Well, as a new blogger trying to wade my way into the world of FIRE and its associated community of keen savers and earners, I try to make a habit of keeping up to speed on the financial happenings in the world. I listen to a lot of Podcasts related to finance and the economy, such as David Stein’s Money for the Rest of Us, most everything from The Economist and also Planet Money from NPR. I also like to read blogs and media sites, primarily when killing time and being ‘unproductive’ at work, such as right now.
One sight I have come across here and there is Moneyish, which is a pretty cool but not overly technical sight about money and the people, places, and things that go along with spending, saving and investing it. It can be a little tabloidy, with very click-baity titles, but they are trying to attract millennials after all. We all are. But I like most of what they are getting across, and it is usually pretty entertaining.
Anyway, while listening and reading, I am trying to find new and interesting angles on topics that I feel you, the reader, will enjoy. Sometimes, I also just simply want to share something awesome, stunning, or outrageous (in a good or bad way) that someone else has shared in these articles or recordings. And late last week, I came across this article, titled “This is the Most Expensive Year of Your Life”, on Moneyish, that checks all these boxes.
What the article reveals is that, on average, the year that people spend the most money is when they are 31 – $61,000 on average. Of course, the average income is much lower, meaning it is also the year that we are racking up the most debt:
ClearScore surveyed 3,000 people aged 25 and over, and had each outline their expenses for that year. They found that 31-year-olds spent the most money, with the biggest expenses being getting married (27%), buying a house (25%), having a baby (20%) and paying for a honeymoon (14%). (Worth noting the average U.S. worker’s salary is $44,564 a year.)
However, most of the debt seems to be going towards things that are not only completely unnecessary, but also complete fabrications of modern western society. Our standards for size and costs of weddings, houses, childrearing and trips have all inflated to the realm of ultra-unsustainable, yet we continue to March forward, racking up debt like everyone else. Debt that we won’t come to rue for another decade or two, when we come to realize we have been living the life of a civilized slave, with our lives being shaped by the calls of our creditors.
The article then profiles a couple of young people. Now I am a big advocate of each-to-their-own, and that shall always ring true, but I will just point out that if these people were asking me for financial advice, I would have some drastic mindset and behavior changes to suggest to them just as a starting point.
Nick Pennebaker, 31, is living his most expensive year right now after moving across the country from Chicago to Denver. He bought a new house, got engaged and traveled to Europe, and will have spent well over $65,000 of his savings by the time he turns 32.
“This year has been obscenely expensive in terms of what I spent,” Pennebaker tells Moneyish.
Moving cost him about $6,000, and renting the new house alone will run up to $30,000 for the year. After the move, Pennebaker proposed to his now-fiance Anna, and says he’s already spent $10,000 on wedding planning, as well as flying back and forth to Chicago, where they’ll tie the knot next year. Then there’s travel and leisure, like a trip to Amsterdam which racked up a $5,000 bill, and weekend escapes around Colorado that have totaled around $3,000.
Spending on travel and experiences in their new city, coupled with life events, is a priority over budgeting right now, says Pennebaker.
“Thirty-one is an interesting age, because you’re well into adulthood by having a real job, paying bills on time and balancing a checkbook, but there’s also a touch of immaturity,” he admits. “So what if you pay a bit extra for a nice meal … a weekend trip to the mountains or New Orleans? We definitely have a good amount of responsibility on our plate, but not having kids or people truly relying on each of us does give some more wiggle room.”
That means room for going out to dinner four times a week, and splurging on golf and brewery outings that stack up to about $300 a week, Pennebaker says.
Good god Nick. Good freakin’ god. $300/week on dinners out!? That’s more than my current weekly budget for EVERYTHING, and I am no pauper by any means. If Nick started investing 3/4 of that income ($900/month), it will be somewhere in the range of $1.4 Million dollars! And he would still have $300 per month just for dinners out. I won’t even touch further on his clearly overpriced wedding ($10,000 on ‘planning to date’!?).
It bears repeating:
“Spending on travel and experiences in their new city, coupled with life events, is a priority over budgeting right now, says Pennebaker.”
Well Nick, I would argue that it is about time you understand that everyone needs to have a budget, and that budgeting and earning should be thought of as distinct endeavors. Also, if you must forego your savings for your retirement (note I am not considering Nick as a candidate for any form of ‘early’ retirement) in order to pay more than you can afford for ‘experiences’, then I would suggest the biggest shift needs to be your expectation of your experiences and a realization that great experiences and expensive experiences are not synonyms. Not at all.
Then consider Sachi:
Other 31-year-olds are investing in their futures. Sachi Lee, a Los Angeles-based entrepreneur who runs her own jewelry business and works part-time as a DJ, has invested thousands of dollars in business ventures and living alone.
“At this age, you’re making more money, but you’re also reinvesting in yourself because you’re on an upward career trajectory,” Lee says.
Her first splurge was getting her own two bedroom apartment sans roommate so that she could have a home office space for work, which costs her $26,000 a year for rent — a little over $10,000 more than what she was paying to live with a roommate. She’s also spent $3,000 in new DJ equipment to host private events and pop-ups for additional income.
Holy. Frickin’. Crap. Sachi! $26,000 a year for rent!? That’s $2 167 per month! Spending that much on housing may sometimes be justified if, as it appears is the case with her, it is for business/earning/home-office reasons as well, but it had better be a well-established and high-earning home business already to justify spending that much on rent. My goal for spending in 2018 is about $12,000 USD ($15,000 CAD). If Sachi stuck with her roommate situation, it sounds like she could save $10,000 per year, allowing her to make a down payment on a home in a few years, and at least be paying her own mortgage while paying so much for housing. I think renting can be a decent financial strategy under the right circumstances, but it’s hard to imagine any circumstances where spending over $2,000 on rent is justified at all.
But there’s more from Sachi:
Lee, who prides herself on being an independent working woman, has also committed to self-care at any cost. That includes: A $2,400-a-year gym membership; $1,200 preventive botox sessions she said she never had to worry about in her 20s; and around $3,600 a year on hair, makeup and manicures to look presentable at work events. She’s also spending around $5,000 on travel for the year, including an upcoming trip to Las Vegas with family.
$200 a month at the gym!? $100 a month on Botox!? $300 a month on hair!? (never been happier to be balding). Damn Sachi, you had better have it going on!
But in all seriousness, as further proof that people delude themselves into justifying their spending habits (and behavior in general), this is how Sachi summarizes her current outlook:
“I definitely have prioritized my career my whole life, and now everything I’m spending is an investment in the future,” she says.
No Sachi. No it is not. Yes, health and confidence are important investments, but they NEVER require $6800 per year on memberships and cosmetics. A real investment in the future would be putting that money into a low-fee, highly diversified ETF and wait until you’re 65, at which point it will be in the range of $930,000. After all, you’re going to need the Botox much more then than you do now.
So, what this article is really saying is that on average, 31 is the age at which you make the worst financial decisions of your life, and may just finally be earning enough money to do so. Just enough that the banks are willing to issue you more and more credit, that is.
Sign above the dotted line to forfeit your Freedom.