This brilliant article was written by Dave Gow of Strong Money Australia and has been shared with his permission. Please note: nothing in this article should be considered as financial advice. So do not act on what you read here. I (Owen) am simply a fan of Dave’s writing, so I wanted to share this with you. You can reach out to Dave via his website (see the links in his author bio below the article) or comment/make a FIRE topic in the Rask Core Community.
I’ve noticed a peculiar trend in recent years. Despite having an already-incredible and increasing standard of living, my fellow Aussies seem to be growing less content with each year that passes.
This lack of contentment results in desires which seemingly need to met. And in meeting these new desires, then our lives will be better and at last the void will be filled.
There’s a few reasons for this, and it represents both a conundrum and an opportunity! So let’s go through it together and I’ll explain how this can help you become wealthy and financially independent faster.
Consumerism: The Religion
Many decades ago, a new religion was born. This religion was called Consumerism. And it’s fundamental premise was: more stuff = better life, and a better life = happiness.
But it’s not quite as simple as that, and there’s a hole in the strategy. Effectively it looks a bit like this…
Not to worry, because this philosophy was gobbled up like big ol’ bag of choc-chip cookies. This tasted great at first. But ultimately, people got hooked on these cookies and the sugar-high of ‘more stuff’.
So much so, that we’ve run out of room in our homes to store the growing pile of possessions, and a growing industry of self-storage facilities has blossomed. And it’s not because our homes are smaller than before. In fact, the average home is larger than than ever and there are less people living in each dwelling!
But things have started to change in recent times. We’ve started to realise that this particular bag of happiness cookies actually doesn’t satisfy us, and that using this as a strategy for happiness is often bad for our mental health. In response, the concept of Minimalism has grown in popularity and the benefits are many.
Consumerism 2.0
So, our desire for more stuff has already been met many times over. And at the same time, wealth and incomes have continued to grow, so we now have more disposable cash than ever before.
This creates a dilemma. How do you get people to part with their cash who are already overflowing with stuff?
Convince them they need better stuff. Higher quality. More features. A richer experience.
They’ve even created terms for it: Mass-tige. Prestige for the masses. Genius, right?
And it’s working! We’ve swapped the pursuit of more, for the pursuit of better.
From home developers, fashion designers to product creators, all are pushing higher cost products to the masses. And the implied payoff is basically the same: status, popularity, envy, and the appearance that you’re totally winning at life!
Not because we need it, of course. At this point, we don’t need a damn thing. It’s just another bag cookies in a new flavour. But these are even more addictive than the last.
That’s because unlike the ‘more stuff’ cookies the first time round, the ‘better stuff’ cookies of Consumerism 2.0 is a bottomless packet. There’s a limit to how much we can own. But there is no limit to better.
So we just keep munching away, thinking we’re getting somewhere, while the cookies are continually replenished as fast as we can eat them. So we munch faster, trying to take it all in. Better technology, better holidays, better cars, betters clothes, and better restaurants.
We’ve become addicted to better. We’ve become addicted to novelty. Addicted to new for the sake of new.
This sugar-high gives us a feeling of wealth in the short term, but ultimately leaves us close to broke over the long term.
So what does this mean?
Essentially, in decades past we traded our growing incomes for more stuff. And in the current and coming decades we’ll be trading even more surplus cash, not for more stuff, but for better stuff, including products and services.
In terms of personal finance, this opens up a huge chasm, between those who get sucked into it, and those who don’t. Between those who follow the crowd, and those who think for themselves.
Because with each decade that passes, we require a smaller percentage of our wages to cover basic living expenses, as I looked at in this post. Yes, there are exceptions, but overall that’s true. That’s the whole reason financial independence is even possible in the first place, where it wasn’t in the past.
Level-up your money management
If you’re not already, start playing this personal finance game and create the best, healthiest lifestyle you can for the lowest cost. The goal is to maximise your enjoyment while also maximising your savings rate.
The two are not totally incompatible! If you think they are, then you may have been drinking the marketing kool-aid.
Those who understand this dance and make conscious choices about where their money goes will be handsomely rewarded. With a higher savings rate, lower stress, higher levels of contentment and the ability to retire many decades earlier than their peers.
Those who don’t get it will simply repeat the work/spend treadmill of past generations and wonder why they aren’t getting anywhere. As the gap widens between those who get it and those who don’t, I think becoming financially independent will actually become easier as time goes on!
Now onto some examples of exactly what I’m talking about. Where the pursuit of new and better for the sake of it has real implications beyond simply a monthly repayment.
House renovations
A kitchen and bathroom upgrade is not all that uncommon, to give your house a ‘new’ vibe. The cost can easily be $30,000 or more. And that’s often added onto the mortgage rather than paid for with cash, but we’ll ignore interest for simplicity.
Cost: After ten years, with a 7% return this would turn into around $60,000. And of course, after ten years, the house is looking quite tired again and the novelty has long worn off. So further property upgrades are on the cards at this point. Yes, I know every house needs to be maintained. But every house does not need to be constantly updated.
Moving
A simpler option than renovating is to simply move house. This satisfies the urges of newness, excitement and the possibility of ‘better’.
Moving costs on a $500,000 property average around $30,000 in most cities from stamp duty and selling fees alone. Let’s say a restless couple moves every 5 years, rather than a more reasonable 10 years.
Cost: Every ten years this couple burns through an extra $30,000 plus interest on a higher mortgage balance. Again the same amount of money would compound to $60,000 after a decade.
It might seem silly to include this when I’ve sort of covered house novelty with renovations. But we know people who have both moved house regularly, in combination with the home customisations above, burning money in both ways because they never seem satisfied.
Vehicles
Is it any surprise that people are supposedly struggling when every second car on the road is a brand-new SUV? By the way, I figured out what SUV stands for: Simply Unnecessary Vehicle.
Anyway for some reason, many folks seem to have this urge to upgrade their car every 3 years. What’s going on here? I think it’s boredom. I think it offers something to get excited about, among the soul-sucking monotony of the rat race.
If we have to drive to work everyday, we might as well enjoy it, right? Well, I can see the thought process here. But this is exactly the kind of thinking that keeps people handcuffed to that job in the in the first place!
Cost: Assuming an attractive vehicle is purchased, the cost could be $30,000 or more. It is then sold after 3-and-a-bit years for $20,000. This cycle repeats 3 times over a ten year period. Whereas a frugal person may spend around $10,000 on one car and keep it for ten years, investing the surplus cash.
This makes a difference of $20,000 up front, plus an extra $10,000 each for two upgrades. Again the desire for better has cost around $60,000 over ten years. Double this for a two-car household.
Technology
Tech options are limitless these days, but for this post we’ll just look at phones and TVs. Both categories have a never-ending stream of upgrades available with every year that passes. And for some, the call is too strong to ignore.
We’ll assume a content couple goes through 2 phones each and 1 TV over ten years. In contrast, our insatiable couple upgrades their smartphones to the newest model every two years, and their TV every 3 years.
Cost: The upgraders will acquire an extra 8 phones and 2 TVs in a ten year period. With the best new phones costing around $1,500 this equates to $12,000. Why would you get less than the best available? And 2 high-quality TVs might set them back another $5,000.
Now this seems a little strange since people rarely fork over $1,500 to buy a phone outright. Instead they’re locked into a ridiculously overpriced plan, making it worse, so I actually think this is being generous. All up, with modest returns on this money, our tech-lovers are likely behind by around $25,000.
Fashion
Buying newer, better things to decorate ourselves with is another popular avenue of spending. Clothes, shoes, bags, sunglasses, watches and other accessories. Clothing and fashion is built on novelty, and new for the sake of it.
Quite easily, a couple would chew through an extra couple of thousand dollars each year, over an above what a more needs-based spending household would.
Cost. $2,000 per year invested across a ten-year period amounts to another $25,000.
Restaurants/Cafes
Everyone enjoys eating out, myself included. A burger here, a restaurant meal there. The difference is when you normalise this behaviour and it becomes just another part of your routine.
Oftentimes, the novelty wears off and the level of enjoyment diminishes rapidly, yet the habit remains. The novelty is then juiced up again by visiting different cafes or a new restaurant, and the cycle continues.
My own threshold for this is when it becomes a couple of times per week, rather than a couple of times per month. In my view, that’s the maximum novelty you’re going to extract without the cost blowing out.
Cost. Assuming a simple meal out for a couple is $50. Twice a month would cost $100. Twice a week would cost $400 per month. The difference here is $300 per month. At a 7% return, this compounds to about $50,000 over ten years.
So what?
At this stage you’re probably thinking that none of these ideas are new. And you’re right, they’re not.
But by presenting it to you in this way, with short-term thinking and child-like impulsiveness on one side, and self-assured, long-term thinking and powerful wealth-building on the other side, you can better choose which road is a better fit for the life you’re trying to create.
The examples above amount to more than $200,000 over a ten year period. By no means an exhaustive savings list (not even close). I haven’t even mentioned travel, which can amount to tens of thousands per year and is often done for the sake of novelty more than anything else.
But this isn’t a lecture about spending. What I’m pointing out is our massive opportunity. Because if so much common spending these days is optional as I’m suggesting, then we have the power to get this under control, and use a good portion of our cash to create a financially strong future for ourselves.
The crazy part is, I’ve measured differences over a decade. With ongoing investment returns, the sums would probably double every decade after that, which is insane.
We spend too much money on crap we don’t need. And what you actually need is far less than what you think you need.
More important than the numbers, are the additional years of freedom you attain by being aware of this stuff and becoming financially independent faster.
I’m not saying don’t have a nice place to live. And I’m not saying don’t buy technology, or clothes, or eat out. What I’m saying is, you can comfortably dial that shit down a bit, still live a great life and end up in a drastically better financial position.
A starting realisation
I’ve noticed something over the years (you may have too). Apparently if you use something for longer than a year, something incredible happens…
It actually keeps working!
Clothes don’t disintegrate. The car doesn’t burst into flames. Kitchen cupboards don’t fall off. The phone still swipes and texts. Those shoes still cover your feet. And you definitely won’t suffer from a good supply of home-cooked food.
Instead, you run the risk of becoming wealthy enough so that work is optional. And independent enough to not require the approval of others to be content with your own life.
Try an experiment. For the items you currently own, make a decision that you’ll only replace it when it no longer works. And I don’t mean when it’s not as good and has seen better days. I mean when it’s no longer physically possible to use it.
You’ll be amazed how long you can go without needing anything, by simply using what you have until it becomes unusable.
Without really doing anything, you’ll come to realise that things don’t need to be constantly upgraded. That it’s just a behaviour we’ve formed, from stories we’re told (marketing) and then never question.
And that you won’t be left behind, living some Flintstone-like existence while everyone else is living it up. This is yet more marketing at work, preying on our fears and insecurities around fitting in and being liked.
Thinking for yourself
Soon, marketing will no longer be a set of instructions and messages permeating your subconscious. You’ll see it for the bubbling-over cauldron of bullshit that is really is. And then you’ll probably find it amusing more than anything.
You’re now an independent thinker, as you work towards FI. Our job is to cut through the hyped-up stream of junk being marketed at us from every direction.
We must sit back and think critically about purchases, whether we really need something and how quickly that sugar-high is likely to wear off. Or whether it’s going to make us any happier over the long term.
Your new role is to get excited about being a selective spender. Because this is the major factor in helping you create the freedom and Financial Independence that you’re after.
Besides, being content with what we have makes our lives happier right now. Rather than endlessly chasing fancier better versions of the same thing.
It allows us to slow down and be more grateful. It lowers our stress levels and frees us from the urge to compete and keep up with the novelty chasers.
Final thoughts
Many people right now seem addicted to novelty. To chasing newer, better, bigger, fancier versions of what they already have.
This becomes a self-reinforcing loop to nowhere, creating more anxiety, less contentment and emptiness. Not to mention consuming most of their energy and income!
Financial strength and freedom is built on the opposite side of the scale. In contentment. In simplicity. And in the long list of things we don’t need.
This allows us to effortlessly save and invest a healthy amount of our pay, until finally ‘work’ becomes another thing on that list that we don’t need.
