In Praise of Frugality and Money Mustaches

Paul Solman is consistently excellent in his Making Sense reports on the PBS Newshour each Thursday. He chooses wonderful topics and explores them with whimsy and depth, and he is not afraid to challenge common perceptions. I am never bored and I always take away something useful.

Last Thursday he introduced me to a blogger I had not heard of, writing under the brand of Money Mustache. The founder of the blog is a guy who managed to retire at thirty, and claims he has a method for most others to achieve something similar. Having felt that I did pretty darned well in retiring at fifty, obviously way behind target for these people, my interest was immediately piqued.

At the heart of the blog is the insight that a certain amount of wealth should be sufficient to fund a lifestyle forever, or at least as long as most of us are likely to live. That is because invested wealth generates income. The Mustaches believe that you can spend about 4% of a pot of wealth each year, and on average the wealth will not dwindle to nothing until you are dead. So if you can find a way to live on $30,000 per year, you need first to acquire wealth of $750,000, and then you can retire.

You could acquire the necessary wealth by inheriting from wealthy parents. If that avenue is not available, then anyone who can get a reasonably well-paid job in the USA can budget to save a proportion of their income until the target is reached, noting that things get easier because along the way income from already acquired wealth kicks in.

Then lots of blog postings bemoan how most Americans spend far more than they need to, and often for flawed reasons like being seen to keep up with neighbours. Some of the money saving ideas are rather biased - many would say male-orientated, such as living with only two or three pairs of shoes. Some, such as a penchant for do-it-yourself, are not available to everyone. But many of the ideas are sound, and sufficient to provoke thinking about what satisfaction such expenses truly provide.

I agree with a lot of the blog. I too am astounded how much many Americans think they need to spend. Median salaries are over $60,000 and, the way I was brought up, that should be enough to save plenty for anyone living outside the big cities with high rents. I too have experienced the happy phenomenon of wealth generating income. When I retired, I vaguely calculated how much I could spend per year to tide me through to the time I could draw my pension. In practice it has been much easier than I foresaw because of the wealth-based income.

I certainly agree with the investment strategy of the blog. It is not necessary to be a fancy investor like a day trader or frequent stock picker, indeed for most of us that would be both boring and loss-making. Instead just put money in index tracked funds and leave it there. It will go up and go down, you will feel in turns rich then vulnerable, but leave it long enough and it will grow and generate dividends.

Much of the frugality advice doesn’t really apply to my international family. One trick is to game credit cards, by churning through special offers. Well my circumstances mean I can’t even get most credit cards. We have also chosen to live in NYC with its high rents, and have necessarily high travel costs because of our connections in Europe.

When you first move to a new country, or even a new region, you have to loosen the purse strings a bit, and that is when you are most likely to make mistakes. Even amidst the chaos, try at least to get the big things right, like housing and cars. It is not easy. I found that it took about six months to regain any control over my finances.

I have two pieces of advice for people living abroad though. The first is to try to do things as the locals do. In Sweden, shrimp is plentiful and cheap, so eat it. The locals do things for a reason, usually geographical, so you’ll be rewarded if you follow their lead. The second advice is about planning to leave. These assignments tend to have variable end dates, and the temptation is to live always as though you might be leaving within a few months. Within reason, avoid it, for life in a suitcase is miserable – just act as though you’ll be there for a few years, and deal with it later when things turn out differently.   

Going back to the Mustaches, many of the frugal principles are good. The blog hates cars (they are also closet environmentalists). Most people consider the cost of driving to be the cost of gasoline, but a good rule of thumb (in the US) is to multiply that by five. Families with two or three new SUV’s have plenty of scope to reduce costs. Next, they hate cable TV. I can see the point, as the cost is ridiculous, but I do love my live sports, PBS and NY1. Part of the reason they want to ditch TV is to avoid exposure to ads tempting us to waste money, which feels a strong argument. They also try to save on clothing, maintenance, gyms, smartphones and so on.

One common theme is about being wary about future liabilities. That obviously holds true for a car with a low down payment. I didn’t yet find it in the blog, but pets fall in the same category. You can pick up a cat for a few dollars, but that same cat will cost you thousands before you are done with it. Go ahead if the pleasure means that much to you, but do so with your eyes open.

I was brought up in a very frugal household, a product of war and rationing scars on my mother. Bless her, she acted as though her main goal in life was to die with a large bank account, and she duly achieved it, but she could have had a more fulfilled life if she had learned to be generous, especially to herself. As the blog argues, it is good to be both frugal and generous. I have been blessed in my life partners for slowly teaching me the wonders of generosity, and perhaps I have managed to imbue a bit of frugality in them in return.

My frugality has also been supported by my geeky love of numbers. It is much easier to understand accounts and to budget if spreadsheets and estimating and calculating come easily. I do wish school curricula paid more attention to this mundane subject, limited in mathematical depth but crucial to every human. Our daughter was offered a personal finance course right at the end of high school, but it seems that most of it dealt with parochial things like tax codes. There are many more useful, universal aspects to the subject than that. The subject is so difficult for so many people, and, sadly, their reaction is often to wish away the problem and just hope for the best – not an effective strategy.

A frugal upbringing, numeracy and cynicism must be the perfect combination for developing good frugal habits. Perhaps the original Money Mustache was blessed with the same combination. His acolytes certainly seem to be on to something, since this has developed into quite a movement by now. Well played them. And thanks again to Paul Solman for bringing it to my attention.

Thinking of frugality led me to try to come up with a list of top tips from my own experience. I’ll share them next time.

Doubling Down on the Dutch

We have just returned from a two-week trip to Europe. We visited two airports in each of England, Belgium and Portugal, stayed in one hotel in Belgium and two in the Netherlands, and drove extensively in Portugal, Belgium and the Netherlands. I understand each culture and each language poorly, but just well enough to observe, and learn, and spot lessons, usually simple lessons that the world fails to heed.

Having lived in Holland for eleven years and rarely having been back since, that part of the trip was the most interesting to me. We spent time with our daughter in a small town in the south and visited relatives and friends elsewhere, and a short trip to our former hunting ground of The Hague proved very fruitful. Our former Church had an event planned so we could meet many acquaintances and enjoy a dinner afterwards with friends, and later we even met another friend by chance on the street.

The Dutch are a special race. I was reminded of this even before the visit, when attending a music workshop in New York led by a Dutchman. He was confident, with no airs and graces – his whole demeanour said: “take me as I am”. He offered a few life lessons, as he called them, prompted by things that came up in the workshop. One such piece of advice was “argue properly”, something I had never heard but which immediately resonated. It is the Dutch way. They love a good debate, and everyone takes debates seriously and offers opinions, sometimes for hours. But eventually a conclusion is reached, based on shared data rather than hierarchy, and after that implementation starts. This is a large part of what is called the Polder model, and it is how Dutch society operates.

This trip reminded me of several ways that Holland and the Dutch can be really ugly. The land is stunningly flat and featureless. While the old towns are beautiful, much of the modern architecture lacks variety. The language is loud and guttural. The weather is wet and windy. The people seem to lack warmth and taste and care little for style, and their customer service is abysmal.

Yet despite all this I had a great time and my admiration for the land and its people was rekindled. I remembered how simple it was to do business there, because people wasted little time, said what they thought, implemented well and were careful with money. I could see the results of this everywhere I looked, with functional industry thriving. We drove along the coast through the delta, and saw wonderful examples of the water management skills of the Dutch, a competence that the whole world will benefit from as climate change wreaks its toll.

Most amazing of all was the transportation. Unlike the US, Europe seems to have a method of asphalting roads that avoids them becoming immediately pitted with potholes. The smooth ride is helped by wonderful signage and smart design of junctions, although I found many of the roundabouts a bit strange – they often had two lanes with a divider between them at certain points, which meant you really had to choose carefully.

Then there is the provision for cyclists and pedestrians. In towns, the car is very much the junior partner, with any journey interspersed with pavements that are either light grey, indicating a pedestrian route, or red for cyclists. Add in tramlines, and it can feel like a maze. It was unfamiliar, even for someone who had driven there for many years, but it was functional and safe.

One thing this system requires to be effective is obedience. The Dutch have ensured obedience by embracing technology and heavy penalties. The parking meters are a technological marvel. The motorway speed limits are even more amazing, changing every few kilometres, often in real time and automatically depending on traffic. It foreshadowed a possible future of unmanned cars, all of us tootling along at the same speed without changing lanes or looking to game the system. And we all arrived safely and without delays – well played the Dutch. But I must pray that my car hire company doesn’t send me a bill in the next few weeks for some unknown offence.

The Dutch have among the most car miles per square kilometre of anybody, because of the dense population and developed economy, so they need all this innovation to avoid gridlock. I also loved the way so many traffic lights had sensors determining when they would change for optimum flow. Actually, I fell foul of the system until I realised what was happening, because amber lights repeatedly stopped me. I was at the back of a line of cars, and the sensor wanted me to get through and then change the light, but I was going a bit too slowly and being a bit too cautious.

I love theories about how geography and history determine character. In the Dutch case, it is simple. The land is flat and prone to flooding, but productive if managed. The delta provides a source of income via trade and especially tariffs for passage. So think of a grisly lock keeper, hardened by the weather. He or she must be technically proficient, resilient and ready to endure hardship. He or she must also be tough, almost brusque and uncompromising in taking fees and counting pennies. He or she must work in partnership with other lock keepers but be ready to argue. That is the Dutch character. Take me as I am.

As soon as I drove in Belgium, I could detect differences. The people are softer but also more slapdash. The signage is poorer, the roads are less safe and some drivers lack discipline. But the welcome is warmer and the food so much better! I find it fascinating that just a few miles distance has created such stark and sustained differences.

The world has become much smaller since the Dutch character was formed, and there is a chance for future generations to defend their unique characteristics while also learning more readily from others. Transport again offers so many simple opportunities.

In New York, the longer phasing of traffic lights is smart, but sensors could make things so much smoother. A lesson in procuring and laying asphalt is long overdue. Bike lanes are smarting to emerge, but are compromised by double parking and carelessness of drivers. Speed limits are lower than in Europe but hardly followed or enforced, even though technology would make that simple.

A transport experience is highly visible. But there is no doubt that the Dutch have used their character equally effectively in less visible areas of public policy, such as health and education. Lessons would be abundant, were we ready to accept them. 

What holds this learning back? Partly it is resistance to change, often masked as protecting freedom. Perceived freedom means a lot to Americans, descended as they are in most cases from pioneers. Discipline and cooperation do not often gel well with such priorities.

It is not surprising that Dutch is a language full of proverbs, reflecting outcomes from years of Polder model learning, passed through the generations. “Argue well” is such a saying, one that I had not heard before but which I love. The US political system could benefit from learning to argue well. The Dutch used to run New York – it was originally settled as New Amsterdam. Perhaps it would be a better place if they were to return, though the food would certainly take a turn for the worse. 

I am Kavanaugh

The US is currently consumed in an ugly drama, being played out in public. I was not here at the time, but it feels reminiscent of the OJ Simpson trial. This drama shares elements: a human story playing out along a cultural fault line; live TV courtroom style drama; most people having a preordained opinion and taking a selective view of the evidence; and long-term consequences for the nation.

I joined most people last Thursday, finding CNN on my TV for the first time to witness the Kavanaugh hearings. They were certainly dramatic. Despite the ludicrous format imposed by the Republican majority, a clear picture of Christine Blasey Ford shone through. As one commentator put it, it was a wholly compelling performance, precisely because it was not a performance. Many people tuned in hoping for her to be exposed as a political puppet, or an unreliable witness, or with a fatally flawed recollection. None of these things happened, and the best that those that wished to discredit her could come up with was a reluctant admission that the events she recalled really did happen, but perhaps Kavanaugh had not been one of the perpetrators.

Then Kavanaugh took the stand, and I was shocked by his attitude. He was just as authentic; it was just that the character exposed was far less likeable. He was angry and bitter about the process, claiming the whole circus had been a political ambush. He was close to a broken man, bemoaning the lasting damage to his reputation. I believed him as well, at least in these aspects. When he deigned to comment about the actual allegations, I was less convinced.

While watching, I was struck by similarities between my own background and that of Kavanaugh. He is just a few years younger than me. We both had ambitious parents with money and were packed off to private schools and top colleges, burdened by high parental expectations for our futures. From what I gathered, both of us had a desire to belong socially, and that meant fitting in with groups of boys. That led us to comfortable forms of rebellion such as drinking and boorishness and maybe a dose of bullying to show our credentials. Maybe we were both frightened by girls and female intimacy, fearful of humiliation, which led us to struggle to create normal friendships with girls, and then to potentially objectify them when with other boys.

My own experience is painful to recall. My father was old and died when I was 15, and my mum found intimacy difficult and was prudish. At the time, TV and movies and books did not help much either, generally portraying idealised confident and aggressive boys. I remember recoiling when a girl tried to kiss me when I was 17, and then again when another girl suggested sex when I was 21. I don’t remember seeking advice for anything intimate, and I guess it was no surprise that in the end an older woman was the one to enable me to start to face the inhibitions when I was 25.

From Kavanaugh’s attitude, evidence and interviews, his story might well be very similar. One difference is that he was better connected and also a athlete and presumably more desirable, so he had more opportunity for missteps than I did. Most of the time I could just hide in my misery. At the country club and fraternity, he had a higher likelihood of encounters like that described by Ms Blasey Ford. I could easily have made similar mistakes – what saved me was not good character but acne and a lack of opportunity.

My guess is that these stories are far from unusual, even today, and that it would be helpful if people knew that. I think I read in the 1980’s that about 40% of boys left college as a virgin. The percentage may have reduced now, but not all that far, and not in every culture – Japanese boys are known as inhibited and late developers, for example. Yet popular culture portrays male virginity above 20 as uncommon and freakish. I watched the movie “the 40-year-old virgin” and cringed. This culture does nothing at all to help those frightened boys.

One way that boys will be boys remains that they exaggerate and struggle to express their true feelings or to seek advice. It may not be 40%, but a significant minority will be suffering like I did and perhaps Kavanaugh did too. I would not equate their trauma to that of victims like Ms Blasey Ford, but it is still trauma. And of course if society could address the trauma of confused boys, that would create fewer female victims as a direct consequence. Luckily, this is one of the many ways that the current generation is so much smarter than my own, but it is not the case for everyone, nor everywhere – think of India or China. 

Going back to the current politics, feeling commonality with Kavanaugh helps to put me in his shoes, but it doesn’t make me support him for the Supreme Court. There are many reasons for this.

First, it feels all too likely that he really did molest Ms Ford, even if some of the other allegations might be exaggerated and driven by less pure motives. I might have done this too, given different circumstances, and, in the unlikely event that I would have risen to become a Supreme Court nominee, I think I would have dug myself into a hole too. First I might have dissembled, then I might have doubled down and become angry: that is how entitled people who are used to getting their own way behave. My guess is that he now regrets not being fully transparent from the start, but that hole is too deep for that now, at least if he wants to fulfil his lifetime ambition.

Now, I’d be open to an argument that says he should not be excluded by an indiscretion as a 17-year-old. Indeed, I’m very open to that; my own experience means I would not judge him too harshly, despite the trauma of Ms Blasey Ford. The problem is the hole he has now dug. It is sad, but he has probably dissembled, and that would disqualify him. The legal burden of proof here is far lower than a criminal case; even if we think the odds on his honesty are as low as 75%, he is disqualified.

That would be sad, harsh and even potentially unjust were it not for two other arguments.

First, he destroyed his own credibility on the witness stand. It is fair, even true, for Lindsey Graham to berate the Democrats for their cynical ambush of the process. But Kavanaugh cannot do that himself, still less attribute motivations of revenge for 2016 and the persecution of the Clintons. A Supreme Court judge cannot be so nakedly partisan, and, even under duress, he should know that. For as long as he sat on the court, decade after decade, he could never shake off a label of being partisan and hence biased. We struggle to defend Clarence Thomas as a possible abuser. That would be hard with Brett Kavanaugh also, but possible. Observing him as a naked partisan undermines the Supreme Court far more completely.

My other argument is about hypocrisy and fair standards. Entitled people tend to shrug off their immature behaviour. The last two Republican presidents evaded the draft, and both have plenty of other youthful excess to explain away, one of them not just in youth. I can almost forgive that, if only these same entitled people demanded the same tolerance for others. But they are the ones who cheer on policies that lead to mass incarceration of black youth and weak attempts at rehabilitation; in context, those kids are at least as forgivable.

And what about abortion? That is such a tough issue, with the judgement about when a foetus becomes human against potentially destroying the prospects of a young mother. But I don’t see a massive attempt from these same people to make the boys as responsible as the girls, nor to make unwanted pregnancies less likely. Look at Kavanaugh and imagine things went a bit further and Ms Blasey Ford became pregnant – it is all too possible. Dragging up a peccadillo from 35 years ago may damage his reputation, but the other party would probably have had to abandon any chance to reach the Supreme Court or any other senior position, were abortion not available. Sadly, it is typical of men of privilege to expect a different treatment for themselves than they demand for others.

Sorry, Brett, I can empathise with you, I can fully understand what you did, but you are not worthy of the Supreme Court, and it would be an enduring tragedy if we have to remember this every time we see your face with eight others in black robes for the next thirty years. It is time to quietly retire and devote the rest of your life to defending victims. How about setting up a foundation to help mixed up boys?