Author Topic: Why You Will Never Be Rich Cutting Your Budget  (Read 12227 times)

Tim

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Why You Will Never Be Rich Cutting Your Budget
« on: July 10, 2012, 09:03:51 AM »
Got a kick out of this article:

http://www.budgetsaresexy.com/2011/09/cant-get-rich-cutting-your-budget/

The authoritative tone brings a smile to my face.

... I read about how cutting cable will cause my spending to burgeon in other areas but in reality, I start maintaining what I own, going outside more often, and learning new things.

... I read about how I should work more to close the gap between what I spend and what I earn (!!!!), but since I make far more than I spend, I just can't get motivated to look for extra work.

I've been reading PF blogs for about five years now, and lately there's been this movement of making more money to afford your lifestyle. There's nothing wrong with improving yourself, but how is this going to help anyone in the long run? If you spend beyond your means now, more money is not going to solve the problem.

arebelspy

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #1 on: July 10, 2012, 10:25:12 AM »
The author is just ridiculous.  He talks about cutting cable, and says "But, what about the sacrifices to the quality of life that you are making? Is it worth it?"

...when virtually everyone who has done it has said quality of life has gone UP since cutting cable.  If not having 200+ channels of junk would make your life miserable, maybe you need to reevaluate things.

I had to stop reading at that point.
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grantmeaname

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #2 on: July 10, 2012, 10:28:28 AM »
I thought that was hilarious too. Even better, apparently the fact that the author took his kids to the aquarium, baseball games, and museums instead of plopping them down in front of the TV wasn't good enough to make up for the decrease in his quality of life that cutting the TV in the first place caused.

mechanic baird

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #3 on: July 10, 2012, 10:33:29 AM »
I could barely read that article.. It sucks big time.. He's got everything wrong..
Why do you have to fill your nil time with expensive activiteis. What about playing kick ball with your kids in the back yard? We find so much fun just BBQing chicken legs in the backyard and hose each other down on a hot summer day. It's such a quality family time. I just don't get what this person is trying to say.. Pure sadness..

darkelenchus

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #4 on: July 10, 2012, 10:48:38 AM »
J Money be trollin' ...

Jamesqf

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #5 on: July 10, 2012, 03:41:29 PM »
Not to mention equating wealth with living in a McMansion in a neighborhood of McMansions.  As one of the comments points out, McMansions (as opposed to real mansions) are typically a 5000 sq ft house on a 10,000 sq ft lot, built of cheap materials but with pretentious-looking architectural details.  They are designed for people (usually those living beyond their means) who hope to appear rich without knowing what true wealth actually is.  The really rich folks - and there are a good number hereabouts - may or may not have live in a mansion, but the house they do own is set on acres of land.

JamesAt15

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #6 on: July 10, 2012, 06:45:12 PM »
Quote
EDITORíS NOTE:  I like this article cuz it reminds us...

"Cuz"? Really? Mr. "Editor"?

sideways8

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #7 on: July 10, 2012, 08:11:50 PM »
I can think of several things my parents did with us as kids that were low cost or free that were really fun and made for some very happy memories. That guy's just a derp.

menorman

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #8 on: July 10, 2012, 08:55:15 PM »
Oh boy, where do we start? I see several glaring errors. I'll go bottom to top. First, he brings up McMansions and somehow equates them to millionaires. Apparently he's never laid hands on a copy of The Millionaire Next Door, otherwise he'd know that people living in McMansions are usually those with high earnings, but low (to nil) net worth. Translation: they usually aren't the creators/inventors he's desperately trying to make them out to be but rather people who happen to get paid a lot more than everyone else so the bank lets them have a large mortgage. (At the top of housing bubble, banks were throwing out mortgage money at 10x people's salary, so even if they've pulled back to a "conservative" 5x now, that still puts $200k+ in the $1mn shopping territory.) Moving on to the income argument, I still can't agree 100% here either. While yes, increasing income won't hurt a bottom line at all, his advice about it will. Essentially, he's saying to hell with the budget, just earn more to solve all your problems. But without taking time to analyze the budget and cut expenses where possible, the higher income will lead to more expenditures that expand to consume the increased income. Then of course, there's his whole line about cutting cable won't save money then writing the whole article on cable. Cutting cable might not be feasible (although if you did go ahead and get the second job to boost income, when will you have time to watch all that cable anyway? Might as well ditch it anyway...), but there're plenty other things that can be cut by many. Eat out less, pare back the cell phone data package, bike to work/store, etc. All those actions separately might seem insignificant, but will still add up quite a bit. Then I definitely think he went into full retard mode by complaining that he then had to (gasp!) take his kids out to do stuff to keep them entertained. I think I can guarantee that as life moves along, the trip to the aquarium will be far more memorable than countless hours spent flipping channels. Besides, when was the last time anyone went to say a graduation party and saw a slideshow of the whole family sitting around watching one "favorite show" after another?

Will

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #9 on: July 10, 2012, 09:13:01 PM »
And he says this:

"You will never become rich by simply cutting expenses from your budget. Eventually there will be a time when you cannot cut anymore. Something will have to give."

Really?  Seems someone needs to start reading MMM!

darkelenchus

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #10 on: July 11, 2012, 09:01:12 AM »
And he says this:

"You will never become rich by simply cutting expenses from your budget. Eventually there will be a time when you cannot cut anymore. Something will have to give."

Well, this is technically true. Becoming rich can't come from cutting expenses alone, if "getting rich" means attaining financial independence, and financial independence is defined as the point where your investment income exceeds your expenses. To become rich, you've got to increase your savings rate.

grantmeaname

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #11 on: July 11, 2012, 09:08:27 AM »
Isn't it only true if you cut your income every time you cut your expenses? I mean, the only time "something has to give" is if you're making the same amount you're spending. It makes me think he's lying and he's never tried actually cutting his expenses, so he just fundamentally doesn't understand what would happen if he tried it.

darkelenchus

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #12 on: July 11, 2012, 10:18:49 AM »
Isn't it only true if you cut your income every time you cut your expenses? I mean, the only time "something has to give" is if you're making the same amount you're spending. It makes me think he's lying and he's never tried actually cutting his expenses, so he just fundamentally doesn't understand what would happen if he tried it.

Actually, we could go a step further than that. You'd have to cut your income such that at always matched your expenses, giving you a perpetual savings rate of 0%. Even if your income dropped, you could still have a positive savings rate that makes it possible to become rich within a human lifespan.

It's still true, though, that cutting expenses is only half the equation. You have to take income into account as well, since both income and expenses determine your savings rate, and savings rate determines whether and when you'll become rich. The biggest flaw in his position is that he's focusing on income alone. "You will never become rich by simply raising your income" is just as true.

Even though he acts as if increasing income is the only factor, there's still something to be said about putting your efforts in to that once you've reached the point where cutting expenses provides diminishing returns.

grantmeaname

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #13 on: July 11, 2012, 10:23:22 AM »
I totally agree that increasing income can be valuable, especially after your expenses are relatively low. It just seems totally disingenuous for him to suggest that cutting expenses can't work, because he's clearly never tried it.

darkelenchus

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #14 on: July 11, 2012, 10:57:32 AM »
It just seems totally disingenuous for him to suggest that cutting expenses can't work, because he's clearly never tried it.

Maybe he tried, sucked at it, and didn't want to admit it. :-)

MrSaturday

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #15 on: July 11, 2012, 02:25:43 PM »
Quote
But, adding income is an easy way to make up the ever widening gap between what you spend and what you earn...

Anyone else catch that?  He needs to make more money to decrease the gap between spending and earnings.  He's operating on a deficit lifestyle.

This reminds me of the Onion debt article.

skyrefuge

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #16 on: July 11, 2012, 03:05:37 PM »
J Money be trollin' ...

Yeah, I've never read that blog, but my assumption was that it was a fake/troll/satire post.  Was it not?

Tim

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #17 on: July 12, 2012, 07:20:45 AM »
J Money be trollin' ...

Yeah, I've never read that blog, but my assumption was that it was a fake/troll/satire post.  Was it not?

Sadly, it's quite real. Apparently the only way to get readers to your blog these days is to be polarizing. Whether your information is helpful or not is secondary. Even more disturbing is that the author claims to have a masters degree in Finance and is working on becoming a Personal Finance Planner. What could possibly go wrong? :D


Guitarist

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #18 on: July 12, 2012, 10:57:38 AM »
Quote
I love having two hundred high definition channels from my cable television company. And, the way I see it is that they are actually saving me money in the long run. Many personal finance blogs throw out the easy fix of cutting back on your cable television programming as a way to save money from your tight budget, and that is absolutely true. Dropping from 200 channels paying $150 per month down to the bare bones basic package could save your hundreds of dollars per year.

But, what about the sacrifices to the quality of life that you are making? Is it worth it? Will you fill the void of less television channels with something else, maybe something even more expensive? I found out when I dropped my cable package a few months ago that I got incredible bored sitting at home, reading books, and simply watching old DVDs. I was saving a fortune initially, but then I started to go out to the movie theater to see more movies or buying new releases on DVD. Taking my two children to the movies with me quickly racked up to $40 a trip to the local movie theater if you include tickets, popcorn, and drinks. And, the movie theater wasnít the only suck on my wallet.

Now with all of our free time thanks to the elimination of our cable television, my family and I had more time on our hands to explore our city, visit the aquarium, and see a baseball game. You do not have to be a rocket scientist to realize that these activities quickly started costing me more money than I was actually saving by ditching my cable channels.

What sort of 1984-esque doublespeak is this? At what point did less television equate to a LOWER quality of life?
I honestly think it's possible to make humans, as a whole, to believe whatever you tell them if you have enough patience to wait a generation or two. I have zero faith in our species as a whole, or at least for the first world. I am just glad that I don't spend all my time worrying about it.

strider3700

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #19 on: July 12, 2012, 10:53:34 PM »
perhaps his readers will fill the time freed up watching high end cable tv  watching soap operas on basic tv.  they'll become hopelessly addicted to dorito's and icecream while sitting on their butts watching the shows and  will gain 400 lbs.  Their health insurance will spike to thousands of dollars a month and they'll be forced to give it up since they can't afford it.   Their kids will be horribly bored with "primetime" game shows and will head outdoors in the evenings.  Eventually they'll fall in with the wrong crowd and start smoking weed. Very quickly this will progress to crack and they'll be forced to take to a life of crime to afford their next hit.   
 
A perfectly healthy family destroyed by the attempt to save $100 a month.   Do you want to be the financial planner responsible for this outcome? 

Jamesqf

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #20 on: July 13, 2012, 12:56:11 AM »
What sort of 1984-esque doublespeak is this? At what point did less television equate to a LOWER quality of life?

Second that.  I've managed to live a fairly happy life without ever having owned a TV, and don't know how I'd manage to find the time to watch if I did. 

Uncephalized

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #21 on: July 13, 2012, 12:04:40 PM »
Honestly, the guy comes across as a boring idiot.

"I cut my cable and then all I had to do was sit around reading boring books and watch old movies whaaa whaa whaaa."

"I can't afford a McMansion so that means I am poor whaa whaa whaaaaa."

"I'd rather work even more of my life than I already do than cut out some unnecessary fake luxuries derp derp whaaa derp."

Maybe if you had any actual interests, it wouldn't be so difficult for you to find interesting things to do that don't cost a lot of money. You could also (gasp) go outside with your kids.

His tacit acknowledgment that he makes less money than he spends means that he is a financial dumbass who shouldn't be giving advice anyway. That and his obvious inability to do simple math.

Rich M

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #22 on: July 14, 2012, 11:50:50 PM »
Quote
EDITORíS NOTE:  I like this article cuz it reminds us...

"Cuz"? Really? Mr. "Editor"?

Fo Shizzle!  ;)



Guitarist

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #23 on: July 19, 2012, 07:49:34 AM »
   Do you want to be the financial planner responsible for this outcome?

I think Darwin had some theory about beings like this that eventually... well... just... die out.

Far be it for me to get in the way of science or evolution.

arebelspy

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #24 on: July 19, 2012, 09:55:40 AM »

I think Darwin had some theory about beings like this that eventually... well... just... die out.

Far be it for me to get in the way of science or evolution.

The problem with survival of the fittest as applied to economics (specifically our brand of capitalism combined with our brand of representative democracy) is that the "fittest" are those that do illegal or immoral things and don't get caught (or punished, due to sufficient political donations, etc.)
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Guitarist

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #25 on: July 19, 2012, 10:07:18 AM »
I meant the whole leading to doing drugs and eating crappy food thing.

arebelspy

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #26 on: July 19, 2012, 10:10:20 AM »
I meant the whole leading to doing drugs and eating crappy food thing.

Ah, gotcha.

That sort of behavior doesn't win them Darwin awards though, so they still procreate.

We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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darkelenchus

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #27 on: July 19, 2012, 10:48:55 AM »
I meant the whole leading to doing drugs and eating crappy food thing.

Ah, gotcha.

That sort of behavior doesn't win them Darwin awards though, so they still procreate.



+1

arebelspy

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Re: Why You Will Never Be Rich Cutting Your Budget
« Reply #28 on: July 19, 2012, 11:31:38 AM »
MODERATOR NOTE: Idiocracy discussion split off here: http://www.mrmoneymustache.com/forum/welcome-to-the-forum/idiocracy/
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.