Adm Karpinsk has been a bit more reasonable lately, posting some numbers to back up his assertions. But I thought I should join in at this point to address something that has probably been in your mind: how much can I really give up, without going crazy? After all, we all COULD live under a bridge and eat out of dumpsters, but no amount of money savings would make this worthwhile.
The miraculous answer to the question of how much you have to give up is: not much at all. The reason is that you will be using your creativity to enjoy the lifestyle of your choice, at about 75% less than the standard cost. You can think of it as gaming the system. And it can be really fun once you get into it.
Let’s start by explaining why the system is so easy to game if you live in a so-called rich country like the US, Canada, Australia, or much of Europe.
Our country is home to a great surplus of wealth. It is very unevenly distributed, but there is plenty of it. We also have mind-bogglingly advanced technology and international trade which makes it so that certain goods are unbelievably cheap to buy. You can buy enough basic food (rice, beans, oats) to power you for a day for about $1.00. You can buy enough oil to carry you and 2400 pounds of steel 40 miles for $3.50. But there are also goods that are incredibly overpriced. You can pay $900 for a decorative leather satchel that serves no purpose. A day’s worth of food could also cost $900 at the right restaurants.
The whole game of our system is for the rich company owners to pay for advertisements to convince everyone else to buy their products at as high a price as possible. Ads and peer pressure make it very tempting to have the more expensive products. Rich people and other big spenders buy these products briskly, driving up the high-priced products while simultaneously advancing industrial technology and competition which actually drives down the price of medium-range products. But if you can peek through the ads and identify the actual needs that you want to meet, you can pick much more suitable products for yourself and save a bundle. To put a number to it, your goal should be to spend only 25% of what the average person of your income spends in each product category.
By letting yourself spend 25%, instead of 0% like the guy living under the bridge, you can still be part of the good life, enjoying normal modern society without anyone even knowing what you are up to unless you choose to share it with them.
So to go through a few examples:
- Goal is getting around the country on 4 wheels: Average person spends $25k for a Honda CRV or Ford Explorer, you can spend $7k for a few-years-old Scion Xa
- Goal is being not naked all the time: Average person spends $600/year on clothes from the mall, you can have a slightly smaller rotation of nice clothes (considerably nicer than Adm Karpinsk’s clothes, for example) from Target for $150/year
- Goal is getting out for healthy bike rides: your friends may buy $2400 carbon fiber road bikes. You can still find a great bike with some old-fashioned aluminum on the frame and carbon forks for $600 on Craigslist and ride just as fast as them.
You can figure out a trick like this for just about every category of living expenses. I challenge you to tell me one (leave comments below if you like) that can’t be improved over the standard person’s expenditures. There are some that are easier than others of course, so I like to cut those even more than 75% to free up some money to spend on things more dear to me. For example, I spend 0% of the average on cable TV and 10% of the average American dining out budget, but more than 100% of the average on housing since I like to live in a nice place. As long as my other savings can more than make up for the house I can still meet the 75% off goal.
So you’re giving up some spending.. but you’re not giving up your needs.. or your happiness, if you do it right.