“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” – Wilkins Micawber in David Copperfield, by Charles Dickens
Lately I’ve noticed a new trend in the media that I would like to address. In most areas of life, it is generally accepted that you have to walk before you can run. You don’t just walk into the gym one day, throw four plates on each side of the bar, and start deadlifting it repeatedly. You have to start with a much more manageable amount of weight and train your body to handle more and more through sustained effort over time. And 405 is more than many people will ever deadlift in their lives so there is the crucial element of being realistic as well.
But with personal finance, there seems to be a backlash against that concept. If anyone dares to repeat the totally valid, if tired, advice that people replace $5 coffee drinks with $.10 ones they can make at home and enjoy just as much, they’re met with ridicule or even the vicious personal attacks that have sadly become commonplace in a world where so many people seem to in an ongoing competition to be more outraged by seemingly innocuous things than anyone else. Chase Bank, a bank I have mixed feelings about at best, was crucified for posting simple, actionable advice of that sort – advice that could help a lot of struggling people. And its CEO, again, a man I have very mixed feelings about, has become a political punching bag for some people who appear to have made it to adulthood without learning basic economics at any point along the way.
The theme of these attacks seems to be that people in general don’t make enough money, so giving them any financial advice that doesn’t involve being paid more money (by someone else) is condescending and insulting. In other words, it’s all someone else’s fault. It’s time for a reality check. No one on this earth is entitled to anything. And no, this is not political. I have to say that because the word “entitled” has been infused with bullshit political implications to such an extent that its mere utterance has become almost a war cry. In most of the world, people live in a reality where if they themselves don’t make something happen, it won’t. The fact that we live in the relative comfort of an incredibly prosperous place where life is incredibly easy does not change this reality. We’re all adults here. The days of someone else being responsible for us should have ended long ago.
If you want something, you have to earn it. If you want someone to pay you a lot of money, you have to give them a reason to do so. This typically involves using the infrastructure and resources of their existing business to make them more money, some of which can subsequently be paid to you. And outside of some very lucky folks, no one is exempt from this. If the board of directors didn’t think Jamie Dimon was creating more value than what he is being paid, I can assure you they would not be paying it to him.
If you don’t accept that concept, it’s going to be very difficult for you to have a successful career. Even if you start your own business, which is very difficult to do without experience, capital, or both, I can’t see a path to prosperity for you if you don’t believe everything has to be earned. It is imperative that many of us stop blaming our problems on others and start taking an honest look in the mirror and changing the things that are holding us back. It’s the only way anything is going to improve.
To that end, no, if you’re living paycheck to paycheck, you can’t afford a $5 cup of coffee. Even a few of those per week could cause you to pay a bill late and fall into a cycle of paying interest, late fees, etc, that could become very difficult to get out of. And it doesn’t stop with the paycheck to paycheck crowd. I very rarely buy a $5 cup of coffee. It is simply too easy to enjoy not just drinking great coffee, but making it, at home – and at quite literally 2% of the cost. This isn’t to say I never get coffee from a coffee shop, because I occasionally do. But usually I’m meeting with a customer, a friend, a date, etc, and the coffee itself isn’t the real reason I’m there. Buying the coffee is just an expense I have to incur in order to spend time in a particular place for a particular purpose. I’m already wealthier than most people and I’m only in my early thirties, but I didn’t get here by ignoring reality. In fact, I doubt almost anyone who is highly successful got there by enjoying luxuries before they could afford them. The only way to change reality is by first accepting it.
This is so much more than just coffee. No one is literally saying that cutting out a coffee shop habit is going to make you a millionaire. It is just an example of a very important concept that can be applied to many different areas. The same applies to a restaurant meal, which if made even a once a week routine, could easily turn into a $100 per month premium over equivalent food that could be made and eaten at home. I’ve seen people using Uber when they could drive to the same places and turning $10 worth of parking and gas into a $50 round trip in the process. Again, even at once a week, this costs over $100 a month over and above what it would cost to get the exact same thing done. It all adds up – and usually pretty quickly.
I think most of the outcry over this very valid and legitimate advice amounts to some bad actors trying to score points by telling people they don’t actually have to deal with reality. It’s easy to make people feel good telling them things like that. But it does them absolutely no favors. Some people see a $5 cup of coffee, a $15 restaurant bill, etc, and don’t realize what they represent. These are examples of doing things in wildly inefficient ways and especially when you’re first starting out, expenses like these can be the inches that make up the difference between winning and losing.
How important are the inches? Just look at the quote I opened the post with. If you spend less than you earn over a sustained period of time, even by just a little, you will build assets and life will get easier. If you spend more than you earn, you’re doing the exact opposite. The average person in this country has roughly $10k of credit card debt. Most of them didn’t rack that up overnight. It usually happens when someone is living at or close to the edge and gets hit with the inevitable unexpected expenses. If they can’t cover them with either excess income or savings, then the only option is to borrow. Too many people turn to credit cards, one of the worst forms of borrowing. It’s so easy. Almost anyone who can fog a mirror can get a credit card. And if you just pay a little bit each month towards the ever increasing balance, you can have pretty much whatever you want.
But there is always a cost. In this case, it is that as the interest grows, it becomes an expense of its own that does nothing for you and increases each month unless you pay down the principal. Instead of living on the edge, you’re now beyond it and gradually burying yourself deeper and deeper. It doesn’t seem like a big deal at first. But over time, the situation will not only get more and more difficult to dig out of; it will deprive you of opportunities you won’t even know you’re missing out on. Those opportunities come in many different forms, but the theme is the same. If you have money, you can use it to make more. The more you have, the easier life gets. That, in essence, is the American Dream – work, save, invest, prosper. What a tragedy that marketing departments, and another kind of enablers with political motivations, successfully turn so many people away from it before they even know what they’re passing on by taking the path of least resistance.
But those people don’t control you. Only one person on this earth does. You get to choose where you get your information, how you process it, and how to proceed from there. This is both a privilege and a responsibility, so take it seriously. The quality of your life depends on it. If anyone is trying to feed you sugar – something that tastes sweet in the short term but seems just a little too good to be true, ignore them. The sweetness is gone as soon as you swallow; but the fat ass you’ll develop over time is going to be with you much longer than that. Whether we’re talking about food or finance, you want to be taking advice from the same people: the ones who give you the tough love that doesn’t feel so good in the moment, but keeps you on the path of true progress. They’re usually the same people who are succeeding in their own lives – and these days, sometimes being demonized for that very success. They can help you get there as well. In fact, paying it forward is something many of them enjoy doing very much. But in order to benefit, you have to ignore the yes men (and women) who peddle easy answers that never deliver results. And then you have to listen to the proper advice and work your ass off carrying it out.
At the end of the day, it’s about who you want to be. Mr Micawber was a tragic character in David Copperfield. He realized his folly, but not until it was too late. Don’t let that happen to you. You can join the masses of lazy people telling lies, pointing fingers, and bitching because they haven’t been handed the results they want in life. Or, you can admit you don’t know what you don’t know (there is power in that, NOT shame), learn what it takes to actually succeed, and then get to work. The latter will get you results. The former will keep you from getting any further than you already have. Reject that. Learn, grow, and live a better life. It all starts with taking responsibility for yourself.