Maybe a Low Cost of Living Is for Losers and Underachievers
By: Rocco Pendola
Tags: Money, Budget, Personal Finance, Spending, Self

As you might know, I subscribe to the notion of an insanely low cost of living. It’s not how much money you make; it’s how you allocate the income you do bring in. I know there’s something to this. I’m not crafting a total facade here.

In some of my best years of earning, I spent excessively, carried considerable debt, and saved very little. As I embraced frugality and became obsessed with cost of living, I saved and invested significantly more money during comparatively lean years income-wise.

This said, I sometimes wonder if I’m a hypocrite.

Do I subscribe to an insanely low cost of living because it’s something I can riff on as superior to other styles of managing personal finance? Do I do it so I can feel better about myself? Do I do it to justify laziness or effectively rationalize the fact that, from month to month, I make what amounts to a middle or upper middle class salary?

Am I an underachiever? A loser?

To stave off these feelings, preaching and maintaining a low cost of living becomes the shoe that fits, so I wear it. I don’t need to earn more money because my method of allocating what I do make compensates for making more. In other words, saving 50% of, say, $5,000 each month is better than saving 10% of $10,000. Sounds great, though something might be missing from this equation.

Do I hold myself back — from an earnings potential standpoint — by adopting this low cost of living mindset with such ferocity?

I explored this thought in an August Medium article, where I hypothesized that some of us might need to spend more to make more. Do we need to use strategies to put pressure on ourselves to work more — or harder, or smarter — to earn more:

Because I don’t have a regular source of relatively guaranteed income, I need to put pressure on myself to earn. It actually works like a charm. I try to match discretionary spending with savings. On a low level, I attempt to save — in addition to what I would routinely save — what I spend on coffee each month. If I spend $200 on coffee, I save an additional $200. On a larger level, if I take a trip, I take a key component of the trip — often the Airbnb — and concurrently save the same amount of money I spent.

This strategy recasts the old “you gotta spend money to make money” adage. If I do this — match discretionary spending with equivalent savings — I up my personal financial ante. It’s one way to counter low cost of living as dogma.

As it stands, I can get by each month on $2,500-$3,000 without having to touch savings. If I make $3,000, I have roughly $500 left over at the end of the month. I can treat it as disposable income or allocate it to a savings account or my dividend stock portfolio.

When I make $5,000 or $10,000 a month, I have more wiggle room. I can splurge, save more, invest more, or move on a combination of all three actions.

Other than my penchant for saving and investing money, there’s nothing that drives me to earn more other than my own desire. I technically don’t need more money, though I’m pretty sure I’d like to have it. This is why I work so hard.

However, I’m not putting real pressure on myself.

The script flips when I do something such as book a trip or buy a big-ticket item. Maybe something that costs close to what I spend on rent each month.

For example, when I book a roughly $1,000 getaway to Portland, I put at least a little pressure on myself to earn more so I don’t have to use savings to pay for the trip. If I turn the heat up and commit to saving $1,000 to match the cost of the vacation, I’m getting somewhere. I’m forcing myself to do the math. If I’m flying to PDX in three months, I need to up my income by least $666 a month prior to departure. This covers the trip, then matches the outlay in savings/investing spend.

If I don’t put some form of staged pressure on myself that quickly becomes real (because I have a bill to pay!), I run the risk of stasis. Of letting myself get comfortable. Of not hustling as hard as I otherwise could.

I used to work with a guy when I did inside sales in 1999–2000. We were basically straight commission — $1,000 base monthly salary + commission. We made a lot of money. Some of us spent a lot of money.

This guy spent a ton of money. He was always having big, expensive dinners (House of Prime Rib, baby!) and planning weekend outings to see sporting events, often in other cities. By all accounts, he had a super high cost of living.

He also worked his ass off.

He was always on the phone. ABC. Always. Be. Closing. He was relentless. When I found myself spent and taking a snooze at my desk, he was standing, phone to his ear, trying to make a deal.

Even though he never admitted this out loud and might not have been aware of it himself, he fronted his month with out-sized expenses. He had no choice but to earn — and earn big — as quickly as he could into the month to match his exorbitant cost of living.

Most months, he succeeded. I also recall him borrowing money from co-workers every once in a while to cover a shortfall. However, this was rare. And when he did borrow, he paid his debts back fast.

He was a cash flow machine, because he had to be. You can’t be a spending machine, unless you’re cash flow machine or you have rich (and understanding and generous) parents or you max out your credit cards and lines.

This guy’s way of marrying money and expenditures is the exact opposite of what I do. And, if I’m being honest (I believe what I’m saying now!), what I think I should do.

I front my month with income, aiming to cover my expenses as early as possible. The thought of fronting my month with obligations then feeling the pressure of having to hit a big number freaks me out. It intimidates me. What if something goes wrong along the way?