Do frugal people have an unfair competitive advantage when it comes to accumulating a prodigious amount of wealth because they were just born that way? I’m beginning to wonder based on two things that happened recently.
1) Homejoy, a three year old housecleaning startup, decided to close its doors after raising about $40 million in funding. They ultimately failed to get sold or raise more money due to poor financials and lawsuits from contractors who wanted to be employees. It’s always a sad day when a company closes because I admire entrepreneurs very much. The founders had the courage to try, which is more than can be said for many others.
I never would have used Homejoy because I always clean my own house. Doesn’t everybody? Apparently not. Or apparently most people do, otherwise Homejoy wouldn’t have gone under. I find cleaning to be both cathartic and rewarding.
2) I got in sort of an e-mail tiff with my new master tenant’s roommate because she demanded an extra set of keys. It wasn’t a nice ask, but an entitled demand as if she owned the place. She first said she needed the keys for convenience purposes when other people stayed over. Then she said she needed a key for her housekeeper. These keys aren’t easily copyable. For security purposes, they have to be sent into a factory to be specially made. Each key has a specific embedded serial #.
My initial response was to ask her to just let the housekeeper in when she’s around or clean more herself if she’s got to wait an extra day or two. She wasn’t too happy with my suggestions! She said she works a lot and it’s none of my business how much she cleans (or doesn’t). Fair enough, even though it’s 100% my business for protecting my property from liability. I did end up spending a couple hours getting her that extra key, and am waiting for her to sign the addendum to take responsibility if the key gets lost or if the cleaner gets in a deadly fight with another condo owner.
DON’T PEOPLE JUST CLEAN THEMSELVES?
From 1999 – 2012, I regularly worked 60-80 hours a week. Not once did I hire a person to clean my home. Not even in 2007 when it was raining money. I just made the time to clean my abode by myself.
So who gets a green pass for using cleaners? Busy parents, incredibly messy people, people allergic to dust mites, folks who live in mega mansions, elderly and the disabled come to mind. But for the rest of us, hiring a cleaner seems like a waste of money.
Here are some other reasons why I won’t pay for a cleaner:
1) I don’t feel comfortable having a stranger come into my house. It feels like an invasion of privacy.
2) Even if theft is rare, theft still happens. Many home robberies are perpetrated by those who’ve worked in your home. They might not rob you tomorrow. But they might rob you a year later when you least expect. My temptation to steal was greater when I earned less money as well.
3) I know how to clean. It’s easy. Most things that don’t pose physical risk, I do myself. This includes taking care of the yard, washing Rhino, and doing my laundry. Even though I can afford it, not doing these things myself feels like a waste of money. I eat out because my cooking is mediocre compared to world class chefs here in SF. Preparation also takes a long time. I paid a contractor to expand my bathroom because otherwise it would never pass inspection. I use an auto mechanic to fix my car because I worry about fixing things wrong and causing an accident.
4) I enjoy cleaning. There’s immediate satisfaction because you can see an immediate difference. It feels very zen to wipe down the hard wood floors. I love my mop and I love to vacuum. Decluttering makes me happy. Spending 30 minutes to an hour cleaning once a week is cathartic.
5) Like many of you, I like to save money!
I know I’m going to piss off some of you who do use cleaners, so let me have it in the comments section below why I’m a donkey for thinking the way I do!
DIFFERENT PRIORITIES I GUESS
I’ve always thought that most people were like me, which is why it kind of annoyed me that my new tenant was demanding an extra set of keys for her cleaners. I can understand if she was a working mother with two kids. But she’s in her early 30s, single, and really only has half an apartment to clean since she shares it with her roommate. Why couldn’t she find time to just clean 500 square feet of space herself?
I asked my underemployed friend her viewpoint since she also has a cleaner. She said,
“Well, it’s just like anything else. You pay for convenience or you do it yourself. I hire my friend for $20 bucks an hour for three hours a week to help her out and get a clean apartment as well. I’m so busy taking care of my son and working that my time could be better spent instead of cleaning.”
This makes sense. If my underemployed friend who is looking for ways to save money is willing to spend $240 a month on cleaning services, maybe I’m the outlier here!
CAN BUSINESSES WIN DUE TO LAZINESS?
If you don’t do what you easily know how to do, I think that’s just laziness. If you’ve got the finances to afford discretionary spending, there’s nothing wrong with being lazy. However, from an entrepreneurial perspective, I wonder whether you can really be successful doing a business that relies on other people’s laziness.
What happens when the economy turns south and people have to take the bus, shop for their own food, wash their own clothes, pick up their own meals, buy their own underwear, and scrub their own toilets? Holy crap!
Let’s briefly look at Homejoy’s business model. For aspiring entrepreneurs like myself, it’s important to learn from failures to avoid future mishaps.
1) They are the middlemen for cleaners and people looking for cleaners. They took a percentage of revenue for each cleaning session. Once they connect you with a low cost cleaner, why do you need Homejoy any more? Just make a side deal directly with the cleaner and save.
2) They charge ~$20 – $25/hour gross. Can you really make that much off a business where the client can simply cut Homejoy out if they like the cleaner?
3) Cleaning is a cash business. By becoming a 1099 contractor, the cleaner now has to pay taxes. Who the hell wants to do that? Anybody who has worked in the services industry knows that cash is king.
4) The product actually creates another layer of friction because you can easily find cleaners on Yelp, Craigslist or through referrals. You don’t really need “on demand” cleaners. You need a trustworthy cleaner who can commit to a long-term schedule.
5) If the economy ever turns, paying for cleaning will probably be one of the first discretionary spending items to go. I’d rather invest in high growth and defensive companies (e.g. Samuel Adams Beer co) than a company that’s highly cyclical.
6) Legal issues and high burn rate. $40 million is a lot of money to spend in three years, even with 50+ employees to pay. Clearly they were allocating money to legal costs, subsidizing clients with enticing offers, and spending money on signing up cleaners and customers.
In retrospect, all of this is easy to write, but I do wonder about the countless other businesses out there that delivery discretionary services on demand. There’s even a company called Underclub, which delivers a pair of underwear to you for $22 a month!
Uber can win because its billions in funding is used to subsidize its drivers, thereby undercutting the incumbent taxi industry, fight lawsuits, and lobby the government.
The main takeaway from Homejoy’s failure is to build a sticky service business modeled on what people don’t know how to do well themselves. I once started an advertising business before with the Yakezie Network, and within a year my clients simply replicated my business model and kept the profits for themselves! In a way, it was a blessing in disguise because it forced me to create a new, safer way of earning revenue online. Those who took my idea are now floundering because they never changed and I never shared with them my secrets again.
I’d love to hear from all of you about whether or not you clean your own home and why. Are people who hire cleaners lazy or efficient? If I can spend two hours writing a post, isn’t that time much better spent than spending two hours cleaning my house? I’ve really had a default assumption in my mind that the vast portion of people clean themselves, and only the rich spend money on cleaners.
I’m of the belief that frugal habits are mostly developed based on our upbringing. My parents were always frugal, so I adopted their frugal nature. Being frugal also became a necessity when I realized I couldn’t depend on the government to implement an affordable health care system or give back my Social Security contributions in retirement.
Then again, even when I was making a healthy income when I had a full-time job, I’d often just drink water while dining out and drive a beater even though I could afford to spend more.
One of the biggest takeaways from all these finance-related surveys I’ve been conducting over the years is that most of you are super savers (25%+ savings rate). I’m trying to ascertain whether saving money and building wealth is an inherent attribute or a learned skill. If being frugal and building wealth is a genetic disposition, then perhaps those who’ve been able to accumulate outsized wealth or run a business have an unfair advantage!
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Wow. I love my cleaner. She was also my babysitter and still pinch hits. I know all of her family and went to her daughter’s wedding (who also sat for us). If i’m home I enjoy her presence. If i’m not, I trust her absolutely. It make me happy to pay her because she does a great job and I admire her on a number of levels.
I’m not one of those deluded people who pretends this not an employee/employer relationship but those can be rewarding emotionally too.
It saves me time, but reduces marital tension (because my husband works his butt off but is a slob). Divorce is very expensive. So is marriage counseling. This is a total bargain!
It’s a luxury, I know, and when I was young and single and not a mom I did it myself. But as a mother and wife, I’ll take coming home to a clean apartment without a hint of resentment over eating out any day of the week.
I’d hire a cleaner to come once a week if I could afford to. I have terrible allergies and several cats, so cleaning is an endless cycle. Every day I sweep their food area, do the litter, and de-fur the furniture. I try to vacuum every other day, and I’m constantly washing blankets and curtains. Seriously, if someone would invent a housecleaning robot to do the unpleasant stuff, I’d buy it!
I like organizing, just not cleaning!
In my bachelor days I shared a nice downtown apartment with a fellow bachelor. Between the two of us we were able to afford a much nicer place than we would have been able to individually. Despite our best intentions, we couldn’t sort out a cleaning schedule that we could adhere to and we hated the sight of the other vacuuming or dusting. Dishes got done and laundry was done but the house lacked a woman’s touch. We brought in a elderly neighbour who agreed to clean two hours every two weeks for $20 a time. I don’t think she needed the money but she liked helping and chatting away to us as she wiped down the shelves and polished the mirrors. She used to get an amazing amount done in those two hours which made the difference between an ordinary bachelor pad and a nice place. Well worth it to avoid any disputes and to know that every other Friday the place would be in good order. I recommend it for anybody sharing a place with a non-relative who doesn’t especially like dusting or cleaning tile grouting.
A) I think frugality can definitely be learned.
B) There are many other measures of frugality that can be far more injurious to one’s monthly budget. Doesn’t it all come down to choices, and what you’re able to save each year from take home pay
–Sam, you live in SF. Are you a member of the Bay Club or the Olympic Club? They’re both expensive. As for me, yeah….guilty as charged for one of those clubs.
–Any suburbanites out there do their own yard work? I do the mow and blow, neither of which takes up much time given that brown grass in the SF Peninsula doesn’t accumulate much height. That saves $150 to $180/mo.
–And the biggie…car payments? Ka-CHING!! I drive a 15 year old Subaru. Before I paid off her house boat disguised as a car after eight months of ownership because I was going to punch a hole in the wall, my wife’s payments were $700/mo. Absurd.
–And another biggie: FOOD! I drink a lot of money in the form of wine. But we rarely eat out, except when it’s f’ing hot outside, which it is now…or when we’re on vacation…or three day weekends.
Oh, and we (me, wife, kid, dog) do have a cleaner. Amazingly great expenditure.
Frugal, cheap and thrifty are all the same thing. There isn’t any moral baggage with any of them.
FS happened to pick housecleaning because he enjoys it. Other people might prefer renovating the bathroom, fixing the car or other tasks that Sam chooses to outsource. It’s not about laziness, frugality, skills (go watch some You Tube videos) or “I’m saving time to be more productive.” You pay other people to do things you don’t want to do for any number of reasons.
More interesting is how the comments illustrate employee vs. business owner/entrepreneur mindset. Employees are far more likely to say “Why would I pay someone else to do something I can handle right now?”. Biz owner thinks “Why wouldn’t I pay someone $15 / hour to free up my $100 / hour time and work on more valuable?” Like Sam, I happen to enjoy cleaning my own home (and renovating), but you definitely won’t see me cleaning bathrooms in the office or at any rental property.
FS: Do you also enjoy cleaning the rental properties after a tenant leaves?
Financial Samurai says
As an entrepreneur who works for nobody, don’t I dispute your theory?
Building outsized wealth is a mindset. There will be elements of both frugality and cost/benefit optimization. But things you can easily do yourself, I encourage people to do themselves. It creates a level of discipline and hustle power that goes a long way.
For my condo rental, I’ve painted it myself a couple times, and the tenants pay for a cleaner or clean themselves before getting their deposit back since they entered it clean.
My house rental, I’m only on my second set of tenants. We cleaned it ourselves first, and the tenants paid task rabbit for cleaners to clean for 3-4 hours.
In many ways, you’re the perfect example. You pay other people to free up your time in other areas.
I think most people would say my analogy doesn’t hold at all. Entrepreneurs outsource in order to leverage their time and earn more money overall. Employees have a fixed income and think primarily in terms of keeping whatever cash they’ve already earned which leads to the DIY mentality. Nothing particularly wrong there (unless you truly hate the activity), but you can’t become wealthy just by cutting costs. It always requires generating income first.
Thinking in terms of ROI on your personal time gives you a much different perspective, particularly time spent improving the bottom line of “My Life, Inc.”. That’s the big difference. Someone cleans their own house, saves $50 and immediately spends it on dinner instead of investing it. That really doesn’t help at all. It’s just cost-shifting.
Being frugal, cleaning the house and writing a $50 check to an investment portfolio is a better idea. However, the best option is spending those extra two hours each week on planned activities that increase the overall household bottom line by either generating more income or increased savings. It might be researching investments, learning about tax planning, moonlighting, studying passive income strategies or meeting with like minded people. All of which are worth far more than the $50 out-of-pocket expense for house cleaning.
I’m a work-at-home entrepreneur and two of the biggest impact changes for me recently have been establishing a company MERP and Solo 401K. Those are worth literally tens of thousands (if not hundreds of thousands) of dollars and I never would have found them without explicitly putting aside time to learn more about money. Same with taking the time to refinance earlier this year. That’s a hefty monthly addition to savings instead of sending it to the bank.
Everyone’s universal complaint is lack of time (along with lack of money), so they “don’t have enough time” for those kinds of things. Yet they’re fine with doing the cheapest possible grunt work in the name of frugality. It’s literally doing the work of a poor person who earns minimum wage. Unless you really enjoy the activity, that’s the very definition of penny wise and pound foolish and a great example of financial laziness.
May I suggest you word the survey differently?
As it stand I can agree with both answers without contradicting myself. I do not think frugality is a gene, I think it can be learned. So I should answer “no” to your survey. However, the other possible answer says
“Yes. *If* you have an inherent desire to be frugal, you will likely accumulate more wealth over your lifetime.”
And I agree with this as well. IF frugality were genetic, then I believe you would be more likely to accumulate wealth.
Financial Samurai says
Is not having the inherent desire to be frugal, someone who possesses the Frugal Gene?
The interesting point is that 85% of folks believe being frugal can be learned, yet 25% don’t clean up after themselves. I’m assuming the majority of the 25% have extenuating circumstances for them to hire cleaners e.g. working parents, allergies, disability, etc. I’d like to bring out the minority of the 25% who don’t and hear their perspective!
hi Financial Samurai! I haven’t commented on your blog before, though I have been reading it for a while. I agree with you about cleaners. I did once employ one for about a year, quite a few years ago now, but stopped because I felt uncomfortable having people come into my home and because I felt it cost too much. So now I clean my own home. I don’t do a brilliant job because I don’t have the time but I’d still rather do it myself. I am also frugal in general now, but used to be much less so, so I think it’s a habit that can be learned.
Re cooking, I just wanted to say that cooking needn’t take a lot of preparation time – in fact, it takes me much less time than eating out would. It is also something I used to be bad at and have learned to be good at and now I love it. Also, it saves me money. :)
Financial Samurai says
Thanks for your comment Cathy. Wasn’t so bad, was it? :)
I don’t mind cooking, especially if a company like Blue Apron delivers me all the ingredients. Yes, lazy, I know.
I do have some fear over slicing my finger off when chopping carrots or onions though. I almost did when I was kid, slicing a finger to the bone as I tried to pull off a knife cover. Kinda traumatizing!
Terry Pratt says
Many poor people, sooner or later, live frugally by necessity, if not by design or inclination. For me, a lifetime low earner (max annual $17K), the realization that I will probably never be within shouting distance of the median North American income changed my relationship with money.
Earning money is for me an arduous task; an $8 per hour wage does not go very far. So I pinch pennies and can’t afford to spend beyond bare necessities.
For the average or even UMC earner, there are often tradeoff choices to be made between time and money, e.g. pay for a cleaner in order to spend more time with family, or DIY?
As you get closer to subsistence level, those choices become easier to make; I without hesitation DIY.
I’m lazy, I pay a cleaner every other week. Well not lazy I just hate to clean. So much so that I tended to not clean as much as I should. For the first 13 years of my working adult life I cleaned my own place. I decided with my last move to hire a cleaner. I’m extremely happy to come home from work every other week to a clean house that I did not do myself.
On the other hand I don’t eat out a lot. I like to cook and am pretty decent at it.
Even though I have a cleaner I consider myself frugal. I just spend money in this area where most frugal people don’t because I truly hate to do it.
I think it can be learned, though I believe my biological father is frugal and I am. My mother is not. Maybe it’s a 60/40 shot?
I wouldn’t hire cleaners at this point (single with 2 dogs) but if I had kids, perhaps I would hire someone to do the deep cleaning once a month.
I do like to hire someone to mow the grass. I am allergic to all things outside and it’s not my body’s favorite task. I’m buying a home now and there’s no sod in the back yard (hallelujah).