Author Topic: Being frugal while trying to rely on market returns driven by consumption...  (Read 1728 times)

FIRERoad

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I'm sure I am not the first one to think this or bring this up.  Maybe I can be pointed to another good discussion thread where this has been discussed.  I have also not come across a posting in the MMM site regarding this topic. 

Anyway, when thinking about this lifestyle and thinking about relying on investment returns, rental income, or a mix of both, I have conflicting thoughts about what seems more reliable or appropriate.

I've also been binging on pod cast by Mad Fientist and Afford Anything, and just read an article in Money magazine about the FIRE community and Vicki Robin.

We feel like we must be frugal to achieve this life style and not over consume or let lifestyle creep take over yet we want to rely on market returns that are driven by people consuming and buying more stuff, and financing things, and new generations perpetuating the system. 

And we roll our eyes when we hear co-workers talking about the latest toy they are trying to buy or finance when they get the next paycheck or bonus or when they out to lunch everyday yet are wondering if their next paycheck was deposited yet.

If everyone tried to follow this frugal lifestyle then nobody would be able to do it.  Is this something you just accept?  Are we just trying to win in a different way?  You are frugal while hoping others continue to consume so that our investments have good returns that we can eventually live off of?  Or do you just accept that people are not going to change anyway and we are making a conscious choice to live life a different way and will always remain a minority?

Is real estate a more reliable and/or sensible choice for this lifestyle?  I mean, people have to live somewhere.  Not all can afford to buy or want to buy for various reasons.  I'm providing a real service that just happens to require less time than full time employment or be more passive.

Vicki Robin seemed to express some disappointment that they didn't "get everyone" to change their life by reading their book. She seems to get some of her income through real estate / house hacking.  But both the old and new book she talks about investing and market returns.  But if everyone adopted this lifestyle, this would fall apart and not work. Would it not?

Anyway, I realize I am kind of rambling.  Just curious of others thoughts in this community.  Thanks.


stoaX

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Is this something you just accept?  Are we just trying to win in a different way?  You are frugal while hoping others continue to consume so that our investments have good returns that we can eventually live off of?  Or do you just accept that people are not going to change anyway and we are making a conscious choice to live life a different way and will always remain a minority?

I don't really think about it much because I have no desire to tell others how to live.  So I guess you last sentence is the closest to to my point of view.

FIRERoad

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I would also like to comment that lately I've been feeling like I remember feeling in 2007, before the recession.  I had just started my job after college and gas prices were high, and housing prices were high, and the cost of everything was just going up kind of fast relative to wages.  I remember thinking it seemed kind of unsustainable or like something had to give.  But I moved on and kept on living life and bought a house.

Recently, I've been feeling the same.  Housing prices just seemed to be going into levels that just seem ridiculous again.  Gas prices have ticked up again.  I often hear the guys in the office talking about upgrading cars, houses, buying more toys and fancy mowers.  It is maybe not as bad as it was in 2007 but it is starting to feel the same again.  And I've been tuned out from paying attention to the news too much but it is hard to avoid hearing about how the market has dropped and that we are due for another market adjustment or recession.  And I kept my funds in the market after the market dropped but after I was more hesitant and kept a lot of the gains in cash as I sold off.  Meanwhile, investing in single family homes just doesn't seem to make sense on paper in my local area and I am still looking for the right multi-unit/duplex to move into for the next couple of years.  Or just keep renting for now.....  I sold my house last year.

FIRERoad

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https://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

Thanks for the link. That is along the lines of my thoughts and I imagined there was something like this I had not yet found.  And what a rabbit hole was the comments section!  I had to stop.

I guess, after reading the article,  I still think that if everyone went gradually frugal, things would just rebalance to a new norm.  Everything would still be relative.  Maybe there would be a new lower inflation number and lower market return and lower wages and lower costs of goods.  Or we would be shifting consumption to other nations to perpetuate growth and returns and therefore benefit from their lifestyle creep. 

FIRERoad

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Is this something you just accept?  Are we just trying to win in a different way?  You are frugal while hoping others continue to consume so that our investments have good returns that we can eventually live off of?  Or do you just accept that people are not going to change anyway and we are making a conscious choice to live life a different way and will always remain a minority?

I don't really think about it much because I have no desire to tell others how to live.  So I guess you last sentence is the closest to to my point of view.


I agree.  I've tried to help a couple of people do a budget or advised on finances and think I see a glimmer of hope just to see them go off and not follow through and continue on the same path.  I still try to silently "ugh" or roll my eyes to myself and I think I realize I just choose to live my life differently and they choose to live theirs that way. 

I had a couple loooong drives this past week and a lot of time to have thoughts like this....  I do appreciate there is a community such as this for like minded folks I did not know existed a few weeks ago.

AMandM

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There's a whole world of different behaviors out there, with people making all kinds of choices, including many foolish ones and even many wicked ones. It's the environment we have to live in, so I don't think it's wrong to benefit from it being the way it is, even if we wish it could be different. I can be a cardiologiost even while I try to get people to eat less fat, or a prison guard even while I volunteer for a crime-prevention program.

I think it would be problematic if you wanted people to keep making bad financial decisions.

drachma

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I think:

1. everyone wouldn't suddenly become frugal, that would definitely represent a (potentially destabilizing) shock to the current system, but it is extraordinarily unlikely. you'd be talking about a monumental shift in cultural norms, attitudes, and ways of thinking, and humans generally don't do that on a mass scale very quickly.

2. in the steady state, say we had a culture with a less wasteful consumer culture, I still think the economy would need to grow. more people being born every day! it's just that instead of profits being based on the latest iphone or gucci bag, corporate profits might come from feeding a larger number of people and providing for their basic needs. So I think it is possible that an ethical, growing economy *could* exist

3. that is not to say that we can rely on infinite growth; eventually the world only has so many resources and humans/the-laws-of-physics only have so much ingenuity to make new technology. I think at some point the world's resources might be depleted and such an economy could no longer sustain it's growth based on a growing population. In such a scenario, index investing probably wouldn't work the same as it does now.

4. Overall, I think we are a long way out from exhausting the world's resources and reaching some limit on what improvements technology can bring - long enough that the index investing strategy will work for our lifetimes. I just wish we could be approaching that limit it in a more ethical and sustainable way, with less wasteful consumerism.

TLDR; I don't think GROWTH necessitates WASTE, that is just the trap our society is in at the moment. There are other ways.

diapasoun

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My .02:

For me as an individual, being frugal is only ever going to be a good thing, no matter what the world is like. If the economy goes into a tail-spin (whether because of Current Politics or because the worldwide populace suddenly goes Mustachian on us), frugality, combined with practical skills, allows me to do more with less while living lighter on this planet. My other economic strategies -- saving now, and building assets and income streams that are as well-diversified as I can -- should provide for me in a wide variety of situations, including but not limited to our current world.

I don't think it's particularly likely that the whole world will suddenly become frugal and live within its means. Debt is not a new phenomenon by any means; the more we produce, the more people consume, and that's been about it for thousands of years, as far as I can tell.