Wednesday, July 16, 2008

Is it possible to be frugal in America?

My lifestyle costs $22,552.88 a year which seems reasonable; it is less than the median American household earns after taxes, and given that the personal savings rate in the country is around 1%, it is less than the average American household spends per year. Good. By American standards I am frugal. Should that make me feel all warm and fuzzy?

The global GDP per capita is around $8,241.00, which I think puts the average income (and spending?) of an earthly inhabitant at close to that. By that standard I don't look so good, coming in at almost triple what the average human is spending. If you make the decision to live in the world's richest country, is it possible to consider yourself 'frugal' if your living expenses exceed that of the planet's average resident? Or is frugality a relative concept?

My biggest expense is housing, and I live in a 650 square foot apartment, which is just about the smallest thing around here, but when I look around the world I see the majority of people living in far smaller and less sophisticated dwellings than me:
  • In China, hundreds of millions of migrant workers live in shared dorm rooms on company premises
  • In Africa, several hundred million rural people live in huts made of mud and sticks.
  • Throughout the planet, there are one billion people living in urban slums, basically in very inexpensive shacks.
  • Lots of middle class and lower middle class urban people (a billion or two?) worldwide are living basic existences in houses like this.
  • There are a billion farmers between China and India alone who live in very basic accommodations
Sitting in our homes in America these are just the faceless masses but the more I travel and have met so many actual people who fit into all of these different categories, the more I realize they are exactly the same as me, largely smarter and harder working than me, with the same hopes, dreams, concerns, worries, problems, and ambitions as me, whose lives are just as complicated, as important, and as individual as mine, the only difference is they don't have as much money, and the reason for that is basically because they don't have the opportunity.

To some degree frugal Americans are the least sensitive people of all when it comes to money, because we get all self-righteous when comparing ourselves to the Joneses, when in fact we should be comparing ourselves to the Wongs and the Perezes. The Joneses know they are Supersized Americans when they haul the LCD big-screen from their Hummer into their 5,000 square foot palace with marble sinks, but how many of us understand how ridiculously extravagantly we are living when we load a bulk order of frozen fish sticks from Costco into our 10 year-old Civic?

I think the biggest barrier to true frugality in America is housing; while I outline a few examples of inexpensive housing around the planet above, none of these are really possible in America. While occasionally you see stories about someone who lives in a log cabin and earns almost nothing to avoid paying taxes in support the war, or lives in some miniaturized custom-built house sitting in someone else's backyard, or lives in their car, these are all people at the fringes of society and comes at the cost of social acceptance and probably has career consequences in practice.

My thinking is that it is not really possible to be truly frugal (spending below $8,241.00) in America, which is not a reason to not try to be frugal, but rather a reason not to live in America. I'll leave America for the big spenders while I create a modest, but comfortable, existence in some lower-cost country.

4 comments:

P said...

I am a frugal bachelor as well, but my burn rate is quite a bit higher. For one, I am in a two bedroom apartment running nearly $1000/mo. In addition, I spend alot on nice foods, such as fresh fruits and veggies, which are expensive.

Still, in the scheme of things, your spending s a bachelor is modest and controllable, compared to what it would be if you were married with kids (or divorce).

Getting married likely entails buying a house in a "good school district", which is likely far from work, large SUVs (safe for wifey & offspring), organized events to entertain the kids, along with gasoline to haul the kids around in rush hour traffic. Vacations to Disney World, etc, etc.

If you divorced (with kids) because the wife got the idea you were too cheap, the courts would make you hire $300/hr lawyers, divide property "equally", and then pay over $1k+/mo in child support for the next two decades, including possibly college education even for mediocre kids with mediocre IQs.

In either case, forget being frugal.

Nonetheless, I think you are getting too worked up about frugal'ness, comparing yourself with the world's huddled masses. Everyone plays the game within the framework in which they exist. Third world immigrants move to the U.S., get tech jobs, and buy McMansions and mega-SUVs just like everyone else. They have kids who become American'ized. That is, the second generation gets fat and watches MTV and American Idol.

I suspect that while Americans are rich in material wealth, we are likely much poorer in social capital, compared to other countries. THis is probably due to car culture mobility, where peoples "friends & family" live across the city, or even in entirely different cities. So while suburbanites have houses and accouterments that would make the world blush, the suburbs are mostly socially sterile and forgettable.

I imagine a large percentage of American wives secure employment and brave the commute each day, for no other reason than to have people to talk to. Otherwise, they would be relegated to shopping at lonely big box retail and watching Oprah during 8-5pm.

Frugal Bachelor said...

Great comment and feedback, thanks for replying. Hope to see more of you around here.

Anonymous said...

I think your definition of "frugal" is a little bit warped. Being frugal is about maximizing our utility (happiness) while wasting as little as possible. This generally results in people living below our means and saving the difference. I don't think frugal is really a relative term. Feeling bad that you are better off than most of the planet is one thing. Considering yourself less than a cheap-ass "frugal bachelor" is another thing entirely.

You said it yourself, there really is no other way to reduce waste on your part. That is the very definition of being frugal.

I bet if those same people who make $8k a year had the same income and opportunities as you, they would not consider it wasteful to eat better (i.e. things besides booze and frozen burritos.) or live in a slightly nicer house/apartment. They would change their lifestyle to maximize utility. Just because they are "content" or make do with what they have doesn't mean they wish they could do better and be less "frugal".

If you really feel bad that you have so much money compared to so many other people, why don't you donate a lot of your excess wealth to well-researched charities? Since you travel the world and meet so many people, why don't you hand out money to these people to improve their lives? It would do a lot more to help balance the inequality of wealth than to simply move to another country and spend your days drinking cheap beer and chasing local women who think you have lots of money.

Personally, I think you should do whatever the hell makes you happiest. If moving abroad and continuing with your current lifestyle make you feel less guilty, then by all means. God bless the USA for giving you the opportunity to earn so much money and the right to move where ever you want whenever you want.

P.S. Love the blog! Glad you're back safe and sound.

frugalbabe.com said...

ten years ago, I spent two years in Africa with the Peace Corps. That experience showed me how little we really need. But once I came back to the US, I got a house with running water and electricity, and bought a used car, and shop at Costco. I don't still live as if I'm in Africa, but I do live with much less than most of my friends, thanks in part to my time in Africa.
My family spends a lot less than we earn, and we work hard to minimize our waste and impact on the planet. To me, that's frugal.
Just found your blog, and I'm really enjoying it :)