Freedom
In my last missive, I wrote about lifestyle creep and specifically the difference between “sticky” creep and less enduring lifestyle changes. I want to continue on that theme by talking about the article in the New York Times that inspired me.
It is behind a paywall (Support journalism!) but here’s the summary. It was a profile of a woman in New York City who lucked into a $250 rent-stabilized apartment thirty years ago and has not moved since.
I can see you rolling your eyes. But I want you to look past the specific fact of the case (the $250 rent) and focus on the larger picture. What she said in the article — and I dearly love this quote — was, “That $250 represented a great deal of freedom.”
She is an artist with a variable income and by keeping her main must-have fixed expense low (ridiculously low), she was able to pursue the career that she wanted in the city that she loves. I cannot think of a more inspiring example of true financial wellness. Yes, of course, the apartment is not luxurious (although it looks positively palatial compared to my post-grad school NYC abode); I imagine that over these past thirty years she has had the economic ability to upgrade. But she didn’t because…well, see above.
In my previous blog, I wrote about how someone could insulate themselves against the vulnerabilities that durable lifestyle upgrades introduce. Yes, do that. But I didn’t talk about the opportunities that may be closed off to you when you take on heavier hard-to-turn-off expenses. These enduring expenses are not just housing, by the way. I would put decades-long debt (six-figure student loans without Public Service Loan Forgiveness on the horizon, enormous HELOC loans taken for major renovations) on the list as well.
Eons ago, I worked for a Wall Street investment firm. Most of my long-time co-workers were miserable. They were rich, but still miserable. The fundamental reason was that as much money as they had, they felt trapped in a job that they did not love. And the reason they felt trapped was that they had constructed a lifestyle infrastructure (home(s), private school tuition, sometimes spousal expectations) that could only be supported by their current employment. The classic Golden Handcuffs. When I left after just a few years and people asked why, I would say that I was leaving because I still could.
I am an advisor so to bring this back to where I started, I’ll offer some advice. As you consider a major lifestyle upgrade, consider not only your defensive plan if your income were to fall (insurance, emergency fund), but whether this new house (or whatever) will close off future opportunities.
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