Your Friends Really Do Influence Your Spending Habits

Wimbledon Center Court Roger Federer

Watching Roger Federer on Center Court at Wimbledon 2014. Bucket list item.

I met up with a friend of mine the other day for a function. He rolled up in a new Lexus IS350 that costs about $43,000 out the door. Immediately, I was envious of his wheels given I just drive a $20,000 Honda Fit named Rhino. My thoughts of doing the economical thing of buying out the residual value after the three year lease expires went out the window. I began fantasizing about what sports car to buy in 2017.

No, no, no! I told myself several minutes later. Sure, I’d love to drive a fancy car, but I reminded myself that I hate the stress of worrying about damaging expensive things. I enjoy parking in a crowded parking lot and not caring about a door ding. I’d much rather own stuff I can just throw away without any after thought.

Back in 2005-2008 I was extremely into collecting fancy watches. One friend had a FOMOYOLO mentality and bought a couple $8,000 IWC watches, just because he liked their style. So of course I started collecting watches because I thought, why not me too? I’ve got just as much money as him and I work harder. The funny thing is, before hanging out with my friend, the most expensive watch I’d ever purchased was a $500 Seiko. Now here I was spending $12,000 on a Rolex Stainless Steel Daytona. It was nuts!

The Median Net Worth Of US Households Over Time Has Gone Nowhere

Median Net Worth Of US Households Over Time In 2013 Dollars

Edward Wolff, a professor of economics at NYU put together a really shocking median net worth chart over time in 2013 dollars I wanted to share with everybody. The main takeaways are:

1) The median net worth of middle class households has dropped by a whopping 44% since 2007 and has not recovered after the worst was over in 2010.

2) The median household today is 6% poorer than their parents were in 1969.

3) There have been periods of income declines before from 1990-1995, with large rebounds over the next 10 years.

Be Careful Justifying Your Spending As An Investment

Lambo Huracan For $237,000

The Lambo Huracan For $237K: Because You’re Worth It

One of my readers on The Spending / Savings Balance post asked why I should feel bad spending money on remodeling my house when it should be considered an investment, so long as I don’t go over board. The truth is that when I was cutting multi-thousand dollar checks every week, I was telling myself that all this spending was indeed an investment to make myself feel better about going outside my spending comfort zone.

But now that I’ve taken a hiatus from spending for a couple months, given it takes time to get my drawings approved by the San Francisco Planning Department, I’ve come to realize how dangerous it is to justify every single dollar spent as an investment. An investment has an implicit assumption that it may provide a return some time in the future. The reality is that there are no guarantees, except for the guarantee you no longer have the money you spent!

My hope is that by spending around $100,000 on my home, I’ll provide at least $200,000 in value at some point in the near future. Given I was so focused on this type of “investment return,” I cut checks with ease for the first $60,000. Now that I’ve taken a break and only have $40,000 left in my budget to spend, I’m going to be as scrupulous and strict as possible to make sure the contractors do an amazing job within budget. If I didn’t take a break from remodeling, I’m pretty sure I’d go over my budget by at least $20,000.

Is There A Natural Spending / Savings Balance?

Balanced Spending by Andrew MacGill Flickr Creative commonsFor the past several months, I’ve been spending tens of thousands of dollars remodeling my new old house. I’m only its second owner in the house’s 68 year old history and it needs a lot of work as a result. For example, I just spent $9,000 painting the exterior, the fence, the windows, and all the metal fixtures. The painter estimated the house hadn’t been painted in 25 years! He mentioned that his crew normally uses two gallons of spackle to fix stucco cracks on a house my size, but they used eight gallons to smooth everything out.

Even though I budgeted extra money to bring the house up to date, I still feel dirty spending so much money. It makes me wonder whether we all have some type of self-correcting overspending limit, just like we all have this self-correcting over-eating limit. If we didn’t, we’d all be obese and broke. Nobody I know wants to work forever and feel the constant stress of having no money.

If the average desire to spend is a 5 out of a 1-10 point scale, I’m about a 3. But for the past several months, I’ve been spending at an uncomfortable 9. I’m curious to know where would you rank yourself on the spending scale?

Some of us might have to hit rock bottom before we find our happy spending / saving balance, but at least that makes future spending and savings habits that much stronger.

Why Are People So Ashamed About Inheriting Money?

InheritanceHow did I get my million dollars? It was simple. One day, I bought an apple for a nickel. That night, I cleaned and polished it. The next day, I sold it for a dime. With that dime, I bought two apples. That night, I cleaned and polished them, and sold them the next day for twenty cents. I repeated that process every day, without fail, until I had amassed $6.40, whereupon my grandfather died and left me $999,994 in his will…” – A Yahoo commenter named Dave

A funny thing occurred on Yahoo Finance the other day. A fellow blogger by the name of Anton was able to get interviewed for a focus piece on how he became a millionaire by age 27. When I first read the article, I was pretty pumped. I thought to myself, Neat! Another guy showing the world that it’s possible to get rich through disciplined savings and investing! I had experienced some similar luck with investing, earnings, and savings in my 20s as well so I thought his overall story was believable.

I never once questioned how he got to $1 million because he offered solid tips, invested in real estate, and spoke so eloquently on camera. But I guess the massive amount of attention he got from being featured on Yahoo’s front page for a couple days wore on him. He admitted on his Facebook page just days later that he had actually inherited 75%-80% of his net worth from his parents who died years ago!

Immediately, everybody started bashing Yahoo Finance and Anton for the deception in the comments. They’ve got the toughest crowd online. Despite all the blowback, if his new revelation about his inheritance is true, he’s still a millionaire!

A Great Way To Save More Money: Visualize Your Broke-Ass Lonely Self

Graffiti Long Island No Money No Honey

5Pointz, Long Island City

Ever since I was in the 4th grade, I’ve had this mild obsession with staying in shape. There was this girl I liked in gym class that I so wanted to impress, but I already had a gut as a nine year old! So imagine my dread when it was swim season and I had to sit down next to her in only my trunks. I couldn’t wait for the teacher to blow her whistle so I could jump into the pool and exhale. I was always so envious of the bony kids who didn’t have to suck in their guts.

I never did get the girl. I blamed genetics and my lack of courage to say, “Wanna get an ice cream sandwich during recess?” All throughout secondary school I decided to get into better shape because I knew I couldn’t be poor and out of shape at the same time. That would be a disaster.

Nowadays, I no longer care as much about being in good shape because I’ve usually got my clothes on. Women don’t seem to care for hunky dory guys anymore. A nice smile, an engaging personality, a job, a car, a stack of Benjies, and a two bedroom condo with a view of jumping dolphins in the horizon will do. Can you really blame single 40-year old guys who are still having the time of their lives?

“Even if I don’t need him to take care of me, I’d like to know he can provide the life I want to lead,” mentioned a couple female friends who are 8’s, but settled for 6’s.

If we men can’t stay fit, then we must be able to at least generate enough wealth to provide. Being unfit in wallet and in wealth leads to loneliness. This is our curse from society, which I’ll discuss more in an upcoming podcast.

“No money, no honey,” as the saying goes. 

Life Hack: Use Yelp To Save You Stress, Time, And Money

New Roof Bitumen

New Modified Bitumen Roof

Ever since paying $225 for 15 minutes worth of handyman work, I’ve been trying to figure out what the best way is to improve customer service, get out of hostage negotiation scenarios, and stop getting ripped off.

It doesn’t matter how much money you make or have, getting ripped off is a bad, bad feeling. Not being able to resist a free lunch no matter how much you’re worth is the same idea in reverse. Everybody wants to feel like they are getting a good deal.

After going through some bad deals with my interior painters, electricians, and hardwood floor finishers, I’ve devised a solid system that should help me and many of you in the future.

The internet is the great equalizer that will save us all!