You know it won't happen that way

[Joshua]

That's what someone said to me the other day. "You know it won't happen..."

Let me recap the conversation. Some folks were standing around a classroom, waiting for some training to start. The discussion turned to savings and retirement options. I mentioned that I had recently done up a spreadsheet for how much money I'd have saved by retirement if I kept my current standard of living (ie lived off of the paygrade I'm at now) but continued to receive promotions on a fairly conservative schedule. If I were to do that, I said, I would have $XXX,XXX in the bank by the time I could retire.

"Yeah," says the guy I'm talking to, "of course, you know it won't happen that way."
"Well, nothing's exact," I say, "but it's still a guideline."
"No, no," he says. "It's just not possible. You'll be able to save a percentage of your income, but the amount you spend will go up with your paycheck. It's just not possible to keep the same expenses even though you earn more. You'll see the money coming in, and you'll spend it. That's just human nature."



Huh? The conversation came to a dead halt right there. I was floored. I couldn't even figure out what to tell the guy, so I just went back to my desk and waited for the training to start.

What in the world? It's "human nature" to spend every penny you have, just because you have it? How does he figure? Is this the average philosophy of personal finance?

I admit, I haven't been perfect with my spending lately, but I haven't been trying to stick to a budget recently, either. I used to be much, much more strict about it. I think I've been in something like shock the last couple years just having a job that I'm not afraid will disappear by the end of the week, so it has taken me a while to come down off the high and start planning for the future, but to just flatly state that I will never be able to maintain the same standard of living in the face of a rising income in order to plan for my retirement? I don't know what to make of that. Has anyone else had any experience with this supposedly fundamental part of "human nature"?

Josh

 

[DangerMouse]

You know, some people will say things such as you have just experienced, as that justifies their own behaviour. If they believe it is human nature, they are letting themselves off the hook from taking any responsibility.

Now that you have drunk the koolaid you will notice how much of this goes on. After a couple of decades it does get a bit old, but you will learn to tune it out.

 

[LOL!]

Many pay raises just track the rate of inflation, so you will spend more, where more means inflation-adjusted.

OTOH, if you have a fixed rate mortgage, that won't change some of the costs and if you do not have a car loan, then that won't change much either. Cars are actually cheaper than they were 10 years ago. Soon you will have all the music you will ever want to listen to, so you won't be buying any music anymore. Same goes for good tools. And if you have kids, they will get launched or ejected.

Hopefully, the amount you will spend on investments will go up when your paycheck goes up. So that's your retort to this guy, "Yep, you're right. I'll be spending more by buying more retirement funds. It's just my human nature."

 

[traineeinvestor]

Absent a deflationary envoronment and/or a monk like existence, I would expect my expenses to go up due to (i) inflation and (ii) life style expansion.

The inflation aspect is pretty much unavoidable. The lifestyle experience can be controlled but, in practice, I would expect it to be difficult to keep the real level of spending constant. In my case, some new hobbies, the urge to do some travelling, getting married, having children, adopting a cat and many other things have added a lot to my expenses but I still kept up a healthy savings rate.

 

[FIREd]

Well, it did happen that way for us and last time I checked we were human. Since 2004 our income has increased 280% while our expenses have actually decreased 6%:

But I will acknowledge that, as our income increased, the temptation to spend more was real. Had we not been so driven by FIRE, we would have probably succumbed to that temptation.

 

[traineeinvestor]

Well, it did happen that way for us and last time I checked we were human. Since 2004 our income has increased 280% while our expenses have actually decreased 6%:

But I will acknowledge that, as our income increased, the temptation to spend more was real. Had we not been so driven by FIRE, we would have probably succumbed to that temptation.

Wow - that is really impressive - especially on the expenses side.

 

[TooFrugal]

Has anyone else had any experience with this supposedly fundamental part of "human nature"?

I don't think it is human nature but living pay check to pay check or close to it has been common in American culture in the recent past. That is part of why this forum is so cool, because you can interact with people with spending habits outside the bell curve (on the frugal side) that you probably wouldn't meet in your day to day offline life.

 

[aaronc879]

My spending is at it's lowest ever even though my pay is at it's highest. I expect my expenses to now stay the same(inflation adjusted) until retirement. My pay should go up close to the rate of inflation but probably not any higher from now on.

 

[rescueme]

During my accumulation years, I always looked at the contributions to my retirement portfolio as an expense - not as savings per se.

Over 25+ years, every increase in salary was accompanied with an increase of this "expense", with 50-75% of any increase being added to my portfolio.

The 401(k) was a no-brainer. I started out at 2% contributions and increased it as time went by. When I started my IRA (back in '82) I made the maximum contribution ($2k) and increased it as the contribution levels increased.

It got to the point that by the time I reached the age of 50, I was above the limit on 401(k) contributions, but if I received a salary increase, I would contribute "above the line". Since these were post-tax contributions, the total amount was broken out when I rolled my 401(k) to an IRA and the post-tax funds used for my monthly income after I retired (at age 59).

Treating retirement investing as an expense allowed me to look at it in a slightly different manner.

Just my thoughts...

 

[brewer12345]

I dunno. Left to my own devices, I have pretty modest requirements, with the only real splurge on a regular basis being food, and DW is pretty darned frugal (Scottish/Welsh father and farm daughter mother who both spent time in 3rd world countries). Where we have been getting killed the last few years is kid-related expenses and vet bills.

 

[Andre1969]

I don't know if I'd call it "human nature", but the habit of finding new ways to spend money as it comes in does seem to affect an awful lot of people. Maybe "majority of human nature"?

I'll admit, there have been plenty of times that I've been tempted into adjusting my lifestyle as more money comes in. Back in 2004, when I was getting ready to put my condo on the market, I was expecting to clear about $35-40K, after renovations. That was when the new Chrysler 300 had just come out, and I had thought about buying a loaded Hemi 300C model with that money. Well, there were delays in the renovations on the condo, and by the time it finally hit the market, I cleared something like $77K. Funny thing happened though. By that time, I was no longer interested in blowing the $35K+ that a 300C would have set me back. I made the final payment on the existing car about 3 weeks before the condo went to settlement, so with the condo off my back, and the car payment off my back, I suddenly felt extremely free!

Right now, I work in a gov't office, and have learned to pretty much keep my mouth shut about finances. I may not have the income, but from hearing some of them talk, I'm in a better financial position than a lot of the GS-15's and SES's.

There's this one secretary who must be around 75 or 76 now, who will occasionally say "you should be grateful to have a job". It's SOOO hard sometimes to resist the urge to just turn that around and say "No, you should be grateful I tolerate you."

Of course, to get to where I really want to be, I might have to "tolerate" her for a while longer...

 

[landonew]

There's this one secretary who must be around 75 or 76 now, who will occasionally say "you should be grateful to have a job". It's SOOO hard sometimes to resist the urge to just turn that around and say "No, you should be grateful I tolerate you."

Of course, to get to where I really want to be, I might have to "tolerate" her for a while longer...

Made my morning.

 

[Walt34]

Right now, I work in a gov't office, and have learned to pretty much keep my mouth shut about finances. I may not have the income, but from hearing some of them talk, I'm in a better financial position than a lot of the GS-15's and SES's.

I've run into that also. Was surprised/stunned that another guy I work with, maybe five years younger than me, has a $1,200/month payment for the next three years on his 'benz, plus a new $2k/month 30-year mortgage. Yikes! My '03 GMC pickup is starting to look almost thrifty by comparison.

And DW and I thought we were being spendy because she wants to spend $600-700 on a new TV, and my latest "I wanna..." is a $450 Colormunki for calibrating the computer screen and printer colors for photography. The TV we'll get this week, the other thing may wait until Christmas.

 

[Sarah in SC]

You know, some people will say things such as you have just experienced, as that justifies their own behaviour. If they believe it is human nature, they are letting themselves off the hook from taking any responsibility.

Now that you have drunk the koolaid you will notice how much of this goes on. After a couple of decades it does get a bit old, but you will learn to tune it out.

Yeah, this is my take on the conversation, too. Rationalizations and justifications for their own spending.

 

[aida2003]

IMO, maybe it is human nature to spend more when you get more, but each individual chooses whether to go with that temptation or resist it. Around my DH's bonus time I start forecasting (so to speak) in my head how much he might get paid this year and what we could spend it on. So, I would hear a commercial of new cars on the radio on the way to work, and dream about a new car. But then somehow we mostly end up putting some in savings, also some go in taxable investments over time and leave some for vacation. During vacation I always feel happy because it was paid by the bonus and didn't need to draw down our savings.
Every quarter I inquire DH how his company is doing, so after new year I can resume my dreaming/planning in my head for the next bonus

 

[bbbamI]

""No, no," he says. "It's just not possible. You'll be able to save a percentage of your income, but the amount you spend will go up with your paycheck. It's just not possible to keep the same expenses even though you earn more. You'll see the money coming in, and you'll spend it. That's just human nature."

Mule muffins.

Since we're human we are able to make our own choices.

 

[militaryman]

I agree that it is entirely possible to LBYM but in this case a more convincing statement to pre-empt the comment made to you would have been if you could have said "I recently did a spreadsheet showing how much I have saved for retirement and this is a direct result of the fact that since 1995 I have banked every promotion instead of raising my standard of living."

The fact that you had not done what you were proposing to that point lent credence to his arguement in that it is much like losing weight....

How many times have you heard folks say " I am going on a diet and lose 20-30 lbs" Yet months later they look the same more times than not.

He may have been arguing that there is a better chance in you continuing to do what you have done for the last years vs taking some pain and changing what you are accustomed to doing.

 

[ikubak]

Good graph. I keep a graph too, but don't have it here at work. I can say that as our income has gone up, we have not increased our spending much. Additional spending is usually the result of additional activities for our son or us, not the purchase of goodies because we have more money.

I wouldn't say it's human nature to spend more, just some people's nature, maybe even most people's nature. Our forum friends on the other hand are a unique bunch and would most likely increase their savings if they made more money.

 

[FUEGO]

"The conversation came to a dead halt right there. I was floored. I couldn't even figure out what to tell the guy, so I just went back to my desk and waited for the training to start."

Sometimes it is good to realize when the conversation has ended. Some people are set in their ways.

 

[Andre1969]

I agree that it is entirely possible to LBYM but in this case a more convincing statement to pre-empt the comment made to you would have been if you could have said "I recently did a spreadsheet showing how much I have saved for retirement and this is a direct result of the fact that since 1995 I have banked every promotion instead of raising my standard of living."

Usually that's the point where they'll then switch to the argument of "Well, what if you get sick and run up some medical bills, or get laid off for a long period of time, or get disabled and can't work, or lose your money in a bad investment, the country goes to war, loses, and the enemy seizes your bank account, blah-blah-blah".

Some people just want to live in their it-can't-be-done gloom and doom, and don't want anybody's optimism to hint that something better is possible.

 

[audreyh1]

What in the world? It's "human nature" to spend every penny you have, just because you have it? How does he figure? Is this the average philosophy of personal finance?

It's human nature for some people. But fortunately not for everyone. The folks on this board don't have that problem.

For some folks, automatic deductions into savings from their paycheck can help "hide" the extra money so they don't "see" it. But some folks don't even need that level of discipline.

I think your colleague is just justifying his spending habits.

Oh - and there was no need for that conversation to continue anyway. Don't waste your breath.

Audrey

 

[aida2003]

Usually that's the point where they'll then switch to the argument of "Well, what if you get sick and run up some medical bills, or get laid off for a long period of time, or get disabled and can't work, or lose your money in a bad investment, the country goes to war, loses, and the enemy seizes your bank account, blah-blah-blah".

Some people just want to live in their it-can't-be-done gloom and doom, and don't want anybody's optimism to hint that something better is possible.

Yep, I always used to hear my sister say "what if I die...", so when she recently mentioned that she would start saving for retirement, I was so dumbfounded that I didn't know what to say to that

 

[SVHoper]

I guess this may be a list of what not to do.

I'll preface this by saying while we still live below our means, contract our spending when we needed to and save, we have been very, very, very guilty of letting expenses increase with income, so are not in as strong of a position as some of the inspirational savers here. Here are some of the main weak human excuses/choices/confessions:

* Substitution of $ for time - this has been the main one I have been guilty of. While I still mow my own lawns, I very frequently make the choice of spending $ to make my life more enjoyable... eating out, buying expensive baked goods, not chasing the refund/rebate, hiring contractor, not working full-time.
* Very much more expensive cost of living associated with moving to area related to the increase in income
* Spending more than necessary on kids again and again and again (now a bit of a issue I have to "undo" as I try to get them to budget in preparation for Living below their much more meager means)
* Addition of expensive hobby - DH gets a lot of enjoyment
* General weakness and relaxation of values: I used to think ziplock bags were a huge waste (now I just reuse); that seeing first run movies was totally unnecessary - now we do it w friends or family; we survived with activities for 2 adults, 3 kids and 1 car for 5 years, but now have more cars than drivers; it was OK to have 1 living area and 2 boys sleeping in it (while we extended), but now have a pool table in that room and 2 big screen TVs in the other - that sounds v.bad (teens video games).

In summary, I am very aware of lots of these choices, I'm a bit guilty, I hope we won't regret them... In general I don't think we do so far.

 

[Joshua]

The fact that you had not done what you were proposing to that point lent credence to his arguement in that it is much like losing weight....

Ouch! Touche. You have me on that one, I fear. I can't stand a bunch of people sitting around talking about what they're "gonna" do, when they've never done anything like it in the past, despite having that exact same conversation many times over many, many years. That's partly why I offered it as a hypothetical, "This is what's ideally possible..." comment, not necessarily as something I was promising would happen. I didn't have much ground to stand on, though, since I couldn't demonstrate any results.

Still, I'll warrant that the majority of big savers and early retirees did not all have a solid financial vision in mind from the instant they earned their first dollars. Some did, but that's not everyone.

We all have to start somewhere. Repeating that to myself is the only thing that keeps me going at the moment, when I look at the hash I've made of various opportunities I've received in my lifetime. I think about where I could be, if only I had been more focused or had more experience "back then," and it makes me sick with despair. I feel like I've failed myself and my family by not having the strength and knowledge to do what I should have done.

I probably knew what the right thing to do was years ago, but I couldn't articulate it, so I let myself get pushed by other people down paths that have lead my current situation. I don't know if I even deserve the opportunity to turn things around now. I really don't know.

But I think that, for whatever reason, the opportunity has come my way. Here and now. It's like waking from a daze! All I can do is try to get moving and hope I can establish some momentum that will keep the fog from descending again.

Josh

 

[travelover]

I think it is human nature to want to drag others down so that you don't look bad in comparison. Like crabs in a boiling pot pulling down the ones that reach the top of the kettle.

After high school I worked for a while in a blue collar job. I got a lot of resentment from coworkers when I announced that I was going back to college. I'm sure most of them are still there, living within their own predicted limitations.