A Low Cost of Living Can Be Spending $10,000 a Month on Cars, Beer, and Blow

Try not to judge the way others manage their money

If you made $50,000 a month — $600,000 annually — what would your budget look like? Maybe you currently earn something close to $50,000 a month. If so, what does your budget look like?

Let’s consider my situation. We’ll go high on my insanely low cost of living and call it $3,000 a month. Most months, I make more than $3,000. The surplus tends to go to savings and investments and, in some cases, one-off discretionary and/or additional necessary spending.

If, suddenly, I started making $50,000 a month — consistently — I’d have $47,000 left over every 30 days. I could save that extra $47,000 each month and, without earning any interest, have $987,000 (basically a million) in 21 months. In less than two years, I’d be a millionaire.

If I did this and maintained my $3,000 a month cost of living, it would take 329 months, or more than 27 years, to blow through that $987,000 if I just let it sit there. If I situated it to produce income — say in a portfolio of dividend stocks — I’d likely never run out of money.

When you look at it this way, I’d be an idiot to do anything other than save this $47,000 a month. I could easily “retire” in less than two months if I saved at that clip.

People exist who make this much money — and certainly much more. Not big-time celebrities or any meaningful flavor of public figure. Just “regular” people. The people whose houses I walk by when I urban hike through some of Los Angeles’s poshest neighborhoods.

The standard setup in these enclaves — a modest or out-sized California Craftsman style home with a Tesla or Audi (or both) in the driveway. This typical household likely has a higher combined car payment than my monthly rent. The people who live in these houses could probably rent my apartment three or four times with just one monthly mortgage payment.

Or maybe the run of the mill $50,000 a month earner rents a luxury apartment in the heart of Hollywood for like five or ten grand a month. These apartments exist. Somebody’s living in them. The Tesla or Audi or maybe the Porsche stays in the underground garage. You can see the Peloton from the window as you walk Vine Street. The Equinox membership gathers dust alongside expensive art, Restoration Hardware furniture, and a fully-stocked home bar.

When we’re able to go out and party, this urban dweller goes hard, dropping more discretionary income in a month than most of us make in a quarter on beer and blow. Almost by accident, they manage to save a few thousand bucks a month between a 401(k), a massive checking account cash cushion, and a Robinhood account consisting of the platform’s ten most popular stocks.

You can compare what you think you’d do (or what you’re doing) on a $50,000 a month salary to what I hypothesize I could do and what I assume at least a heaping handful (probably tens, if not hundreds of thousands) of Los Angeles residents do.

You can also make judgments along the way.

You can consider frugality righteous while looking down on the examples of high costs of living. Or you — we — can stop being so judgy. We can acknowledge the way people spend and live can change commensurate with income on the basis of several factors:

• Socialization
• Psychology
• Means to the same/similar end
• Different paths to the same/similar destination

We’re socialized to spend more as we make more.

Psychologically, it might feel unavoidably weird to attain $50,000 a month in cash flow yet maintain an insanely low cost of living, in part due to the socialization. Why bother? You’re successful. So, act as fucking if.

We all want to get to a point where we don’t have to work. Some people still view this as a life phase known as retirement. Others call it financial freedom. I prefer financial flexibility. We use money as the means to get there.

We all operate on different timelines because:

• Socialization influences each of us to different extents and in different ways.
• We’re all unique psychological animals. Even if we’re sort of “the same” in the way we do life, no two contexts are identical.
• Money as a means. To one person, this means saving X every month to get to Y by Z. For this person, X, Y, and Z do not change with how much money they make.

Consider the person who embodies the thinking behind this last bullet point.

Their end is “retirement.” They don’t care much about getting there before they turn Z. By saving X each month, they’re certain to have Y by the time they turn Z. Everything is else is excess gravy, so they spend it.

Who cares if they spend it on an expensive house, a sweet apartment, a sick car, and beer and blow? Who hasn’t dreamed of a main home in LA and a pied-à-terre in San Francisco?

They save what they need to save to retire in 40 years. That’s more than enough. They make so much they don’t even have to think about it. Maybe they don’t save anything at all. They’ll sleep — and save — when they’re dead. You know the attitude.

Your path to retirement, financial freedom, or financial flexibility might look different. Your head and heart might tell you to continue spending just $3,000 a month no matter how much more money you end up making because you can use the surplus to get to retirement, financial freedom, or financial flexibility much more quickly. You want the time to sleep and do other cool shit long before you’re dead.

You compromise today (some might say sacrifice) to get something you want more tomorrow. The present is a key part of the means to your end. If you could be frugal for two years on a $50,000 salary, you’d do nothing but save for two years. You’d be living the dream. Your dream. You view the here and now as precious time towards whatever your goal is.

The other person thinks of today more urgently — as your only life. Work hard. Play hard. Not tomorrow, but now. They’re not giving anything up to get to where they want to go any faster. To them, today represents living, not tunnel vision to a tomorrow that might never come, no matter how much you save. I mean, you could die tomorrow. Or in a week, month, or year or two.

Imagine dying with all of that money you’ll never be able to use saved. That would be a bummer. We all know people who think this way. You might think this way.

Of course, we could muddy the rhetorical, value judgement waters by bringing ideas such as waste, materialism, and inequality into the equation. But let’s not go there today.

All else equal — and, I know, it’s never equal — why does any of this matter?

I’m all about keeping dogma out of personal finance. Even if you make it your goal to die with zero dollars in the bank, who am I to judge? While this might sound extreme, it’s necessary.

I get mildly pissed when homeowners refer to people like me as “throwing money away on rent.” Some homeowners get all smug and talk down to those of us who rent. This serves no purpose other than being counterproductive (you’re just gonna make me want to rent even more!) and unhelpful. Empower, don’t belittle me. There’s no one way to dwell and subsequently spend/save/invest money to fund your vision of what life ought to be.

I catch myself judging like this all the time — but in reverse. I believe in renting, so I scoff at owning. I adhere to a relatively insane low cost of living, so I chide, even if under my breath, people who throw thousands away each month on a mortgage and car payments, at bars and restaurants, and on beer and blow.

See — wait — back up!

I typed, “throw thousands away.” This is no joke. In a sentence that’s part of an entire article that essentially warns against money-related value judgments, I, without thinking, made a value judgment. It came naturally. It didn’t even feel out of place until I reread it.

They’re not “throwing money away.” They’re just doing life differently and on a different timeline than me. Or they don’t want to do what I want to do. They want to do the opposite — or something not quite the same. I can’t know unless I ask. It’s almost always better to ask, acknowledge, accept, learn, and discuss than to criticize.

Bottom line — you can’t cherry-pick the personal finance decisions others make that you’re going to judge. You can argue your own preferences and even argue against somebody else’s.

However, the second those of us obsessed with a defensive style of money management (e.g., spending matters more than income, be frugal, save and invest ALL of your monthly surplus) judge and effectively cast off the way others approach money; we’ve done a disservice to the larger personal financial conversation.

I’d rather:

• Welcome, all kinds of people and approaches.
• Dig into the socialization and psychology that influences, if not dictates, how and why people spend and save.
• Mine the pool of experience — from one extreme to the next and everything in between — to generate a deeper understanding of individual and — where we can aggregate — collective personal financial situations.

This is how we have healthy and productive conversations about money. We welcome everybody in. We don’t judge. We learn from those we can’t quite understand. We take something from every experience to help inform and craft our own.

Plus, if we actually want to persuade others to do it the way we do it (or close), we’re better off taking this approach. Nobody likes being talked down to or told there’s only one means to what is a dynamic, very personal end.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.