Lifestyle Creep

I read a post from Ben Carlson about lifestyle creep and had a few thoughts. Mainly two, to be exact.

“Feeling rich” and “being worried about money” are emotions, therefore exist because everyone is also exposed to the opposite. Can you know what happiness is if you have never been sad? This type of philosophical mumblings. The TLDR on this subject should be something like “cannot experience the good without the bad, get over it” and “we always want more”.

Maybe there are still valuable insights to add?

Kids

“Younger you would probably be blown away by how much you make but older you is a completely different person with different preferences and responsibilities.” writes Ben.

“Younger you would probably be blown away by how much older you is spending on kids” is my reply to that. Part of it is on me. I never even cared to ask, before the idea of having kids appeared on my map, what were the costs involved. I actually learned a lot while listening to Ben’s podcast Animal Spirit: if I remember correctly, the other host’s firstborn is one year older than my daughter. His complaints during the podcast were my prep.

Part of it is on inflation. In particular, how costs related to babies sky rocked.

Not only I should have asked parents, I should have asked RECENT parents.

Having a son is an emotional blessing but a financial shock. There is no easing into it, if anything costs start at the top and then, maybe, reduce a bit. If you do not have a second one, at which point the shock is even bigger: a family that originally had 2 salaries for 2, now have 1 salary for 5 (4 family members plus the nursery).

Me and my wife decided to do it at level IMPOSSIBLE: living a thousand km from any grandparent. That meant that any past low-cost entertainment choice, like going to the movies, now had a nice cost bump. I know that “now I cannot even afford to go to the movies” does not represent the actual truth but in the end…I am not going to the movies anymore.

I have a lot of new “reference points”, meaning fellow parents at my child’s (nursery) school. Willingly or not, we benchmark ourselves based on our surroundings. My daughter just started school and “the system” put her in a school close to our apartment. Fellow parents are not a distribution of all the people that live in Zurich, they represent the section that can afford to live where I live. The “bottom” on which I measure “how good I am doing” is higher.

To be clear, I have no particular interest in spending time with these guys. My old friends were perfectly fine. Until I, or them, decided to have kids. That’s when the relationship broke for force majeure. Sometimes it doesn’t even help if we both have kids, they have to be closer in age to create a match.

Here the school provides parents the contacts of all the other parents in the same class. So much for the infamous Swiss secrecy. Obviously we googled their names. One of my best friends is an architect who is bartending while waiting for the right job opportunity… for the last 15 years. One of the parents here is an architect who designed skyscrapers in Japan and the US. I did not want this lifestyle creep. This lifestyle creep chose me.

It is normal to wish the best for your kids. To be worried about them. If a fellow parent tells you they put their kid to additional German lessons, to ease their integration, you ask them the phone number of the place. Maybe it is not violin plus Chinese plus ballet, hopefully it is not Justin Bieber singing at their birthday party, but you keep up with those Joneses.

The husband of the last desperate housewife my wife met at the park in London was a known fashion photographer. The husband of the first desperate housewife my wife met at the park in Zurich is a private banker. The husband of the first desperate housewife my wife met at my daughter’s school is a hospitality entrepreneur (his parents own two buildings, not apartments…the entire thing, in the old town of Zurich).

[I do not want to imply that the above is a 100% random process because it is not. We are like dogs, we smell each other. There are tells that favour this ‘spontaneous collisions’ to happen.]

The fact is, they are all nice folks. More often than not, we even have the same interests. We spend pleasant time together. This is why it is easy to be deceived into thinking our lives are relatable. In more sober times, I know I am Di Caprio here:

But hey, if I squint enough I can be Cate too (I speak four languages after all…). I can live in the city centre of the most expensive city in the world in an apartment that can fit a family of four. But more often than not, in my mind I live in an apartment that is almost as big as the apartment where I was living alone 15 years ago.

I focus on what I am missing, not what I have. Well, sorry, you do. The lads in Ben’s post do. I know a bit better now.

To prove my thesis I have a valid counter-argument, friends that had a good career but, for one reason or another, do not have kids. Rest assured, they are happy where they are financially speaking; they tell me all. the. time. They might have 99 problems, as we all do, but “not feeling rich” ain’t one. They might move the goalpost but at least they win all the challenges with any past version of themselves.

Kids push your money-related worries in a perennial bull market for obvious reasons. You are now responsible for more lives. Your burn, as Prof G calls it, is higher and you have less control over it. You are less flexible: you need a higher salary to cover our burn and can chase fewer opportunities cause you cannot move as freely as when you were alone (or in two). I just moved the whole family from London to Zurich and believe me, the pay bump required for me to repeat this experience jumped higher than inflation in Argentina.

Some weeks ago I watched this very interesting interview of Adam Butler. The main topic of the video was how Adam invests his money, but towards the end he provides gems on the subject of leaving money to his kids. The way the world currently works means that the more and the sooner you can funnel money to your children, the more opportunities they will have. Sort of a flywheel effect. Ok, if you thought about this meme, watch the video, it is not that simplistic:

Rich Life

I stumbled on this article on Bloomberg and had fun reading it. Not that anything inside it represented something new or surprising to me. And that’s probably the point: today you do not have to be part of the 1% to know how extravagant their life can be. I mean, one rainy evening I was watching Bling Empire on Netflix with my wife when she started to laugh and said: “Oh, that’s my boss’s boss”.

I do not have to tell you the effect that social media has on our perception of other’s lives. But that’s only half of the story. Surely, if I can borrow the concept from Ramit Sethi, Insta provides daily updates on where my acquaintances spend lavishly without offering the same view on where they cut their expenses aggressively (if they do). I have the feeling of missing out on the fun while I do not see the sacrifices to get there.

The “new” half of the story is that businesses got better at upgrading any possible interest you have…priced at a premium. Just go back a few decades and the market was grossly segmented: expensive restaurants and cheap ones. Plus, the expensive option was maybe mildly attractive in the first place; you would like to be forced to wear a jacket to go to a restaurant?

Today we have premium hamburgers, even premium fast food! Thought private clubs were just for old and boring folks? Enter the Soho House. Boutique hotels. Heliskiing. Heliskiing and surfing on the same day in Iceland. Maybe all the things I listed here do not matter to you but I bet I can find something that is an upgrade of whatever is your thing.

Having more options is great, it means spending on something that is tailored to you. Would it make you feel richer or poorer? From a purely theoretical point, you should be better off because there is less of what you spend that goes “wasted” on stuff you do not care about. At the same time, you feel even more compelled to spend. Does this create a healthy push to grind harder? An unhealthy one?

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If you have a family, I think it is almost impossible even to define a minimum target of wealth. Forget the ideal one. There is no goalpost when your kids are involved. Those surveys are meaningless because the majority of respondents are parents. The matrix of possibilities and risks cannot be emotionally solved in a satisfying way…but I hope you will.

The world has become more continuous and less discrete, even in the definition of wealth. I have the impression that for my parents it was easier, in the sense that the difference in classes was sharper. Easier to cope with but not better.

What I am reading now:

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