The Things We Need...

I have been thinking a lot about the idea of debt as slavery.  It’s a common enough phrase, but one that has taken on a lot more meaning for me as I have slowly worked my way out of that form of prison.  It is really just the beginning though.  Everything that we need that costs money is a form of slavery in the sense that we must continue working to support that need.  The less we need, the less we need to work.

There is a calculator in Jacob Fisker’s book “Early Retirement Extreme” that really brings this point home.  It uses the “safe” withdrawal amount of 3% and calculates that a monthly $200 expense would require an additional $60,000 - $80,000 in savings.  If someone makes the U.S. median income of $26,364, the $200 habit is roughly equivalent to 2-3 years of work.  It really is no wonder that so few people are able to retire and live solely off of their investments. 

Thinking about my spending habits in this light really brings home the point that my nominal efforts so far are just a small step in the right direction.  I have to reduce expenses by taking a hard look at where my money goes.  Some major steps will have to wait for various reasons, such as my 12 month lease on my apartment, but the paring down can and should begin immediately.    

Talk Is Cheap

I have been thinking and writing a lot about frugality, early retirement, conscious spending and the like.  The problem is…well, I’m full of shit. 

Sure, I am much better about spending than the average American citizen, but is that really anything to brag about? 

I don’t spend on luxuries.  I don’t have high-end clothes, cars, or liquor.  Because of fairly cheap tastes and decent income, I am able to save a respectable amount each month.  That being said, I am not really challenging myself.  I buy tons of books, many of which are still waiting on the shelf to be read.  I eat out often.  A lot of the eating-out expense comes from buying coffee and inexpensive meals at the cafes that I work from.  (This message is coming to you from the neighborhood Starbucks) This really starts to add up.  I could easily make my meals at home and then go to the library to work.  This satisfies my need to get out of the house while also allowing me to save the hundreds of dollars each month that I spend in this category.

There are some categories of spending that I am content with, even though they are far above the norm.  I spend a lot of money for my boxing gym membership, but the value that I receive is worth every penny.  This really gets to the heart of where I want to be with my version of frugality.  I want to consciously spend my money on the things that I get real value from.  I do not get any value out of buying meals out of convenience at the local coffee shop.  This should be an obvious place to cut spending.  Likewise for books; if I am working at the library anyway, renting reading material will be even easier than going to the store to buy a new book that I may or may not read.

The goal is to get to the point where 90-95% of all purchases are planned in advance.  This really is the only way where I can be sure that my money is going to the things and activities that I personally care about.  If the purchase is not planned, then I open myself up too easily to frivolous and reactionary spending. 

The bottom line is that I am fortunate in terms of income and in terms of freedom.  If I buckle down, I can really make in-roads into changing my life.  I can do this without huge sacrifices, but I do need to make some.  If I live every day in line with my values, and my spending reflects those values, I will be successful.  If I do not, then I am just another blowhard with a blog.  Talk is cheap, actions are what matter.

Conscience Investing

Most people look at investments solely in terms of risk and return.  We analyze a company’s financials, learn about their products, read commentary and discussion about their plans for the future, and compare them to their direct competition.  It occurs to me that even those of us who have a philosophy of frugality, locality and sustainability often invest in companies based entirely on what these companies can offer us in terms of cash rewards.  Certainly, many people I know will choose not to invest in certain companies for ethical reasons, but the ones we do put money in typically fall into a category of non-offenders.  Companies like Amazon may not be doing any environmental or social harm, but are they actually in alignment with the values that we say we care about?  Are they actually moving our society in the direction that we think is ideal? 

In “Deep Economy,” Bill McKibben relates part of a conversation that he had with a green energy entrepreneur during his research for the book.  The man was having trouble finding investors, not because his idea didn’t work, but because his expected ROI was around 3%, instead of the more swollen returns that many investors are looking for.  I have no idea if that company was legit or not, but the statement stuck with me.  If I am constantly railing against the corporate attitude of profits above all else, how much of that am I, as a shareholder and consumer, to blame?  Are these companies doing anything different, albeit on a larger scale, than the person who complains about jobs being out-sourced while faithfully shopping at Wal-Mart?  It seems to me that our investments should reflect our values, even if our own returns might be less.  That or maybe we need to stop complaining so much about the macroeconomic effect that all of these small decisions add up to.

Over the next few months I will be researching how others have handled this moral dilemma, and also will be thinking more deeply about exactly what kind of company I would be proud to loan money to.  While I will be keeping my current positions during this investigation, I plan to eventually look over everything I own and review them against my to-be-determined investment requirement checklist.

If anyone has any ideas on how to get started, your suggestions would be greatly appreciated.

An Age of Certainty

Lately, I have been constantly surprised by how sure everyone is about…well, everything.  Personally, I blame the internet.  Information, not to be confused with wisdom or understanding, is never more than a smartphone away.  Thanks to Wikipedia, Google, and a million data centers and opinion sites, the ability to “prove” any point we want to make is easy. 

I don’t get how people can be so confident.  For me, the more that I read, the more that I study, the less sure I am about anything.  I have my beliefs constantly trampled on by the exposure to new ideas and new experts and new studies.  Everything we can think of is more complicated than we originally take it for.  There are entire industries dedicated to the development, design and testing of plastic ziplock bags.  If such a thing is possible, then surely large subjects like the economy cannot be explained away by the easy billboard slogans that are so common today.

I am no expert, and I recognize the situation as such.  I will debate politics, the economy, and just about anything else that I have passing knowledge in, but I am willing to be proven wrong.  I am willing to learn something.  That doesn’t mean that I am willing to give up my opinions easily.  If I encounter opposition, then I will question it, debate, and see how it fits with other things that I believe to be true.  I may not change my opinion often, because I do take some pride in researching subjects that interest me, but if I encounter a solid argument that is well-reasoned and is not too idealistic, by which I mean that it could apply in real-life situations, I am very willing to accept the idea that my knowledge is incomplete. 

Using the internet for news, information and research seems to decrease a person’s exposure to conflicting viewpoints.  This is truly a waste of an incredible resource.  The ubiquity of political blogs, the fairly-recent addition of allowing comments on a news article and the surge of think-tanks all make it possible for us to go through life considering ourselves informed citizens while rarely being exposed to the other side of the argument.  Because so much of our “news” is actually opinion and editorial commentary, we get interpretations of interpretations as our information.  The other side is almost always demonized in these writings, which only solidifies our beliefs further into “us” and “them.”  We then come to reject on sight the opinions and beliefs that we have learned to identify as coming from the opposition. 

If you read about a subject that has a clear bias for one side, why isn't the natural reaction to read a perspective from the other side?  Why are we so tied to our opinions and beliefs?  To some degree, I believe that it is because questioning our beliefs about politics, economics and foreign affairs forces us to recognize that these issues are not as simple as we would like to believe.  It takes away from the idealistic view that there are easy choices, or that everyone can be happy and successful, or that we are on the side of "good."  Some level of uncertainty is the only sane response to a world as big and complicated as ours.  We can't all be experts in everything, so why do we pretend to be?