By Dr. James M. Dahle, WCI Founder
Upstate NY has its charms- like the Shawangunks. The author's sister and brother-in-law 300 feet off the deck on High Exposure, 5.6.
There are two cities in this world that always make me feel poor, no matter what my income when I go there, London and New York City. I returned recently from a very enjoyable 6 day vacation to New York, which impressed me again just how much variation there can be in your living expenses. On Manhattan, it may cost $25 an hour to park your car (and $12 a day to park a bicycle), $400 to get a room smaller than the cell an inmate might occupy, and $150 to see a show. You're likely to pay $25 just to go to the top of a tall building to look around, if they'll even let you inside. The second part of the vacation was to the admittedly less expensive upstate portion of the state, where I paid $17 a day to go rock climbing (outside, with all my own stuff) and $25 per person to go on a short hike. It makes me grateful to have spent most of my life in states with dozens of state and national parks where the “really cool places” aren't privately owned.
Spend Your Money On What You Value
I really enjoy being able to go on a trip like this and for the most part be able to do whatever I want to do, without having to worry about the cost. Part of the reason we can do that is that we keep our fixed expenses to a low percentage of our income.
Long ago we made the decision that we value experiences (like vacations and time away from work) far more than “stuff” like cars, furniture, clothing and a fancy home, so that's where we spend our money. I don't have a problem with someone who wants to drive a $70K car (as long as they can afford it), but I can go on a lot of trips with the difference between a $70K Mercedes and my old Durango.
Spending More Doesn't Necessarily Bring More Happiness
I was also impressed with the amazing range of cost in various activities. It starts when you get on the plane. A round trip ticket from my home to NYC will run you $500–$600. If you want to sit in a slightly wider seat, get a meal and a drink, and board a little earlier, then that same trip will cost you $1,700–$2,300. I like leg room, but I don't like it that much. Seeing Newsies on Broadway will set you back $150, but I can go to the local second run movie theater and catch a show for $1.50 (75 cents on Tightwad Tuesday). Both events will provide me 2 hours of entertainment. Now I'll be the first to admit that Newsies was a far better show than most of the crap Hollywood is pumping out these days, but 100 times better? Hardly. And $25 per person for a short hike? $25 will get an entire carload of people into a National Park, for a week.
Splurge in Moderation
If you're having trouble putting 20% of your income toward retirement and meeting all of your other savings goals, then perhaps it's time to think about those areas of your life where you could spend 1/3 as much (or 1/100 as much) and still enjoy your experience almost as much. Perhaps it is a cheaper car, a cheaper show, or a cheaper meal. I'd rather go on two trips, flying coach and staying in Motel 6, then one trip flying first class and staying in a swanky hotel. But for those who are meeting their savings goals, direct your splurges to those things that bring you the most happiness.
What do you think? In what areas of life have you noticed a wide range of possible expenses for similar experiences? Comment below!
A behavioral economist named Dan Arielly wrote a book called “Predictably Irrational” which deals with this exact phenomenon. He presents research which vindicates your choice to spend on “experiences” rather than “things” citing that, subsequent to both purchases, you’ll experience more joy reminiscing about an amazing day of scuba diving with the sea lions than had you spent that same money on something seemingly more practical like a couch.
Hedonic adeptation stymies joy.
Yesterday, I watched a first year Ortho resident spend more on a new set of tires for his audi A6 than I paid for my ’98 honda civic (off Craigslist). During residency, I’d say the fundamentals count the most: housing, transportation, and food expenditures vary greatly among my peers, usually dictated by the needs of, or lack of family depending on their frugality.
Great post. So true. Also, the experiences don’t cost you money and more importantly your time when they break down unexpectedly or need maintenance.
Well I live in one of the cheapest metropolitan ares (Dallas/Fort Worth) so I don’t notice it much on a daily basis but especially of late we have been more cost conscious when evaluating how we spend money on similar products.
I can tell you that a beer at the local sports bar costs $4 at home its $1.50. In Fort Worth its $5 and in Dallas its $6.50.
I have lived in europe, traveled much of the world and a good deal of the US as well. There are a lot of awesome places to travel but when you live in one of those high dollar places you tend not to travel much to others as you don’t have any money.
Oh and I agree about London. It may be my favorite city in the world, but it sure is expensive.
That’s a great picture!
Would love to do that climb someday.
I completely agree and is one of the motivating factors to get out of the DC area. Eventually I will work my way back west. I had to pay parking fees at National Forest (not a National Park) in NH when I had never seen such a thing at a National Forest out in NV, WY, UT, MT, etc. Paying to climb outside with your own gear? It boggles the mind. My family doesn’t understand why I don’t want to return to MA; meanwhile I don’t understand why they don’t leave!
Money can certainly be used for unnecessary extravegance, but it’s also worth mentioning that money can be spent on convenience and exclusive access. This is the nature of the game in high dollar cities like NYC. There are just too many people, so market forces allow for high prices that seem rediculous in the less-populous west and med-west.
The reason I mention this is sometimes I think in the pursuit of savings people are willing to put up with unwarranted inconvenience.
Despite being “rich,” I’ve spent many nights in a Motel 6, many more sleeping in my car/tent/bench/under a semi-trailer/side of the road/red-eye train/etc…it makes the very rare stay at the Four Seasons (of course: deductible business expense, combined with hotels.com credit, and upromise 529 contribution) seem all that more extravagant!
Although I agree saving as much as we can is important and spending money where you want is important, I tend disagree with the car thing….I drive my car about 90 minutes a day about 300 days a year….that is about 450 hours spent in the car each year….and if I buy a nice car and have it for 10 years that is about 4500 hours spent in one car. That’s a lot of time in that car so I want it spent in an enjoyable car with a nice sound system so I can relax before and after my long days of work. Probably this is different for those who have 2 minute commutes, but most people living in big cities will waste a good deal of time in their car, so in my mind it is money well spent!
This is a good point. I have a friend who “splurged” for all the option on his last car because his drive is 45-60 minutes each way (he should have “splurged” on a closer house if you ask me).
Also in Medical school I met an OB/GYN who drove an old Ferrari Testarossa. Apparently he had wanted one from the first day it was released. Said he spent more time at the hospital than his home and wanted to at least enjoy going to and from work. Still, even used I would guess back then the car ran $150K…
I realize you’re not judging him in your post. One thing to consider: you’re on a money/investment blog. If you go to a Ferrari enthusiasts’ blog, they would support the physician buying the Ferrari. A Disney World blog would support someone spending $1k a night at the Grand Floridian resort.
People have priorities. Driving the Ferrari makes someone feel good. Our priority is making a stable financial decision (whether investment, DI, life insurance, whatever), and it makes us feel good. Their priority may be to drive a Ferrari for some reason we just may not understand, just as they can’t understand why we dwell on the details of index funds.
If someone feels good by doing something and it doesn’t hurt you, it isn’t always a “bad” decision.
So an expensive splurge isn’t always a horrible thing, even if we can’t understand it (upgraded hotel or whatever)
As with all things in life, moderation my friends. You don’t want to spend every dime you earn, nor do you want to save every dime.
Having invested on my own for 25 years, a few items that have allowed me to accumulate more wealth than I ever dreamed.
1. Save more when young, just out of residency. Live like a resident for a couple more years. The money you save and invest while young, will compound over and over and “work harder” for you than any money you save later.
2. Invest money in index funds, low cost.
3. Enjoy life, in moderation. You don’t need the biggest most expensive house, nor the most expensive vehicle.
4 The way medicine is going, not sure any of us want to practice 40 years.
This is why I moved from Long Island to Indianapolis, much better cost of living in this nice midwest city enabling me to ramp up my savings to an extent I would not have been able to in NY with its high property and income tax, let alone its insurance cost.
Once money is set aside for retirement and paying down fixed expenses, anything extra is just gravy to enjoy in any way you wish. May it be many little trips, one big extravagant trip or fast cars and loose women. The money is useless in your grave so you should enjoy it.
I agree completely with WCI. I splurge on trips that matter to me, but keep baseline entertainment costs low (no vacation house, or season sports tickets, etc.) I have gone to NYC for a 4-night trip nearly annually for the last 10 years. I meet up with my former college roommate and we leave the husbands at home. They’d rather do something else (golf, etc.). Paying for only one plane ticket and half a hotel room makes the trip a financial non-issue. I’d like to point out that there are plenty of free things to do in NYC. Going to any of the TV shows broadcast from there is free. I’ve been to Letterman twice, the View twice and the Today show including free outdoor concerts multiple times. Central Park is free and the Metropolitan Museum of Art has a recommended admission/donation, but you can pay what you want. The Staten Island Ferry is free and it goes right by the Statue of Liberty.
That being said, I don’t want to relocate there, even though it would be good for my career — I don’t think they’d bump my salary $100K to make it worth my while to move from Chicago. My husband and I would get slaughtered in taxes. Speaking of Chicago — we won’t be retiring here, only living here while we’re working.
That’s fine. Just leave the Chicago attitude there when you leave. We hate “F.I.P’s” in Indiana for a pretty good reason. Slow down your nasty, aggressive driving too. (this is meant for you only if the shoe fits)
Man some of these comments seem to come from some competition for cheap-assedness(tm) or something 🙂
But as for NYC, you sorta got played as a tourist. There are a lot of great cheap things in NYC, you just have to know about them. Start with accommodations. Skip the crappy and over priced hotels. You can get a nice private rental flat/room/pied a terre from airbnb. Second, there are a lot of great cheap eats, especially ethnic foods. Third, the best entertainment in NYC is walking the streets and enjoying all the street life; not to mention specific free stuff you can look up when you get there. It’s easy to have great experiences in world class cities if you know how.
Yes, when you know a place better you can get better deals. I’m always surprised to see anyone pays full price for a lift ticket for instance. Nearly everyone I know skis either free or at least for a significant discount.
Yes familiarity helps. But I am trying to make a different point- if you love traveling and exploring different cities, you can do so at a reasonable budget. I’ve been to NYC, Tel Aviv, Paris, Vienna, oh and Amsterdam in the last couple of years and pretty much did so on a reasonable budget. How?
1- many were done as stop overs, so the flight expense was part of something else.
2- rent private accommodations (airbnb, etc.); you save a lot, get better quality, and can have breakfast, coffee and dinner (if you wish) at home and save on expensive restaurants 3x per day. I always have lunch out, as I’m out exploring, and eating is part of the experience; but you can choose/ control costs better this way. Also, pick a neighborhood that is central and has a lot to offer on foot, so you can enjoy it while going to/from public transport to other places.
3- I love museums; some have free days/discount eves. Some are free.
4- I usually skip tourist traps (they are mostly for tourists, really) and visit places locals would go to.
5- so many free events in cities, and easy to find online.
6- mostly I walk and explore neighborhoods, cafés, see people, visit stores, parks, urban plazas, taking public transport.
I live in San Francisco, so perhaps this approach is natural to me on a day to day basis. But I think others can apply it, especially when visiting expensive cities.
I get your point about price vs entertainment. Generally higher end stuff don’t return linear growth on functionality/fun/anything. And for the most part I do agree with you. Definitely should be planning to have enough for the future, BUT there is one part of me that justifies splurging. I may be not that old (or young) but as I have aged I have noticed that “fun” has got a lower and lower ceiling.
The other day I bought a raffle ticket from an 8 year old girl who’s face lighted up when she started talking about a moon bounce. She was so excited about it it made me wonder does anything in this world make me THAT excited?
So, my point is that perhaps even though a $2 movie vs $200 ticket to a show does not equate 100x more fun, but watching that $200 show at a younger(poorer) age may make up the difference. I guess it comes down to personality at the end of the day. As for me, I don’t wanna ive broke and worried about money in the future, but I rather live larger younger and more humbly older.
Why not live well now and later? I hardly feel like I’m roughing it blowing through 5 figures every month, yet I can still save an adequate amount to do the same in retirement.