Saturday, January 21, 2006
'Tis a Gift to be Simple...
Or, "Living simply in one of the most expensive places in America."

At dinner last night with friends, a coworker and I were discussing money matters. I had commented on how much lower my living expenses were than my income--that, now with the new fiscal year (I was trying to live very frugally and get money into accounts before January), I've got money sitting in my checking account that I intend to invest and pay off loans early. She seemed surprised by this.

It's eerie how I'm becoming my dad (in personality as well as looks). One inherited attribute is tightfistedness. My dad makes a good salary, but our family spending is far below income. For years, my father would park in the parking lot at work, next to the Lexuses and Accuras, in his big red pickup truck. A few years ago he finally broke down and bought a Trailblazer (my tree-hugging heart went reeling, but my folks have recently redeemed themselves by buying a Prius). Most of his money goes into retirement investments. He'll retire as soon as he can.

I have the following monthly financial obligations:
Add those together: $1230. Multiply by twelve months: $14760 (although it should be noted that the car loan actually goes towards a liquifiable possession). I make more than that.

(Aside: Fortunately, unlike a lot of Googlers, I don't have any student loans. My family is littered with Wisconsin alumni, and that's where I went with scholarships that made it pretty cheap. I took five years to graduate with degrees in computer science, political science, and economics. Take that, Stanford.)

Of course, any money I spend is post-income-tax, meaning that there has already been 30% or so taken out of it.

Post-tax income X 70ish% = Pre-tax income.

Rearranging terms:

Post-tax income = Pre-tax income X 1 / 70ish%

1 / 70ish% = 1.42ish%.

Spending money on things means that I really pay almost 50% more than the real cost, especially if you consider sales tax on a lot of things.

The result: I don't like spending money on things. Despite being a tax-and-spend liberal, I don't like wasting money and I'd rather not pay taxes on things if I can avoid it.

The only real other expenses I have are entertainment (including dining. Most of my food I get at work) and media (music, books, etc). A lot of the money that I earn and don't spend goes into a 401(k) account, which, fortunately, I don't have to pay income taxes on until I take it out when I retire (and only at that annual income tax rate, which wil be lower than what I pay now), and, being in my early twenties, has 30+ years to grow. The added benefit of this is that it reduces my taxable income, and I don't have to pay taxes on the most highly-taxed dollars (marginal tax rates increase with income).

The 401(k) is a good thing. Americans' savings rate is abysmal. The amount of consumer debt is mind-boggling. If there's anything that shakes my confidence in the theory of rational self-interested economic actors, it's Americans. Americans rack up high-interest credit card debt to buy unnecessary things, and they apparently don't realize the true cost of such actions. In the less-than-economic rhetoric of George Carlin (sorry about the language), Americans spend "money they don't have on shit they don't need."

I'm not a rabid anti-materialist or anything, but I own the following pieces of furniture.The other day, I bought a TV for $50 (I'm actually still waiting on it). My desktop computer I bought from SWAP for $57 (including monitor).

Part of it is that I like to be able to move easily. I still haven't gotten away from the move-yearly college mentality.

Speaking of, I'm considering a move to the city in the next few months. Ali might be moving to San Francisco. If so, rent would be a little higher (but not much, surprisingly. While the home sales market in San Francisco is insane, rents have not made a similar rise), but parking would be around $200 a month. That seems excessive. There's a shuttle to Google, so I'd likely sell my car and rent Zipcars when necessary.
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