Author Topic: The overwhelming concept of fungibility (to me, anyway)  (Read 4236 times)

Ann

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The overwhelming concept of fungibility (to me, anyway)
« on: March 23, 2017, 11:36:01 AM »
Silly question: I was wondering how everyone else deals with the sometimes (to me) overwhelming concept of the fungibility of money?  Every. single. money decision I make affects the bottom line.   If I think about it too much it can lead to decision fatigue. 

Personally, I have a monthly budget for things like "household" and "gifts".  I actually transfer a set amount each month to an online account.  Then, when I purchase something, I just transfer the amount back to pay the credit card.  Is it more work?  Yes.  But I only have to decide once (or review on a regular basis) what I think I should spend on XYZ category.  Individual purchases are fine, as long as it is within budget.

Or do other Mustachians not stress about this at all?


steevven1

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #1 on: March 23, 2017, 11:47:58 AM »
The idea is to just grow your "badassity" as much as possible, and realize that the vast majority of purchasable items available simply won't make you happier at all in the long run. Once you realize this, it becomes to some extent "obvious" what is and isn't a good buy (hint: almost everything isn't). Figure out what's really important to you, and just ignore the rest. You'll be happier about it AND less stressed.

If you're stressing about each purchase decision, it probably just means you're tricking yourself into thinking that "things" which you don't yet own can provide more happiness than they actually can.

On the other hand, it's important to realize when you're "close enough" on your target FIRE date, financial goals, etc. When making significant policy changes in your remaining spending starts shedding only a month or two off your FIRE date, it's time to stop worrying and be content where you are. If you're debating about buying a new $30,000 car, however, you should probably keep agonizing over it until you get it right.

camillus

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #2 on: March 23, 2017, 12:39:38 PM »
Hi Ann,

How many accounts do you have? I wonder if you are stressed out because you are making things too complicated. It can be as simple as having one checking account and one credit card. I don't recommend using sub-accounts or different actual accounts for budgeting - that's way too complicated. You also don't have to send small payments to your credit card after each purchase - if that's what you're doing. Just set your card on autopay from your checking account. That should pay your statement balance in full once a month.

What I happen to do is use a budgeting tool called YNAB (You Need A Budget). My one checking account and my one credit card are synced with this software and the balances of my budget categories go up and down, with me checking and verifying everything.

If on the other hand, when you buy some milk you are stressed out that those dollars aren't going towards early retirement, this is what I suggest: Imagine you putting the milk back on the shelf and walking out of the store with those dollars in your pocket a frown on your face - only to get flattened by a truck.

Life is too short :-)

Ann

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #3 on: March 23, 2017, 02:14:41 PM »
Thanks, Camillus.  I like the reminder that life is short.  It's not the complication of multiple accounts that bothers me -- I love that part!  I very much a "splitter", not a "lumper".  It is putting putting effort into reducing money on goods for myself . . . but I spend even more than I save on gifts, charities, family vacations.  Which is what money is FOR!!  The money is aligning with my values (mostly, I'm not perfect).  I look at how much money I spend in a year as a single person and it is more than MMM as a family of 3. 

So . . . that is why I did the separate accounts.  I'll go ahead and accept I spend $X on gifts, $Y on charities and $Z on vacations.  Then when I do spend money on those things I don't have to think about it or feel bad.   The decision was already made.  I'm fooling myself, but a little cognitive dissonance is okay I guess.

catccc

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #4 on: March 23, 2017, 06:46:36 PM »
You'd really love YNAB.  You give every dollar a job.  You can change each dollar's job if you want or need to.  I used to have multiple savings accounts earmarked for various purposes, but with YNAB i have really streamlined the accounts.  The YNAB budget tells me what it is for, the accounts in YNAB tell me where it is.  Now, where it is matters much less than what it is for.  Highly recommend you look into it!  It's right up your alley with the way you like to get granular with your budget.  My family has 3 restaurant budgets- one for family dining out, one for DH (work lunches and outings with friends) and one for me.  I've found that getting really detailed helps me.  I don't want to stiff the family on a dinner out because my BFF chose a fancy place for her bday dinner.  That kind of thing.

matchewed

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #5 on: March 24, 2017, 05:28:27 AM »
Like others said, define your needs and wants. Everything else is what you reduce your spending on. If you want too much then learn to want other things or be more conscious about it.

teen persuasion

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #6 on: March 24, 2017, 06:27:36 AM »
I think everybody views money differently.  You have to figure out what works for you, regardless of the "right" way to do it (as if there is one right way).

When DH was a teacher, his employer switched from 26 even paychecks annually to 21 paychecks during the school year only, with 10 (or even 11) weeks w/o paychecks during vacation.  Our expenses tend to be lumpy thruout the year, too - property taxes in January, school taxes in September, oil prebuy in October, etc.  I figured out an annual budget, decided on an amount to transfer from each paycheck to savings to cover summer paycheck vacation, planned to transfer $ back for the big lumpy bills.

It turned out that all the transferring drove me crazy and made our income feel more scarce, rather than reassuring me that money would be there when we needed it.  I felt much more relaxed just letting the checking account balance float up and down, mostly ignoring it.  We don't check the balance and spend based on that, we just follow our usual spending patterns.  Over time I'm buying less and less stuff.  We've got more than enough now.  I'm also an optimizer, so I keep trying to drive costs down, find better deals on our required purchases, buy just a little less (or less often).

Figure out your favorite method, it's probably not my favorite method, but do what works for you.

FLBiker

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #7 on: March 24, 2017, 07:42:06 AM »
Personally, one of the intended benefits of living frugally is NOT having to worry about every little thing.  (Unfortunately, I still tend to worry more than I should, but less than I used to.)

Similarly, I don't personally have a budget.

There's a principle (which probably has a name) that I tend try to live by: in my experience, in many areas, it takes about 10% of the work to get 90% of the benefit.  To get up to 100% of the benefit, though, requires an additional 90% of work.  I remember first applying this to grades -- it was so easy to aim for A minuses in school, whereas it was maddening to always try to get 100%.  Sure, sometimes that meant I got B+s, but it also meant I sometimes got As. 

In other words, it's pretty easy to do something well (even very well, if it's something that you like and have aptitude for) but it's really hard to do something perfectly.  I try to settle for good, and not worry about perfect.  I have strong perfectionist tendencies, though, so it isn't always easy to let stuff go.  It's become clear to me, though, that it's much more fruitful to work on being able to let stuff go than it is to work on being more perfect.

When I find myself obsessing about a financial mistake (like when I cancelled my Verizon contract two weeks early and had to pay $80 or when DW opened a store credit card that may bump us up against Chase's 5/24 rule when I want to make my next application) I try to remind myself that we're doing GREAT.  We make OK money, live frugally, and make good decisions the vast majority of the time.

Ebrat

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #8 on: March 24, 2017, 07:59:25 AM »
There's a principle (which probably has a name) that I tend try to live by: in my experience, in many areas, it takes about 10% of the work to get 90% of the benefit.  To get up to 100% of the benefit, though, requires an additional 90% of work.  I remember first applying this to grades -- it was so easy to aim for A minuses in school, whereas it was maddening to always try to get 100%.  Sure, sometimes that meant I got B+s, but it also meant I sometimes got As. 

That's one of my favorite principles, though I'm not always great at living by it. It's called the Pareto Principle (or the 80/20 rule)

FLBiker

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #9 on: March 24, 2017, 08:13:15 AM »
There's a principle (which probably has a name) that I tend try to live by: in my experience, in many areas, it takes about 10% of the work to get 90% of the benefit.  To get up to 100% of the benefit, though, requires an additional 90% of work.  I remember first applying this to grades -- it was so easy to aim for A minuses in school, whereas it was maddening to always try to get 100%.  Sure, sometimes that meant I got B+s, but it also meant I sometimes got As. 

That's one of my favorite principles, though I'm not always great at living by it. It's called the Pareto Principle (or the 80/20 rule)

Thanks!  Although if I'd followed that principle in school, I guess I would have gotten B minuses... :)

Dicey

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #10 on: March 24, 2017, 09:18:33 AM »
Short answer: yes, use all the tricks at the beginning of the journey to get there as fast as possible. Once there (FIRE),  nah, you won't need any of them. Since the goal is for being FIRE to last a lot longer than getting to FIRE,  it's worth the effort.

BTW, is YNAB free?  If not, you can DIY with a simple excel spreadsheet or even the lowly pencil and paper.

Laura33

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #11 on: March 24, 2017, 10:10:49 AM »
There's a principle (which probably has a name) that I tend try to live by: in my experience, in many areas, it takes about 10% of the work to get 90% of the benefit.  To get up to 100% of the benefit, though, requires an additional 90% of work.  I remember first applying this to grades -- it was so easy to aim for A minuses in school, whereas it was maddening to always try to get 100%.  Sure, sometimes that meant I got B+s, but it also meant I sometimes got As. 

That's one of my favorite principles, though I'm not always great at living by it. It's called the Pareto Principle (or the 80/20 rule)

Yeah, we call it the "knee of the curve." 

I too struggle with trying to optimize everything:  I do not like spending money; therefore, when I do buy something, I intend for it to be permanent; therefore, I must make the best, most perfect choice before I spend the money.  Especially with big decisions, this leads to analysis paralysis, because something better is always going to come along at some point.  What tends to get lost is the value of having a "good enough" thing now, vs. the possibility of "better" at some undetermined time in the future.

Like FLBiker says, one of the benefits of living frugally and having savings is that it allows me to tell myself that I don't have to get it *exactly* right or make the most perfect/best decision in the history of the universe -- good enough is good enough.  E.g., I'm looking at a possible replacement car, and I've found one that appears to be a good deal for its age, equipment, mileage, etc.  Thinking about this car is literally keeping me up at night fretting about it -- my car is *just fine* (if ratty) and so I don't really need a different car (but boy I want it); is this the best use of my "want" dollars; should I just keep my old car and keep the $ in savings; should I focus on a different type of car; if I want this type of car is this the best deal; etc. etc. etc. ad infinitum.  Because if I'm going to drive this car for the next 15-20 years (until I am too old to drive a stick), boy, I'd better get it right.  [And the other way around, too: if I'm going to drop money on a "want," then I'd *better* drive it 15-20 years to prove it was worth it.]

But the reality is that the decision is not even remotely as fraught as my brain makes it out to be:  the deal is objectively a good deal, based on all available data; the car is used and so has already massively depreciated; and if I decide that it's not the right car in a couple of years, I can sell it and buy a different one.  So my downside risk is limited -- I probably won't even take much of a depreciation hit given the age of the car, but even if I do, we have sufficient assets that doing so will not affect our future plans in any way.  [Also note that I am using a car as an example, just because it is in my head; to me, a car really is a major purchase that merits significant thought, even if maybe not to the extent of "keeping me up at night."  But I do exactly this same kind of dithering over questions like "do I need another pair of black pants for the office, or are my two existing pairs in good enough shape to last me another year?"]  This is where spendypants DH is helpful, because he gets impatient with my analysis paralysis and focuses me in on the "good enough"; he reminds me that we will be fine even if I don't get everything 100% perfect every time.

kelvin

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #12 on: March 24, 2017, 01:07:18 PM »
There's some great stuff in this thread!

My rule of thumb is "start with what's cheap and easy, and work my way up". I started with a cheap bike from the local hardware store, and it was pretty terrible. In two summers I spent more money in replacement brake pads than the purchase price of the bike. When I went to replace it, I got a Dutch import. The steel frame is much more stable when carrying heavy loads, and the disk brakes are much safer in inclement weather. It's been my daily drive for 7 years (season permitting - damn you Canadian winter!).

Another thing I'm trying to do is time my purchases - spread them out so I don't just lose all my money at once. I'm not buying bookshelves until after I've finished cleaning out my closet. I'm not buying new shoes until after I've applied for another job in my field. I don't want to spend money just because it seems like a normal thing to do. The money I spend is a direct reward for actions that help me get ahead in life.



Ann

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #13 on: March 24, 2017, 01:26:13 PM »
Thanks for all the feedback!  I've thought about YNAB.  I do have a very detailed Excel sheet that I have used for the past 9 years.  Great tips! 

I'm not worried about this stuff all the time . . . just sometimes I get into my own head too much.

MrsPB

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #14 on: March 24, 2017, 05:48:50 PM »
Thank you, OP, for this thread! This is me. Every time we spend money, I feel some level of guilt if it's not deemed 'essential' and it's not a nice feeling. I do remind myself there needs to be balance in life and I need to enjoy it now as well as in the future. The value of a purchase is not solely in how little it affects my savings rate 😜! I do love YNAB as if makes me feel like I'm allowed to spend that $$ on that thing. I love this forum, but I have to remember not to compare myself too much. Sometimes it can feel like a competition to spend the least, no matter what.   I've learned so much here, but FI and RE are not the only goals I have in life, it's good to remind myself of that at times!

Simpli-Fi

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #15 on: March 24, 2017, 07:20:11 PM »
Minimum effort for maximum return.


JustGettingStarted1980

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #16 on: March 24, 2017, 07:24:52 PM »
There's some great stuff in this thread!

My rule of thumb is "start with what's cheap and easy, and work my way up". I started with a cheap bike from the local hardware store, and it was pretty terrible. In two summers I spent more money in replacement brake pads than the purchase price of the bike. When I went to replace it, I got a Dutch import. The steel frame is much more stable when carrying heavy loads, and the disk brakes are much safer in inclement weather. It's been my daily drive for 7 years (season permitting - damn you Canadian winter!).

Another thing I'm trying to do is time my purchases - spread them out so I don't just lose all my money at once. I'm not buying bookshelves until after I've finished cleaning out my closet. I'm not buying new shoes until after I've applied for another job in my field. I don't want to spend money just because it seems like a normal thing to do. The money I spend is a direct reward for actions that help me get ahead in life.

I think you make a very subtle point here. Would you have ever appreciated the Dutch import if you hadn't had the cheap bike to begin with?  This has to do with hedonic adaptation, but it also has to do with having a knowledge base evolved enough to appreciate what "better" actually means.

Hargrove

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #17 on: March 24, 2017, 10:18:01 PM »
The basic underpinning of any strategy for improving your life is this:

You need to figure out how to develop a sense that the new life is the fulfilling one. It won't work if you're miserable the entire time. You have to connect your sense of reward to the reward you really want. Your trouble sounds like your head thinks "saving good" and your heart has not given up on "spending makes happy."

Ok, how do you do fix that?

Figure out why. Really examine whether acquiring STUFF makes you happy. Look around your house. Didn't all that stuff make you happy at some point? Is it not doing it anymore (in which case it didn't really work) or is it STILL doing it (in which case you don't need more stuff)? If you're miserable the entire time you're saving money, it's a lot harder. If instead money is a score for how kickass you are at buying your own future as a present for yourself, spending money on little things starts to seem comical and doesn't create decision fatigue.

Mustachians learn that saving money is the reward, and they teach themselves to get their boost when they up their savings rates. They track their savings and watch it grow and imagine the freedom they're on the road to buying. They simply ask if a purchase will increase their happiness by the value of the purchase. I have like ten billion hours of things to watch on Netflix for 10 bucks - will a thousand additional cable channels improve my life? Haha no, of course not. But NOW where do I mail my 100 dollars a month? I guess I'll save it like a total badass. Suck it Comcast.

catccc

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #18 on: March 27, 2017, 08:51:14 AM »
YNAB is not free, unfortunately.  I have a perpetual license for the classic version, and I probably should be researching a replacement in the next year or so...  The newer subscription version is $50/year.  I think I'd get it for $45 a year, but I really don't want to pay anything.

I know there are other similar apps out there- mvelopes, every dollar, etc... I haven't gotten a chance to give them a try yet, though.

kelvin

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #19 on: March 27, 2017, 09:15:09 AM »
There's some great stuff in this thread!

My rule of thumb is "start with what's cheap and easy, and work my way up". I started with a cheap bike from the local hardware store, and it was pretty terrible. In two summers I spent more money in replacement brake pads than the purchase price of the bike. When I went to replace it, I got a Dutch import. The steel frame is much more stable when carrying heavy loads, and the disk brakes are much safer in inclement weather. It's been my daily drive for 7 years (season permitting - damn you Canadian winter!).

Another thing I'm trying to do is time my purchases - spread them out so I don't just lose all my money at once. I'm not buying bookshelves until after I've finished cleaning out my closet. I'm not buying new shoes until after I've applied for another job in my field. I don't want to spend money just because it seems like a normal thing to do. The money I spend is a direct reward for actions that help me get ahead in life.

I think you make a very subtle point here. Would you have ever appreciated the Dutch import if you hadn't had the cheap bike to begin with?  This has to do with hedonic adaptation, but it also has to do with having a knowledge base evolved enough to appreciate what "better" actually means.

Exactly. The cheap bike taught me that I like biking everyday, and I will do it, even if I hate the bike. Good money can be spent on an existing daily routine, but if I'm interested in developing a new routine, I'd better start with the cheapest, easiest option. I didn't want to pay for a good bike just to have it rust on my balcony.

Simpli-Fi

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #20 on: March 27, 2017, 10:47:48 AM »
  The newer subscription version is $50/year.  I think I'd get it for $45 a year
an extra $0.0136 / day isn't worth keeping your same budget software?  I don't use any software to track so I don't know, but I did find a penny yesterday and I picked it up.


Joel

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #21 on: March 27, 2017, 11:27:48 AM »
  The newer subscription version is $50/year.  I think I'd get it for $45 a year
an extra $0.0136 / day isn't worth keeping your same budget software?  I don't use any software to track so I don't know, but I did find a penny yesterday and I picked it up.



It's too much to pay for the new version of YNAB that is watered down and a lot less functional than the old version.

My recommendation is to develop a budget and provide yourself with some ability to spend on things that are important to you. That's what life is about, not completely avoiding spending money altogether.

Ebrat

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #22 on: March 27, 2017, 01:31:07 PM »
  The newer subscription version is $50/year.  I think I'd get it for $45 a year
an extra $0.0136 / day isn't worth keeping your same budget software?  I don't use any software to track so I don't know, but I did find a penny yesterday and I picked it up.

I've never used the old version, but I happily pay ~$1/week for the new version. It saves me much more than that.

galliver

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Re: The overwhelming concept of fungibility (to me, anyway)
« Reply #23 on: March 27, 2017, 04:57:45 PM »
Silly question: I was wondering how everyone else deals with the sometimes (to me) overwhelming concept of the fungibility of money?  Every. single. money decision I make affects the bottom line.   If I think about it too much it can lead to decision fatigue. 

Personally, I have a monthly budget for things like "household" and "gifts".  I actually transfer a set amount each month to an online account.  Then, when I purchase something, I just transfer the amount back to pay the credit card.  Is it more work?  Yes.  But I only have to decide once (or review on a regular basis) what I think I should spend on XYZ category.  Individual purchases are fine, as long as it is within budget.

Or do other Mustachians not stress about this at all?

I look at orders of magnitude. Large-scale decisions like where to live (rent+commute+utility costs), whether to (as a rule) cook at home or get takeout, where to shop (thrift store, discount store, department store, boutique?), how to have fun (hiking, clubbing, boating/sailing?) will determine a large part of the scale of your spending...and this isn't to say that any of these choices are automatically wrong...maybe living in a more expensive area is important if you want good schools for your kid(s), and that also creates a longer commute. Maybe your expensive hobby is something you have a lot of talent for and is very fulfilling and your reason to get up every morning. But, those are big decisions that will have a big effect on the bottom line. But once you lay that out, you're down to everyday decisions that are generally less impactful, at least each on their own. A restaurant meal will cost tens of dollars, where a home-cooked meal will cost dollars...you might take it from $5 to $3, but that's a smaller gain than the $10 you save (daily! which=$3650 annually!) by deciding to cook at home in the first place. So if you end up staring at the grocery store shelf deliberating if you should get your favorite pasta sauce or the one that's on sale but you think is weird, just get the good sauce and move on as you do the math of $1.43/$XX,XXX of your annual income in your head.

Of course, it's very easy to take that reasoning to the "it's just $10" point of justifying every little thing and upsell. So I think it's important to combine with other commonsense principles like "can I wait [to eat/drink] until I get home?" "do I already have a working version of X?" "Is X in line with my values?" "Where will I put it?" "How much will I *actually* use it?" "Is the extra $$ of deluxe model worth the improvement over the basic model?" And so forth.