An Embarrassment of Riches

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Spending and saving are not mutually exclusive.

We all spend money, and most of us save it too.

I, for one, do not believe in some Platonic ratio of saving to spending.

If there were such a ratio, (say a perfect 65% savings rate,) then it would be easy to tell someone if they were over-saving or under-saving.

But to imagine a perfect saving ratio, is to imagine homogenous race of human beings with identical values, resources, dreams, and needs.

What a ridiculous premise.

It is trite to say that we are all different and have different needs and different values. But, as far as I can see, it also happens to be true.

In fact, the older I get, the more I am attracted to that once dirty word, “relativism.”

I remember as a college student, there was this fundamentalist preacher would drive his Astrovan to our commons in sunny La Jolla and accuse everyone walking by of being sinners or fornicators. (At the time my chief regret was that I was not more guilty of the latter.)

He wore an ill fitting tan polyester suit, a short sleeve button-down shirt with armpit stains and a thick, course burlap looking tie. He had thick engineers glasses and a severe side part.

He would pronounce words like “hell” as if they had two syllables… as in “you’re going to Haaaayyyulllll, fornicatorrrrr!”

He was quite honestly, like a creature from Mars Who had landed and had promptly begun haranguing the passing surfers, and frat boys, and coop hippies.

But I remember a point that he made that was quite interesting to me at the time. Essentially, “if you don’t believe in an absolute God derived truth, on what grounds can you judge anything to be evil, or sinful, or wrong?”

As a kid who grew up hearing stories of my grandparents fleeing the Holocaust, I was pretty attached to this idea of absolute evil. So this argument really resonated with me.

But even then, I could see how backwards this logic was. After all it required accepting without evidence an almighty being just because it satisfied our our own small impulse to judge.

Now this argument seems not only logically unsound, but it feels wrong to me too.

Each day, I am more aware of my own irrationality, and the dependence of my judgment and behavior on external factors like how much I slept, or the moods of people around me, or what I’ve eaten, or what season it is.

And this increasing sensitivity to the fallibility of my own judgment, has paradoxically opened my mind up to the possibility of change. If sleeping more makes me a kinder person, then couldn’t there be a way for me to structure my life to ensure that I get more sleep? If I am motivated by the drive for pleasure, then isn’t there a way for me to align my pleasure seeking tendencies with some forward progress towards a goal?

This point of view sees decision-making more as the expression of a complex equilibrium, than as the exercise of binary moral choice.

Which is to say, at this point in my life, I’m pretty relativistic.

(Unless your name is Richard Sherman, and you cheated and got away with it, then caused the 49ers not to get to the Super Bowl, and then blabbed your big fat mouth about how great you were and how lame your opponent ((Who happens to have a great set of hands)) was to a sideline reporter. That is just evil.  Pure evil)


And from his cavernous nostrils shall come sulphuric jets of hellfire….

But I digress. The point of all this is just to say that as far as I can see, there is no such thing as absolute over-saving or under-saving. There can certainly be saving too little to reach a specific financial goal. And there can be saving too much, If by saving you are robbing yourself of happiness.

But this is very difficult to judge even for oneself, let alone for someone else.

So why not be empirical about it? Why not start cutting down our own spending, until we reach a point where our happiness is negatively affected, and then spend just a little bit more than that?

My sense is that culturally we are constantly bombarded with messages to consume more, so it seems logical for us to turn our focuses inwards. Why not simply evaluate our happiness relative to the changing variable of our own decreasing spending?

Which is maybe why this table (the one that got me going on all this early retirement stuff in the first place) was so impressive to me when I first happened upon it last year.  (on Mr. Money Mustache)

SavingsTable (1)

It doesn’t say “you save too much” or “you save too little.”  It’s simply points out that the percentage of your take home income that you save (and spend) has a measurable impact on how far you are away temporally from financial independence- (or the point at which employment becomes a purely voluntary act.)

It is logical, and nonjudgmental, and it frames financial choices in a tangible way that has effortlessly bent the trajectory of my own spending towards more saving.

And unexpectedly, it has seemingly bent the trajectory of my life towards more happiness.

So perhaps I’ll keep this experiment going for just a little while longer yet…

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11 Responses to “An Embarrassment of Riches”

  1. Robert January 23, 2014 at 5:30 am #

    This post reminds me of the advice I always used to hear from financial advisors, magazine articles, books, our 401(k) workshops at work, etc., about the need to have enough retirement savings to provide 80% of the income you were earning while employed, and if you wanted to be on the safe side–given that many retirees like to travel a lot–100% would be better.

    There is an entire savings industry that profits the more you stash away and the larger your accounts grow, especially when they are asset-based management fees. And maybe most retirees DO spend 80-100% of what they earn. But there is no reason you have to maintain such a lifestyle as a retiree to be happy!

    And the real irony is that in order to save enough to provide that level of retirement income, given the reduction in corporate pension plans, etc., today, an employee would need to sock away a significant part of their income as savings. So they would already be living on less than 80%.

    And what really makes no sense is that as you continue to get promotions, salary increases, etc., throughout a career, that 80% number keeps growing as well, so you never can catch up to the “required” nest egg amount. But how ridiculous to think your spending in retirement has to match that arbitrary number!

    In my case, I was saving about 20%, spending about 20% on kids’ education the last several years, and spending about 10% on mortgage payments. With income taxes in the 15% range after deductions, plus another 8% or so for FICA/medicare, my spending on these categories totaled about 73%. When I retired, the home was paid off, the kid’s were through college and on their own, my income (and thus taxes) got slashed, and I no longer needed to save. So, I only needed 27% of my income to maintain the same lifestyle.

    But in fact I found there were still other spending reductions I could easily make as a retiree, especially when I started making a game of it. While working there was a psychological urge to splurge–a reward for the labor. But as a retiree, I found I could cut back on dining out without feeling sorry about it. In fact, I was trying to recover my health, and preparing my own meals was much healthier and helped me lose the extra weight I’d gained over the years (still working on that, but making progress!). I love concerts and shows, but didn’t feel the need for as much entertainment as when I’d worked, and a more flexible schedule let me catch the matinees or other off-peak times for lower prices as well. I didn’t need a gym membership because I could ride my bicycle outside in the middle of the day instead of being limited by darkness when working. I didn’t need the cellphone services I used while working, so cut back to a cheap paygo plan that runs me about $3/mo and meets my needs.

    I could go on. But honestly, that 80% number may be sound advice for people who can’t manage a budget, but if you are reading this blog, you probably can adjust your lifestyle without sacrificing quality of life, and live on much less. But, if you don’t believe it, then ask your boss for a pay cut. That will immediately boost the value of your nest egg in terms of retirement income as percentage of your current income. If you ask for a big enough pay cut, you’ll magically be at the 80% number. And then you can tell your boss you are retiring! (There…see how ridiculous that 80% is?!)

  2. Bob January 23, 2014 at 1:38 pm #

    A static saving rate is misguided if only for the fact that when you “retire” that saving rate is not static anymore. If there’s anything you want to be static, it’s your quality of life.

    “Retirement” likewise is a poor term, implying you will retire from or stop whatever you’re doing. Which doesn’t really apply to your situation.

    That table is great for most working stiffs who look forward to not working at their job anymore. But you are not one of those people. You’re already spending your time how you desire.

    • Miles Dividend M.D. January 24, 2014 at 12:00 am #


      Your description of retirement sounds fantastic. I’m even more motivated reading it.

      A couple of points.

      1. The chart refers to the percentage of your take home income saved, not your total income.

      2. Getting a paycut does nothing to boost the value of your nest egg in the above equation. The value of your nest egg when it comes to your time to retirement is determined relative to one value, and one value only, and that is the amount you SPEND each year. When you’ve saved 25 to 33X your yearly spending, you have arrived at financial independence.

      Thanks for your comment.


      • Robert January 24, 2014 at 5:28 am #

        Doc, I understood that. I was referring not to the chart but to all the popular retirement financial industry advice about what it takes to retire. Their arbitrary 80% is–well, arbitrary! If a person earning 30k/year can retire on 80% of that income, why does a person earning 100k/year need 80% of his income? For that to be true, in most cases it must be a difference in wants, not needs. If you can’t adjust your wants, then keep slaving away until you have that 80% covered. And hope your “required” standard of living doesn’t keep increasing as your income increases, or if you are very successful in your career and get large pay increases, you may never catch up!

        My comment about the nest egg was just to point out the ridiculousness of the logic that a fixed percentage of earned income is what it takes to retire. If we use a 3.5% withdrawal rate (between your 25x and 33x), then if you are earning $30,000/year, 80% is $24,000 and you’ll need a nest egg of $686,000 to fund it. If your income is $100,000/year, 80% is $80,000 and you’ll need a nest egg of $2,286,000 to fund it. So, suppose you are earning $100,000 and funding a nest egg and you’ve grown it to $1,000,000. If you have to have 80% of your working income to retire, then you have many more years of labor ahead of you. However, my tongue-in-cheek comment was that according to the financial industry’s arbitrary percentage, anyone can retire on 80% of whatever they were making, so all you need is a pay cut to $30,000/year and suddenly your $1,000,000 nest egg is more than you need to fund an 80% income in retirement. Thus, your nest egg suddenly became “more valuable”–you can retire now! LOL.

        • Miles Dividend M.D. January 25, 2014 at 2:04 pm #


          I understand what you were getting at now. Interesting point.

          I completely agree that the financial industry, is rife with shysters, and that much of its common wisdom is not well thought out. (But I still think investing in low cost index funds is a great thing to do with your savings, as I suspect you do too.)

          I also agree that any hard fast rule on “the right amount” to save is ridiculous.

          One of the things that I love about the 4% withdrawal rate rule is that it offers a spectrum of possibilities. This allows each person to balance out their spending and saving priorities to match their own values. It is individualized, and non prescriptive.


    • Miles Dividend M.D. January 24, 2014 at 12:03 am #


      Call it what you will. A rose by any other name is but a rose.

      And the above chart is just a statement of probability. If you derive a different conclusion after considering it, so be it.

      I wish you only happiness.


  3. Bob January 24, 2014 at 4:08 pm #

    What are you referring to when you say “it”?

    Robert seems to have a better intuition of the chart. Savings rate is meaningless outside the context of what you actually need and want. If you are already spending your time how you desire, and all your expenses are being met, you don’t need to save anything or give up golf to figure out how to save more.

  4. Miles Dividend M.D. January 25, 2014 at 2:00 pm #


    1. “It” is “retirement,” which you labeled a “bad term.”

    2. So an NFL player who enjoys playing football and is meeting his expenses, and saving nothing doesn’t need to figure out how to save more?

    3. I still play golf.


  5. Bob January 27, 2014 at 3:45 pm #

    An NFL player’s situation is so drastically different that comparing them to you as ‘apples and oranges’ would be an understatement. The average career span of a NFL player is a few years, for a position like running back months might be a better measurement. This is not even counting the medical injuries and insidious long term brain injuries that aren’t fully understood. Even if an NFL player’s dream is to play NFL forever, that is an impossibility. I can’t think of anyone who needs to learn how to save more than an NFL player.

    On the other hand, your work has amazing longevity AND you love it. Your work is your livelihood and you enjoy it and can die doing it. Consider yourself already retired. Although you may still play golf, but you’ve traded some golf away to save more even though you don’t need to save more. That is why ‘retirement’ is a poor term. You don’t need to, or want to, stop or retire what you’re doing. “Retirement” obfuscates your actual individual goals for a brainwashed societal archetype.

  6. Miles Dividend M.D. January 27, 2014 at 5:27 pm #


    I agree that my situation and that of an NFL players is much different.

    I was merely responding to this statement that you made, which struck me as flawed:

    “If you are already spending your time how you desire, and all your expenses are being met, you don’t need to save anything or give up golf to figure out how to save more.”

    I think the overspending NFL player nicely illustrates The limits of such a statement.


  7. Bob January 28, 2014 at 11:03 am #

    Yes, I meant “you” as in specifically you, Alex you. Not you in the generalizable ‘everybody’ you. For you specifically, there is very little value in squeezing out the last of the toothpaste.

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