Why I think My young non-mustachian friends spend too much money

[Crusader]

Because they can, it is their money, therefore theirs to do as they want. They are college aged, finally making a fair amount of money (as in $15+ a hour). This probably been discussed before, but I am just dumping my thoughts on this. Like other people when they finally have their money to spend, not parents money with strings attached or irregular income. The income is steady and theirs to do as they wish.

They have so many desires and habits that "true adults" have. Such as eating out most if not all meals. Because cooking is for poor people and restaurant food is better right? They finance a new car or truck because I must have my own car. Not the crappy hand me down or used car of my parents. Then there are all the items and "toys" they buy. New computer, maybe a motorcycle, pets, and self funded trips alone. 

This all sounds typical, but it is the idea of a young person realizing" I earned this money, it is mine with no strings attached on what to spend!" is perception/idea that came across to me. For the most part when MMM talks about being spendy it is mostly about it keeping up with the Jones's or the better life for their kids.

In the case of my friends, it is a combination of independence, freedom, and possibly being an adult as opposed to what I said above. I do not know if anyone of this age group, co-workers, have kids, or what other relation can concur with this or see this same reason.

Correct me if this has already been discussed and point me to it. This is just something that came to me after hanging with my friends for two years and seeing the continuing drift of how we handle our personal finances.

[MisterTwoForty]

As always you are free to spend your money as you wish.  Most of us had a few spendy years and eventually found our way.

Its good to experience the world some and scale back from there. 

[aceyou]

I think you summed it up pretty well for youngsters.  A few things I'd add. 

Recurring bills.  You mentioned a lot of one time purchased, but things like the $80/month cable bill that gets direct deposited, the $10/month for netflix, the $5/month or whatever for pandora/spotify.  These things add up in a hurry. 

Status.  When you are young and looking for a partner, kids feel pressured to look at least as successful/eligible as their peers.  You can't see what the other guys 401k looks like, but you can see what their car/apartment/clothes look like.  You think to yourself, I don't want not buying the latest trends to be the reason I don't find the right person.  Of course as we get older it's easy to see that this is foolish thinking, but it doesn't seem that way at the time for most kids. 

[Waylander]

A 20-something fresh-out-of-uni spendypants? That was me. If you've embraced frugality at a young age, I envy you. I wish I had done the same. But I've got the spending out of my system and since mid-2015 I've made pretty decent strides in the personal finance area of my life.

The reasons I spent without thinking were simple (and very common):

1. It was my first taste of financial freedom and I could afford anything I wanted.

2. I was burnt out at work. I earned a lot and the company I was with equated that to working me and my peers hard. I had to miss a lot of reunion dinners and family holidays. I was in the office over weekends and past 2, 3 am on weekdays. I remember crying in the office numerous times out of anger and frustration that I could not spend time with my family. 

3. My peers at work, with whom I spent most of my days with, were all young 20+ somethings as well and spent their money on branded bags, shoes, dresses. I didn't.

The combination of the 3 factors above meant that I ended up spending a lot of money on food and drink. It was totes okay because hey, at least I'm not spending as much as my peers! I'm not living paycheck to paycheck!

I never packed lunches or dinners. I "didn't have the time". I always ate out or got food delivered to the office because I "deserved it / a break" + it was convenient. If you don't keep count (and I didn't), each $15-25 meal added up to embarrassing amounts of money -- but that didn't bother me because I would always have money in the bank at the end of the month. I was constantly kept too tired from work to think about the long-term, much less plan for it. I also drank a LOT. Downing multiple $25 cocktails in a night and/or a series of pints was not uncommon.

It only stopped when I changed my job and found myself in a much healthier working environment. My colleagues were sensible (and a lot older than me) and a lot of them had dependents and so were generally much more responsible financially. I made the effort to track my spending and found ways in which I could make cuts. I started making more of an effort to get healthier so started going to the gym and packing my own lunches.

Then someone recommended MMM and the blog (and you guys) have given me extra motivation to FIRE. It's great reading all your stories and tips.

So yeah. Maybe give your friends some time. I think getting the spending out of your system is pretty common. I'm lucky I started getting smart at a relatively young age so I can start catching up. :-)

All the best for your journey!

[MustachianKentuckian]

This was me.  Despite having gone to school to be an accountant, I failed to actually put pen to paper to plan where that new "big" salary was going.  Took me over a year to figure out (no payments for 12 months!) and by then really it was too late.  I was in a hole that would take me years to climb out of, not to mention I had established some bad spending habits.  Wish I had never even gone down that route, but thankfully I  got my act together eventually!

[czr]

I think being frugal at an early age is very difficult because you have everything going against you: consumer advertising all over the place, peer pressure, being surrounded by nice things, and with some money in your pocket, you feel like you are entitled to it. Also, wanting a mate also leads to this. It's part of nature. You want to see the fancy things and have the appearance that you can take care of someone and the good looking people are wearing nice clothes and nice cars.When people get older they start to realize what is really important and priorities change. I think balance is important but you also have to take things into perspective especially as you get older. Some people make $31k ($15/hr) a year and spend all of it: $31k. Other people make $200k spend $170k  and they will still have saved $30k. Others can make $50k and spend only $20k, so same amount saved annually. Point is people have different goals and as long as you have written goals and income grows and you keep your spending % low and consistent and your savings is in alignment with those goals, you should be fine.

You are well ahead of the game at this point but pay attention to the big 3 expenses: housing, cars, and spouse.

[Milizard]

Define spending too much money.  I do agree with the gist of your argument, but at a certain point, spending too much is very subjective.

[MoneyCat]

When I was in my 20s, I spent like a drunken sailor in port because I grew up in poverty and I felt that I "deserved" all the things that my high school classmates had enjoyed. It's weird because I spent so much on clothes that I'm still bringing out some of the clothes over a decade later because they never got used. (That was actually helpful when I recently lost a lot of weight. Those old spendypants clothes I never wore were the only clothes I had that were the right size.)

[Crusader]

Define spending too much money.  I do agree with the gist of your argument, but at a certain point, spending too much is very subjective.

Just in time income to cover the credit card bill. They do keep a close look at how much they earn, and just spend enough under it on the credit card. That way the income can keep it zeroed out. Fortunately no consumer debt except their cars, but little to no savings.

[Digital Dogma]

My first and final thought after reading the OP is this - Your young friends spend too much money because they have easy access to credit, allowing them to spend more than they have at any given moment.

If they had to get a loan from Tony down the street (and pay up by next Monday or else,) they would probably not spend as extravagantly.

[chemistk]

I have to concur with the OP - though it's not something that is true of every "new adult".

I spent about 6 months like that once I got my first "big" paycheck, quickly realized that the lifestyle was going to go nowhere fast. After I stumbled across MMM, I really got hooked - haven't looked back since.

It's not easy to find frugal young adults for the very reason they are frugal - they tend to go against what others their age are doing. Meanwhile their peers get all the press and attention.

[Kaspian]

Wish I had your brains at your age.  I was a minimalist punk rocker but still managed to blow all my money on music, beer, bars, takeout, smokes, and treating moocher friends.  I'd be FIRE by now if I'd been smart between 22 and 30.  :/

[Milizard]

Define spending too much money.  I do agree with the gist of your argument, but at a certain point, spending too much is very subjective.

Just in time income to cover the credit card bill. They do keep a close look at how much they earn, and just spend enough under it on the credit card. That way the income can keep it zeroed out. Fortunately no consumer debt except their cars, but little to no savings.

Ah, sounds like they need to at least go the YNAB way--living on last month's income.  That's probably where I'd start with them, if you're trying to help them see the light a little.

[human]

I was living on my own at 18, not that young for some on here I think. I was making less than 14k a year working at McDonald's. At 18 my Dad moved out and in with his girlfriend, my brother and I lived together. This was just the practical way of doing it, my brother and I were thinking of getting our own place as the three of us were in a two bedroom.

The gas for hot water had been off for about 6 months and the power for a week right about when we started working, my brother and I paid off the unpaid bills and were in school and working almost full time at 6.85 an hour. We managed to pay off the bills, but now that we were in control of our own money you better believe we partied. Part of the reason for the partying lay in the uncertainty as to what kind of life this was leading to, if I was gonna be a minimum wage bum I was just gonna drink away my big 200 bucks a week.

Two years out of University and just waiting tables I finally got my first office job at 25 making 50k a year. I paid off student loans slowly over 10 years and partied and traveled. I didn't save a cent and had a balance of a couple k on my credit card every month. I had a pension and not a care in the world.

Part of it is growing up with no money and wanting to blow it all, part of it just being young and reckless. Not a big mystery really. That civil servant job made me better off than most because at least I was paying into a pretty secure pension.

[Boganvillia]

Young people are still carving out their identities, and marketers know it, so the young are herded into using consumer goods to define their personal identity and to project it to their peers.

By middle age, it is far more likely that we know who we are, and we (oughta) know that we are not our stuff.

Young people are also not as ornery, resistant, and canny about marketing messages. Sure, they learn about advertising at school, and how to unpack media messages ... but despite all the theoretical knowledge, it's still somehow irresistably fun to be part of popular culture, to be a participant, and to leap in with everyone else.

Older people have had the opportunity to see first-hand their peers making a fortune out of being on the other side of these transactions: BEING the marketer, being the retailer - and have a much more clear-eyed view of the transience of fads versus the growth of capital.

Young people have not seen whole stories play out, and are rosier about their own prospects, because they think they have all the time in the world and would be shocked to learn that it is possible (indeed preferable) that they too will soon age, their bodies perish.

Older people are more likely to profit by the experience of others because the cumulative lifetime effects of daily decisions are there staring them in the face when they go to high school reunions. People who do not wise up get stuck going around in circles.

Young people are less likely to have dependants, with their prosaic drains on one's wallet - such as school excursions - which only hardens to resolve of marketers to target the young and their disposable income ever more ruthlessly.

Finally: there is no fool like an old fool. Some people remain spendypants well into their 60s and 70s. I am thinking of a woman in her 50s who has a PhD in marketing and yet routinely shops for grocery items at one of the fancypants expensive supermarkets. And most people on this forum know sundry guys and gals in their 50s/60s/70s who do this kinda thing.

[rocketpj]

Another aspect of youth is the desperate desire to 'fit in' and/or feel and appear attractive.  We have a multibillion dollar advertising industry that is basically all about making product x = sexy and independent.  It's a big industry because it works, really well.

It is hard to get out of that mindset without conscious (and constant) effort.  It is hard, as a young person without a tremendous amount of confidence, to be the friend or coworker with the crappy car or that isn't willing to drop a lot of cash on a fancy restaurant meal or bar tab.  To not buy a round (or not go out at all). 

The fact is that most young people are doing exactly that, and in many cases having a good time doing it.  They haven't grown tired of their jobs yet, they aren't raising kids, they have what feels like tremendous cash flow. 

It's hard to break out of that, most of us just grow out of it eventually. 

[Chris22]

For me, it was a combination of two things.  One, I basically had nothing and was starting from scratch; I had some clothes and a laptop and not much else, I needed to start up an apartment.  That meant buying stuff, and some of it was relatively necessary (ie, you have to eat out every meal until you own some pots and pans to cook with).  I had some parental help with cast offs, but not much, plus I moved halfway across the country so it was what could I cram in my car (not a sofa or mattress).  The second was, I was coming off of 22 years of not really ever being able to afford much of anything; I didn't want for much, but there were certain things I always wanted to own that I never had the means to before, such as a decent TV, a nice mountain bike, a good stereo, etc.  Nothing super extravagant in the grand scheme of things, but a few hundred here and a few hundred there adds up fast. Once I got some of that out of my system, and had gotten most of my basic "needs" taken care of (no you don't NEED a sofa but it's nice to have a place to sit...) the spending calmed down, but it did take a big bit out of my income to get myself "set up".

[mm1970]

I did pretty well from the start.  I was 22, bought my first car, didn't have much.  I think I had a few cast-off pots, pans, plates.  I bought cheap Kmart silverware.

I rented a cold basement room with roommates.  I did not need a TV or any other furniture because it was there (though the 3 of us went in on a couch from a garage sale).

The person vacating the room was buying a new mattress and wanted to sell me her older mattress and box spring.  One of the other two roommates (a sorority sister a year older than me), told me that if I said no, she was probably too lazy to move it.  Which was the case.  The mattress had a big dip in the middle because she was heavy and it was old.  The drafty basement room had some shelves.  So...I didn't even buy a dresser.

I did buy a car though.  Used Escort.

[runningthroughFIRE]

For my peers, I mainly see large spending as an effort to live "the good life", whatever that may be to them.  Most of my friends are mid 20s and are either accounting/finance types, engineers, or IT folks.  There's as many reasons to spend as there are personalities, but the spending I would consider excessive can usually be summed up by the person having a concept in their minds of what a 20-something man/woman/engineer/autobot/CPA should be.  They're reaching the goals of some of their most concrete plans (degree and "big kid" job for my peergroup), and in the absence of more clear goals to work towards they're enjoying a little R&R while they recalibrate. 

It's also quite a shock to suddenly go from low to high wages.  A former roommate of mine jumped from making $9.50/hour for 7 hours a week in college to making ~75K/year as an engineer.  Now they're making more money than they know what to do with, and spending it doesn't seem like a problem because they don't have a good grasp of what you can do with money other than just spend it.  If someone handed you a literal firehose and cranked it up with no training, would you be able to handle it right away without spewing a ton of wasted water everywhere?  Same idea with some people and post-graduation incomes.

Mainly, I don't think that young people tend to see the value in saving.  If they thought that early retirement was an achievable and desireable goal, they might consider it.  Most of my friends lose their minds when you put a dollar sign (or your preferred currency symbol) in front of numbers, and those that keep their cool don't always want that for themselves.  Work is still fun for many younger people:  you're learning a lot, you have tons of energy to burn on difficult projects, you're meeting new and exciting people, and you're earning small but numerous promotions.  Why would you retire* and stop doing something you like?

*I understand that this isn't retirement as we know it, but fighting the Retirement Police is tiresome

[Kaspian]

Because they can, it is their money, therefore theirs to do as they want. They are college aged, finally making a fair amount of money (as in $15+ a hour).

I'm so surprised this has happened.  Any Generation Xer will tell you we were all flat-assed broke at college age.  It was a damn rare thing when someone was able to scrape $100 together for a pair of Doc Martens or a used guitar.  A trip somewhere tropical?!  That didn't even exist--nobody ever did that.  You might as well propose a trip to Mars.

Eating out = chip stand or maybe Burger King if you were feeling wealthy.

[LAL]

Nowadays people can spend extravagantly because they live at home and have no bills.

[Crusader]

Nowadays people can spend extravagantly because they live at home and have no bills.

I kind of fall into that honestly. I am 24 in the DC metro area and I live at home. Even then with the options of spending extravagantly, living independently, and saving you can only pick two. I picked "spending extravagantly" and saving. If you consider spending extravagantly meaning at its highest being 60% of my monthly income. I have had some minor lifestyle inflation from changing jobs, but percentage and hard money wise I am much farther ahead.

[elaine amj]

I was pretty sensible with money, even when I was young. Still, I remember my college days. I worked part time and made enough to cover my living expenses. I remember consciously deciding that there was little point to saving at that time - I was still so young. I could think about saving seriously once I was graduated. One summer, I scored a great paid internship and made "real" money for the first time. It was insane how much money disappeared that summer. I was finally able to treat my friends for meals, go out a lot, and just generally have a good time. Feeling flush, I also took a big chunk (for me anyway!) of money and invested it into a small start-up business. Anyway, business eventually failed a few years later (the writing was on the wall from the start!) and all the spare change was frittered away on fun. I married DH shortly afterwards and I clearly remember draining my bank account of the last few hundred dollars so I could pay for his wedding ring. On the good side, DH had been working and saving for some years so we were able to start our lives together comfortably, even if I did come to him with an empty bank account!

So for me, it was not having a clear view of the future or anything specific to save my money towards. I don't entirely regret it but am very glad it lasted just a few short years.

[mm1970]

For my peers, I mainly see large spending as an effort to live "the good life", whatever that may be to them.  Most of my friends are mid 20s and are either accounting/finance types, engineers, or IT folks.  There's as many reasons to spend as there are personalities, but the spending I would consider excessive can usually be summed up by the person having a concept in their minds of what a 20-something man/woman/engineer/autobot/CPA should be.  They're reaching the goals of some of their most concrete plans (degree and "big kid" job for my peergroup), and in the absence of more clear goals to work towards they're enjoying a little R&R while they recalibrate. 

It's also quite a shock to suddenly go from low to high wages.  A former roommate of mine jumped from making $9.50/hour for 7 hours a week in college to making ~75K/year as an engineer.  Now they're making more money than they know what to do with, and spending it doesn't seem like a problem because they don't have a good grasp of what you can do with money other than just spend it.  If someone handed you a literal firehose and cranked it up with no training, would you be able to handle it right away without spewing a ton of wasted water everywhere?  Same idea with some people and post-graduation incomes.

Mainly, I don't think that young people tend to see the value in saving.  If they thought that early retirement was an achievable and desireable goal, they might consider it.  Most of my friends lose their minds when you put a dollar sign (or your preferred currency symbol) in front of numbers, and those that keep their cool don't always want that for themselves.  Work is still fun for many younger people:  you're learning a lot, you have tons of energy to burn on difficult projects, you're meeting new and exciting people, and you're earning small but numerous promotions.  Why would you retire* and stop doing something you like?

*I understand that this isn't retirement as we know it, but fighting the Retirement Police is tiresome

There's some good stuff here.

It never occurred to me to try and get my own place back then, because I'd never lived alone.  Many of my friends got their own apartments.

It never occurred to me to pay the big bucks ($250/yr) for the fancy gym (subsidized by the Navy), when I could join the community center for $45 a year.

My thoughts were paying off my car and my student loans.  Because I grew up poor and didn't like debt.  I have my college buddy to thank for the idea of savings.  My family didn't have retirement accounts or anything like that (just SS).  So he introduced me to USPA/IRA (a military-related group for retirement planning).  The bad side: they sold me on front-loaded mutual funds and whole life insurance.  The good side: they got me saving, thinking about retirement, got me an IRA, taught me how to pay myself first - all things I never was going to get from my family.  And after a number of years, we wised up and moved our money out.

[mathlete]

Yeah, the best part of being an adult is that no one can tell you what to do.

It is probably good for everyone to have the chance to determine whether (and in what amounts) spending money makes them happy.

[Gondolin]

man/woman/engineer/autobot/CPA should...

Do you know a lot of young transformers? :P

Seriously, though +1 to everything you said. Many of my peers are recalibrating while they figure out what they really want to do with their lives now that they've got their degree, a job and transitioned into adulthood.