When you’re working full-time and bringing in $100,000 a year, a $100-spot probably doesn’t seem like all that much. Heck, it doesn’t even represent 1% of your income. You can easily drop $100 on a nice dinner these days. Or a new pair of kicks.
Us “professionals” spend $100 like it’s going out of style. Food. Clothes. Shoes. And why not? When you’re driving around in a new $42,000 Cadillac CTS, what’s $100? A pittance is what it is. A mere pittance to a person of your means. You’re bringing home the bacon. Makin’ 6-figures and driving around in pure luxury, your perception of value is shaped entirely by your cash flow.
And your cash flow is killing the value of what used to be a lot of money.
Remember when you were a kid? Struttin’ around with $100 instantly transformed you into the bombdiggity – not to mention the target of a good ass beating. It was a lot of money to someone who probably didn’t have much of it. You don’t pay for food. No rent. You probably don’t even buy your own underwear. I never paid a cent for my whitey tighties as a kid.
The tl;dr version
If you’re too lazy to read, or my writing is that bad, here’s the “Too long; Didn’t read” version: If you want $100 to be worth more, stop spending so damn much.
The longer, more wordy version
Little to no income and little to no expenses – Instantly, $100 becomes worth much, much more.
Why? Simple: Money is all relative, isn’t it?
To those who drop $80,000 a year living the life “they deserve”, a crisp Ben Franklin probably doesn’t impress. This is pure economics. The more we spend, the less each dollar is worth to us.
Ever hear the expression “I wipe my ass with hundred dollar bills!”? Setting aside the obvious risk of blindingly painful paper cuts in places that you definitely don’t want them, this expression is [truthfully] uttered by those who earn and spend more money than most of us will ever see in a lifetime.
To them, $100 is practically worthless. But, earning $100 isn’t all that tough. A day’s work doing manual labor can bring in a hundred bucks. Even working minimum wage, it doesn’t take long.
I never want to get to a place in life where my sense of worth is so warped that $100 becomes meaningless. If that ever happens, I know that I’m doing something very wrong. And I deserve to be slapped across the face. Why?
Because when $100 is nothing, everything in life becomes more expensive. And if the shit does hit the proverbial fan in early retirement, it takes that much more effort to climb out of the financial hole of which we willingly dug.
Keep the value of $100 high
Here’s the truth: As an early retiree, we want $100 to be worth quite a bit of money, and for two good reasons:
1. We will be less likely to spend it – If we feel that $100 is a decent chunk of change, we will be more cautious before spending that amount of money. The more cautious we are, the less we spend; and, the lower our yearly expenses, the greater the likelihood of enjoying decade after decade of jobless bliss. This equation is remarkably dependable!
2. We can easily earn $100 doing odd jobs – Since $100 is fairly easy to earn, we get to the point where we put in a day’s work in exchange for a value that represents “a good chunk of change”. Imagine working only a single day and getting paid 5% of your monthly expenses. 5% in a single day.
If your monthly expenses were $2,000, a hundred dollar bill is a measurable portion of your budget (5%). Spend more than $6600 a month ($80,000 a year), however, and that same $100 is only 1.5% of your monthly budget – a mere fraction. It takes more than $330 to cover 5% when spending 80-grand annually. That amounts to days of working odd jobs after retirement – for just 5%.
The key is simple: Keep the value of $100 high by spending less money. The less you spend, the more that $100 will mean to your life, and the less effort it will take to cover your expenses.
Make the economist in you happy. Remember, this isn’t about “being poor”; rather, it’s about keeping your expenses as low as possible. Most of us want maximum benefit with minimum output…or in other words, lots of happiness without a lot of effort.
Controlled spending is the solution!
Have you ever caught yourself diminishing the value of $100 because you earned and spent like a drunken sailor? If so, what’s your best story of your not-so-frugal escapades?
Steve is a 37-year-old early retiree who writes about the intersection of happiness and financial independence. Steve is a regular contributor to MarketWatch, CNBC, and The Ladders. He lives full-time in his 30′ Airstream Classic and travels the country with his wife Courtney and two rescued dogs.