Quote:
Originally Posted by HockeyIlliterate
People should look at this not in terms of what it costs now, but what it costs later.
Spending a sustained $6,000 a year requires, at a minimum, $150,000 in principal. Which is to say, if you believe in the 4% safe withdrawal rate (I don't, by the way), you need $150,000 to support $6,000 in annual spending.
It might not take that much work to earn $6,000, but sure takes a lot more work to save $150,000. With income taxes and the like, saving $150,000 probably requires earning at least $187,500. Or, alternatively, earning and saving something less than that amount, but not touching it and let compounding work its magic.
Either way, that $6K in spending is going to cost you a lot in terms of time and effort in the future in order to keep the $6K expenditure going. That hedonistic treadmill is an unforgiving and demanding bear.
Only you can determine if, as they say, the juice is worth the squeeze, but most people will admit that most expenditures aren't really worth it. Not worth the initial outlay of money, not worth the ongoing expense to keep it in terms of storage and housing cost, not worth the work and effort to earn the money that was used to buy it in the first place or that is needed to keep it.
There is some truth to the comment that "people spend money that they don't have to buy things that they don't need to impress people they don't like."*
But at the same time, it is becoming exceeding difficult for middle class (or lower) people to get started on a secure financial footing when employers demand pieces of paper that cost thousands of dollars for jobs that do not need them, when housing supply is being restricted to favor those who already have a house, and there is a tendency amongst those in government to privatize profits but socialize losses.
* This comment, or a variation of it, is often attributed to Dave Ramsey, but he wasn't the first to come up with it.
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People don't understand things in this way though. They're incredibly short sighted. Then you add in the fricken clowns who make like $200-300K and legitimately think that a pre-approved line of credit is cash he actually owns because he can go to the bank and take it out...
I get where you're coming from, but I don't think the average person even bothers thinking of the $6K in that way. You're at best going to find people willing to agree that the $6K not spent is $6K saved which means $6K available for other things/to pay costs. I don't disagree that it's a cycle that's hard to break.
Quote:
Originally Posted by burn_this_city
I can put $50k into a car and lose the majority of my investment in a few years. Or I can lease that car for 2.9%, put zero down and put my $50k into the market for a 8% return. You still lose money, but a lot less on the differential between 8% and 2.9%.
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Sounds great, until you realize the vast majority of people will not invest the difference and instead spend on that home theatre, electronics, vacation, drugs etc. Then there's far less difference between the 8 and 2.9%. Just a ton of extra depreciate assets.
I've literally met the finance the asset and invest the difference type people like less than 5 times in my entire life. The vast majority of the prudent financial people are save to the max, cash down everything to avoid paying interest. Exceedingly few have the ability to think in an opportunity cost/ROI method. I've met more and more, "Don't buy a house and be anchored to it, rent forever!" type people, but they're more the type of people who literally do it because it's a lower monthly cash flow alternative to buying. They then take the difference in cash flow and blow it all on other things.