A friend of ours once wondered out loud if people who claim they “have no need or desire to spend more than $50K or $100K a year or whatever” are a) lying, b) easily contented or c) unimaginative.”
Naturally, I took offense, as all three options are criticisms and, at the very least, there ought to be d) another option, but none was given.
This friend of ours may be familiar to you. His name is Dr. Jim Dahle, and he posted this leading question in his White Coat Investor Forum several years ago. You can see my responses in the old thread, but I felt this was a topic revisiting.
I contend that those who live a life they love on a relatively modest budget are the most imaginative. It’s the high spenders who typically take the more expensive path, the convenient path of least resistance, that are more likely to be lacking in imagination.
Hypothesis: Low Spenders Lack Imagination
For the purposes of this discussion, consider a low spender to be someone spending $50,000 to $100,000 a year in 2016 dollars, which is when the question was first posed. After updating for inflation, that’s the same as spending about $62,000 to $124,000 in 2022.
“Lacking imagination” was only one of three options given, but “easily contented” is basically synonymous, and “lying” is an odd accusation, although I can imagine lying to oneself about contentedness could be a coping mechanism when one realizes that they’ll never achieve a higher standard of living.
Supporting Argument: Fun Stuff Costs Money
Dr. Dahle thinks that people who spend less than $124,000 or whatever are unable to come up with something that they’d like to do or have that would cost more. For example, he was planning a heli-skiing trip at the time that was going to cost about $1,000 a day. Can’t they think of something like that to splurge on?
Similarly, luxury automobiles cost money, as do great homes in top school districts. Who wouldn’t want these things if they could afford them?
Opposing Argument: Fun Can Be Had Without Spending Top Dollar
You can’t really replicate every aspect of heli-skiing without spending the money to do it, although, with a little imagination and research, you may find a location, outfitter, or time of year that allows you to heli-ski at a lower price point.
I would also posit that one can take a heli-skiing trip very year on a $124,000 budget. You’d still have something close to $120,000 to spend after accounting for the trip.
What is it that you like most about heli-skiing? Is it the helicopter rides? Probabably not, but one can take a helicopter sightseeing ride for under $500 in some pretty amazing places.
If it’s skiing in fresh powder that floats your boat, you can be first in line at your favorite ski resort after a good overnight snow. No, it’s not the same experience, but it can be had for hundreds of dollars rather than thousands.
With a little imagination, you may not fully duplicate the experience or thing that costs beaucoup bucks, but you might be able to approximate the most desirable aspect of the costly endeavor or object.
Taking the luxury automobile example, if you wouldn’t be devastated to own a model released a few years earlier, you might save a lot of money buying used versus new. If the car of your dreams is known to maintain or even appreciate in value, shop wisely and be open to cashing in when an opportunity to sell at a profit or at least break even presents itself.
A home can also be viewed as an investment. The carrying costs are quite high, but so are the benefits, i.e. a place to live. If you can find an available home priced below market value, your odds of coming out ahead increase. Again, this may take some effort or creativity (or dare I say imagination), but those efforts may be rewarded.
You know what doesn’t take much imagination? Buying whatever vehicle you want at sticker price from the dealer without taking into account the car’s potential to maintain its value or better. Nor does relying on realtors to present you with homes they think will check off every box on your wish list.
Hypothesis: High Spenders Lack Imagination
I’m not sure what exactly constitutes a high spender, but let’s say it’s some combination of spending well over $124,000 a year and a relatively low savings rate. A high savings rate would indicate that the person can’t imagine anything better to do with the money than save it for later.
Supporting Argument: Spending Money is Easy
I honestly don’t see how spending money takes much imagination. It’s about the easiest thing to do, and billions of dollars are spent by marketers every year to nudge you into spending more on an endless array of goods and services.
You don’t need an imagination to figure out ways to spend money. Turn on the TV, play a podcast, or drive down the freeway, and you’ll be inundated with an abundance of ways to part with your hard-earned cash.
All you really need in order to spend money is money. Actually, you don’t even need that. With a credit card, you can spend borrowed money!
If you were forced to spend an insane amount of money in a short period of time, a la Brewster’s Millions, some creativity may be in order. Spending as much or more than a physician typically earns doesn’t require any imagination at all.
What does take some ingenuity? Finding a way to take an amazing vacation using credit card points. Planning your travels around incredible airfare. Using your connections and asking the right questions to get a good deal on a car or home that wasn’t publicly listed for sale. That’s using your imagination.
Opposing Argument: The More Imaginative Things Cost the Most
I don’t imagine I’ll ever climb Mount Everest. It’s not because of the cost, which can be upwards of $50,000, but rather the fact that I don’t like to be that cold, air-hungry, and generally uncomfortable for any length of time, let alone weeks on end.
I could, however, imagine taking a world cruise someday. Royal Caribbean’s Ultimate World Cruise also costs more than $50,000 per person for the 274-day itinerary.
Paying for these things doesn’t require imagination, but freeing up your time to allow for them certainly does. How does one do that? Essentially, you must live below your means long enough to save for both the cost of the trip and to make up for the lost income from taking time away from work if you’re going to do these things prior to retirement.
That’s obviously much easier to do if your baseline spending is low enough to allow for a substantial savings rate. You’re setting aside money, not for a lack of imagination, but because you’ve got an active one.
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My Experience as a “Low Spender”
When I actually tracked my spending back in 2016 to 2018, I found that we were spending in the neighborhood of $60,000 to $70,000 a year. That was with paid-off homes, no student loan debt, and not counting charitable giving, which we do primarily with a separate donor advised fund.
When I calculated our post-retirement budget a few years ago, I figured $80,000 a year would cut it. Add the increased inflation of the last year or two, and we might be spending closer to $100,000, but I still think that qualifies us as relatively low-spending according to Dr. Dahle’s figures.
I’m not lying about our contentedness or spending. I could pass an audit based on our bank and credit card statements, and I love the life we’ve carved out for ourselves.
I wouldn’t necessarily say that I’m easily contented. I can be rather particular about certain things, and I don’t automatically go for the cheapest option. I do believe that having expensive tastes can be a handicap, as your perceived needs can get in the way of might otherwise be a good time, but it’s reasonable to be picky in some ways as long as you don’t always have to have the best of everything.
I clearly feel that I’m not lacking in imagination. My family and I are about to embark on our third “trip of a lifetime” in 2022 alone, with each of them lasting longer than a month and allowing us to explore the histories and cultures of several different countries.
Why do we spend what some perceive to be so little? Truthfully, we could more than double our annual spending while abiding by a 4% safe withdrawal rate, yet we choose not to.
I like to feel that I’m being a good steward of the money we’ve got, and to me, that means not spending it in a way that would feel frivolous.
I like a good value, and I want money to do good things, both for my family and me, but also for others. I’ve never personally owned a luxury car, but the money we’ve donated to causes we believe in could have filled a garage with Bentleys and Beamers. That’s simply a value choice that we’ve made.
Who’s Lacking in Imagination?
If you’re a big spender who pays little attention to the cost of things, buying what you want when you want it, I think you’re the one lacking in imagination.*
Clicking the “Buy Now” button on Amazon doesn’t take a lick of originality. Defaulting to taking an Uber or Lyft to get around when there’s strong public transportation or plenty of time to walk is the easy way out. Consistently ordering from a restaurant menu doesn’t take half the imagination of meal planning cooking for yourself, but it does cost more and usually results in meals that are less healthy.
Saving money and spending with intention, and thereby opening up more possibilities by hastening the time to obtaining true financial freedom, is what takes some imagination.
Consider how life-changing it would be to make work truly optional, and use your robust imagination to envision what your future could hold.
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*I’ll note that this does not apply to Dr. Dahle, even if he did ask the question that prompted this post. He definitely considers the cost of things, is a good steward of money, donating generously, and is not lacking for imagination.
Has your imagination led you to spending more? Or spending less? What’s the most imaginative thing you would splurge on if money were truly no object?