It’s All Relative

Yesterday I went running with a group of women from my neighborhood. We recently moved to a large neighborhood in Davidson, North Carolina, and the neighborhood we moved into, to use terminology from The Millionaire Next Door, is “income affluent.” That means that people in this neighborhood tend to have high incomes, but also spend large amounts of money so that they have a low level of net worth.

It's All Relative www.thethreeyearexperiment.com

In other words, they’re broke.

I was proud of myself–I had gotten on Facebook and posted a message to the neighborhood women’s group we have there. I found several women who were interested in starting a runner’s group, something I sorely needed since I have about motivation to run as I do to clean the toilets (read: none). But running, unlike toilet cleaning, is good for me in myriad ways, predominantly mental health-wise, so it’s helpful to have accountability partners in the journey.

We live in one of the (or the) least expensive homes in the neighborhood. I will admit that I didn’t really want to move to this neighborhood, because I have read all of the Millionaire books (and am reading the new one which comes out in a few months–review soon!), and one of Thomas Stanley’s tenants for millionaires next door was that they live in low-key neighborhoods. When you live in an income-affluent (but not balance-sheet affluent) neighborhood, it’s really easy to get sucked in to the buying habits of your neighbors–there are so many Audis, Tahoes, and Mercedes in this neighborhood. People seem to always be renovating some part of their house, or all of it. And moving. People move here all the time, for no reason other than “they wanted bigger bedrooms for their kids” (that is a statement I heard recently).

Why do we live here? Mr. ThreeYear really liked the neighborhood because they have a large tennis community, and he’s a huge tennis player. The house also fit our needs and price range, and there weren’t a lot of those houses available. We had limited options, and this was the best one. So, we’re trying to develop our frugal reputation and maybe, just maybe, be a good financial role model for some neighbors.

Back to yesterday–as we ran, I spoke to one of the women who lived in “The Reserve,” a newer part of the neighborhood where homes aren’t just expensive, they’re exorbitantly expensive. She told me that prices had gone up so much, her family wouldn’t be able to buy their current house at this point (the prices have risen about 20%). Then she and another runner started talking about a “rich neighbor” who lives in a bigger house than theirs.

house in river run www.thethreeyearexperiment.com
Just one of the many large houses in our neighborhood-but this house isn’t in “The Reserve.”

These women live in homes that cost $850K-$1M + dollars. For people on the West Coast, perhaps, that’s not completely crazy in terms of housing prices. But here in the Southeast US, those are very expensive homes!!!

It just goes to show that people’s ideas of what wealth are have become so skewed. And, that people aren’t realistic at all about what they have.

The reason I was struck by this particular conversation was because just the night before, I’d had a “Come to Jesus” conversation with Little ThreeYear. He was complaining that because his brother earned a trampoline party at his middle school (which wasn’t available to earn at the elementary school) it wasn’t fair. To which I replied, predictably, “Life isn’t fair.” Which produced, “I wish life were fair!”

“You wish life were fair?” I replied. “You’re right. Life is spectacularly unfair. But not in the way you think. You have a lifestyle that the vast majority of people on this planet would give a left toe for. If life were fair, then you would live in a house that’s a fraction of the size of this one. You probably wouldn’t have your own room. You may or may not have dirt floors.”

“You’d have one set of clothes, instead of so many we have to organize them in bins. You’d have one toy, and no Legos, because they’re way too expensive. You may or may not have shoes. You’d eat rice for dinner every night, with a side of beans if you were lucky, and tap water with no ice, because you certainly wouldn’t have a refrigerator to make ice cubes for you. You know, if life were fair.”

It’s nice to give the boys a little reality check now and again. And myself, too.

Sounds like the running ladies needed the same reality check.

“You are rich!” I wanted to tell them. “In every sense of the word except net worth, you are among the richest group of people in the history of our planet!” If they’d stop comparing themselves to their richest neighbors, and start comparing themselves to the city at large, to the country, to the planet!, then they’d realize that their incomes can fuel amazing things for them–a future that has enough financial stability to support their deepest dreams, if they’d spend slightly less and save slightly more.

“Imagine,” I wanted to say, “no more questioning if you can still afford your house if prices go up slightly because you’re not living on the edge of what you can afford. No more leasing luxury cars to appear wealthier than you are.” Real self-esteem that comes from knowing you don’t have to rely on other people to fuel your consumptive lifestyle, that you actually have enough money in the bank to fund your life for many years.

I’m making a heck of a lot of assumptions from a short conversation with this lady. But there were a lot of money issues spilling out during our short run.

Let me see if I can get to a point, here. If we can take a step back and look at what we have in more absolute terms (“this is where I am compared to everyone else on the planet“) instead of just comparing ourselves in relative terms to our richer neighbors, then hopefully we can see the money available to us for what it is–vast.

I believe I’ve said this before, and I’ll say it again. Mr. ThreeYear and I are high income earners. Ok, correction. Mr. ThreeYear is a high income earner, and I, because I usually work part time, make a on-the-smaller-side-of-normal income (also, I’m a teacher). I know he has high income because I have plugged his salary into calculators that tell me that he’s somewhere in the top ten percentage points of individual salary earners in this country, depending on what we include in his salary (he gets a bunch of stock each year that isn’t strictly income).

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Despite his high income, I sometimes get the sense that we are poor paupers compared to our neighbors. But then, I take a step back, give myself a reality check, and realize we’re in line to save almost 60% of our income this year. And we can do that because we are in a very fortunate position of being both high income earners and frugal(ish).

That’s the real problem in our neighborhood. Too many neighbors get stuck in their small neighborhood bubble, and think that their $300,000 in yearly income (or however high!) is nothing compared to their neighbor’s $500,000. And so, they need to “keep up” so they won’t look “poor” by buying a bigger house, leasing a bigger car, paying a more prestigious private school tuition.

After I had the conversation with my new running partner, who was very nice, if I haven’t said it before, I spent the rest of the day feeling grateful for the choices we’ve made that got us where we are (and for the incredible amounts of luck and privilege that have helped us along, too).

I get the time freedom to pursue my passion projects, like this blog. The time to run in the middle of the day. Mr. ThreeYear gets to work from home with no commute. We get to exercise in the middle of the day together. We get to spend Thanksgiving and Christmas at the beach. The beach!

Let’s look at a video from last year’s Thanksgiving weekend:

Snow or ice, it was the beginning of a loooooonnnnng winter. And this year, we’ll be at the beach.

Let’s take a look at the beach in the winter:

Seabrook Island in winter.

So, here’s what I took away from yesterday’s conversation:

  • No matter how much money you make, you’ll almost never think of yourself as rich if you’re comparing yourself to people who have a bigger income.
  • No matter how much money you make, if you spend it all and save none, you’ll feel poor.
  • When you have a high net worth, it gives you financial confidence and reminds you that mindless consumer spending does not bring happiness.
  • You have to take a step back and give yourself a reality check once in a while, instead of just living in your bubble and comparing your life with the others around you.

Our family has not yet reached financial independence at the level of spending that we’d like to maintain in retirement (we’re looking at more of a Fat FIRE), but we’re definitely on our way to that goal. We’re reminded of the importance of sticking to that goal and continuing to save large amounts of our income every time we hear the hints of financial uncertainty or doubt from those around us.

That means that we have to do reality checks often, and remind ourselves that we don’t need new cars, or to upgrade our kitchen, or to send our kids to private school, because all those things are fine as they are.

Because no matter how big your income, if you spend it all, you have, both relatively and absolutely, nothing. 

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 “It’s All Relative”

  1. This post is soooo true. It’s a good reminder to me. Love your “if life were fair” explanation to your son. I’m totally stealing that next time my daughter tells me the same thing.

    The neighborhood we lived in previously sounds very similar to your current one. It was beautiful and had so many great amenities, but ironically it was filled with people who complained. Example: The developer planted wildflowers in the open green spaces one Spring. People complained they looked like weeds. One woman stood up at the annual meeting to describe her stress level driving past the wildflowers. Others stood up to affirm her. They were upset at the un-manicured way the wildflowers grew. “How does that reflect on our home values?” someone asked. Of course, they were just getting mowed in two weeks anyway.
    But seriously…YOU HAVE FLOWERS GROWING OUTSIDE YOUR DOOR AND YOU JUST SEE WEEDS.
    To your point, it’s all perspective.

    1. Hahaha oh my gosh! I don’t think I better go to any of our meetings because I can imagine that happening here. The stress of seeing flowers! Luckily people here have been pretty nice, and haven’t complained too much, that I’ve noticed yet, so fingers crossed. But again, not planning on going to any meetings any time soon! 🙂

  2. you might find this interesting: when we moved into our house the neighborhood was a little bit of a dump and we might have been some of the most well-off, relatively speaking. fast forward 15 years or so and the resurgence has happened and soon we’ll be some of the “poorest” if we compared with out new neighbors who are spend big bucks to renovate every 3 months. the thing is that our lives haven’t changed and we live the same, as comfortable and confident with the nouveau riche as we were with the lower income folks.

    i could never understand serial renovators, especially when whatever they’re fixing isn’t really broken. we hang out with some people who make lots of money but thankfully don’t feel the need to spend and keep up to go do activities that don’t align. it’s a crazy world out there.

    1. Has that helped the value of your house? I agree–why are you renovating something that works perfectly fine? Just live with it! Somehow it doesn’t surprise me in the least that you’re comfortable and confident around every group of people. I bet you guys are great neighbors!

  3. Your running group reminds me of my friends in a way and is totally different in others. I went to a football game this last weekend with seven of my friends. While my income before I early retired was probably right around your and your husbands, top five percent range, every one of these were one percenters. And while I have millions invested I still live in my first and only modest house. They have not just one McMansion but two or three in different states and unlike those ladies these guys have huge net worths in the eight and nine digit range so they are high savers as well as high earners. Most of them think a car is ready for trade in at fifty thousand miles, I don’t buy a car unless it has way more miles than that on the odometer. In fact my most recent car cost me $7,000 cash. When I tell them stuff like that they look at me like I’m from another species. But that’s OK, they like me anyway and show no signs of throwing me out of the group for my peculiar frugal ways. I think they just see me as some kind of eccentric personality but my wife and I are just living the way we always lived, and having a great time. So what if our house isn’t so impressive and our cars are functional rather than luxurious? We are happy and it is kind of fun being the weird one in my group of friends. After all we would not have every gotten here and I’d still been working if we had not saved a high percentage of what we earned. I don’t see an upside in buying things we don’t really want now just because we could.

    1. I’m interested to know how you met your friends? It sounds like quite a group to be a part of (I mean, the fact that they look at you, only a multimillionaire, as the “poor one” of the group because you’re not a decamillionaire or whatever like them! Ha). How old were you when you retired? You and your wife remind me of my across-the-street neighbors in Atlanta. They lived in the same 1963 house they’d built down the street from the Lockheed plant he’d worked at (he was a Georgia Tech grad). Although they did buy a new car while we lived across from them and they told us it cost more than their house! It was a new Ford Taurus.

  4. So true! Which is why I think international travel to emerging economy countries is good for perspective. Some amazing people and beautiful country, but also a chance to see how much we take for granted.

    No offense, but your point about home prices in CA could be extended to the equity you may (or may not have) brought from your move. As a native Carolinian (cannot ever say I’m a Tar Heel… just not gonna happen), your house is way above what our lifestyle choices would allow or would be in line with our financial goals. It’s beautiful and you’ve chosen a wonderful location.

    Welcome back! Keep it frugal..

    1. I agree with you about travel. The perspective I’ve gotten traveling internationally has helped so much. Ha–good point about my privileged perspective. Yes, our home equity definitely helped buy a house that’s a lot more expensive than I ever would have imagined, even as it’s smaller than our previous house. That’s one of the reasons I want to continually remind my boys how much we have, because I don’t want them to get caught up in this bubble either. International travel has definitely helped them, too. Interestingly, one of the things that has stood out the most was back in December when we went to Atacama, and we saw a drunk bum on the street. He was happily yelling at us as we drove in to town, and they were shocked. Since then, my oldest has mentioned it several times. Haven’t seen too much of that around here. At least outside! 🙂

  5. I normally read in a feed reader, but I liked this so much I had to click over and tell you so! THANK YOU for doing to mental work to keep a healthy perspective even as you are surrounded by so much excess. Love this.

  6. Loved this post!

    We see this all the time in the DC metro. It’s as bad as it gets. And it’s easy to get caught up in it if you’re not careful. In a town next to us, people are paying $500k for a small house on a lot. They tear it down and build a McMansion in the middle of town. IT’S CRAZY. And it’s happening pretty regularly. It’s a completely different looking town than when we moved to the are twenty years ago.

    The most popular care out here seems to be the Tesla, though we do have our fair share of Beemers and Mercedes. It seems to be all about appearance. No millionaires next door here.

    1. Thanks Fred. That’s insane! It must feel like the world’s gone crazy. I think that’s the hard part of being one of the lone financially responsible people. You keep wondering if you’re the one who’s somehow misguided since everyone around you is acting in the same (financially irresponsible) way.

  7. Hi,

    I share the same views as you. I am a simple peasant who prefer a minimalist lifestyle and adopt low profile approach. There is no need to compare with other people. Compare with ownself is more practical. Simple lifestyle is great and awesome.

    WTK

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