baking, and decorating can all be done in a spirit of joy. But for many people–those with kids, extended family, or those opening their home to people without a home base—it’s just not as simple as sipping a hot toddy and shrugging off tradition.

That doesn’t mean Christmas has to be complicated. In the past few years, we’ve found new ways to simplify. We’ve shaved our Christmas day stops down from four to one or two. We attend fewer Christmas parties. We host a small low-key fireside gathering rather than an epic get together. Our decorations are beloved but minimal. Some years we hang Christmas lights on the house. Other years we don’t. Our shopping list (and pile to put away) has shrunken as we’ve asked our families to do gift exchanges. I’ve whittled my baking list down to two or three favorites. I wear the same few outfits to every party and family function, year after year.

This year we’re even taking a weekend in the busy season to get away as a family and just hang out, hike, and play together.

Every year, I’m excited for the festivities leading up to Christmas. I look forward to buying gifts, putting up the tree, and our little family traditions like visiting a Christmas tree farm, looking at Christmas lights, and ice skating.

And every year, at some point I find myself exhausted, stressed, and feeling too busy. The “slow down and simply” philosophy would have me think I’m doing something wrong if the year’s biggest holiday, the most wonderful time of the year leaves me feeling anything but wonderful.

But then the feeling passes as I take time to reflect on Jesus’ sacrifice as the reason we celebrate. I’m sure it didn’t feel great for him to leave perfect fellowship with His father and become a human baby, subject to all the suffering of this earth.

And then I know it’s not wrong to feel stressed and overwhelmed sometimes in the midst of a joyous but hectic season. It’s okay for sacrifice to feel hard; that’s what makes it sacrifice. After a sacrifice, you know the difficulty was worth it. If it’s not, it’s time to cut that activity or obligation.

So don’t stress about feeling stressed this year. Cut what you need to cut. Talk to someone if you’re truly down. But don’t shy away from the sacrifice that comes with making Christmas a beautiful time for others.

How do you handle holiday stress? What ways have you found to simplify?

Money over Meaning?

What do you believe is most important? Becoming very well off financially, or developing a meaningful philosophy of life?

Come on, now. Be honest. You are reading a personal finance blog.

A similar question has been posed to college freshman via the American Freshman Survey, a survey that has queried 15 million students over the last 50 years. Students are asked to rate life goals with varying degrees of important. In 2016, those rating “becoming very well off financially” as important rose to a high of 82%, compared with 47% rating “developing a meaningful philosophy of life” as important.¹

The priorities received equal ratings around 1978, and since then, money has quickly outpaced meaning. GenX and Millennials were similar in their ratings of importance for each of these goals. Since 2008, the percentage of college freshman rating becoming very well off as important is on the rise. Clearly the recession didn’t shift people back toward meaning over money, as some thought it would.

But it isn’t hard to imagine why. Those born after 1995, labeled iGen by lead generational researcher Jean M. Twenge in her book of the same name, came of age in a time of economic uncertainty. Surveys show their attitudes to be less idealistic and entitled when it comes to work, school, and income than Millennials were before them. Instead, they report attitudes that are more pragmatic: they believe they need to earn a high income just to make ends meet. Contrary to common perception, fewer young people today report a goal of becoming entrepreneurs compared with young people of past generations. To a group raised in the height of the safety craze as well as a recession, entrepreneurship may sound too risky.

What to make of all of this? Certainly money and meaning aren’t mutually exclusive, but they can become excluded on a practical level. Though I hadn’t thought of it in exactly those terms, I suppose I started this blog trying with the goal of integrating the two, or at least holding both in the balance.

Placing less value on meaning can lead to some scary trends, such as less volunteering and charitable giving. Indeed, both these social practices are on the decline among Millennials and iGen. Yes, you read that right: despite all the hype about Millennials being more socially active, they only report favorable attitudes toward volunteering and charitable giving. Self-reporting in the American General Social Survey show less engagement than previous generations at the same age.

Concern with money over meaning is also contributing to what former Stanford dean Julie Lythcott-Haims calls “the college admissions arms race.” In her book How to Raise an Adult: Break Free of the Overparenting Trap and Prepare Your Kid for Success, she laments the extreme competitiveness surrounding elite college admissions, which is viewed by many as the only path toward a financially stable life.

The problem both Lythcott-Haims and Twenge report, from their vantage point as academic faculty, is that college students are no longer there because they care. Past generations viewed college as a great privilege, an opportunity to learn and explore; now it’s simply a means to end.

Just some whiny college profs? Maybe. But what will it mean for our society if young people, usually the most passionate dreamers, are cynical or indifferent? What will it mean for charities, non-profits, and the people and causes they serve? What will it mean for professions high in meaning and relatively low in salary? I’m thinking teaching, social work, and the arts, to name a few.

Perhaps some will conclude there need not be a distinction between meaning and money. That frugality can be a way of life so all-encompassing it constitutes a controlling value. I’m no philosopher, but I think this goes too far.

Certainly we can value meaning while also making a decent living and handling money prudently. This may look differently for each person, but some principles stand out:

  1. Live on less than you make. Depending on your situation, this may mean you need to make more, or spend less. As a culture (species?) we tend to assume we need more, but a hard look at our spending may reveal otherwise.
  2. Prepare for a lifestyle in congruity with your chosen profession. When enrolled in the college of education, I had no dreams of ever living large. I figured my faith and my library card would get me through life.
  3. Do absolutely everything you can to keep your school debt in proportion with your earning potential. While in high school, use Post Secondary Education Option, AP or dual enrollment courses, and retake those standardized tests at least once for a shot at raising your score. Then apply for scholarships, re-apply each year, get a part-time job, and consider taking some courses at a community college to reduce tuition costs. And please choose a reasonably priced university.
  4. Start giving as soon as you graduate (or even before). Don’t wait till you’re making the big bucks to make regular charitable donations. Start early and small, and increase with each raise so it just feels like a natural part of your financial plan. Regular givers report this is the most fun they have with their money.
  5. Make time for people. Long hours or side hustles can be profitable for a season, but if you don’t have time for family and friends, you may be placing money over meaning in a way that compromises your mental health. If you need to, make relationships a calendar item. Schedule a family night, date nights with your spouse and children, and time with your friends, as well.
  6. If you’re working toward FIRE, what’s your goal? Doing more of what you love? Or more of what makes a difference in the world? Meaning is perhaps never more important than in such a potent position as early retirement.

Do you think it’s naive to value meaning over money? What are some ways you keep both in balance?

¹All research from the following:

Lythcott-Haims, J. (2015) How to Raise an Adult. New York, NY: Henry Holt and Company.

Twenge, J.M. (2006) Generation MeNew York, NY: Atria Books.

Twenge, J.M. (2017) iGen. New York, NY: Atria Books.

Inflate Your Usefulness, Not Your Lifestyle

Lifestyle inflation is a popular personal finance metaphor for the phenomenon of expenses endlessly rising to match (or surpass) income. It captures the predicament of the 37% of Americans living in one of the world’s richest countries who claim to be too broke to save. And it describes what those pretending to poor want to avoid. Bloated spending not only causes financial problems, it also makes people less useful. It ties up time and money so that it all has to be spent on lifestyle maintenance, leaving less room for meaningful pursuits like family, friends, and volunteering. Plus, when life is centered on convenience and acquisition, people miss out on the satisfaction of becoming handy, resourceful, and helpful.

But those of us who don’t inflate our lifestyle also face potential danger. Have you ever thought about what you are inflating instead? We need to invest in something we can put stock in, and I don’t mean the stock market. If all you inflate is your bank or retirement account, you’re missing out. Saving and investing are worthy, responsible steps that we preach. But we all know there’s more to life than money. Most people think this “more” is freedom: from the 9 to 5, having to worry about money, or keeping up with the Joneses. Freedom is depicted as early retirement, working for yourself, traveling-hacking, or otherwise finding happiness outside materialism.

These are all appealing replacements to lifestyle inflation. But will they pay the dividends of a joyful and productive life? It’s easy to place false hope in the financial freedom or frugal ecstasy so often promised. A growing body of research documents the correlation between increased wealth and decreased interpersonal skills, emotional health, and happiness:

  • Lonely At The Top, by Thomas Joiner, documents the tragic pattern of men achieving success and wealth, only to find themselves without companionship.
  • In the Boston Globe article “Why It Matters That Our Politicians Are Rich” Britt Peterson reports, “Rich people have a harder time connecting with others, showing less empathy to the extent of dehumanizing those who are different from them. They are less charitable and generous. They are less likely to help someone in trouble.”
  • Richard Ryan’s report in The Annual Review of Psychology (2001) found that a focus on financial and material goals correlated to a lower sense of well-being and found money is not a reliable predictor of happiness.
  • Madeline Levine’s The Price of Privilege states the “newly identified at-risk group is preteens and teens from affluent, well-educated families.” These privileged kids are more likely to suffer from depression and other emotional ill health.

Yikes! There is a real gravity toward these scary outcomes for the wealthy. Pursuing wealth for different reasons doesn’t make us immune. Let’s heed these warnings and not let the journey to so-called freedom make us slaves to side hustles and financial goals. We want to remain flexible while increasing our financial flexibility, and the key lies in what we’re inflating along the way.

To us pretending to be poor is about inflating our usefulness at the same time we invest for future needs. Our financial journey isn’t just about us, or even our family.  If we get to “retire” early, that’s just icing on the cake, because we’re using our time and money to build a good life NOW. And the good life is not just about geeking out over spreadsheets, net worth, and shopping at ALDI. It’s not just about finding happiness in frugal hacks and free pleasures. The good life is about helping others.

The outcome of inflating your usefulness isn’t to leave yourself destitute, but to do good, to be rich in good works, to be generous and ready to share,  storing up for themselves the treasure of a good foundation for the future, so that they may take hold of that which is life indeed” (1 Timothy 6:18, 19). So how can deflating your lifestyle inflate your usefulness?

  1. Work to live, don’t live to work. A good work ethic is important, but working constantly while ignoring family, friends, faith, and those in need is not a balanced or healthy life. If you’re hustling for the proverbial dangled carrot, maybe it’s time to free yourself from the rat race, not necessarily by retiring early, but by deflating your usefulness so you don’t need that carrot.
  2. Get useful by DIYing. Some people feel excited when they find the next new product that will make their life easier. Don’t get me wrong, I love my microwave and dishwasher. But others seek accomplishment in spending less, and this often results in becoming more useful. For example, I love Indian food, but I don’t love spending money at restaurants. So I’m learning to make Indian food. Neil enjoys riding his bike because it’s free exercise and saves on transportation costs. For both of us these money-saving measures are enjoyable in part because we feel accomplished after a challenge.
  3. Share the usefulness. Now that you have amassed helpful DIY skills, you can help other people. When someone need helps with a broken car or house, you can help. When someone loves Indian food, you can cook. You are saving other people money, perhaps teaching them useful skills, and feeling satisfied by widening your sphere of usefulness. Even if you don’t have amazing skills, simply by making time to help others you will find a world of needs to meet. Volunteering for an after school program, the high school group at church, to help a friend move, or to babysit are all ways we’ve found to be useful. Other ideas include volunteering at a nursing home or hospice center, Habitat for HumanityBig Brothers Big Sisters, English tutoring for refugees, mentoring teens in prison, or taking a short-term missions trip. (I’m going to India this summer!)
  4. It is better to give than to receive. Freeing up money to give to charitable or faith-based causes is hugely rewarding, and, need I mention, helpful! For example, donating to disaster relief in Nepal would expand your usefulness to a global scale. Yes, you have to do a little research to make sure an organization is trustworthy. But there are lots of reputable places and you can check them out on charitywatch.org or ministrywatch.org. Or visit a local food bank, after school program, or homeless shelter and check it out yourself.
  5. Be a good friend. The research on sad, rich Americans should be sobering. Thankfully the antidote is simple and free: have friends. Caring about other people and sharing life together can keep you grounded and balanced throughout your financial journey. You’ll avoid ending up lonely at the top, and you’re bound to be useful if you’re a good friend.

Titus 3:14 describes usefulness well: “Our people must learn to do good by meeting the urgent needs of others; then they will not be unproductive.”

What DIY success are you most proud of? What have you learned from sharing your time or money with others?