Thoughts on Cars

There’s one ideal way to own a car: Pay $0 for one that never breaks down. Wouldn’t that be great? Wouldn’t that be one of the best deals ever?

Yeah, well, too bad. Every car decision is some combination of risk. You can pay a ridiculous portion of your net worth for a new car, which saves you from repairs for a few years but is otherwise a rapidly depreciating asset, or you can pay very little for a used car that just might blow it’s head gasket next week. Pick your poison. You will find any number of suggestions about what you “should” do. Some people think you should always buy new cars and sell them before the warranty ends; others think you should always buy used cars and save yourself the depreciation. But if everyone bought new our world would be trashed even more than it already is, and if everyone bought used, well, eventually there would be nothing left.

Personally, I always buy used. I look for models with the fewest complaints against them and specific cars that preferably have only had one or two previous owners. I thus far have preferred mid-size sedans with front-wheel drive. My target range has been $3000-6000, but I have considered cheaper cars, and I have also thought it would be really nice to be able to buy a $10,000 car in cash. Ideally, I’d have 10k sitting in the bank for another car if/when that day comes.

But here’s the kicker. I’m comfortable buying older cars because I do most of the work on my cars. I’m a fairly outspoken proponent of understanding how cars work and doing the work yourself, but my faith in this latter position has been shaken on several occasions. And this stems from the fact that working on your car can really, really suck.

Earlier today, I was engaged in fierce battle with my Camry. I had needed to change the tie rods for awhile, so I decided to finally get things rolling. This was one step in a series of things needing to be done. I needed to replace a lug nut, change the tie rods, get the tires rotated and balanced, wash the car, and then get an alignment. My tires have started to feather a bit and the steering wheel has been off ever so slightly since the last rotation (a sign that the tires may be wearing unevenly).

So Saturday I decided to go to my parents’ to change the tie rods, which had been leaking grease a tad and had started creaking more. It’s a fairly easy procedure. Loosen the lug nuts, put the car up on jack stands, break tie rod the lock nut free, take the castle nut off, use a device to pop the tie rod free of the steering knuckle, then unscrew the tie rod. Reverse with the new tie rod. It’s one of the easier jobs.

I swapped one side in less than half an hour, then went to the other side. Everything was going fine until I tried to back the lock nut off: it ended up twisting the entire inner tie rod, though it did “break free” of the outer tie rod. This is not good, because that nut needs to move freely for proper alignment. So I spent a large portion of Saturday dousing it in PB Blaster ,hoping this would soak in and free the rust, then taking the impact driver to it while holding the inner tie rod in place with an adjustable wrench. I even took a propane torch to the nut. I then talked to one of my mechanic friends to get some more ideas and see if I was crazy or not. Nope, it happens. There are more effective torching methods, but I didn’t have those. “Letting it soak” is something I keep coming across, too, but I couldn’t believe it was having so much difficulty. (My suggestion for avoiding this problem is to soak any suspension part you may be planning to change in PB Blaster, and do this a day or two ahead of time!)

Inner tie rod and lock nut, post freedom. That inner tie rod’s a bit rusty, huh?

So I put the old tie rod back on, torqued everything down, and went home, frustrated beyond belief. It’s just tie rods, what the hell?

So after waiting for a day, my hope was to finish the job. I went to my parents’ again, put the car in the garage, and started to loosen the lug nuts. But there was a problem: two lug nuts were not coming free. They had been just fine the day before. I didn’t know what else to do – it didn’t make sense. Using a breaker bar, I kept unwinding one of the lug nuts. And then…it completely sheered off.


So now I was miserable. I had a great many choice words and slunk into a garage floor catastrophe coma. Was this really happening? How had what should have been a simple job turned into…this? What was I going to do? I could still tighten the other stuck lug nut down, since THAT one hadn’t sheered off yet, and with four lug nuts, I could (somewhat) safely get my car to a shop. If I took a risk on the second one and it sheered off as well, I’d be looking at getting the car towed, or replacing the hub, which could easily be it’s own nightmare, and would definitely require me to stay the night at my parents’ and probably take the next day off work.

Now, deep in the recesses of my mind, I remembered knocking a few lug bolts out of their hub. At the junk several years ago, I had found a freed knuckle assembly lying in front of an old Corolla and had bought it to test on my new press. At some point I had needed to remove the lug bolts before I could press the bearing out. So as I looked online today for answers to my situation, there was suddenly a light at the end of the tunnel to realize that individual lug bolts can in fact be replaced with removing the hub. Of course. Sweet!

At a few bucks a pop, I bought three new lug bolts from Napa, as well an inner tie rod, boot, extra lug nuts, and then an inner tie rod tool from another shop. I’m not saying I wanted to change the inner tie rod, but there was no guarantee that bolt was coming off, and I was not taking any chances!

I don’t have a picture, unfortunately, but it turns out that when you take the rotor, caliper, and caliper mounting bracket off, there is a divot in the knuckle specifically designed for the removal of lug bolts. I actually knocked the first one out with a hammer when it was on another side, since there’s just enough clearance. The second one I aligned to the proper location, and I used a special tie rod puller (oddly enough) that forced the bolt out smoothly and without the jarring effects of the hammer. You get the new lug bolts in by pushing them through the back as far as you can, putting a washer around the front, then torquing a lug nut down so as to pull the lug bolt into place inside the hub. Very fortunately, my impact driver (not to be confused with an impact wrench), was up to the task. Really wish I’d taken a picture of this, but oh well. Also, I should definitely buy an impact wrench.

Also, the lock nut did actually come off the inner tie rod. This was such a relief! There’s definitely something to be said about soaking suspension parts in penetrating oil and waiting a day or two before attempting to remove those parts. I could have changed the inner tie rod while I was down there, it probably would not have hurt anything and the car is getting an alignment anyway, but those can be tricky as well, and more work was the very last thing I wanted to deal with. I put a lot of anti-seize grease on the inner tie rod before putting the new outer tie rod into the place. (Trick: if you put a few beads of anti-seize on the tie rod, the lock nut and/or outer tie rod will spread the anti-seize along the threads for you)

So it all turned out, and tomorrow I’ll get my rotation and alignment figured out and probably drop the car off at a nearby shop that I can walk home from. I can always get alignments from my friend, but I think he’s a bit busy right now :).

Great, but what does this have to do with working on cars?

Well, like I said, sometimes it really sucks. Today really sucked, except that it worked out and I learned something new. I’ve had tie rods go very smoothly, I’ve even had axles go very smoothly. But other times I’ve collapsed on the floor of the garage in mental agony. I’ve also made some mistakes that could have been extremely dangerous. It takes the right conditions, the right tools, and a certain level of grit to pull some of these repairs off. It takes money, too. Shops aren’t cheap, but tools aren’t either. I would argue that tools are cheaper than shops, but you also have to consider the value of your sanity.

Once again, there is no conclusion to this post! I still think people can only benefit from understanding how their cars work, but for all the work I’ve done, I still come across awful little situations like this past weekend. I’m struggling to know what to recommend, honestly. For one, it’s worth having tools for those “oh, shit” moments, and I think it definitely helps to be over prepared for the job at hand. I may follow this post up with some suggestions on how to go about these DIY repairs. Half the battle is just knowing what you’re truly up against, and that’s the problem with recommending people do the work on their cars. You simply can’t predict what you’ll be up against. Doing it yourself only makes sense under certain conditions.

Personal Returns on Education

One clever life strategy is to carefully select your post-secondary education to maximize its ROI in your personal life. I’m not talking so much about monetary earnings as I am about the utility of specific skills in your life when they are used for you.

For example, my degree is in Anthropology. This was a highly intellectually stimulating subject for me, so I really loved it. But it does not translate into high pay (or much of any pay at all), and it’s unlikely to save me any costs. How it is likely to affect my life, in the sense that I mean in this post, is that it has given me broad-based cultural awareness that will likely help me to adapt to life and potentially earn money in foreign cities, something I hope to capitalize upon some day. Mostly, it’s still an intellectual subject ๐Ÿ™‚

One subject I’ve been interested in studying is Appliance Repair. My parents’ refrigerator has crapped out twice now, but I was able to directly solve the problem the first time and made an informed guess that turned out to be accurate the second time. This has saved them the hassle of paying for a brand new refrigerator, probably in the range of ~$1400, and in the first case, it saved them from the lie of the repair guy that the compressor was bad and would cost $800 to replace. That’s substantial savings, but let’s think about this more. Your value as an Appliance Repair person comes from your work on many people’s appliances. The chances of your specific refrigerator dying are fairly small in any given year, but let’s say that over the course of your life, your refrigerator dies three times and you replace it each time. If you love what you do, that’s fine, but as far as personal ROI goes, you may be lucky to be saving yourself $5,000, maybe a little more if you consider other appliances and maybe rising prices or refrigerators with more features. HVAC training would have a higher personal ROI, but even then, a few water heaters and maybe a furnace are not going to save you a tremendous amount of money as a factor of your earnings over the course of your life.

Programming, surprisingly, is only marginally better. You could potentially design your own website, and if you are a crazy beast you could even build an e-commerce platform, but in the case of the latter, you’re still likely to hacked into oblivion because programming and security are done in teams, and solo programmers are rarely able to do everything themselves. In the former, you need specific technical skills that may not be a part of your “stack”, or base of knowledge. This blog that you are reading right now is built on WordPress, which is written in the PHP programming language. I don’t know PHP. I’m probably capable of hacking through it, but it wouldn’t be fun. There are tons of sites that have all of these pieces already put together for you, and they are very often a better use of your time and money than going solo, even if you are a professional programmer.

If you can see the trend, it’s that in order to make money in a particular occupation, you have to be highly specialized in that occupation, which has the side effect of being less useful to you, in person.

Accounting is not bad, but you don’t need a degree in Accounting to keep a budget. I have no training in Accounting, but I did go full geek last month and learned how to calculate my paychecks, taxes and everything. It took some reverse engineering of last year’s tax return to double-check my logic, but it was pretty fun for a few days. Likely, Accounting WOULD be extremely useful if you owned a small business.

Art is interesting in that art is expensive, so if you can do your own, you can likely style things exactly as you want for much less. With graphic design, you can make your own business cards, do your own photo retouching, etc. As for design, I have a distinctive international style I use for decorating the living room, and I’ve always thought it would be sweet if I could hammer and cut metal to keep that style going. This will scale with your needs, though, so it only saves as much as you were determined to have in the first place. I also suspect if you love artsy things, it’s easy to find and love cool things made by others, but that’s sort of beside the ROI discussion ๐Ÿ˜‰

I would argue Nursing has high ROI as you become highly trained in many subjects of general health, you can perform your own bloodwork, and especially if you have kids, you will better know when they really need to go to the hospital or when they will be fine without special treatment. These savings can add up significantly over the years, and the knowledge does not require the extensive education that becoming a doctor does, which again, requires a great deal of specialization that may not be directly relevant to you or your family.

Probably the highest personal ROI of any occupation I can think of at 1:00am is Auto Mechanical work. Since most people own a vehicle and enjoy doing so, it makes sense that a mastery of automotive knowledge will help you save tremendous amounts of money keeping your cars running or finding good deals on used cars. Since maintenance is routine and parts can and will fail, this provides a steady stream of work which will create a higher ROI for your knowledge each time. I pride myself on doing most of the work on my car, but I don’t have the special training (or some of the gumption) to do everything, nor the experience to feed my decisions when I set to work. If I were financially independent, I would seriously consider doing an automotive program, and would love to rebuild my own engine some day. The ROI would be lower for mechanic work on heavy machinery, since you are not likely to need knowledge of heavy machinery maintenance for your daily life.

I also suspect that an Associate’s Degree in Business is one of the highest ROI degrees. You learn some accounting, some finance, some law, some communication, all in one package. It may not have the prestige of a Bachelor’s degree, but dollar for dollar, you’re getting a lot of great knowledge for very little time and money cost. Even if you never used the degree in a job setting, the knowledge would probably pay for itself many times over.

Carpentry would also be very high on the list, especially if you own a house.


There’s no science to all this, just some perspectives. There are many, oh so many, occupations that we could sit down and talk about. I especially like the Occupational Outlook Handbook, but the sort of analysis I’m doing here is fairly rare. Typically, people only look at either compensation or personal reward (e.g. intellectual stimulation, as with my degree). These are really great to consider, but don’t be ashamed to be strategic with your education ๐Ÿ™‚



The Ubiquity of Cyclical Spending

In a theoretical economy, the wages individuals earn through the value of their labor would be spent on the labor of others. A lawyer would use the wages he earns practicing law to purchase groceries from one who distributes groceries, he may also use part of his wages to make car payments to another who distributes vehicles. In theory, his earnings enable him to purchase the labor of others both as he needs and as he sees fit, and each person, adequately specialized, would do so in turn. One’s consumption would be in proportion to ones production, so to speak.

Of course, the real world does not work this way. Jobs are lost and found. Skills become outdated and new skills must be acquired. Decay happens unevenly and perhaps unfairly. Moreover, not all labor is needed or even desired, but ever the chase remains to make one’s specialization valuable to others in order to convince them to purchase your labor. Everyone wants their “pound of flesh”.

The most obvious and ubiquitous persuasion occurs in the context ofย cyclical spending. For example, the desire for food is cyclical: when we, as humans, are done eating, we undeniably must eat again at some point. Grocers stay in business rather easily, at least from this perspective. They must compete with prices in order to retain an adequate market share, but there is never the fear that the demand for food will renders one’s specialty as a grocer obsolete.

In the past, it was enough to produce a good or service and to sell it to a consumer for a profit. But especially during the 20th century, it was learned en masse that this was not the most profitable of strategies. It was discovered that if consumers could be locked into cyclical spending, either through perceived demand or dependence, then the great fear of inadequate demand could potentially be eliminated from one’s business. At first, straight razors could be resharpened with a lathe, and the one-time purchase of a good straight razor practically guaranteed one a shaving utensil for life. Gillette discovered that by making disposable blades, he could lock consumers into cyclical spending since the blades would eventually all wear out and the consumer would be forced to purchase new blades. This happened in the early 20th century, but we have seen this get even more ridiculous as the blades have gotten more expensive and clever marketing even sends a free razor and spare blades to young men when they turn 18, with the intent of inducing brand loyalty.

Several years ago, Adobe famously switched from selling stand-alone licenses to selling “Creative Cloud” licenses, which have set expiration dates and typically require monthly payments to continue access. As with most software, you hit a point where additional features affect a diminishing number of customers, so many prior customers find that they no longer need to upgrade, as every feature they needed was already included in older versions of the product. This decreases market share and diminishes revenues from new product sales, so the solution must be to force all customers into monthly or yearly payments.

As producers, we love cyclical spending. It keeps us in business. It pays our salaries. But as consumers, cyclical spending is the quickest way to waste our earnings and prevent long-term wealth.

I don’t have any answers to questions about how to balance this. All I can say is that it is not our responsibility to buy products we do not want or need, or to spend money at the sacrifice of what we truly want in life. There are a great many desires in the world and we are largely free to choose from which we please, and this is the great part about a free economy. But make no mistake, everyone wants your money and will try every trick imagined (and then some) to deprive you of it.

Common Cyclical Expenses:

  • streaming services (Netflix, Hulu, satellite TV) {monthly}
  • car payments {monthly}
  • mortgage payments {monthly}
  • food {variable}
  • vacations {yearly}
  • cell phones {release-cycle dependent}
  • gasoline / diesel {variable}
  • utilities {monthy}
  • credit card payments {monthly}
  • vehicle registration {yearly}

Basically, if it’s a specific budget item that gets paid every month, it’s a cyclical expense.

Producers are very savvy at persuading people their products are necessary. Insurance has mastered the art of fear. Automotive companies have mastered marketing new cars as a the only “safe” option for children and families. Internet companies make commercials showing you how much your life would suck without fast speeds. Not too long ago, cell phones didn’t exist. Now we can’t go more than a few days without a handheld computer [guilty].

So although our productive power has dramatically increased over the years, it seems everyone is struggling under the weight of our own expectations. Going car-less in America is for weirdos, having a flip phone is laughed at. Everyone assumes you have Netflix. Many people still believe that they will always have a car payment. Some couples spend $800/month on “healthy” food that they “simply must have”. It happens.

Although it’s impossible to eliminate cyclical costs, I think it’s wise to delay the cycles, and I think this works to our advantage. Many people will immediately buy a brand new car because they fear a $1,500 repair. That’s insane. Your new car probably loses $2,000 off the lot. But the psychology is different; it’s easier to imagine a monthly payment in more manageable doses than $1,500 all at once. This is how you can spend $4,000 per year for 7 years so you “don’t have to worry about repairs”. In the vast majority of cases, this does not work in your favor, unless you’re the car dealership, of course.

And spending $150 on software may hurt in the short run, but it should still be running for you five years later, at which point maybe you need to replace your computer and the new computer isn’t compatible with the old software. You decided against a monthly cycle and pushed for a five year cycle, potentially saving yourself $500 in the process.

Merkur safety razor on stand, with badger hair brush

I own a Merkur safety razor that I purchased about 8 years ago. I think the blades cost me $15. I have purchased a few “cakes” of shaving soap over the years, but the razor itself could easily last me the rest of my life, and unless I decide to nix the beard, I will probably be going through the blades for the next decade.

Instead of spending on new blades at $25 a pop every two months, I’ve gone to once-per-decade on the blades. Guess which one I prefer.

Now, as people, we change. Styles change. Fun changes. There will always be cyclical expenses. But the people who waste the most money are typically locked into the lie that they are slaves to all of these expenses. This is something I’m passionate about trying to break off.

Delay is a valid tactic for saving money. I used to keep a sheet of paper with all of my wants on it. At the end of the month, I’d see which of those wants I could afford. Consequently, I rarely saved that money. But what was amazing was that when I stopped recording my wants, I often forgot about them, and it turns out that if you keep forgetting about the things you want, you probably don’t want them that much after all!

A similar principle applies to delaying your spend cycles. When you have tons of monthly expenses, it produces what I want to call a “chaos” effect. THIS needs to get paid, and THIS needs to get paid, and oh, don’t forget THAT. It’s easy to focus on paying those “bills” and it’s easy to forget that many of them you could easily do without. By waiting, you test what really matters to you. Maybe the cycle doesn’t even repeat for some things, maybe you find that your purchase was one-and-done. Great. But the more urgent the feeling, the less hesitant you are to throwing money out to make the bad feelings go away.

I do this with groceries a lot. I write down every little thing that is getting low and put it on the list. I did this several weeks ago with a favorite hot sauce. In reality, the current bottle still has a long way to go before it’s empty, so it really just tacked an unnecessary $5 to my costs. And guess what? If I’m out of the ingredients for one dish, there are usually plenty of ingredients for another dish! I always get caught up focusing on the “lack” and not focusing on the “abundance”. Hence, it’s probably been over aย  year since I hit my grocery budget goals. I’ve considered challenging myself to eat everything I have before buying more.

There’s something to be said for buying higher quality things at a higher upfront cost than buying lower quality things at lower upfront cost. But this is a complex topic because measuring quality is extremely difficult. Some things are easily broken or lost, too, and price truly is not a great discriminator. Case in point, the expensive towels I bought last year are already starting to undo themselves at the seems, which really sucks. Perhaps a little sewing kit could save the day, but for the price I paid, I shouldn’t be dealing with that crap one year later.

I may have mentioned this before, and it won’t be the case for everyone, but when I axed Amazon Prime last year, I magically found myself spending less money on Amazon. By NOT having access to free two-day shipping, I was, unbeknownst to myself, putting my desires to the test. “Do you really want this if it’s going to take 5-8 business days to arrive?” Turns out the answer was usually ‘no’. I’ve saved a ton of money because of this. You don’t think there’s a catch? They wouldn’t do the free two-day shipping if it didn’t make them more money. In this case it feeds off of the spending cycle, and human impatience, to increase purchase frequency. Good for them, unlikely to be good for you (unless Amazon is like your substitute grocery store, or something like that).

One more note on rushed spending: it has become very, VERY popular this past year for companies to ask you if you’d like to “round up” your total to the nearest dollar for XYZ organization or non-profit. I hate this. I always tell them no, because I don’t have the time or the desire to research whether XYZ is full of crooks or not. They feed off of the “rush” to finish the transaction, and they also feed off the assumption that people don’t value their change. I do. That’s why I have $80 worth of change in my coin counter right now.

Anyway. Pay attention to cycles. I think there’s a tremendous amount to learn here, and I feel like there’s a lot I’m missing.

$80 of change

The Power of Cash Position

My cell phone bricked itself this morning. Just completely shat itself out. Coma-inducing diarrhea. One moment it was running just fine, the next it was black-screened, and after several half-successful attempts to turn it back on, the damage seemed final. It even feels slightly lighter now, like its soul has leapt from its fleshly bonds to wander the ethereal plains.

Like most Westerners, I freaked out a bit. With no land line, how was I going to communicate with people? And what if I was involved in an accident while driving?

I felt silly, of course. It’s one thing to know that you are too dependent on the internet; it’s another thing to actually combat that fear when “disaster” strikes. I keep an old flip phone on hand for emergency calls, so I powered that for a bit and took it with me on a great quest to find a new phone.

What was most tragic about today was that I found myself having to spend money. Rage! One day your cell phone is working just fine and you think you’ll have it for several more years, and the next minute it’s dead and you are forced back into consumerism. Hmph! What’s more, my old crappy laptop is on the verge of death as well and is probably not worth the new battery it might take to get it to charge higher than 55%.

I had been thinking about splurging on a new laptop. My work computer is a high-end Dell that probably runs around $2k, so although I didn’t want to spend that much, the thought of going >$1k definitely occurred to me. Go big or go home, you know? Nothing beats a laptop that can handle several instances of Visual Studio and several databases at once, and do it all in style.

And yet, it’s hard to spend that much money when really all you do is program, store some stuff, and surf the web. Spend $1500 on a computer when my Roth IRA still isn’t maxed out? Puh-lease.

(Bear with me, there is a point to all this.)

Not wanting to spend $700 on a Pixel 2, I managed to find one last original Pixel at a large, local electronics store. They price matched from $380 to $320 thanks to the Pixel being old and better deals existing online. They didn’t exactly search for the best deals, but they did fine one and honored their match. Also, I found a refurbished, slightly older version of my work computer for $300, and it’s freaking sweet. I’m typing on it right now. It’s silver, and has an i5, and if I need to upgrade I can buy the i7 for this socket for $50 on ebay, and it runs Visual Studio smoothly and doesn’t sound like it’s going to croak and…and…I could keep talking about it. Cha-ching, money-saver! I got home, popped my sim card into the Pixel and was back in business.

So what I first want to talk about is the power of cash position. By ‘cash position’, I mean having cash on hand that you can spend. Although I preach investing your money, it’s really not wise to do so before you have a strong cash position. Dave Ramsey’s 7 baby steps start out with #1 being to have $1000 saved for an emergency fund. Step #3 is fully funding this to 3-6 months of your expenses. This I think is great. I also think this is extremely important because most people simply do not save money at all, sometimes because they can’t but usually because they won’t. But for me, because security is so important, I almost have an emergency fund for my emergency fund. Fighting against this instinct, I have been saving into a “Personal Development” savings account that functions as an “Opportunity Fund” for expensive things I may want that fall outside of my budget.

I was at first terrified that I would buy the phone at full price and buy a pricey Dell laptop too, which would wipe-out my Opportunity Fund. I’m planning to visit my sister and her family next month. I also want to go to Nepal maybe next Spring in 2019. How could I wipe out my Opportunity Fund in one go like this? What if I were laid-off and didn’t get a chance to rebuild it for awhile?

Well, that’s the power of having a good cash position. When your phone dies, you buy a new phone. When your laptop sucks, you buy a new laptop. These are really not emergencies, but they are worth saving up for. When you want to visit your family, you make plans and go fly to see your family. Don’t sell investments to do this; have cash on hand for these things.

Now, my frugal instincts did kick in and saved me a ton of money. But that it took me so long to do something like replace my crappy laptop is perhaps to my shame. That I have put so little into my Opportunity Fund ($2k) compared to my retirement accounts (about $30k) is possibly not the best way to go through life. You should build a good emergency fund first, but after that, do save a little for yourself. I personally think I could have gotten a better deal on the phone if I had calmed down and waited a week for an online purchase to arrive. But sometimes fear does take over, and having the cash on hand can be really nice. Within 3 hours postmortem, I had a working phone up and running. This was a huge relief to me. I’m also super excited I don’t have to program exclusively on my work laptop anymore. $700 is a lot of money, but it’s not so bad when you have saved up the money to spend. For the record, I recently saved $700 by dropping the Hebrew class I mentioned in my last post ๐Ÿ˜‰ . I am sure glad I did not spend the money on that. I might write sometime about what I have learned trying to distinguish wasteful spending from good satisfying spending.

Anyway, be frugal but have money to spend. Don’t be a tool like me and lose your mind because you have to spend money. Life costs; deal with it.

The Pernicious Lie

“It will always be tough.”

Several years ago, I experienced a significant pay raise at my job and found that my money was melting away and I wasn’t sure where to. I was living with my parents to avoid paying rent and was using a large part of my paycheck to pay off my student loans, but I began to question why I wasn’t making faster progress despite the pay increases.

“You know, it will always be tough,” my mom told me.

Now, to be clear, I’m not saying my mom is trying to spread pernicious lies. But I am trying to say that my mom’s reaction that day is characteristic of a broader social problem, this belief that life is so difficult and there is never enough money. I have read articles about families making $200,000 per year and complaining that “it’s just so hard to make it.” A cursory look at their expenses basically revealed that people are not naturally intelligent creatures.

Scarcity is an old and neglected economic term. One major and influential economic theory states that human desires are infinite while resources are finite, thus producing scarcity. In a scarce environment, supply and demand rule, and thus is born the market economy. The whole Occupy movement was created to protest the lack of capital among the “99%”, blaming this on misconduct by the “1%” who have hoarded capital (I’m not going to take a position on this here). We see this in political movements, but we all see this in personal finance contexts, where people lament just “how hard it is to get by” and how “you just can’t support a family on $X per year”.

A common theme, something I discovered within myself that day, was no matter how much one earns, the money never seems to be enough. But how was it that at lower pay, I had everything I needed, and at higher pay, I still had everything I needed but didn’t know what had actually happened to the difference?

We all know I was spending that extra money. It’s not rocket science. We humans have this amazing proclivity to increase our expenditures when we increase our income. We have more money, so we spend more money. After all, human desires are infinite. I can sit down at any time and make a list of things I would like to own if I either had the money or money weren’t a factor.

Now, I have read that wages have not increased with the cost of living. Especially here in Denver, I’d say most of people’s expenses are being dumped into overpriced houses and overpriced apartments, and many jobs do not earn enough money to cover these expenses and most other necessities. And that sucks. But I also want to explore this more.

The market is not your friend. Technology tells you how much it can improve your life and increase your creative juices, and help you to make money from your own innovation. Car companies tell you to treat yourself to the new car smell and gain prestige for the good hard work that you do. Cereal companies tell you that you are a good mother for feeding your kids a nutritious breakfast. Insurance companies tell you how secure you will feel knowing your money or health is protected. The problem is that we believe this. Because of scarcity, because of supply and demand, everyone wants your money. And you’ve been raised to spend that money on the products those people are selling. You go to work and depend on your company to sell things so that you continue to have a job so that you can continue spending. We all know this cycle. It’s not good, and it’s not evil. You could potentially extrapolate this message from the “labor” Adam is forced to perform in Genesis. Nonetheless, we spend because we believe it will make us happier, that it will satisfy x or y desire or “need.” This becomes ingrained in our understand of what “base subsistence” even means. Dave Ramsey has a great story about how, when he was going bankrupt, he absolutely refused to give up his Jaguar until the choice stopped being his. “But I need this!” we all say. “How can I live without this?”

I also want to approach one major objection to Financial Independence. People love to criticize it when they have kids. “Haha, yeah, I’d like to see you live like that once you have kids!” Clearly, kids cost millions of dollars, despite the fact that humans have successfully raised them for hundreds of thousands of years before the market economy existed.

When I was a child, I really wanted these flip-head Power Ranger action figures. You pressed the belt and the head flipped from mask to no-mask. I thought it was super cool. But my parents refused to buy me any for the longest time. Do you know what I did? I had these large Power Ranger marbles that stood-in for the action figures, took on personalities and went on adventures all the same. I wouldn’t have even cared if I hadn’t known the action figures existed (demonstration-effect theory, anyone?). Those marbles probably cost a few bucks compared to much more for even just one action figure. Spoiler: I did eventually receive one for my birthday, if I remember correctly.

I’ve always been fascinating when reading ethnographies to learn that many indigenous children grow up making mud or baked cow-manure figures to play out social roles they see around them. Cost $0 USD??? It sounded like they were happy. I guess you’d probably get a call from social services if you baked some cow patties and your neighbors saw your kids out playing with them, but while I’m joking I’m also not, and that’s just a reflection that society is not a perfect representation of reality, and cultural norms can be flawed. What you can derive from this is that your kids don’t need expensive masses of toys to be happy. We’ve shuffled them into an immaculate toy world where everything is about toys. It’s just sad.

Also for the record, toys are only one category of overspending on children, but I’m beginning to suspect I could fill a whole post with more. “You don’t have kids, you can’t talk!” No, but I’ve seen what parents and family members buy for kids and it’s proof that people can be idiots in their rush to give those kids a perfect consumerist childhood.

Going back to the pernicious lie, you also see people buying new $30,000 vehicles in order avoid a major $1500 vehicle repair and a day or two getting rides to and from work. Many believe car payments are essential to life. People nearing bankruptcy refuse to cancel their satellite TV service to save money. Having an iPhone is considered essential living “because of my fine taste.” I’m starting to feel negative so I’ll cut this off here, but this is a small sample of what happens.

We just are not very smart. We are so not smart that I’m planning to write about the sorts of not-smart things I have done with money.

Several months ago I was putting 12% of each paycheck into my 401k, and the stretch to 15% made me question if I could hit my other savings goals. Then I moved it to 20% and found out that I was fine and had plenty left over. So in January I will be taking the plunge and giving 30% a shot. It’s amazing how stupid I was being before, how much floating money I was leaving outside of any budget bucket, “just in case”. My goals is 50%. Currently I could reach 40%, but this would wipe out the money I plan to put monthly into my car maintenance savings and the money I would like to save for things like travel and visiting friends across the country. Most of it will be saved, but won’t be invested, per se. The easiest way to reach 50% is to get creative with living situations or find an apartment that costs less than my current (this is somewhat difficult in Denver).

Lest we feel too negative over the “it will always be difficult” maxim, there is another maxim that is also popular: “live below your means.” Many people do not like this because it forces you to assume responsibility for your actions. Yes, there is injustice. Yes, there are difficulties. Yes, some people have extreme circumstances. I hate feeling like I have to qualify everything all the time, but people hate you if you don’t. If you’re helpless, then ignore me. If you are in any control of your life, challenge yourself to live below your means. Build a budget. Understand where your money goes and why. Do you shop to feel better? Do you believe that car payments are a good thing? Are you paying people to do things you can do yourself? Do you use the things you have purchased in the past? Have you ever had buyer’s remorse? If so, how can you avoid that in the future?

If it feels I’m leaving this post incomplete, I am. I think I can really dig into more specifics by detailing my experiences and what I’ve seen other do. This applies to both good and bad.

The pernicious lie does not have to apply to you.



Assessing the True Cost of Things

Ignoring costs can lead to poor purchasing decisions.

One of my pet economic theories is that all items you can purchase can be analyzed from three cost perspectives: the initial cost, the inherent cost, and the extended cost. I’m certain I’ve picked this up subconsciously from real economists or economics classes, but it has proven quite useful in my purchasing decisions.


Initial Cost

The initial cost is typically the most obvious, and is the price or amount of money you pay for an item. If I’m buying a chair from the department store for $60 or a lawnmower from a neighbor for $100, the initial cost is $60 and $100 respectively. Initial costs are the only thing I record in my ledger when keeping track of my budget balances, and the great danger to initial costs is that they make it easy to ignore the other costs.

Inherent Cost

Inherent costs are those costs that are accrued in the course of utilizing or operating an item. The inherent cost of a car is typically the cost of gasoline, the inherent cost of an apartment is the cost of utilities, the inherent cost of Netflix is the price of internet service. You get the idea. Whatever relies upon the purchasing of an additional item or service is bound to an inherent cost. We are usually aware of inherent costs, but we tend not to calculate their magnitude over large periods of time. Because my commute is so long, I tend to budget around $150 per month for gasoline, but don’t want to think about how this will cost me $1,800 per year.

Extended Cost

Most pernicious and evasive is the extended cost of a thing.ย Extended costs are additional expenses that complement the item being purchased, and are often established by cultural norms, expectations, and habits. Most televisions or monitors either do not have speakers or come with “crappy” speakers built in. You could argue that manufacturers do this to encourage you to buy a sound bar or sound system to increase the audio quality of your television experience. Most of the people I know have a sound bar for their televisions, and this would be considered an extended cost to the purchase of a television. You may be very excited about your new 60″ television, but unless you have a sound bar, the idea may start to grow in your mind that your new television would really be better off with a nice new sound system to go with it. This is often how extended costs work.

For example, I have considered buying an XBox One S so that I could play games with two of my close friends who recently moved to different parts of the United States. Yes, Black Friday sales approach, but generally these consoles have cost $300, and I have been extremely leery of making this purchase for several reasons. First, although the console may “only” cost $300, the service to play online costs $60 per year. Moreover, in order to make the console more useful, I would want to buy additional controllers so that I could have friends over to play as well, and each controller typically costs an additional $60. Because I don’t like going through large numbers of batteries, I would probably want to purchase the rechargeable controller batteries, which cost around $25 each. So really, for a system with two controllers – and that certainly isn’t enough for having more friends over – I would be paying around $530 to get started*. Oh, and I forgot about the games. Ultimately, though, my long-distance friends don’t have the time or the access to play online, and all of these things have convinced me to set the desire aside completely. I also don’t play video games enough to justify the purchase in the first place. Many friends have decided it is worth it to them, and that is perfectly fine as long as you know what you are getting into.

Although I will be writing about houses and apartments another day, I would like to mention here that having too much space can generate extended costs. Who wants an empty room? Most people will add a guest bed, perhaps a few items of furniture, or perhaps paint the walls. Just having empty space tends to fight very strongly against our cultural expectations of interiors, and will often lead us into spending more money than we planned in order to satisfy those expectations in our minds.

I should perhaps also mention that time and opportunity cost play into these as well. The true cost of a book includes the time you spend reading it, and the true cost of pretty much anything non-essential could be the well-being of your car if you know it has issues and are trying to ignore them by purchasing something “fun”. Nothing is fun about paying for car repairs, but not doing so will cost you in added stress and strain later.

The moral of the story is, don’t just look at sticker price (the initial cost). Consider the ramifications your purchases will have in other areas of your life and across your wallet. When you understand these costs, you are positioning yourself to make better decisions with your money.


* I forgot that most consoles already come with one controller, so this total may be $470 instead, or maybe you decided to buy an additional controller without the rechargeable battery ๐Ÿ™‚