Are You Camp Earning or Camp Saving?

I have subscribed to Ramit Sethi’s emails for years, ever since he was a fledgling blogger at I Will Teach You To Be Rich. His websites are now slickly professional and he runs a multimillion dollar empire, selling courses on how to increase your earnings. I’ve never bought a course, but his emails are full of advice about negotiating and growing your business, and he writes compelling headlines (if you don’t believe me, sign up and see what I mean). He’s helped thousands of people earn more money in their businesses.

Are You Camp Earning or Camp Saving--www.thethreeyearexperiment.com

Three days ago, he sent out the email, “What Successful People Don’t Tell You.” It linked to an article by the same name. The premise of the article is that people who truly love their jobs will never stop working, no matter how much money they make, because “you would enjoy being on the beach for about 3 weeks…then you would get bored and want to get back to work.” Apparently everyone that this guy has ever met who’s made big money feels this way. Okay. Let’s accept that premise for a sec.

Ramit goes on to slam the FIRE community, for delaying gratification and staying at a job they potentially hate, eating rice and beans, and leading colorless, boring lives (including WALKING as a hobby for God’s sake), only to retire early and then have no purpose for the rest of their lives.

Apparently, there’s a subreddit detailing the dark underbelly of FIRE, which is that once people have sacrificially saved for 14 years, they then have no purpose beyond amassing their $600,000 so they can live off the $24,000 a year in perpetuity.

The article ends by asking you to pick a camp:

“If someone handed you a check for $600,000, what would you do? If your answer is ‘retire and milk a 4% return to live on $24,000 for the rest of my life,’ you should check out the FIRE community.

On the other hand, if you say, ‘Man, I’d take an awesome 5-star vacation, I’d fly my friends in… then after a few weeks, I’d be ready to get back, refreshed, (maybe with nicer shoes) and I’d start on my next project…’

…you’re one of us.”

Seeing as how Ramit had slammed my beloved FIRE community, in a blatantly one-sided article, I read every comment. The first few commenters were people who wholeheartedly agreed with Ramit, that they could never live like those frugal weirdos. But slowly, the timbre of comments began to change, and many commenters made extremely thoughtful and nuanced comments about how they believe in both philosophies, how it wasn’t all or nothing.

I thought I’d weigh in here, both as a way to work through my exact frustrations with his piece, and as a longer response, a manifesto from someone who has seen the benefits of learning how to save in her own life, even as she earned more and more.

Here’s the article (which you might want to read in full), and let me say up front that I realize:

  • Part of what this guy is doing is selling his courses. He has very successfully and consciously developed a following of young, successful entrepreneur-types who want to earn more. Although Ramit started his blog sharing some automatic-saving advice, in the last few years, his focus has been helping people earn more and grow their businesses.
  • Getting people to pick camps helps him differentiate his product from others in the PF community. I’m guessing he wants to identify potential growth-mindset entrepreneurs who want to earn more. That leads him to overstate his case, using scant evidence (a sole subreddit feed, from the looks of things), and making broad generalizations about the FIRE community.

Here’s what I think about Camp Saving versus Camp Spending:

Let’s throw out the “versus.”

We live in a big world. There are many camps. There are tennis camps, writing camps, riding camps, coding camps, tennis camps for coders, coding camps for writers, and on and on. I don’t think we have to divide ourselves that rigidly. Haven’t we had enough of red versus blue? In a post on Medium, Sean Blanda writes about the false-consensus bias:

“We and our friends are the sane ones and…  there’s a crazy “Other Side” that must be laughed at — an Other Side that just doesn’t “get it,” and is clearly not as intelligent as “us.” But this holier-than-thou social media behavior is counterproductive, it’s self-aggrandizement at the cost of actual nuanced discourse and if we want to consider online discourse productive, we need to move past this.”

It’s a false dichotomy. I don’t think anyone benefits from the us versus them. Plus, lots of entrepreneurs save plenty. Just because you save doesn’t mean you can’t earn, and vice versa.

It’s about INDEPENDENCE.

True, lots of people who are on the road to FIRE don’t have a good handle on what early retirement might feel like. But many aren’t necessarily aiming to sit on a beach. They want the independence to do whatever they want in life, without being tied to making an INCOME.

It’s not the job they want to be free from, it’s the dependence on earned income. And saving up allows people to be free from that dependence. Some like their jobs, some don’t. Some are entrepreneurs, some aren’t. Some want to retire early, some want to keep working forever but are pushing for financial independence so they don’t need to or have to earn an income.

Yes, It’s About Earning More.

You’ve got to grow your income to a certain level in order to be able to more easily save. It’s way easier to save half of your income if you have a bigger income, because your fixed expenses are lower.

I come from a family of entrepreneurs. Building a business that generates cash flow is a brilliant way to create financial independence for yourself. But his article doesn’t talk about that at all. It just talks about why you’ll never want to stop working. But that’s coming from an unmarried guy with no kids who’s in prime health.

What about if you want to raise a family? If you’re a single mom? If you get sick? If you can’t work anymore? Then what?

If you can’t figure out how to save, you are screwed (see the real life story of my two grandfathers below).

It’s Also About Developing Self-Control.

If you don’t practice the self-control involved in regularly saving a percentage of your income, you’re never going to be wealthy. Doesn’t matter how much you earn. And the more self-control I’ve developed through saving, the more efficient and organized I’ve become in general–exercising more, eating better, using my time more wisely, and becoming an all-around more reliable person. In short, saving has made me a better entrepreneur.

It All Comes Down to Minding the Gap.

As Paula Pant has said, it’s about growing the space between how much you earn and how much you spend. If you can do both, you’re golden. Work on the skills it takes to earn more in your profession. If you hate it, by all means, get another profession like I did.

A Tale of Two Grandfathers

I’ve shared this story before, but I think it pertinent to do so again. I lived with Robert Kyosaki’s Rich Dad, Poor Dad, except mine were my two grandfathers. My two grandfathers lived in houses right next to each other for a time. That’s how my parents met. (Yes, my mom was literally the girl next door). One grandfather earned way more than the other. He was a doctor, the son of an immigrant who had become a successful clothing salesman. My other grandfather was a sharecropper growing up, because his father had walked out on his wife and two kids. He used the GI Bill to go to college after WWII, although he never formally graduated. He spent his whole career at South Carolina Electric and Gas, aka The Power Company, starting as a lineman and eventually working his way up to management.

My doctor grandfather was very generous. He always dressed sharply, in custom-made suits, and drove brand new cars, which he upgraded every two years. He bought several beach homes and mountain homes, never keeping any one too long. He also got divorced and remarried after 28 years of marriage. After his remarriage, he worked his whole life, until he was in his 80s. My sharecropper grandfather was extremely frugal his entire life, probably too frugal. He and my grandmother always saved 25% of their incomes. They never bought a vacation home, but they did take vacations, and bought a very nice home in Charleston, right on the marsh. They were married for over fifty years when he died. They, too, were generous, increasingly so as they got older.

Both grandfathers have passed away. My sharecropper granddad left his widow about a million and a half dollars in equities, and a paid-off house worth almost another million. My doctor grandfather didn’t have enough money to pay funeral expenses, so his children had to do that. His widow must make do with her social security benefits (she no longer receives his benefits), one house which she’ll be lucky to sell for $200K, and another mountain house probably worth the same. No investment assets.

I don’t have to debate about saving versus earning. Both my grandfathers benefitted from increasing their incomes.

But you’re a bonehead if you don’t get that you have to learn how to save, or your kids are going to be paying your funeral expenses.

My doctor grandpa out-earned my sharecropper grandfather for years. But he blew all his money.

I do think that the personal finance community can perhaps focus on saving to the detriment of posts on earning (but many bloggers, such as ESI, and Afford Anything, talk about earning more all the time). I also think we focus on saving because we realize its importance. Without saving, earning more is meaningless.

You can’t ignore saving, Ramit. Because eventually, when you’re in your 80s and you’re sick enough that you can’t work anymore, if you haven’t learned to save, the fumes of your entrepreneurial ventures just won’t cut it.

What are your thoughts, readers? 

 

Author: Laurie

Hi. I’m Laurie, and my family and I have set out to double our net worth and move abroad in the next three years. Join us on our journey!

18 thoughts on “Are You Camp Earning or Camp Saving?”

  1. I’m with you-both are hugely important to me. I’ve increased my pay from $22k per year at my first job to approaching $200k now. As my income has gone up, so has my savings-but I always saved, even when it was just $50 per month. I focus on the FI, not the RE, because my goal isn’t exactly to never work again. It’s to never have to (key words here) work again. Even though I’m relatively young I’ve been through my husbands near death from sepsis & I have three kids-plenty of motivation to achieve FI.

    And if someone handed me a $600k check I would (1) pay off my mortgage, (2) fund college for all three boys and (3) launch a business with the rest. Maybe take the family on a nice international trip. I certainly wouldn’t blow it on a 5 star getaway with all my friends.

    1. Nice job on growing your income! That’s an almost ten-fold increase!! We also focus on the FI, because the independence part really drives us, because we want the freedom to travel and live when and how we’d like. I think your experiences with almost losing your husband (and mine with my husband being laid off twice in a year) mean the freedom from financial worries is about the best gift we could give ourselves with $600k.

      I would do exactly the same thing with $600K, except instead of starting a business I would use the rest to fund taxable accounts. I don’t think I could spend $600K on a 5 star vacation if I tried (would have to be a LOT of friends).

    1. I agree!! I think simple living/saving encourages contentment, which seems lacking in the Sethi article. Reminds me of the story of Kurt Vonnegut, asking author Joe Heller, at a a billionaire’s party, how it felt to know the billionaire made more money in a day than Catch-22 (his book) did in a lifetime? Joe replied, “I’ve got something he can never have. The knowledge that I’ve got enough.”

  2. Great post and spot on take on Ramit’s motivation with his current direction in writing. I enjoy his blog and his book, but it’s a business now and he has to continue to appeal to the masses to self-sustain. Thank you for sharing the tale of your grandfathers, it was enlightening – a simple reminder of the importance of saving. Good luck with your own goals!

    1. Thanks! I agree with you; there was definitely an underlying reason for such an incendiary article. Yes, I think about my grandfathers a lot. It is still shocking to me how little my doctor grandfather ended up with.

  3. I’m not sure I completely understand the disdain for the FIRE community. Although it may be due to them not buying their products 🙂 Personally, I would love to hit FIRE and then find a passion of mine that I’d like to pursue. If it makes money great and if not, I don’t need the money. So either one I’d be fine. Not everyone in life is blessed to pursue their passion 100% of their life as much as some people would like you to think.

    1. It seems a little manufactured to me, too, Mustard Seed Money. I think you’re in a totally different place in your life when you’re a 20- or 30-something unmarried person with no kids than you are on the other side of that. Your goals of hitting FIRE and then pursuing your passion sounds awesome! It would be great to find something that does both, but I think the sweet spot is not needing or caring about how much money you make because you’re FI. 🙂

  4. Great perspective! I too really like the concept of “growing the gap.” In the past 5 years I’ve grown my income by 5x by starting my own business – and although my husband and I have also stepped up our lifestyle/expenses, we’ve done that 1) selectively, spending more on only those things that are TRULY important to us; and 2) by a factor that is LESS than (not proportional to) the increase in income, which means the gap is still growing.

    1. Congratulations Shayna. That’s impressive progress in income! And the gap is growing–even better. That’s the surest way to FI. We constantly work on spending on stuff that really matters, like travel, and less on stuff that doesn’t, like random Amazon purchases. But it’s a process (for us at least!).

  5. Hello Laurie Kiyosaki, I found your article through Ramit´s Twitter account. I have also shared his article on my Facebook page, I really liked his post slashing the FIRE community. His emails are great and fun but of course he wants to create a dichotomy into high performers (flatter his target audience) and the FIRE community which “are eating beans and rice to retire early and live bored on a beach”. I have had the chance to live almost FI when I was an expat and that is actually when I started a Blog which I intend to develop more. FI is great as it gives you a worry-free life and you feel more in control. During my time as expat I increased the gap and invested the difference, the simple formula to get rich, right? I have always been frugal (or on the brink of cheapo sometimes according to my friends 🙂 ) so that will not change and I am looking at making more earnings. So I´d like to put myself in the 3rd camp “Gap growth” :).

    1. Hi Jonathan. Thanks for stopping by! Well done on my new name. 🙂 Can I also put myself into the “gap growth” camp? I love that. Also if you’re ever interested in being interviewed about your time as an ex-pat, let me know! I have a series on people who have international jobs/lifestyles!!

  6. Hi Laurie!

    This is an extremely well thought out counter argument to Ramit’s post. I have been following him for quite a while and the constant “us vs them” tone of his posts can sometimes be a bit too much for me. In some cases its just blatantly over the top like on the sales page of one of his courses where he says the alternative to buying this course is to “buy an ebook about selling ebooks.”

    Seriously?! There are really no other similar courses on the planet?!?! I can list 5 myself.

    But anyway, thanks a lot for writing this post. I am currently working on getting my blog up and running and writing a guest post on FIRE. I will certainly link back to this post.

    You read my mind when you said “It’s not the job they want to be free from, it’s the dependence on earned income.”

    I also noticed that you have been to Singapore before. It’s where I live right now! If you ever come here again, please let me know.

    Like Jonathan above, I have worked overseas (Houston, TX) for a year. I’ve also done a work/study program in Stockholm, Sweden. If I am a right candidate for an interview, I’d love to do it!!

    Thanks again and I just subscribed to your blog:)

    1. Wow, first of all, thanks so much for your comment. And so cool that you’re in Singapore! We loved it there! I will definitely reach out if I’m there in the near future, which would be so nice. 🙂

      I’d be delighted to interview you and hear more about your international experience. Be on the lookout for my email! Thanks for subscribing!!

  7. Wow, great post Laurie!

    Not everyone can be like Ramit (but he won’t sell you that). I’ll tell you what though… *everyone* can learn to save and eventually gain financial independence.

    Guys like Ramit simply don’t live in the real world. There’s a reason most new businesses close within 5 years — It’s hard. Not everyone has the time, energy or talent to maintain a small business. Some people have families to take care of. Student loans. Daycare. Car payments. Elderly parents to care for. Rent.

    FIRE is far more real than the sunshine he’s selling.

    1. Thanks for visiting, Mr. Tako. Yes, I so agree–life is so much more complex and multi-layered than Ramit’s one-sided article makes it out to be. I love your point that everyone can learn to save and gain financial independence. It’s boring, it’s staid, it’s get-rich-slowly, but it’s real, and it’s doable for anyone.

Leave a Reply to Mustard Seed Money Cancel reply

Your email address will not be published. Required fields are marked *