There have been numerous posts about Sean Cooper’s recent feat of paying off his quarter million dollar mortgage in 3 years. While this may or may not be interesting to people by itself, I think it’s a concrete example of a more abstract concept, namely delaying consumption.
Everyone has the option between using resources they have in the present, or saving them for the future. People debate whether it’s worth hitting the town with friends and blowing $100 on a night of fun, or saving that money for next month’s rent. Squirrels decide whether to eat a nut now or bury it to eat in the winter. Usually the crux of this decision is how much benefit it will bring us in the future – the squirrel intuitively “knows” that the nut will be more valuable to eat when he’s half-starved in January than in September when food is plentiful and he’s already fat.
Humans have an additional element to this decision, in that we can consume things before we have them – namely spending on credit. We therefore have the decision to consume before we have resources, as we acquire them or save them to consume in the future.
Resources exist to be consumed. And consumed they will be, if not by this generation then by some future. By what right does this forgotten future seek to deny us our birthright? None I say! Let us take what is ours, chew and eat our fill.
- CEO Nwabudike Morgan “The Ethics of Greed” (Sid Meier’s Alpha Centauri)
Sean Cooper is clearly a master at delaying gratification. He’s attracted quite a bit of criticism with what he’s doing, with accusations like ‘Upstanding citizen works his life away, lives in miserable squalor and forgoes human relationships for years. How is this an inspirational story?‘ and ‘Well there. Guess the corporations are right. Work multiple jobs, don’t have a family, and eat rice and pasta and you too can achieve the dream’.
There certainly are examples of misers and hoarders who pathologically save for the future and make themselves miserable in the present. It can be reasonably asked, who is right here – Cooper, the haters or is this an “each to their own” type of situation?
My general outlook on this would be that it isn’t worthwhile to be miserable in the present in order to be happier in the future. It also isn’t worthwhile to be happier in the present at the cost of being miserable in the future. As much as possible, the rational outlook would be to predict lifetime expected available resources – taking into account retirement, future obligations such as paying for children and possibilities of becoming disabled or other reductions to earning power. Then, as much as possible, try to smooth this consumption such that you have roughly the happiness that this average consumption would purchase throughout your life.
In my case, I’ve been very unhappy in most work environments I’ve been in. I’ve saved aggressively with the intention of not having to work for other people. For me, an aggressive savings plan makes sense, because I’m trying to live my entire life off of a shorter number of earning years. Another approach would have been to find a way to earn money that was more tolerable to me, then I could have done that indefinitely into the future – this blog is one attempt at exactly this. I have enough in savings to live a modest lifestyle for the rest of my life. Any additional earnings can be used to purchase more luxuries.
In Sean Cooper’s case, I don’t get the impression that he doesn’t like work. If he does, it seems crazy that he’d be working 80-100 hours a week. It also doesn’t seem to me like he enjoys home ownership particularly, given that he’s living in his basement. If his entire purpose was to be more affluent in the future, it’s debatable whether or not Toronto real estate was the best vehicle to achieve this. While it’s his life and he’s welcome to do whatever makes him happy, I wonder if what he’s done was the best path to his goals.
It’s an inherent contradiction with personal finance that the greater desire someone has for an affluent lifestyle, the harder it is to achieve. The more that is spent on luxury goods, the less there is to save for the future, which makes it harder to buy more luxury goods at a later date. The outliers in the other directions are people who live very modest lives and leave behind a huge bequest or inheritance.
Robb Engen suggested that Mr. Cooper is setting up publicity for a career as a public frugality expert. I hope this is the case, in which case what he’s done makes good sense.
How do you determine the right saving / spending rate for yourself?