Last week, I caught up with a good friend who lives in New York City, has a family, and is struggling to decide what to do on some big financial questions. Despite being a rockstar saver and earning a good living, when he looks at home prices, he suddenly feels poor. He’s looking at very basic houses outside of Manhattan that cost multiple millions, and essentially knows that buying one of them means working forever, if he decides he can even afford one in the first place.
We can relate to that feeling. Before we left the big city we used to call home, we felt like we’d never be able to afford an actual house (though, admittedly, our definition of “afford” was quite different from the bank’s — and it’s the same for our friend now). The price of housing was no small factor in our decision to move to the mountains, even though where we live now is far from cheap. (#mountaintax)
But we remember feeling “poor” in more ways than one when we lived in the city, while now, we comparatively feel “rich,” even though not much has changed in those years in terms of our earnings. (Assets are a different story, since we’re socking money away like crazy for early retirement.)
But our friend’s hard decision is a great reminder of how wealth is relative, and our perception of our own is extremely contextual, based largely on our surroundings.
The Theory of Wealth Relativity
There are high cost of living areas, and low cost of living areas. But that’s not the full story. Much of cost of living is calculated based on housing prices, with smaller components of living expenses like tax rates and food and energy costs factored in. But then there’s the giant x factor: the cultural factors that might dictate higher spending. (Or, in physics terms, since we’re talking relativity, you can think of them as the massive objects exerting gravitational pull that warp your space-time or, you know, make you spend more.)
In some places, the public schools are bad, for example, and it’s simply expected that anyone who possibly can will send their kids to private school. Or it’s a city where no one has room to entertain, and so getting together means meeting up at a bar or restaurant with high prices.
I remember when I first moved to the city we last called home. Suddenly, hanging out with girlfriends meant spending $16 for yoga, $8 for juice or coffee afterward — oh, and you couldn’t show up for a cool yoga class in some ratty old sweats. Thank god I never got suckered into buying Lululemon, but I definitely had to invest in a few pieces that wouldn’t embarrass me, essentially so that I could roll around on the ground and sweat in them.
Then once Mr. ONL and I were together, we lived in a fairly unattractive but rent controlled apartment for years that let us save bundles of money, but we were embarrassed to host friends there. The result: seeing friends meant going somewhere with $12 drinks and $20+ entrees. (You can see how we slid into our baller years without even realizing it.)
Now, looking back in hindsight, we realized that we lived in one of those places where you exist inside this bubble without realizing that it’s a bubble, and in it, all sorts of wants masquerade as needs. “We’re having people over. I need to stop by the cheese shop.” (Because less expensive supermarket cheese is apparently not worthy of our friends.) Or “I’m dying for something healthy. Let’s meet at that macrobiotic place.” (Because I can’t just make a salad at home.)
When you’re inside the gravitational field of a place like that, it’s easy to feel like you must spend money on this stuff, or at least you must if you don’t want to be a hermit stuck at home. And when all that money’s going out the door, it’s easy to feel poor fast, regardless of what housing prices might be. When those home prices are high to boot, the feeling is more like being permanently stuck, with a decent home forever out of reach.
The Perception of Rich and Poor
By global standards, few of us in the U.S. are truly poor — type your income into the Global Rich List for a good reality check. (I link to that site often because it’s an important reminder of how invisible our privilege is to us.) We can take for granted things like clean water, available emergency medical care even for the uninsured and food assistance for people who have nothing to eat.
But despite virtually all of us being rich in global terms, the perception of whether we feel rich or poor is determined largely by three factors beyond our own income and assets:
- The cost of living where we live
- The culture of the place
- The impact of our immediate peer group
Mr. ONL’s answer to what made him feel poor in the city was the cars. We didn’t see many Pontiacs on the road, but instead learned to spot exotic cars like Aston Martins and Maybachs with no trouble. That falls into the second category of the culture of the place, since we certainly weren’t friends with anyone who drove a Maserati or a Bentley.
For me, housing prices were a pretty serious bummer, but at least until the 2008 crash, I just accepted that we were going to be renters forever. The bigger factor for me was peer group related: seeing the women I worked with wearing expensive clothes, getting expensive haircuts, leaving their kids home with their nannies, and going out for lunch at pricey places often. Even though I knew that their salaries alone couldn’t have been covering that, I still felt self-conscious about wearing clothes from TJ Maxx and packing my lunch most of the time. Or having to drop $40 on yoga and juice just to hang out with my friends from work.
Eventually I started doing the expensive haircuts, and was in this completely ridiculous situation where I spent $100 on a haircut and yet felt poor because home prices felt forever out of reach. Yet somehow that feeling also made sense because the housing bubble was so out of control that not getting the $100 haircuts wasn’t going to make the difference in whether we could afford a home. We just needed the housing market to correct itself, which it did, unfortunately taking the whole world economy with it.
The Impact of Place
When we moved from the city to the mountains, we assumed that we were just trading one high cost of living area for another, and that our spending wouldn’t shift dramatically. But we were looking only at the first of those three factors, and didn’t take into account the culture of the place and the power of our peer group.
Where we live now, there is just generally more space, so even if a person doesn’t have a large enough home to feel comfortable entertaining, there are endless free outdoor options for meeting up — parks, trails, national forest lands, you name it. And because most people move here to spend more time outdoors, it’s perfectly natural to suggest hanging out outside. No one worries in suggesting that that they might offend someone who’s not outdoorsy. That just isn’t a thing here.
It’s also not a place where anyone moves to advance their career or get rich, because career options are basically limited to hospitality industry jobs that pay the bills and not much else. So there’s not the same display of wealth like we saw in the city, or the same expectation that get-togethers will involve expensive activities. Most daytime activities with friends involve hikes or bike rides, and most evening affairs are of the “I’ll have chips and guacamole, you bring beer” variety.
The result: When we moved, we went in a very short period from feeling relatively poor to feeling relatively wealthy. From feeling like we had no choice but to spend a lot to feeling like saving was the default.
Thinking Beyond Cost of Living
We’re not suggesting that everyone move to the mountains. But it is worth considering whether where you live matches your values and your financial goals. Housing is a huge part of most people’s expenditures, and it is simply more costly in some places, including relative to salaries in that area. But in terms of feeling like you have plenty or like you’re scraping by, don’t forget to look at the other factors in the local culture that impact that stuff too. And consider your own peers, and whether they support good financial habits or bad ones.
Have you had the experience of feeling relatively wealthy or poor based on where you live? Has anyone else moved by choice to a place with either an objectively lower cost of living or just a culture of less spending? Or done the opposite — moved to the pricier place but managed to resist the temptation to spend more? Let’s continue the conversation in the comments!
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Categories: we've learned
Great post, I think this touch’s on the topic that I wrote about yesterday, hosting long term visitors. Where we live now almost “requires” spending money to do activities, but when we eventually move to New England I think our options will open up quite a bit. There will be more outdoor activities to partake in. While cost of living will increase significantly (home prices) I believe the “cultural” aspects will decrease. Very thought provoking!
It’s great you’re thinking about both sides of the coin! Our current situation is definitely one in which we have the HCOL aspects of our life (housing, utilities, groceries, gas) but tons of free things to balance it all out. I hope you guys achieve the same thing!
Its something we have been giving a lot of thought for our next place. We want to find a place that offer a slower pace, and overall low costs in general. It’s tough to pinpoint it yet since we have years before our three children get settled and we want to be central to them for travel for visits.
Good luck figuring that out, Brian! I bet it’s tough to figure out a place when you have three kids who could all end up in different places! But I think it’s great you’re thinking about slower-paced spots with reasonable COL. :-)
We live in a “resort” town where we feel “not so wealthy” when we are in some parts of town, yet “very wealthy” when we drive down other streets. There are endless things to do here that are free – so we take full advantage. We own a 4 bed/3 bath rental house about an hour away in a nice area of a town that is quite depressed econonmically. It cost $80,000. There is still plenty to do there and all of your typical jobs. If we needed to live in a lower cost area, we would definitely consider moving there.
It’s totally the same here! There are parts of town where we don’t even venture, because we would definitely be the riffraff. LOL. But in our middle class neighborhood, we fit in just fine, though we probably have more saved up than many of our neighbors. Or, who knows, maybe we’re surrounded by millionaires next door! :-) And how great that you guys have a rental property in a cheaper location as a back-up option — same here!
Sounds like we’ve lived pretty similar lifestyles! We just have you by half a generation! Good for you!
This is incredibly true. Feeling rich or poor has more to do with the feeling of normal in the place that you live. Yesterday, the wife and I drove through an upper class neighborhood on the way back from the free county park we were at. As we drove through, we appreciated the beauty of the homes but we realized that wasn’t what we wanted for ourselves. Why? That isn’t the normal for where we live. Instead, we are in a modest area where people would rather grill out and play lawn games. We are in a place where we can more emphasis on being life rich.
Ooh, I love that: “Life rich.” What a perfect way to put it. We’re totally with you guys — those fancy neighborhoods just increase the pressure to keep up with the Joneses instead of focusing on what’s important in life. While our house is still expensive by the standards of most of the country, we deliberately opted to move to the most normal, middle class neighborhood in our town, instead of choosing one of the “nicer” ones where we’d have higher HOA fees, and be surrounded with high-spending neighbors. And like you guys, we’ve never regretted it. :-)
I think your point about the social environment you are surrounded with affecting your budget more than housing is very true. My wife and I constantly try to keep a healthy balance between staying in and saving (while also enjoying family time) and being social with friends, but risking a high entree price. Such a big part of staying on track for FIRE is surrounding yourself with like minded people who maybe you meet at the local park instead of grabbing Starbuck’s together each morning.
The Green Swan
I love how you put it — “Risking a high entree price.” ;-) Yes, sometimes you just have to suck it up and pay for restaurant food! I’m glad you guys have found a good balance and a social circle that’s supportive of your desire to save. :-)
I often feel like wealth is a relational good, particularly when considering housing in the city. Before looking for a place, I knew I was high-income and doing pretty well. But once I started looking, I realized so was every other buyer! It made me think about the people who didn’t get paid six-figures and how, in fact, most of their living spaces were de facto segregated from the highly paid professionals because of cost considerations. Kind of obvious, I know, but it really engrained in me that the people that work in a community and contribute to its culture aren’t necessarily able to live in it.
Whole other important subject! Even though we feel rich comparatively now, we know that our town is a hard place to afford for people who do the low-paid jobs — and this does not make us happy! In the city where we lived before, it was even worse. And even for high earners, that big paycheck doesn’t feel so big when you’re dealing with massive housing cost inflation or other cultural expectations that say you have to spend that whole paycheck. Where’s the big economic reset button? ;-)
This hits home in SO many ways. In our last neighborhood, I felt rich because the homes were all modest and in relation to everyone else, we blended right in and were still saving a lot. I could do yard work in a tank top and shorts and not think twice about it, redid our landscaping myself, and even hung new gutters myself at that house.
Then we moved to our current neighborhood. I remember thinking at the time, “I can’t do yard work in a tank top and shorts anymore, they’ll think I’m some kind of hick!” Immediately, I had started caring about what the neighbors might think because the houses were bigger, grander, and it seemed like there was at least 1 Mercedes/BMW/Lexus, or $50k truck per house…
It took a bit to get out of that mentality and back into the mode of, “what the hell do I care about what these guys think?!” I would still choose to live here again because SO much stuff is awesome. We can walk to 2 lakes, and parks, we can walk to 1 pool, we can walk to the kids daycare, and elementary school in the fall, and the neighborhood does a lot of fun events throughout the year that the kids love going to, plus, it still feels really rural.
I will enjoy our next 2-3 years here because there are so many positives, and I totally feel rich. Not from an outward show of wealth, but from the fact that I will be able to “retire” in 2 years and spend way more time with the family. I wouldn’t want to raise the kids here through their formative years because I don’t want them to deal with “who has the most/best/newest toys/clothes/phone type of stuff” and be around the materialistic focus. I know that will be everywhere, but it will be way more toned down in our next place for sure.
I think it’s awesome that you’ve been able to regain perspective of what’s important despite living in a fancy pants neighborhood instead of getting sucked into keeping up with the Joneses. And I LOVE that you mention your kids and not wanting them to grow up around that mentality. Though we’re happy not having kids, we always said when we lived in the city that if we did happen to have them, we would have to leave the city immediately. That relentless focus on money, status and symbols of wealth is just no good for anybody, and we would definitely have wanted to see kids grow up somewhere more “real,” where people are more grounded and normal. But given the places you guys are considering moving, I’m sure you’ll get that in your next place, as you said! :-)
I have always been a low class hick. I put my kids in private school because I wanted them to have the superior education but the lifestyle of many of their schoolmates was so high they made my kids feel poor by comparison. Fancy houses was less of the thing because at that time houses in Winnipeg were cheap. It was clothing in designer labels and vacations. I vividly recall sitting the gym locker and listening to everyone saying stuff like “Well we were thinking of Barbados this year….” and finally someone asked me. I said with 100% sincerity “My idea of a great vacation is find a bit of woodland with a noisy creek and a set up a camp. If I really need luxury maybe it will have an outhouse and a pile of recut firewood.” I wasn’t being smart or anything. I meant it. They all exclaimed what a poor thing I was. I have always felt out of place in huge homes and I have always shopped in TJ Maxx type places. I have always bitterly resented the idea that you should pay prices two three or ten times their worth for a stuff in certain trendy or fancy shops so I generally just don’t. That is what I am. I have always been this. I have no intention of changing. One of the reasons we moved to current charming small town home is it is filled with like minded people either born to this life type or deliberately choosing to live it. There’s just no point being a scrub cowpony trying to hang out with thoroughbreds. You’re always shorter then them and they always look down their long noses at you. And in any race only one of them ever wins so they are always a bunch of losers. There’s a country music song in there somewhere…..
Haha… you are way too well educated and cultured to be a low class hick. :-) But I’m sure that must have scarred you on some level all the same to grow up feeling like you had much less than your peers, and to have your kids feel the same way when they were growing up. My most relevant experience of feeling that was when I went away from college — I was middle class where I grew up, but definitely on the poor end of things where I went to college, and I was not prepared for that shock! But as you said, no point trying to pretend to be something you’re not!
Excellent post, and a subject Mr. AR and I discuss on a daily basis (typically while telling ourselves how incredibly fortunate we are). We sold our 1941, 1400 square foot bungalow in the Bay Area for over a million dollars, and replaced it with a much newer, much larger lake view home less than a minute from the marina for one fifth of the price. Do we feel rich? That’s probably not the best description of how the change made us feel, but it applies. We feel lucky. We feel we got an excellent price on a lovely home that meets our needs for extra space when we need it, but manageable space for us when we don’t. The lake view is calming and serene and gives us constant contact with nature no matter what the weather. The cost of living here is low, and we love that surprisingly aspect of life here as well. Life is slow and simple here. The pace is probably way too stagnant for younger retirees, but for us the calm is soothing and peaceful. For me in particular, the serenity up here helps me to slow my racing thoughts and endless Type A planning and projects and To Do lists (a carryover from my previous life). Our current income stream and savings wouldn’t qualify us as rich by any means in the Bay Area, but up here we are not only financially well off, we are rich in so many other, much more meaningful ways. I still find myself, on occasion, stunned that we actually pulled the trigger and relocated, but it was undoubtedly the best retirement decision we’ve ever made. It took me a very long time to identify what truly makes me happy, and it didn’t turn out to be another pair of Louboutins.
Every time you comment, I think more and more, “Seems like the Accidental Retirees found the secret formula!” ;-) It’s so fantastic that you escaped the Bay Area and have found a wonderful quality of life at a much lower price. Every time you describe your lake view, I get a little envious! But so great that you get to enjoy your days now and live at a slower pace… even without expensive shoes. :-)
I think I see this rich vs not-rich even among our friends. We have some friends we hang with who don’t think twice about dropping $200 on dinner for 2 and others who are always suggesting the blue-plate special at the diner. We try not to do things combining those different sets!
Where are we in the culture of the place? I choose which things I’m willing to spend money on – so, no to the specialty coffee at Starbucks (I still buy a medium regular when joining friends), but yes to theater tickets. Yes to the nice house in a nice neighborhood, but I drive a car 10 years old and do my own yard work. And dinners – well, we do both, but not the $200 drop very often. But when we do, I really take the time to enjoy the experience!
Isn’t that funny, how you have to keep your friend segments separate because of their spending approaches? I can definitely relate to that, though! I think we used to be those friends who spent $200 without thinking about it, and now want to go to the diner. ;-) But overall it sounds like you spend according to your values, which we’re big fans of. Frugality for its own sake is no fun, but you are spending on lots of fun things, while avoiding the expenditures that don’t bring you joy. Sounds perfect. :-)
We moved further out of the city to pay less for a home, it’s interesting that 8 miles makes such a huge difference in cost. Right now the big thing in Minneapolis is being walking distance to the bar loops, people pay a premium to do so.
Thankfully a lot of our friends have dogs, so we usually sit outside and grill while they run around someone’s back yard!
It IS amazing what a difference a few miles can make in terms of housing prices! We found the same thing in our past cities, and it often also has to do with access to transit (or to bars in your case!). But that’s awesome that you guys managed to keep your costs low by moving just a little farther out, and that you have friends who are happy to do the low-cost variety of socializing. :-)
Mrs. MCD and I consciously work to pull ourselves (and each other) away from the ever-present gravitational pull of the “Rich Bubble.”
In our suburban Atlanta neighborhood, new homes on a postage stamp of land are $700K+ (when we tell people the city we live in, we quickly inform them that we are on the “poor” side of town and we are not one of the “nice” houses in the sub!).
My 7-mile, 30 minute commute to work often includes a mental game of “Mercedes, Mercedes, BMW, Infinity, HEY A FORD!, Tesla, Mercedes.”
Finally, as with large swathes of the South, the public schools are largely underfunded and generally perform poorly. Your choices for a “good” school are to pay $25K+/year/child for private school or buy one of those $700K+ houses to get into one of the neighborhoods services buy highly-rated public schools.
If allowed, these things can easily turn into a self-esteem “oh, poor me, why can’t I have a fancy car and a million-dollar house” issue or an entitlement issue “I work hard, I deserve X, Y and Z!”
More importantly for us, if we allow ourselves to be sucked into this financial back hole, what will the result be for our kids? If they see their parents spending every dollar, wanting for nothing (while saving nothing) and are sent to private school with other “rich” kids who want for nothing themselves, what will be the result? Adults who are comfortable living in debt, who feel that at 22, they NEED and are entitled to comforts their parents couldn’t truly afford in their peak earning years (but got anyway).
No, we’ll continue to fight against the seductive pull of the Rich Bubble and remind ourselves that we enjoy living on Middle Class Island in the middle of the Upper Class Sea. We are HAPPY here and we hope we can raise our kids to be happy, self-sufficient adults here too.
I love how you put that “middle class island in upper class sea.” :-) Good for you for resisting the temptation to keep up with the Joneses who surround you in all directions! That’s hard to do, but you’ve clearly stayed focused on your own goals — high five! And I love your point, too, about teaching your kids the right values about money and things. Sounds like you guys are doing it right. :-)
I bought my house when I was 24 so I ended up in an older suburb of Minneapolis, with the idea that it would be my starter home and I’d eventually upgrade. But now that it’s paid off (and 15 years later), I’d much rather put my money towards early retirement and stay where I am. This house more than suits my current needs anyway.
As I’ve gotten older, the impact of my immediate peer group has been the largest factor in how I spend money. When we were in college and shortly after, we all earned around the same income. But, as we’ve gotten older, there’s a larger difference based on career paths. Many of my friends make half of what I do, so our social circle mainly does brunches or potlucks to ensure everyone can attend. Even meeting one-on-one with certain friends, we’ll usually do things on the cheaper end of the spectrum. Even though I have the money, I’d much rather put it towards something else, so this has worked out quite well for me!
Whoa — you bought your house at 24?! That’s crazy awesome. And even more awesome that you’ve stayed put and you aren’t doing the typical American dance of upsizing the second you can afford to. And so true that peer incomes tend to start out similar, but then start diverging wildly. How great that your group of friends focuses on low-cost activities that make everyone feel welcome. :-)
Perspective is an essential tool. As we battle our way out of debt, I often remind myself to keep things in perspective. It may seem like everyone else is doing so well, but I don’t know their real financial situation. And, there are many people who I don’t have much contact with who are suffering in much worse financial situations. I try to focus on what we need to do to reach our own happiness and remember that everything else is not always as it seems.
#Truth! It’s totally possible that all those people who seem to be doing well are drowning in debt — and it’s possible that was true for all my yoga-doing, juice-slurping friends! Good for you for focusing on your own locus of control and your own happiness! :-)
I definitely can relate to this post. Even though we rent an apartment, we moved to the particular city we live in because it has an excellent school district and it was important to my husband and I that our daughter have the best education that we could give her :)
That rocks that you guys are so focused on setting your daughter up for the best life possible! My parents were the same way when I was growing up — always making sure we lived in the best school districts — and I’m grateful to this day!
We never think ourselves as rich or poor. Through pursuit of our respective careers, we have never found ourselves wanting for anything, which puts us in a very fortunate position. We have to pinch ourselves when we see salary increases, bonuses etc. I guess that level-headed approach and not getting ahead of ourselves is part of the reason we are able to do what we are about to do.
At times, I am sure we come across as “very flush” since we provide funds for parents to repeatedly fly over to visit us. And that is always met with gratitude, love and smiles. To them we have plenty of money but it’s never seen as rich or over the top use of it.
Our home where we wil relocate to in two years is in a much different environment to our current one. No manicured lawns, no shiny SUVs. That is a good thing. We will have to watch the dynamics of having two kids still in school and parents not working and the comments that will undoubtedly follow in what is a very working class / rural area. We are prepared for it.
It sounds like you guys have a very balanced view and aren’t prone to comparison, which is enviable! And yes, I suspect, having moved from the city to a small mountain town, that there are some shocks that will come with that change that you can’t anticipate until you do it, but I’m sure you’ll manage just fine. :-)
I grew up in the rich kids’ suburb, where my classmates drove brand new Lexus SUV’s and Audi’s. I drove a 7 year old Dodge Neon I financed myself. They lived in 5,000+ sq foot houses on a golf course, while I made do with a meager 2,500 sq ft house. I thought we were so poor until I moved out on my own into a 1500 sq foot house. All of the sudden I realized I didn’t need that much space at all! Not to mention, it costs more to heat bigger houses. No thanks. I’m not ashamed to have people over to my smaller (but still pretty nice) apartment because I’m saving loads of money over living in a 3 bdrm house! (PS my parents’ house feels ridicously huge now)
Isn’t it funny how skewed our perspectives are when we’re younger? I always grew up in big houses, but then we didn’t have fancy cars or designer clothes. So I knew we had one of the nicer homes, but at school I felt self-conscious about wearing non-brand clothes. Of course it all seems so ridiculous now! And like you, as soon as we moved into our house (1900 square feet), we realized that we don’t actually need all this space, nor do we want to pay to heat it — hence the super cold temps in the winter. :-D
I have mixed feelings about where I fit in… I have moved to a neighbourhood where housing costs are quite high, and some of my neighbours definitely make me feel relatively poor… We definitely don’t have the nicest house in the neighbourhood and our cars are way older than some of our neighbours… but I’m not so phased by that because it’s almost more okay with my group of friends to spend less doing social things because they know we spent so much to get in our dream neighbourhood… Also, the neighbours that I do socialize with are totally down to earth, so I never feel out of place with them. Does that make sense?
It sounds like you’ve worked out a great balance! There’s nothing wrong with living in a high cost neighborhood as long as you don’t let that pressure to keep up force you into spending money you don’t have — but that doesn’t sound like an issue for you, so great! And how fantastic that your friends are understanding of your desire to keep spending low, and that you’ve found down-to-earth neighbors to boot. :-)
So yeah, we live in a trailer park.
Okay, it’s more like a trailer resort, but still. And you might be surprised at how much money people plunk down to live on the road. We are routinely the smallest rig around, easily dwarfed by huge 40-some-foot condos on wheels that people pay anywhere from about $100,000 to upwards of a million. So for us, it depends a lot on who happens to be parked next to us at any point in time. Sometimes we feel more wealthy than other times, and it’s definitely not just *size* that makes the difference.
You can buy a trailer much bigger than ours and pay LESS than we paid. If space is a priority, then have at it I guess. But having a quality place to live makes us feel as wealthy as we need to be, though we never like to compare ourselves to others. Their money. Their choice.
But in general, I’ve lived in “okay” areas from a rich vs. poor perspective. Well, northern Virginia was a bit expensive, probably around what a mountain town would cost, maybe more depending on how close to Washington D.C. you get. I never felt poor, though. I just felt that those people were in a different stage of their lives and could afford a bigger place (which probably wasn’t the case, but yeah…).
I can only imagine all the oversized rigs you guys must have seen by this point! We’re the weirdos who go to RV dealers and are like, “What’s the smallest unit you have? Something with no slideouts, and as light as possible.” Let’s just say most dealers don’t hear that request all the time. :-) Bravo to you for not playing the comparison game, even when you lived in NoVa, or when you’re parked alongside some million dollar class A diesel pusher.
Yes! Humans are horrible at absolutes. We only know if we are doing well or poorly by looking at the people around us. Shutting off this instinct and just feeling satisfied is a big part of feeling like we have enough. None of us are totally immune to the judgement of the people around us, so putting yourself around people that share your values does make life a little easier.
That’s a great way to put it! Though I think even if you’re content, if everyone you know wants to socialize by going out, it becomes either a choice of spending money you don’t want to spend or being antisocial. The ideal solution is finding people with similar values, as you said, so it’s not a constant push-pull, and instead it’s just a given that you’re going to want to do similar things with similar spending levels. :-)
One thing that I’ve found interesting is that since moving to Raleigh, we’ve befriended people in our lower income neighborhood, people at our church who largely value simplicity, and other students. Having this set of people to compare to makes it really easy to live a basic life without feeling deprived. I am most inclined to becoming wantful when I go back to Minneapolis and hang out with my higher income friends and family.
I totally agree that just changing scenery can be helpful for resetting on this stuff! It’s the same with us when we go back to our old city, even though we have such different habits now — we want to do the things that we know our friends there do, even if we don’t spend like that anymore. But our current surroundings don’t trigger that — sounds like it’s similar for you!
Very insightful post! I agree that our perception of our financial status is very relative and you’ve hit the nail on the head with the factors. In the suburbs were we live, I think people go either way. There’s a lot of over-the-top lifestyle inflation, but it’s also not too hard to cut back and spend less.
That’s so great that you guys live somewhere where you can find your own way without a lot of social pressure — it sure seems like you’re able to do plenty of awesome stuff like your suburban homesteading!
I felt very uncomfortable living in Newport Beach. When my roommate would take me out to socialize and we’d go to after-parties at some trust fund guy’s place….all I thought was that I could never afford anything like that and felt very awkward about it. I moved to a more sleepy beach town (though still surrounded by much wealthier people) , 6 months into that year long lease and had a much happier outlook, but I also had a longer commute and kept busy with more hobbies too.
It sounds like the longer commute was worth it if you got a happier outlook out of all of it, plus still had time for hobbies! That scene you had definitely seems like it would make us feel awkward, too! I have never been comfortable around people who spend money like it’s going out of style!
The commute did eventually get to me unfortunately after that first year in the sleepier beach town…so I eventually moved closer to work, I went back to my full salary (instead of 80% for 4 days) it was basically a windfall with all the reduced commuting expenses (gas, toll roads, more frequent oil changes), but the social life has definitely suffered a bit, but it’s allowed me to ramp up savings. If I stayed by the beach the whole time, I would probably not be talking about a year abroad.
Ah, gotcha. So…. Trade-offs. But sounds like good trade-offs if it’s potentially letting you go to New Zealand for a year.
The cultural factors are huge. There was this one fancy gym I went to that was near an old office and the exact same thing in my local studio cost I think 60% more at the one in Manhattan.
We’ve established that one of my things is nice clothing, but I have to say I love some Lululemon stuff. It just last so long. I’ve tried other workout pants, but they all seem to sag and wear out quickly (I forget which ones those were) or not deal with sweat well (Zella leggings I’m looking at you!), so I prefer to stick to good technical clothing and just buy a few pieces. And I am so externally motivated that fitness classes at a specific time are the only way to get me to workout, sigh. (One of us has an injury preventing us from going hiking at the moment and that’s only an option on the weekends anyway.) I do not understand the constant hair dying (I prefer to accept my hair as it is and I also find natural hair colors look best with one’s skin tone too…). I did give in to the fancy salon by my house, but only because it’s so nice to walk the two blocks there instead of fighting traffic to get across town to a cheaper place. But, I go maybe once or twice a year.
It’s interesting comparing the lifestyles of where I work (not in the city) vs where I live (in the city) – my current coworkers definitely seem more frugal overall than my coworkers at my previous job. We’re really lucky though in that we DINKS with high incomes, which means it’ll be hard to really be priced out of a house, even if they keep going up. Our cafeterias don’t have the best of food, but it’s cheap and people make fun of you if you don’t bring your lunch when you usually do! That amused me the first time.
In my college town where I paid ~$300 per month in rent including utilities, I felt wealthy pretty easily. I spent about $7-10k/year and earned $13-23k/year, which was always more than I spent. It took me much longer to feel wealthy here. In the last few years, I’ve definitely gotten there though, especially as my condo value has shot up… (I’m almost at the capital gains exclusion max! I’ll probably hit it by 2017 sometime, so five years after purchase.)
I grew up in a nice part of the suburbs of a large city not too far from where I am now. My high school was interesting from a wealth observer point because it combined a low property tax area and a high property tax area and there was really a huge discrepancy between those whose parents had money and those who didn’t. I learned how to tell that by how people dressed, talked, what kind of shoes they were, whether they had cell phones, how well taken care of their hair was, etc. I was a very observant teenager! My parents were very careful with who I was allowed to befriend (no one from poor families, single parent families, non-white people, or religious people), so I had a pretty sheltered life growing up. I remember bringing a friend to my house once and they thought I lived in a mansion. I wasn’t allowed to tell my friends how old my parents were either (my parents had me at the age some of their parents were when I was in my early teens, which honestly explains a lot of the wealth gap). I had a beater car in high school, that I bought with my own money and paid for my own car insurance and gas. (Though my parents paid me back for my mileage going to/from school.)
My social circle now is in the realm of privileged high income people who are frugal mostly, which is okay, but there is no balance to people who aren’t high income, so it’s really easy to lose ourselves in this high income world.
Oops, sorry for the novel as a comment!
Wow — your sheltering growing up sounds intense! I think parents do such a disservice — even when it’s out of good intentions — in not letting kids be exposed to different kinds of people. I was sheltered by where I grew up (a very white place, though not a huge income divide), and by my parents to a lesser extent (they were afraid of “bad influences”), and I think it made me a lot less empathetic to the challenges society places in front of people until I finally opened my eyes.
I love that throughout all of this, you are observant and notice things that most people don’t notice. Like you see your own privilege but also don’t let it paralyze you. You notice difference in habits what they are. You make your own choices deliberately. There’s nothing wrong with spending money on quality clothes (not even Lululemon!), it’s just not what I choose to spend on — I would always rather book a flight, see a concert or have a killer splurge meal than update my wardrobe. :-) And yeah, even when I did the expensive haircuts, I did them infrequently!
That’s crazy that you’re almost to the capital gains cap on your condo — but crazy in a good way. :-)
And no apologies — I love long comments! xo
You’d think for all the sheltering growing up, we were religious, but nope! Living in the city is a multicultural experience unlike any other I had before.
I couldn’t care less about concerts or eating out. Flights are nice, but it’s almost so much stress finding the right time and place for a trip that I’d rather not. One of the biggest things I find about travel is that it’s buying together time and seeing a new place, both things I love! That’s something fascinating about watching someone’s spending habits – you can really see where their priorities are.
Haha — same here. Just a protective dad who wanted the best for me. :-) And so true — it’s super interesting to see what people choose to spend their money on, assuming the answer isn’t “everything.” I used to spend on a lot more stuff, but now think our spending is pretty darn close to reflecting only what’s truly important to us.
We just moved into our new house this month, and I don’t think we realized quite how hard we were bucking the vibe down here until we did. We live in the South, where it’s pretty common to move to the suburbs once you have kids and get a 3, 4, or 5-bedroom house. Even folks living in the city “must” have at least 3 bedrooms.
We bought a house we could afford on just my salary, 4 miles from my job. (Our version of afford, not the bank’s.) Because our largest lifestyle factor was reducing our commute, we chose to move to a more expensive area that was significantly closer to work. The trade-off is that we bought a 2-bedroom townhouse, and our 2 kids share a room. (The benefit is that, you know, we actually see those 2 kids.)
I didn’t think there’d be much of a backlash – Atlanta traffic is notorious. And yet people were SHOCKED that we would force our children to share a room. (They’re 3 and 5, and since before that, they slept in our room, they already think this house is a McMansion.) I have had more than one conversation reminding people just how lucky we are to have a home with as many rooms as we do, since in many parts of the world, we’d all be in one room together. That always seems to jolt people, at least to the point where they stop talking about it to my face. #tooblessedtobestressed *eyeroll*
Same story here Pia! We moved to Atlanta (Dunwoody… but the poor side of Dunwoody and NOT the biggest/nicest/fanciest house in the sub!) 3-years ago now.
When we moved in we were expecting girl #1. Girl #2 is now here (literally, she is on my lap making typing difficult..) and we have no concerns about them sharing a room and that being the long-term plan (I even built their bunk beds)!
It can (and should be!) a positive thing if you make it that way. My wife grew up in a house of six to twelve (depending on the day) – the thought of her “own room” never entered her head!
I endorse your eyeroll!
MCD – middleclassdad.com
I was an only child, but I definitely remember when I was a kid that being a guest in someone’s home meant sleeping on the floor in a kid’s room or maybe on a couch, or even sharing a bed with a kid, and parents would stay in the master bedroom while the hosts would sleep in a kids room, or something like that… now it seems that everyone wants multiple guest rooms and all this excess space that’s barely used!
I want to give you so many high fives for all of your reasonable choices! We’re big fans of setting your own home budget, not listening to the bank, so there’s one high five. Then being willing to buck the trends on bedrooms and square footage gets you another. :-) And it’s not just in the south where people want to have all the bedrooms — we have no kids, and it’s crazy how many realtors would have us believe that we need not just three bedrooms, but four. (Excuse me, what? What would we even do with those rooms?) We have three bedrooms now because we couldn’t find a house with two bedrooms that didn’t have a microscopic common area (we have people over a lot and wanted space for a real dining table and a comfy couch), but we’d happily downsize if we could find a house with a decent sized great room and two closet-sized bedrooms (you don’t need much room to sleep!), or even just one bedroom plus a little den or nook or loft. But no one builds houses like that in our area!
We live in a nicer neighborhood where there are a lot of dual-income families filled with higher-paying occupations such as doctors and lawyers.
I do get the feeling that most of these households bring in a much higher income then we do. I make a pretty decent buck, but my wife works part-time at a non-profit, which might as well qualify for volunteer work ;-)
They tend to drive fancy cars and spend a ton of money on remodels on their home. They also have people handling every service imaginable for them. So in that aspect, I feel a little poorer living there. But it’s not something that really bothers me.
And, after just finishing reading “The Millionaire Next Door”, I have a pretty good feeling that our net worth is actually much higher than a lot of people there.
I completely bet that you guys are the secret high net worth people in your neighborhood! I know I’ve drunk the Millionaire Next Door koolaid, but I just no longer believe that people with all those trappings of wealth are also saving at a high rate. So way to stay strong and resist the pressure to keep up! :-)
Great post and comments. Folks who spend lots of money on Lululemon wear (no disrespect if that truly brings you happiness), fancy cars, and $200 dinners… I work so darn hard for a living and am well compensated for it but I didn’t get out of school making that kind of income and I try to always maintain some perspective. I could technically “afford” some of those things yet I don’t see the utility plus I wouldn’t be able to retire early. Sometimes I think (ok I wrongfully judge) SAH-Moms in my neighborhood for driving their Mercedes SUV and wearing their fancy yoga pants. Do some of these folks not work hard enough for their money to appreciate the value of it? Or is it the culture and peer group pressure of wanting to keep up? Maybe they are more of a victim of these crazy expectations? It’s probably a little of everything. I know I got sucked into the baller lifestyle for a short time in terms of wanting to go out to eat and drink frequently. That only resulted in depleting my bank account and putting on unwanted pounds. My neighborhood is an interesting combination of folks who live simply and those who live large with education and professions all over the board (not necessarily correlating with lifestyle choices) so the boundless consumption isn’t the norm. In general I find that the people who are eschewing these things are quiet about their so-called counter-cultural choices.
I would be really careful with some of your assumptions here. Perhaps the person driving the Mercedes, that is their one splurge. Or they saved up and bought it in cash after having beaters for years and they plan to keep this one for a decade. The woman wearing the fancy yoga pants might have only one pair of fancy yoga pants and she wears them every day. What you’re doing here is judging others for their splurges without knowing anything about them! I know I go out of my way to appear mainstream sometimes and to hide my frugality, so you could probably catch me doing some pretty crazy things, while the things you don’t see are the ways in which I’m frugal.
It’s a good reminder that snap judgments are rarely helpful, and sometimes unfair. I can definitely relate to trying not to look like a dirtbag cheapskate at work and with clients, even if that’s what I am much of the time! :-)
Maybe some of those status symbols really do bring happiness for some folks… or not. Hard to know. But it IS hard to live in that kind of culture, for sure, and not have it rub off on you in some way. For us, it was helpful to leave the city, but I’m sure stronger types could do just fine in the city just making different choices. :-) But I’m glad for you that you live in a community where the exterior appearance of wealth is more mixed, and so it’s easier to find your own path. Totally agree, btw, about the super frugal being pretty quiet about it.
I’ve experienced the change drastically with my recent move out of Manhattan. Everyone there likes showing off their money with clubbing, brunches, nice apartments, etc. Out here people don’t seem to show off as much. I actually think it might actually be looked down upon. Way easier to save money – that’s for sure.
I bet you have! I’m glad you’re finding that the shift is such a positive, and it’s now much easier to save. Though seemed like you were managing pretty well even in NYC!
Interesting take on relative wealth or at least the feeling of it. The area where you live and it’s own unique culture definitely effects how you spend your money. Take places like LA or NYC and it’s “normal” to spend in order to show off and everything is just more expensive anyways because the norm for the area isn’t for cheap activities. Of course when you’re living there you don’t see the full picture from everyone so you don’t realize that others are either making serious income so that $50 get together twice a week isn’t a big deal or that more likely those people are essentially broke in order to keep up their appearances.
It’s impossible to know if those folks are keeping up appearances or truly have money to burn, but man, an environment like that can totally skew your view! I bet lots of people can live in a city with that culture and see through it, but for us it was helpful to get out of Dodge and redefine a new normal. :-)
Two big things that we talk about.
1.) COL: We currently live in a very low COL area in traditional terms emphasizing housing. However, there is not much here we like to do. Decent climbing and skiing is an hour plus drive one way. Good climbing is at least 3 hours and good skiing is a flight or the better part of a day’s drive. Therefore we may spend more on housing or spend the same for significantly less, but we project this will substantially decrease our overall COL and quality of life by providing proximity to places and and like-minded people we want to spend our time with.
2.) Relativity: As soon as we started our professional careers, we began saving 50% of our household income and w/in a few years we had each more than doubled our incomes while being happy with spending much less. Therefore we have always “felt” rich and done pretty much whatever we wanted, splurging occasionally. As we have really examined what we want, we really value that more than being able to say we are “retired” in any traditional sense and living on a strict budget. We are now building more toward what I guess would be considered semi-retirement so that we will continue to have that “abundance mentality” versus feeling that we are restricted by a budget and then gradually going to a more traditional retirement living only off of passive income when we have a bit of a cushion.
We can definitely verify that it has been worthwhile to move to an expensive place to reduce our recreation costs. We used to spend a small fortune going to ski, and now we spend very little — season passes are a vastly better deal than day rates, plus no lodging, no travel expenses, etc. Same for everything else outdoorsy. Sure, we still travel to camp sometimes, but it’s usually much closer than it used to be. So knowing what you guys are into, trading up to a higher COL place could still potentially put you ahead.
And I think your evolution on the full retired vs semi retired question makes total sense. We wish we had jobs that we could do part-time — then we’d totally consider that. The hard thing is knowing that if we do other stuff, our effective hourly rate will drop by a ton, and it’s hard to want to work more a lot more total hours. :-) But your point about keeping an abundance mentality is such a good one!
I quit one adult sport league because it not only took up your entire Sunday (and often Saturday), but the culture of it included so much time drinking and eating at a bar. I just could not afford to hang out with them. Eventually I did not want to either. Helped a ton.
Wow — I’m so curious about who had time to spend a whole day (or more!) every week doing rec sports! Sounds like not just a question of affording it financially, but in terms of time too!
I could easily be perceived as being “not rich” where I live because I live in an old crappy apt, hardly ever go out, and drive a used, really sensible car. And don’t get me started about my fashion (or lack thereof). But with the money I’m making, I’d be very rich in certain parts of the country. Yes, the job wouldn’t be there, but I’m trying to work towards saving enough where I don’t have to depend on the job and can go wherever I want…but I’ll probably always still “look” like a non-rich person. That’s OK with me.
It’s SO interesting how relative everything is! You live in a super spendy place, so it makes everything you’ve worked hard to achieve and purchase seem less worthy somehow. But I love that you still have such a great, big picture attitude about it, and you recognize that you’re wealthy by the standards of any other place. Plus, as for “looking rich” — we don’t come close to meeting that standard, and if the Millionaire Next Door is correct, almost no one who looks rich actually is! :-)
Last year, we moved from Dallas to El Paso. Our joint income increased slightly but our relative “class” increased dramatically. In Dallas, we were middle class, constantly surrounded by the $100+ haircuts, private schools and the Joneses…feeling inadequate. In El Paso, we’re in the top 10% income bracket and we feel relatively rich. But even if our salary were closer to the median, it’s so much easier to live a frugal life here. The “immigrant mentality” of hard work and perseverance is all around us and people here enjoy simple pleasures like hiking and outdoor barbecues. Plus, the public schools near us are great so we never have to worry about that expense again.
What a great experience in seeing contrasts! That’s so similar to our experience of leaving the fancy pants place and moving to the mountains — the cost of living isn’t actually much different, but the attitudes are. Gotta love those simple pleasures! :-)
I relate to that feeling a lot. I think frugal people end up having to put up with a lot of feeling less than in a world where everyone’s personal finances are over leveraged and hemorrhaging money. Of course I know that my neighbor can’t afford that new Audi every four years. That doesn’t change the fact that I feel like I have less sometimes.
The issue for me is (and maybe this is just being 24) I love the city. I live not far from Los Angeles and I find myself in West Hollywood or the Santa Monica Promenade often. I don’t go there to shop or spend a bunch of money, but I realize that my love of the area subjects me to a certain amount of consumerism and wealth flaunting.
I don’t know if I’d be happy living in the mountains but I have the very same gut feeling you did, I will never possibly afford a home. In a way I guess a home isn’t that important to me. I’d love the opportunity to pick up and leave a place every few years. Still, I cant shake that societal idea that a home is the ultimate symbol of life achievement and adulthood.
I can definitely relate to all of what you’re feeling! And I know it’s harder when you’re surrounded by people who are flaunting wealth, whether it’s real or imaginary (or borrowed!). But you’re already so much farther along in your thought process than most people will ever be by recognizing that you want to be able to pick up and move and that that’s harder when you have a house. Keep focusing on what you know is truly important — it really does make it easier to resist all those temptations and to stop comparing yourself to others! :-)
Th e Global Rich List is great. I like the perspective it provides. Thanks for providing the link.
Happy to! It’s so important to remember how privileged essentially every single one of us in the developed world is.