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A Repost - Frugality is not Deprivation

June 21st, 2013 at 06:16 am

There was a conversation in the forums about the difference between incomes.

I personally can't take these conversations at face value. I know way too many people who make way more money than me, but who do not enjoy any financial edge. Fiscal inefficiency. Maybe it's more obvious in the region we live in; in the situation we find ourselves in. People tend to be very open with me about their finances. (Either asking for advice after knowing us for a long period of time, or just on a professional level - asking for tax advice). So I see real numbers across a wide variety of households.

If I completely exclude daycare out of the equation, I Can still live exactly the same lifestyle as someone who makes $50,000 more than I. With an extra $50k in income, about an additional $25,000 of that would go to taxes; income taxes and social security. In addition, most people around here are paying an additional $2,000-ish per month for their homes. (If I threw in daycare and working expenses I could probably make this a $75,000 income difference. Double the income, same exact freaking lifestyle!! But I am leaving that out because daycare is more a temporary situation).

Anyway, why so much more on the cost of housing? They didn't put money down. They don't have good credit, and so they pay more interest. They pay PMI. They bought higher. Etc., etc., etc. This one particularly stands out because of the comments we have gotten over the years. No one has any idea how we afford our house - they all imagine it costs us 2-3 times as much than it actually does.

This situation didn't just fall out of the sky. We grew up near San Francisco and knew likely 75% of our income would go to afford a roof over our head. We put a heck of a lot of work, effort, thought and strategy to manage housing costs. Definitely a lot of thinking outside the box.

So anyway:

Pay + $25,000 in taxes
Pay + $25,000 in housing costs
= +$50,000 expenses for the same exact lifestyle

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Anyway, here is a re-post of an older blog post of mine, which this all reminded me of:

So, joan asked an interesting question a while back when I mentioned a mix up between us and another family struggling financially. She legimitimately asked if we *looked poor* or could be *mistaken as poor* by the impression we give off. In this case, was just an e-mail mix up.

But, I think this is an interesting question. Why, if someone is frugal, are they perceived to be so cheap that they must stick out and have a miserable life? Not that joan was saying all that. BUT, I do find that people treat me VERY different on the internet at times, than they do on real life.

The truth is, we fit in QUITE well. Very well. To the point where most people think we are just rich tightwads. Because clearly it is ridiculous that we would watch our pennies so much. (To most people, they don't seem to understand the cause and effect. I'd sum it up as saving money on stuff we don't care about so we have more to spend on the stuff we do care about).

These are the things people will never notice:

**How much stuff we buy used, hand-me-down clothes, hand-me-down furniture. We are big fans of *barely used* goods. I can assure you that no one would ever know if we didn't tell.

**That we eat most our meals at home.

**I delight in finding birthday presents that look REALLY expensive but only cost $5-$10 (on deep discount, of course).

**That when we vacation we make frugal choices - like drive and stay at Motel 6. No one sees that - all they know if that you went to some exciting destination they couldn't afford (i.e. they couldn't afford flying too and staying at a luxury hotel - usually what that seems to mean).

**That I don't spend a fortune on beauty products. Online this is met with *horror.* In person I am often told, "Well - you are lucky you don't *need* it." As if everyone needs hundreds of dollars of beauty products and spa treatments to pass in society.

I do admit everyone thinks we just buy used cars because we are ridiculously cheap (and crazy). They couldn't possibly fathom how much we save (since we are usually told that *old cars cost more*). At the end of the day, my car doesn't come up much anyway. Few people do seem to notice the car situation. Likewise, the few friends I drive around in my van know we paid cash for it and they can't wrap their brain around that anyway. (We bought the van when my youngest was about one, immediately after my long maternity leave, with dh long-term unemployed. I Got a lot of comments - it never occurred to anyone we bought a used vehicle. I know part of the reason no one can wrap their brain around it is because they all think we bought a brand new $24k-ish vehicle that actually cost us about $12k because it was one-year-old. OF course it would have been ridiculous for us to pay $24,000 cash for a vehicle, at that time in our lives).

I admit we are in a unique position since we moved to a low cost area. So, this translates into maybe owning in a prestigious neighborhood, while having the lowest mortgage of anyone we know. Most assumptions are we are about to foreclose like 95% of our neighbors, that we are rich, or that we made a fortune on Bay Area real estate. The truth is that a $300k house feels extremely reasonable to us compared to what we are used to, and that we put 25% down, never borrowed against the home, and have a low fixed mortgage rate. The home was a lateral move from a $290k-ish condo we made no money on. No one else seems to comprehend how we could not be upside down. To be fair, buying price is ALWAYS assumed to be much higher than we paid. We bought the house because it was an awesome deal. Since it was new construction, we locked the price in much lower to what it was even worth when we eventually moved in. For a while (years), when the models were still open, everyone would comment, "I could never afford this neighborhood" after stopping to tour the models. But they seemed completely deaf when we would laugh and reply, "neither could we at THOSE prices."

Then there is the whole *hubby stays home* thing. No one will accuse us of being poor as long as that is a fact. You have to be lucky and rich to manage that, of course. Do you think all of our Joneses type friends can even fathom living on one income? If I opened up my tax returns I think most my friends would faint dead away. (Because of how low our income is, versus assumptions and expectations).

I think for the most part we can figure out how to have whatever we want, cheaper. Whether it be a good eduction (primary or college), a reliable car, a nice home, or whatever it may be. One interesting thing with the kids is dh's love of video games and the prevalence of them around the house. Yes, I'd think it would probably be ridiculous to give my 5-year-old a brand new Nintendo DS, but both kids have a DS and a PSP at their disposal. Cost? Free. As such, they fit in quite well with all the kids and their new game systems.

I remember one day when LM was younger and we were waiting at one of BM's extra-curricular classes. I pulled out a zip lock just bursting at the seams full of games for his Leap Frog. I looked at it, probably for the first time, and thought, "Where the hell did all these games come from?" I had probably paid for just a few games over the years. I was keenly aware that other people must be thinking I was carrying around thousands of dollars of games around, when really it was probably no more than $100 to us.

Anyway, it isn't really hard to fit in. I've got a college degree, a nice home, reliable cars, furniture, appliances, clothing, etc. IT all looks the same as what everyone else has got, for the most part. I can assure we paid very little compared to average for most of the things we own.

So, I had to giggle a bit to myself when joan asked, though I Wasn't surprised at the question. I think if our passions were different, and we didn't have the whole benefit of the low cost of living thing, my experience may be very different. (We maybe would have bought a much more modest home if we didn't perceive this home to be so "cheap." If our passions were not so much on the electronic side, we might not own many of the electronics that make it appear we "keep up.")

I think also we are very moderate. I can think of a few people who are stingy to an extreme. Some have come across very poor when they weren't poor at all. I can't imagine ever being so extreme - in either direction.


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Mr. Money Mustache also says it very well:

Text is http://www.mrmoneymustache.com/2012/06/01/raising-a-family-on-under-2000-per-year/ and Link is
http://www.mrmoneymustache.com/2012/06/01/raising-a-family-o...

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I think these are important to share for motivation and perspective. Why would anyone be frugal? Because it can be extremely rewarding!

5 Responses to “A Repost - Frugality is not Deprivation”

  1. Joan.of.the.Arch Says:

    Must have been me who had asked that question, and now I wonder about the context. (Don't remember.)...I was weirded out by the forum discussion with someone not understanding how anyone could get by on $65K, an amount well more than many live on. I think I'll say something related on my blog.

  2. Suzanne Says:

    I think you summed up the 'secret' of living well on less money very well - "saving money on stuff we don't care about so we have more to spend on the stuff we do care about."
    Suzanne

  3. monkeymama Says:

    @Joan - The context was a school employee very embarassingly confused our e-mail address with that of a child who requested a financial-need scholarship for a pre-K program.

    As to the forum discussion, I think you definitely should blog about your take. Where I live this is a pretty common point of view (maybe more fair given the cost of regional living), but I don't think it's entirely unfair. I *know* I take a lot more income home than some of my more highly paid friends. Just from a tax standpoint. So I know it's fair that economically we have the same experiences, even if on paper they "make a lot more than I do." It's just never exactly "apples to apples" when comparing finances.

    I've had conversations with friends who were trying to wrap their brains around how we gave up a $50k per year income, when my spouse stopped working. They were imagining us taking home like literally $50k less per year. I think that's where these kind of comments come from: "How do you live on only $68k???" We were taking home $65,000 per year, last we both worked. We obviously weren't losing 78% of our take-home pay and only bringing home $15,000 after dropping one $50,000 salary. But that seems to be the perception. (I've had a lot of conversations about this with 2-income families. I suppose not surprising given our financially illiterate society).

    I know there was a lot more to that forums thread and those comments. But, just to clarify more what I am speaking to. IT was more what it got me thinking about than in direct reply to that particular discussion.

  4. Petunia 100 Says:

    When I quit my part-time job to stay home full time with my littles, we did not feel a thing financially. And we were on a very tight budget before I quit. But really, after eliminating work expenses and freeing up time to save money (like having the time to hit different grocery stores for their weekly loss leaders), we were not worse off. It was very surprising.

  5. snafu Says:

    I fully understand how effective it is to plan spending and avoid paying interest. Our extended family views DH & I as cheapskates on one hand but feel compelled to explain their financial mess and ask for help. They indirectly ask for a bail-out with a ton of promises attached which cannot be delivered and are clearly unwilling to make any effort to modify their financial practices. I've suggested they have a look-see at the SA forum to deflect any direct answer and they can't take even that baby step forward.

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