Are The Rich Hoarding The American Dream? An Examination Of Penny And Rich’s Path To Income Inequality.

Penny,

On Father’s Day weekend I spent a lot of time thinking about income inequality. We’ve touched on this topic in the past, and I’d like to spell out some thoughts a little more extensively. You and I are income inequal, as it happens, so this could be an interesting forum to have this conversation, even if you may be delayed in responding due to your technology hiatus.

What got me started on this were a couple articles in the NYT and in The Atlantic. They were highlighting a new book coming out by Richard Reeves called Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do about It. I’ll try to state his case as well as I can from the articles, although I have not yet read the full book. Any mistakes are my own.

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THE DREAM HOARDING THESIS

The upper middle class in the US, defined as the top 20% by income, is pulling away from the middle class and increasingly preventing upward social mobility for others. We all know about the top 1% — the ultra-rich — but the rest of the top 20% wields just as much influence, to the detriment of everyone else. You could even say they are rigging the system. They live in exclusive communities that middle class people can’t afford, and they are helped by deducting the interest on their huge mortgages; they send their kids to the best schools and colleges, the latter being paid for by tax exempt 529 plans; the kids then get the best internships (and jobs) due to the family’s affluent social network.

From start to finish, people in the upper middle class have the advantage, and they delude themselves in thinking they’ve earned it by merit. They don’t see their own luck and privilege, nor do they admit they’re rich. What’s worse, they support policies that will keep them elevated and oppose policies that might create a more even playing field for the lower classes. It’s time to raise awareness and rethink policies that only favor the rich. Most of all, it’s time for the rich to admit that they are the problem.

This thesis seems to be pointed directly at me. Am I really a problem within society? Am I a Dream Hoarder?

Before disputing this, there are certain facts that I’m happy to grant.

POINTS OF AGREEMENT: I’M RICH AND I’M LUCKY AND I’D LIKE TO KEEP IT THAT WAY

Fact 1: I’m in the upper middle class, and the US upper middle class is rich.

Here’s where my household ranks in the US.

  • Income: $260,000. Within top 2%.
  • Net Worth: $630,000 (and growing). Within top 15%.

By the measure of income, the top 20% starts at $112,000. One could argue that six figures goes further in Fargo than in Chicago, but by and large I won’t dispute that a person should be comfortable with this salary. I’ll also grant the more controversial claim that this makes a person RICH. One won’t “feel” rich on $112K in Chicago (or NYC, etc), but feeling rich is subject to lifestyle choices. Objectively speaking, to make more than $112K is to have one of the highest incomes in the richest country with the highest standard of living in the history of the world. It’s silly to deny that, so I won’t.

Fact 2: It takes some luck to get into the upper middle class.

I recently got into a virtual tussle with ThinkSaveRetire about luck. He was arguing that if a person doesn’t meet his/her goals (like early retirement), it’s all their fault. I disagree. Practically speaking, I don’t live my life as if it depends on luck. But, I acknowledge that everyone is lucky (or unlucky) to some degree by being born with a genetic inheritance in a particular time and place with a family / culture / society that supports (or doesn’t support) their ability to make choices. The reality is that anyone who is reading this blog has had an incredible amount of luck — living in the West in 2017 with internet access puts them almost automatically in the top 1% of human history in terms of wealth (hat tip to Make Wealth Simple’s article: “You are richer than you think.”)

My own luck can be seen in my origin story. I wasn’t born as rich as Ivanka Trump or as genetically gifted as Einstein or Michael Jordan, but there wasn’t anything holding me back, per se.

Fact 3: Mortgage interest deductions and 529 plans disproportionately favor the rich.

Agree. This is simple math. The rich take on bigger mortgages and have extra money to save for college, so these policies lean toward the wealthy. Also, it goes without saying that if one pays more taxes in a higher tax bracket, then any tax break will result in a bigger benefit. The progressive tax system by definition incentivizes the rich to be cognizant of tax breaks. This is easy to see when comparing our tax bills, Penny.

I should note there’s strange sort of circular reasoning for one to quibble with the upper middle class about taxes. According to Forbes, those who make over $100k pay 80% of all income taxes. So complaining about tax breaks for the people who pay most of the taxes is like complaining about frequent flyer miles for those who frequently fly. You can’t have one without the other.

Fact 4: Upper middle class advantages can be self-reinforcing across generations.

If a family’s income is high, it’s quite likely that the next generation in that family will have a financial advantage and be able to maintain higher levels of wealth. They are starting from a more secure place, more inoculated to tragedy or bad luck. Many rich families have financial security as a goal. I admit this. I want to build a family legacy through financial security, education, and smart estate planning. 

I’ve ceded a lot of ground here. There are some basic facts that the Dream Hoarding thesis points to, even if I disagree with the implications. So where, exactly, do I disagree with this idea of Dream Hoarding?

IS THE AMERICAN DREAM AN OUTCOME OR AN OPPORTUNITY?

If I had to describe the American Dream to an alien life form, basically I would say that it’s about opportunity. Not exactly equal opportunity (ref. Michael Jordan — I don’t have the opportunity to dunk a basketball, I’m too short), but the opportunity for basic improvement. A person in America should have the opportunity to work toward a better situation in life. But opportunity doesn’t guarantee a particular outcome in a particular timeframe. It will always take a bit of luck to attain a favorable outcome. That’s life.

The system can’t control luck or genetics, but it should strive to be fair to most people most of the time. Over time, perhaps over generations, a person’s family should be able to increase their standard of living to a “middle class” existence, which, as I’ve mentioned, is pretty darn good in the richest country in the history of the world. A place to live, a job, food, and the freedom to pursue happiness. That’s the desired outcome. It’s not guaranteed, but as you’ve shown, Penny, you don’t need to make a lot of money to achieve this in the US. (And good news — your family income has been on an upward trajectory.)

But what shall we make of our inequality? Using rough data from our origin stories, check out our respective household incomes.

Penny and Rich’s Income Inequality. Click on image to enlarge.

I know this is only a specific case of 2 cousins, but it’s worth asking: Was there some dream hoarding going on here? Is our inequality due to luck or choices or both?

The way I see it, a person is born with a certain amount of luck. You can’t change the circumstances of your birth or your genetic makeup. After that, your life outcome will be determined by 2 factors:

  1. More luck (health, key life events, etc).
  2. Choices (education, career choice, who you marry, etc).

Continue reading “Are The Rich Hoarding The American Dream? An Examination Of Penny And Rich’s Path To Income Inequality.”

Monthly Money Check: Rich’s Low Risk Ride To $1 Million — June 2017

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Dear Pennifer,

Before I begin this monthly money check, I want to briefly revisit why I’m writing these updates. Quite simply, my purpose is to track my financial progress and think through how I’m doing with regard to my goals, perhaps clarifying my goals along the way. My purpose is not to brag about finances or elevate money to supreme importance. Human happiness isn’t about money (although money well spent, arguably, can help). I’m also not trying to be an example for anyone. Everyone’s situation is different. This blog is mostly for me, and secondarily for you.

As you know, my goal is to reach a $1 Million Net Worth sometime during my 45th year of life. I gave myself the whole year for the margin of error. I didn’t set this goal for my 45th birthday because, frankly, I didn’t think I’d make it. I’ll be 45 in 39 months, approximately, and I still have nearly $400k to go. It’s a tall order.

However, I’m starting to think it’ll be close. The month of June is an example of why I think this.

JUNE NUMBERS

From May 31 to June 30, our net worth jumped by $14,885. This is encouraging because there was nothing incredibly unusual about the month. Income was normal, with a little extra for overtime.

What’s more, there were no abnormal investment returns or risky market returns inflating my results. My largest investment — ownership of an LLC along with my brothers that primarily holds farmland and commercial real estate — was flat on the month.

It may sound strange to say that I’m encouraged by a lack of returns, but to me this shows that my financial goals are not dependent on any short term risks. As I’ve noted, I hate the broad stock market right now. I think it’s a bubble and I refuse to buy shares at these valuations. (Actually, I might buy some individual stocks opportunistically, like Nintendo before Christmas season, but I’m not buying the broad S&P 500 index here and now). The beauty of it is, I don’t need stocks. Investing, to me, is about risk and reward and meeting goals. If I can meet my goals without undue risk, I will.

Anyway, financially speaking this was a normal month, and it was a good month. When we move back to the US, we’ll need to pay a whopping $4,000 per month in rent, but even with that expense this would still have been a good month.

2017 NUMBERS

Widening the lens, I can’t believe half the year is gone! Let’s see how 2017 is going, with some observations by category.

OVERALL

Net worth is up by $72,837 in 2017. More than half of this is in retirement, so it’s not money we’ll be touching anytime soon. The next largest portion is from debt destruction. It’ll be nice to get that completely out of the way. After that, a bit of cash and investment gains.

Continue reading “Monthly Money Check: Rich’s Low Risk Ride To $1 Million — June 2017”

Monthly Money Check: Penny’s Budget Blew A Gasket in June 2017

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Dear Rich,

I’m still here. Still on-call. Still carrying around a cell phone. Still checking the internet. Still being bothered by it all. But the good news is that I was able to read your latest post on your four commandments of technology. That was good stuff! I really enjoyed it.

Now, onto this month’s money report. Once again, things keep popping up. This month it was an exhaust gasket that needed to be fixed, high school uniforms, car insurance, a new tent, and a bunch of other little stuff. I’m starting to think that we might not be able to meet our goal of putting another extra $5,000 toward the student loans for this year. I was going to do it when we got our property tax refund in September, but now I’m starting to think we might need that money to help pay school tuition bills and whatever else pops up at that time (as things always do, as demonstrated here).

Oh, well. As I’ve said before, I would rather spend money on things that I value (like private school education for my kids and new tents) even if that means adding a little more time in paying off our student loans.

Anyway, here is where my money went this month:

Not very impressive.

Here’s how that looks when lined up with the other months from this year:

I’ll write again with my Happiness Report in the middle of the month.

Until then,

Penny

Rich Recites The Four Commandments Of Technology, Which Were Given To Him On A Tablet. No, Not A Stone Tablet.

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Penny,

Now that you’re on your technology hiatus, I’m not sure when you’ll see this. I may need to start addressing my posts “To Whom It May Concern”!

Actually, the great thing about the internet is that you’ll be able to see these posts whenever you return, whether it’s a week or a month or 2 years.

This got me thinking. I’m about to make the most obvious observation since Luke Skywalker said, “I’ve got a bad feeling about this.” (Of course you do, Luke. The Death Star can destroy planets and a psychopathic villain is your Dad. But such is the genius of Lucasfilm dialogue.)

Observation: Technology is great, but it can also suck.

I understand, and sympathize with, your desire to step away, at least temporarily. A long time ago I read the classic Neil Thompson book, Technopoly, which made a compelling case that technology always changes people and cultures, and does so in ways that are not immediately understood. And does so in ways that are often negative.

I’m not pessimistic, per se. I’m listening to the Beatles on Amazon Prime Music as I type this in Google Docs on my MacBook Air, after all. For me, the key is to take advantage of the best aspects of technology while avoiding the worst parts. But how is one to do this, especially when tech is so sneaky and pervasive?

As you noted, it’s not easy. Even those of us who are sensitive to tech overuse can find ourselves sucked into bad tech. So, I think it’s helpful to have some rules. I was thinking about this, and something amazing happened. 

I went up on a mountain, and found a tablet. No, not a stone tablet. It was a Kindle Fire. And on it were the four commandments of technology.

FIRST COMMANDMENT: TECH SHALT HONOR YOUR FRIENDS AND FAMILY

I’ll never forget when I got my first email account. Juno. I thought: I can’t wait until my family and friends all get on email. Think, we can write to each other whenever we want! Amazing! Maybe I’ll even write to my cousins (ha).

Turns out, email did catch on. And for this, I’m grateful. We started this blog over email, and I haven’t heard your voice in years. Yes, the inbox gets full. Boo-hoo. Have you tried, lately, to send something via pony express? Not very helpful. Email is amazing!

I still have the first email I sent to my wife. It was 2005, we had just met, and I was trying to secure a date. I was trying quite subtly, almost to the point of not trying, almost to the point of being so obtuse that she ignored me. But she didn’t, and that fumbling, nearly disastrous, actually life-changing email is easily retrievable via Gmail search. Amazing.

So indeed, technology can honor our relationships.

And then there was Facebook.

The gig is up with Facebook as an online community. It’s not even an online DMV, a benign and boring utility. It’s malignant. It’s a place to show off, to send a cheap birthday greeting, to get snarky, and to spy on people you secretly dislike. Even worse, it’s turned into an outrage machine.

Guess what, FB acquaintances? I don’t care which (fake) news article you recently found interesting or intolerable. Facebook is playing you. Its engineers, behind the scenes, are selecting articles that will bring about an emotional reaction. You click, they get paid. If you don’t believe me, check out this podcast called What is Technology Doing to Us? where Sam Harris talks with Tristan Harris, former “Design Ethicist” at Google. The latter Harris explains quite clearly that we are mistaken if we think social media content is neutral. Companies need clicks, and they know how to manipulate people to get those clicks. Seriously, that podcast changed the way I think about social media.

Anyway, dear FB friends, please go back to the good old days of posting pictures of your baby, or your cat, or your baby cat.

This is good tech.

I find it entirely reasonable to ban FB from daily usage. If someone wants to connect with me, they can email. Email is amazing! I’d probably quit FB altogether … if I didn’t want to spy on people I secretly dislike.

Bottom line: I want to use tech to connect with people, especially people who I care about and want to see in person, in real life — not a fake community of click-bait victims.

SECOND COMMANDMENT: TECH SHALT NOT KILL … THY BRAIN

The internet, increasingly, is a brain-eating monster. It serves candy, and we are obese kids looking for that next sugar high. There are even these pop culture sites (cyber candy drug pushers) called, ahem, PopSugar and Hello Giggles, that are actively trying to destroy our gray matter.

Right now, I’m pulling up Yahoo for the latest intellectually engaging headlines.

PopSugar: Selena Gomez Has a Summer Look with Your Name on It

Well … that’s a surprise. My name on it? How can I not click on this? Apparently, I should “stick to the basics but accessorize with just one statement piece. Selena knows how it’s done – she rocked her cropped denim with a white t-shirt, slip-on sneakers, and finally, an embroidered choker.”

The embroidered choker doesn’t really sound like me, but maybe I should try it.

Now consider this smart gem of a headline from Hello Giggles: There’s a video of a real life hippogriff and we’re freaking out because Hogwarts must be real

That one was filed via Yahoo News (until clicked on, and then mysteriously shifted to Yahoo Style). Neither News nor Style fits a hippogriff.

This trend of saying “You” and “We” in headlines is insidious. Creepy. Subliminally destructive. The implication is that everyone, or anyone who’s anyone, cares. I know there are Harry Potter lovers who might care, but it’s the wording that bothers me. There’s an undercurrent of mass persuasion and groupthink that is far more dangerous than it seems.

Continue reading “Rich Recites The Four Commandments Of Technology, Which Were Given To Him On A Tablet. No, Not A Stone Tablet.”

Penny Is Taking An Extended Technology Hiatus. (Get Ready For Bigger Doses Of Rich!)

Dear Rich,

I mentioned in my latest Happiness Report that I’ve been getting a bit fed up with technology lately. I’ve had to be on call for this birth I’m going to photograph, and it I don’t like it one bit (the being on call part, not the photographing a birth part). I’m not the type of person who carries my phone with me everywhere I go. Mainly, I just leave it at home and use it as a landline. We would get a landline altogether if it wasn’t for the fact that this Republic Wireless cell phone plan (only $12.50/month)  that we have is less expensive than any landline phone plan we can find…

But now I have to have it with me everywhere I go. I have to check it constantly just in case I missed something. Plus, since it’s a smartphone, I find that I get to checking other things constantly, like my email and facebook, that I really don’t need to. So, anyway, yeah… I’m getting tired of it. Spending this much time with technology has got me wanting a bit of a break from it.

So, without further ado, after I’m done photographing this birth, I’m going to take a bit of a break from technology for the rest of the summer. What will this mean for www.pennyandrich.com, you may ask? We can’t just make it into www.richandrich.com, can we? Well, no, of course not. That would defeat the original purpose and intent of this blog. So, for the remainder of this summer, I will strike a bit of a balance with technology. I will check my email once a week (you know, in case anything important comes up), and I will write both my Money and Happiness Reports for the month. See, you won’t actually miss me that much.

What I will be taking a break from is watching programs, checking Facebook, reading online articles, and other various technology related stuff.

My husband and I raise our kids to have very little media use. I have a 14, 11, 7, and 1 year old. None of them have their own devices. (For an example of how I feel about cell phone use, listen to what a wise philosopher by the name of Louis CK has to say about it.) I want to set an example for my kids and curb my technology use a bit more. As I’ve mentioned before, I don’t really use it that much to begin with, but now, I am feeling called to step away from it even more. I don’t know what it is, but the more I live, the more I feel like pulling away from it all.

Continue reading “Penny Is Taking An Extended Technology Hiatus. (Get Ready For Bigger Doses Of Rich!)”

Monthly Happiness Report: Penny Disconnects From Technology And Connects To Happiness –June 2017

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Dear Rich,

Oh, time is flying by fast here. Summer is upon us. We are outside all the time. Swimming. Playing. Having fun. The only downside to this month is that I am on call to take pictures at a birth. This means that I have to be married to my phone. I have to take it with me everywhere, and check it constantly to see if she’s called. I do not like this at all. I don’t understand how people carry their phones with them all the time as a way of life. I cannot stand this!

I’ve mentioned this before, but the more I live, the more I want to disconnect myself from technology. I like taking pictures at births and stuff, but I don’t enjoy being on call, and I don’t enjoy editing the pictures on the computer afterward. I don’t really do birth photography anymore, but she was a friend, so I’m coming out of retirement for her. But I don’t want to go back to doing photography any more than I’m doing now.

I also had plans to market that documentary I made in 2013. I read all this stuff about Pinterest marketing, and I had ideas for guest blog posts I could do and so on and so forth, but I don’t want to do any of that stuff anymore either. Too much computer time! Too much technology use required!

So, where does that leave me now?

Happy.

I’m happy I’m not on the computer very much. I’m happy that I get to go outside whenever I want. I’m happy with the quiet moments and being unplugged and enjoying life without being distracted by what is happening on the internet.

My happiness rating for this month is:

Despite being tied to my phone for this month, I am doing well. I was even considering a 5.0 rating, but I don’t think I will ever give myself a 5.0 because that seems like bragging for some reason (I don’t know why). Plus, being tied to the phone does bring it down a notch anyway.

But here is my plan for when I am off-call: I am going to be technology free for the rest of the summer. No computer. No streaming shows or watching movies. No extraneous phone usage. It’s going to be so great.

I’m not sure how this will work with writing on this blog. Maybe I’ll work a couple of writing days into the month. Maybe I’ll handwrite it and have my husband type it up. I’ll figure it out and keep you posted.

Until then,

Penny

Monthly Happiness Report: Rich Is Part Of The Global Elite And His Quality Of Life Is An Oppressive Symbol Of Class Warfare. Pass The Quinoa Crackers. –June 2017

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Penny,

I’m going to take my happiness report in a different direction this month. I’d like to respond to an article that popped up regarding the way “the rich” spend their money. I saw it on BBC, entitled “The New, Subtle Ways the Rich Signal Their Wealth.” Originally it was written for Aeon and entitled “Conspicuous Consumption is Over. It’s All About Intangibles Now.” By any title, this article represents what I perceive as a growing resentment toward the rich. Toward me, in other words.

I encourage you to read the article, but I’ll summarize it here.

The rich are getting sneaky. They used to separate themselves with the conspicuous consumption of luxury goods for all to see — fancy TVs, cars, and handbags. But now, luxury items are widely available to the masses. So, to set themselves apart, the rich are increasingly spending on inconspicuous social and cultural status symbols: education, health, and retirement.

This kind of privileged spending activity is subtle but “pernicious,” benefitting rich families while excluding the middle class.

And here’s the concluding paragraph: “Inconspicuous consumption – whether breastfeeding or education – is a means to a better quality of life and improved social mobility for one’s own children, whereas conspicuous consumption is merely an end in itself – simply ostentation. For today’s aspirational class, inconspicuous consumption choices secure and preserve social status, even if they do not necessarily display it.”

End summary.

So Penny, you might be wondering why I’m talking about this in my happiness report. Here’s why. We have a high household income ($260,000), and I’ll grant that we are more or less rich. I’ve written extensively about how I prioritize my spending, both for optimal happiness according to my values and for the benefit of my family’s financial security (in 3 easy steps!). The above article is essentially saying that my way of spending is harmful (“pernicious” was an interesting word choice) as a form of class warfare and social privilege.

In short, I’m part of the problem.

Ok, well … let’s grant for a moment that I’m unknowingly part of an elitist conspiracy to oppress common folk by eating free range chicken and saving for college. How could I take action to distance myself from such a dangerous subculture? How could I prove my desire to be on the side of fairness and equality?

Should I take my kids to McDonald’s and tell them that one day, if they live long enough on nuggets and soda, they could ignore higher education and work behind the counter? Should I blow their college money on a Porsche in the hopes that they will make a career out of filling it with gas? Would I then be regarded as a more moral and less pernicious rich person?

Chicken nuggets — a great way for rich people to champion social equality.

I have another theory. Maybe the rich are just discovering that luxury doesn’t bring happiness, and that the best way to build a stable family environment is to promote health and education. And maybe that’s a good thing.

Continue reading “Monthly Happiness Report: Rich Is Part Of The Global Elite And His Quality Of Life Is An Oppressive Symbol Of Class Warfare. Pass The Quinoa Crackers. –June 2017”

Penny Has No Plans To Ever Move Again, And She Likes That

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Dear Rich,

Glad to hear you’re excited about your upcoming move. As for me, I am happy to be settled. During the first 9 years of our marriage (which is where you’re at now in your marriage), we moved 7 times. During the last 9 years (yes, we’ve been married for 18 years, crazy, huh?), we moved 4 times. We have no plans to ever move again, and I like that.

And I like owning a home. Over the past 18 years, we have owned 4 different homes. The first one, we broke even on. The second one, we made $30,000. The third one went astronomically down in value and we ended up doing a short-sale on it. The the fourth home, the one we own now, is worth approximately $120,000 more than what we bought it for.

As we’ve talked about before, I have thought about selling our house and using the money to pay off our student loans. But, the bottom line is that we will still need to live somewhere. And if we sold the house and paid off our student loans… then what? Buy another house at a higher price tag and just have the same amount of debt all again (except this time it would be entirely mortgage debt instead of student loan + mortgage debt)? Or pay money to rent something that is twice as much as our current mortgage payment?

No, I think we’ll stay where we’re at. Plus, I like owning. I like being able to paint the walls and plant a garden and having full ownership and control over something.

We bought all of our homes for under $130,000. The second home was a 4 bedroom, 2 bath, 2,200 square foot house in a small town that we bought for $35,000 and sold for $65,000. We currently live in an area where home values are $225,000 and rent is $1,500. We are currently paying $843 for our mortgage payment every month. We have $88,000 left on our mortgage, which we will start tackling after our student loans are paid off.

Continue reading “Penny Has No Plans To Ever Move Again, And She Likes That”

Rich Is Preparing To Move. He Enjoys Moving. Wait … He’s Paying HOW MUCH On Rent???

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Hey Pen,

Mrs. R and I are getting ready to move for the 6th time in 9 years of marriage. Even by my transient standards, that’s a lot of moves.

Some people hate moving. I’ve heard of people sticking with a crappy house or boring neighborhood just to avoid moving. The boxes! The packing! Getting everything organized! Changing your life!

True, moving is a lot of work. But I actually enjoy it.

Moving forces me to think about what I want to keep and I can do without. I’m forced to consider what I want my life to look like in terms of location, living space, and culture. In a sense, I’m choosing my destiny. And if I choose poorly, I can just move again. There’s a freedom to it. It can even be exciting.

Here’s the list of our moves:

2008 – East Coast apartment to East Coast apartment: From one apartment to another in order to get DirecTV and the NFL Sunday Ticket (needed a south-facing balcony). Yes, that’s why we moved.

2009 – East Coast to Denver, CO: Work assignment.

2012 – Denver back to East Coast: Work assignment.

2014 – East Coast rental house to East Coast apartment: We didn’t like our suburban house or our landlords after a tree almost killed me during a storm (long story).

2015 – East Coast apartment to foreign country: Work assignment.

2017 – Foreign country to East Coast apartment: Work assignment.

2020 or so – hopefully moving again!

Much of my financial planning energy right now is going toward the move. I alluded to this in my latest money check. Here’s what we’ll need to do over the next few months, along with cost estimates.

Click on image to enlarge.

Unfortunately, this means I’ll need to put a lot of my savings plans on hold until the end of the year. That’s life. No one should cry for me and I’m not complaining.

I should address the elephant in the room here, which is that rental price of $4,000 per month. How in the world is this reasonable? Well, first let me tell you a little about our area and then I’ll tell you more about our apartment.

We had a few priorities when choosing where to live. These priorities were non-negotiable.

  • Short commute. Commutes in our area can be up to an hour each way in traffic if you live in the burbs, leading to 11 hour workdays, less time with family, and general misery. Our commute will be 15 minutes.
  • Close to a good school. We will be able to walk to our kids’ public elementary school, which is Spanish-English immersion.
  • Walkable to good food and activities. We’ll be able to walk to the grocery store, to restaurants and coffee shops, and to the subway.

Right off the bat, there are only a few neighborhoods meeting all these criteria. It turns out we’re not the only ones who want to live in such a neighborhood, and this is reflected in the cost of living. I’m not going to give away where we live, but here are some data for our zip code according to Trulia:

Averages in my zip code. Click on image to enlarge.

So it looks like we’re right in line, even slightly under, the average monthly rent.

What do we get for $4,000 per month? Again, I’ll list the non-negotiables.

  • 2 Bedroom, 1200+ square feet, with a decent layout. Our apartment is a 2BR + Den clocking in at 1246 square feet. The layout uses space well. Some modern apartments have weirdly curved walls and such that make them difficult to arrange.
Our floor plan.
  • Gym and pool in the building. The pool is outdoors but will come in handy for the kids during the summer. The gym will come in handy for me.
  • Garage parking. 2 spaces will run us $175 per month. Indoor parking is great in winter.
  • Intangibles. These are not necessarily non-negotiables, but they are factors that are difficult to measure, like the culture (is it full of rowdy yuppies?), the quality of construction (are the walls paper thin?), and building management (are they responsive?). Our building scored well on these points.

There are a bunch of other amenities — like free coffee, a “cyber lounge”, convenient package and dry cleaning delivery, etc — that are also included.

I admit, $4,000 per month is a huge number. To make sure I wasn’t insane, I Googled “How much should I spend on rent?” The rule of thumb is no more than 30% of household income.

Click on image to enlarge.

It turns out, $4,000 is only 18.5% of our monthly income, so you could say we’re being frugal. Hardy hoo hoo.

You might say, “Hey Rich, with that monthly payment, you could easily buy a house!”

Sure. Let’s say I did that.

Continue reading “Rich Is Preparing To Move. He Enjoys Moving. Wait … He’s Paying HOW MUCH On Rent???”

Penny Says No To The No-Spending Challenge Because It Is Stupid

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Dear Rich,

For the sake of research, I had contemplated doing one of those “No-Spending Challenges” for this blog. At first glance, it seems like kind of a fun idea. But then I thought about it a bit more and I realized how stupid these challenges are.

So, the premise with these challenges is that you don’t spend any money for an entire month. But this is stupid because people just re-allocate their spending to other months. Like, they’ll stock up on groceries, they’ll pay their bills in advance, that sort of thing… the same amount of money is being spent, it is just being done in a different month.

Or, if you’re doing this challenge and you really want to buy a new pair of pants, you just wait until the challenge is over and then go out and buy the pants the next month.

I have no idea what this challenge is teaching anyone.

When I was visiting my mom one weekend, I read about some ladies who did this challenge in the Fargo Forum. These ladies weren’t going all in and stocking up on groceries or anything, as they had set an allotted amount for expenses and bills and such (apparently you can do this with this challenge as there are not any hard and fast rules). Their results were especially stupid. Instead of spending money to go out, they would continue to go out, but their boyfriend or their parents would end up footing the bill. Or they would use gift cards that they already had.

Dumb. Dumb. Dumb.

I like how this blog post on The Financial Diet sums up this stupid challenge:

“Personally, I feel it’s a way for well-off people to congratulate themselves on struggles they haven’t personally experienced. Poor people aren’t making a statement when they don’t buy coffee every morning, it’s simply their reality.”

I can’t believe I wasted my time entertaining this idea. Don’t do the No-Spend Challenge, everybody. Budget accordingly. Spend money on what you value. Live a good life. That’s all you need to know.

Later,

Penny