
How to Afford Anything - sajid
http://www.kenrockwell.com/tech/how-to-afford-anything.htm
======
gjm11
I'd be more impressed by his advice -- in order to be able to afford anything
you need, be frugal about what you don't -- if he hadn't happened to mention
the time that his wife bought a house for $2.8M (and returned it, whatever
exactly he means by that). If you can afford houses that expensive, your
ability to afford nice stuff is probably not entirely the result of frugality.

~~~
kmt
And what about the hypocrisy of "don't have kids" combined with his "support
my growing family" footer?

Incidentally, for those interested in photography I wouldn't take this guy's
photo advise either. The guy lacks depth in understanding and sometimes makes
statements that are just ridiculous.

~~~
bobbin
> And what about the hypocrisy of "don't have kids" combined with his "support
> my growing family" footer?

That's just a contradiction, not hypocrisy.

~~~
kmt
Agree that hypocrisy is a strong word for something that's just a how-to.

Anyway, my point was that his recommendations are not worth much.

------
zalew
TL;DR: be a cheapo and then bam! buy sth expensive.

It's all about what you care more: the nice pleasures in life, or the big
stuff you are waiting for. Personally, i don't think his approach differs much
from someone who is a spender, it's a matter of what gives you more pleasure
in life. For someone who cares about the nice add-ons like driving a car which
is expensive to mantain, but gives you the joy, it's the same clever/stupid
thing as saving for a camera. You could say buying one expensive product per
year and living lower standard every day is irrational. YMMV, and that's it.

Oh, and if someone feels offended that this dude calls other stupid - he's
quite known in photog online community for such statements.

Besides that, some points can be useful for someone who isn't a spender by
choice, but because he cannot manage their daily spendings.

------
charleso
I was more-or-less with him up until the "Don't Rent" advice.

By his own admission, purchasing a condo and riding it up to the very top of
the largest real estate bubble in history netted him only a 1% return. Any
other market at any other time would likely have netted him a loss on that
purchase.

In a non-bubble market, I wonder how much more he would have gained by renting
that very same condo and investing the difference instead?

~~~
muhammadatt
Even if he suffered a loss (i.e. if the appreciation in the home value was not
enough to offset his accumulated outflow of principal and interest) it
probably would not be as much as he would have lost by renting.

Your scenario assumes that (1) he could rent the same or an equivalent
property for much less of cash outflow than buying and (2) he could have
invested the difference in some other asset that had a much higher return than
appreciation of the condo.

If the amount the rental amount is about the same amount as the mortage
payments then you are almost certainly going to be worse off renting than
buying under average market conditions.

~~~
jemfinch
> Your scenario assumes that (1) he could rent the same or an equivalent
> property for much less of cash outflow than buying

Of course he could. If your rent is paying your landlord's mortgage, you're
overpaying.

> and (2) he could have invested the difference in some other asset that had a
> much higher return than appreciation of the condo.

Finding an asset with a better than 1% return is not difficult.

> If the amount the rental amount is about the same amount as the mortage
> payments then you are almost certainly going to be worse off renting than
> buying under average market conditions.

If you're wasting your money by paying your landlord's mortgage, you're going
to be worse off than if you refuse to waste money and pay a reasonable rent.
Renting is cheaper than home ownership; if it's not, you're doing it wrong.

~~~
GFischer
On the "If your rent is paying your landlord's mortgage, you're overpaying"
point: sadly, not every market is equal.

Over here (Uruguay), rents are way more expensive than an equivalent
mortgage... simply put, people (myself included) don't have capital for the
down payment (and the mortgage process is expensive in itself, at least U$D
1000 which is not a small sum here), so they don't have an option - it's
renting, or the street/slums.

And no, there are no "no capital down" mortgages.

~~~
jemfinch
Yes, my comment is very specific to the US.

------
lotharbot
An important insight he misses: the goal is not to eliminate "wasteful"
spending in every one of the areas he lists, or to save in every one of the
areas he identifies, or to be a complete cheapskate in every way possible. The
goal is to figure out what's actually important to you and find ways to
refocus spending away from the unimportant stuff into the important stuff. If
having a big house is not _really_ that important to you, don't pay extra for
it; if eating out isn't that important, do it less; if having the top-of-the-
line camera is something you care about, take what you save from having a
smaller house and not eating out and use it to buy the camera you want.

A lot of people believe they can't afford nice stuff, but often it's simply a
matter of priorities and analysis.

------
DanielStraight
There's some good tips in there as well as some bad ones, but none of that is
the point. The point is simple: spend money on things you care about; spend
nothing on things you don't care about. The author doesn't care about eating
out, but that doesn't mean no one else should. People are different. Any
financial advice that doesn't take that into account is missing the point.

~~~
billybob
There's also the interesting idea of "don't disturb your contentment," to
paraphrase. Drive a modest car and be happy; don't rent a fancy one or you'll
start wanting it.

Each person has to decide which things are worth splurging on. But the answer
can't be "everything." Keeping your expectations low in some areas is a good
idea - and if those areas are expensive ones, like car and house, all the
better.

------
jsiarto
Not to nitpik this, but I don't consider eating off the dollar menu at
McDonalds anyway to save money. In the long haul--that's probably what will
end up killing you or at least racking up some medical bills. I'd rather spend
10x the dollar menu at a local lunch spot with real food that won't send me to
an early grave.

All around, good advice--but don't use fast food as a way to slim down the
budget.

~~~
jasonlotito
He doesn't suggest eating off the dollar menu as the way to save money.
Rather, if you do eat at McDonalds, eat off the dollar menu. Subtle, but
distinct difference.

~~~
rationalbeaver
Also, the food at the local lunch spot may be higher quality, but it is very
likely to have tons of added salt, fat, oil, sugar and other deliciousness
that is just as likely to land you in the hospital later in life.

His best advice is probably to avoid eating out in general.

------
cobralibre
_If you can't afford the tip, then you can't afford the service._

Kudos for not letting the will to frugality operate at the expense of others.

------
JohnFritzen
What he mentioned about riding a bicycle instead of using a car is a huge win.

The money saved is incredible and you cannot put a price on the health
benefits.

~~~
billybob
It sounds great, but like anything, there are tradeoffs. "What's the best-
paying job I can find" vs "what's the best-paying job I can find within biking
distance" are very different questions. The difference in income may far
outweight the commuting costs.

Then again, they may not. But it should be considered. One strategy would be
to find the job, then move to within a few miles of it. But again, do the real
estate costs of living there outweigh the gains? It's complicated.

The health benefits are probably the only really clear part. :) And no, you
can't put a price on that. (Unless a gym membership would be equivilent...)

~~~
Tichy
Work+commute+gym is difficult to manage. There are only 24 hours in the day.

------
elbenshira
_...the real deal now is get your 4 year degree then take a job on a big yacht
as a mate. You will start at $60K/year (tax-free take-home) with room, board
and uniforms included._

I love reading Ken's articles. He talks about the weirdest things.

~~~
lacerus
Can anyone confirm that this is even remotely true? $60K tax-free!?

~~~
Kadin
It's tax-free if you stay outside the U.S. long enough. I believe the limit is
10 months/year, but it might be higher.

Of course, that means you're not subject to U.S. income tax, but you might be
subject to some other country's income tax depending on where you spent your
time.

I've met people who work on offshore oil rigs who have (claimed to have)
avoided taxes this way, but apparently it is a recipe for an almost guaranteed
audit. YMMV.

~~~
ahoyhere
10 months? Sadly, it's not that reasonable. If you're in the US for 30 days,
as a citizen, you have to pay income tax in the US.

If you earn more than, I think, $86k outside the US, as a citizen, you have to
pay income tax.

And either way, you have to file. The law even says you have to file for 10
years after giving up your citizenship!

The US sucks.

~~~
afterburner
US taxes are low.

~~~
ahoyhere
No, they're not. You start as a self-employed person with the basis of 30% -
because employees are subsidized by their employers, you have to pay both
shares. That 30% is Federal, FICA, and SS, doesn't include practically any
services you can use or that will protect you as a young person.

Then there's state tax. And oh yes, if you move overseas, you have to be very
careful in arranging your affairs if you no longer want to pay state tax. If
you want to vote, for example, you must have residence in a state. If you have
residence in a state that has state tax, you have to pay.

So we're looking at a base mix of say 35%-45%, depending on how tax-crazy your
(former) state is...

And for that, what do you get? Nothing. Not healthcare. Not unemployment
insurance.

In Austria, we pay about 55% - but! - that includes very good healthcare,
unemployment insurance (even for self-employed), guaranteed
maternity/paternity leave, guaranteed housing if necessary (in a place you'd
be happy to live in, with gardens and trees), pension, free higher education
including in the fields of medicine and law (student housing and stipends!),
and a lot more awesome stuff.

I used to pay $600 a month for my American health insurance and still ended up
paying $2k when I sprained both my ankles and required several braces,
crutches, an ER visit (which took HOURS), and physical therapy. Having used
the Austrian system extensively since I got here, I can say that it is better
in absolutely every way, even compared to the experience a moderately rich
American can buy in the US.

Of course both countries allow substantial tax deductions for the self-
employed. Deductions in the US are marginally better.

Oh, and what if you want to start a company? Or especially if you're
unemployed? It's easier in the US, right?

Actually, Austria will extend your unemployment benefits and suspend your
social insurance payments for an additional 6-18 months if you want to start a
business.

The myth of American tax superiority is untrue, except for large corporations,
and people who can afford and have the balls to maintain genuine tax shelters.

Oh yeah. And if you are an Austrian citizen who leaves the country? You don't
have to pay taxes. Not even to vote.

~~~
rdouble
US taxes are about as low as it gets for the 1st world. Taxes in the US are
bracketed. If you are poor in the USA you pay essentially no taxes (if you do
pay, you get it all back in a refund). Welfare benefits in the USA are also
for the poor, whereas in western europe there are more benefits available to
the middle class. On the other side, if you are rich in the USA your taxes are
much lower than if you are rich somewhere else.

The taxation pain point in the USA occurs when you make about $85-$100K (the
same salary range as most nerd jobs). You get taxed the same as someone who
makes $170K but definitely do not feel like you have the same spending power.
It's also a bracket that is not a much lower tax rate than someone who makes
$370K. There aren't that many visibly obvious social services available to
someone who makes $85K so the taxes can seem like a rip-off.

~~~
ahoyhere
The poverty line in the US is ludicrously low when basic health insurance
costs $300-400 a month for the not-fucking-your-life plan, birth control isn't
covered, and a gallon of milk costs $5.

In Austria, a person doesn't even pay taxes until they earn over 1200 euros a
month. Until the whole silly Greek affair, that was the equivalent of $21,000
USD for an individual.

And... they still get retirement, maternity leave, unemployment insurance,
free childcare, and great health care.

Not to mention, despite a 20% sales tax, raw food ingredients in Austria cost
less than the equivalent I paid in Maryland 2 years ago when I left.

Additionally: Healthcare in the US is a hidden tax.

Yet more, how many people do you know who receive social benefits in the US? I
have known quite a few, most notably a woman who was deeply involved in an
abusive church and marriage and had 10 children with her husband before
realizing she was in a very bad situation. Her family and his family disowned
her, and what did the government do? Denied her food stamps. A woman who
hadn't worked since she was 18, had no college, and 10 children!

So yes, I think paying 50% to Austria is actually cheaper than paying 40%+ to
Uncle Sam, while also having to pay $600/mo for COBRA because I was denied by
private insurance, and still hoemmorhaging money when I hurt myself. US taxes?
Really not that low.

Except, as I said, for the very rich, and the large corporations, and people
who can afford/have the balls to maintain genuine tax shelters.

~~~
rdouble
I don't wish to continue this but wanted to point out that the average price
for a gallon of milk in the USA is $3.25.

~~~
ahoyhere
Average, sure. But the federal tax poverty line doesn't vary by state, does
it?

When I was leaving MD, after I'd emptied my cabinets of everything, a friend
got sick and I wanted to make him cookies. The ingredients for cookies from
scratch - a pound of sugar, flour, butter, baking soda, baking powder, 6 eggs,
milk, chocolate chips and 1 pack of jell-o vanilla instant pudding mix and one
20 oz bottle of Diet Coke cost me $57.81. At SAFEWAY. Not Whole Foods, Graul's
or any fancy store. SAFEWAY.

I still have the receipt, pinned up as a reminder.

------
Judson
As off as some of his points may be, this one caught my eye:

 _Don't worry about being embarrassed [about what you own]_

I have always said this, and it may not be 100% correct, but:

The rich don't need to buy things to impress the circle they live in. They are
already rich and don't need to prove it to anyone. Wasting money trying to
"keep up with the Jones'" is, oddly, a sure way to lose money in the end.

~~~
brc
Ironically I have neighbours that have every toy under the sun - boats,
motorhomes, 4 cars of varying sizes, indoor gym, hot tub, 4 storey house,
expensive bicycles - the list goes on.

The irony is that their last name is actually Jones.

------
imp
I can't tell if he's joking or not. He has a section titled "Don't Have Kids,"
yet he has two himself: <http://www.kenrockwell.com/about.htm>

So he obviously isn't taking his own advice. Maybe he could have posted tips
on how to raise children cheaply instead of discouraging having them at all.

~~~
callahad
Not having kids is consistant with the goal of maximizing your personal time
and disposable income, consonant with the brunt of the article.

He does not, in fact, claim to have optimally implemented his own suggestions
:)

------
brc
His points on older prestige vehicles are true. I own two older BMWs which are
in good condition, well kept and maintained. Most casual observers date the
cars at 4-5 years old, instead of the actual 10-12 years they are. It is
helped that they aren't used for a commute so are able to be kept clean and
tidy and mileage low. I have these cars because they are built to a higher
standard and are a pleasure to drive and own, with more features on them than
you can get on most 'ordinary' new cars.

Friends think we 'have money' because of the cars, but they don't realise that
both cars are probably worth less than what they have lost in depreciation in
the last two years on their own cars.

But I stress the major reason for owning these cars is because of the superior
build quality, safety and features as compared to other cars in a similar
price range.

~~~
Unosolo
This might have been true 20 years ago, but advances in car technology during
the recent decade were really fast. Newer cars accross the board have better
handling, fuel economy, more creature comforts as standard. Luxuries that
existed only on premium models became mainstream.

In terms of safety, the standards have gone up significantly from where they
were 10-12 years go.

And even when an old premium car matches new run-of-the-mill vehicle in terms
of safety technology, both passive and active safety features detiorate over
time: body looses it's rigidy, original air bags unless replaced which is
costly are much less likely to work properly after 8 years or so.

Cars heavily rely on electronic and software and becoming as transient as any
other gadgets.

My advice:

    
    
       - don't buy new, 3-6 year old car is a much better value
    
       - exclude makes and models that are not routinely sold with 160K miles on a clock.
    
       - go for a used car with high freeway, motorway, autobahn mileage (ca 20K miles a year), i.e. 60K-100K overall depending on a year. They are cheap and still very reliable.
    
       - Regardless of car age, don't buy a car made during first 3 years of model production, i.e. before the first major facelift / upgrade. Cars are just like any other product and it takes about 3 years for a "service pack" to be delivered to a market.
    
       - Another benefit apart from reliability of getting a car towards the end of the model lifecycle is the number of extras you'll be getting for free as standard.
    
       - Have a clear exit strategy: sell before a major maintenance is due.

~~~
brc
"And even when an old premium car matches new run-of-the-mill vehicle in terms
of safety technology, both passive and active safety features detiorate over
time: body looses it's rigidy, original air bags unless replaced which is
costly are much less likely to work properly after 8 years or so."

I disagree with this strongly. The chassis stiffness and integrity in a BMW is
engineered in - try opening the window on a BMW and 'squash' the window
opening. It won't budge. Try doing the same thing on a japanese or korean car
- it will easily bend to your arm. Same goes for suspension systems. Many BMWs
run a full-subframe aluminium carrier for the suspension systems. These are
lightweight, strong and isolate road bumps and NVH from the main body. They
also last a very long time, unless abused or crash damaged. None of these
features are in cheaper cars even today, even if the cheaper ones are stuffed
full of airbags.

As for airbags - they run self-test systems each and every time the car starts
up, so you can tell if they don't work. A friend of mine recently crashed a 15
year old Honda - and the airbag worked just fine. These are seriously
engineered active safety systems designed to work decades after being
installed - they're not like the battery in a Nintendo. Every single
electronic feature in my 14 year old BMW still works like new, from the sat-
nav to the mood lighting, the auto-dim mirrors to the electric memory seats.

Also take body integrity - BMWs and mercedes generally use a double-sealing
door seal, and a closing latch strong enough to pick up the whole car. Again,
not repeating on new, cheaper models. They're also hot-dip galvanised when
built at the factory, so rust is never a problem unless you have poor
treatment or crash damage.

I could go on all day. If you've spent serious time underneath these vehicles,
the difference in engineering is night and day with built-to-a-price cheap
cars. Also, take a wander around a salvage yard where some crashed vehicles
are. That will salve your doubts.

------
Alleyfield
_We love Wal-Mart and Costco. They have the best prices on almost everything.
We're not afraid to admit it; we think people who shop boutiques to buy the
same things in fancier surroundings are stupid._

So you go to a walmart, see the elderly greeters at the door, feel sorry for
them, then walk miles just to get the one thing and get back to the cashier to
stand in a line...

vs.

You drive near a boutique, you get real personalized service, there's someone
to help you all the time if you have any questions, the surrounding is a lot
nicer, the whole process of buying that thing is much faster and much more
comfortable.

Saying that people who shop boutiques to buy the same things are stupid just
conveys a message that you are too constricted in your own scope of
cheapness... And that's maybe a bit stupid.

~~~
getonit
Personalised service and nicer surroundings? Meh, I just want to buy stuff. If
I want to hang around chatting to people, I'll go to a bar.

Questions? Nah, I've done my homework already, and the answers didn't come
from salesmen.

Faster? How does all that chatting, questioning and soaking up the ambience
speed up a purchase?

'Buying' is swapping money for something you want. 'Shopping' is that too,
plus all the things you mention, at a premium. His article on being frugal
provides the context for applying the label 'stupid' to those who choose the
latter - it is an unnecessary addition that costs money. If that extra is
worth it for you, great, knock yourself out, but be aware that for people who
don't think it's worth the cost, you'll always appear 'stupid'. (Just as
they'll appear 'cheap' to those that think the extra is essential.)

Edit: PS: Did anyone else have the words "Yoink! You fat-cats didn't finish
your plankton!" pop into their heads during reading the article?

~~~
Alleyfield
The point I was trying to make was that accusing someone of being stupid for
shopping in boutiques tells more about your lack of perspective for other
people - which is one definition of one being stupid.

~~~
hugh3
It doesn't seem nearly as bad as the "live with your parents" advice. I mean,
he's advocating all this extreme frugality as a way to afford _camera gear_ ,
right?

~~~
jasonlotito
> It doesn't seem nearly as bad as the "live with your parents" advice.

What's wrong with that advice? It's an American thing that kids need to move
out on their own at 18. My wife's culture sees that as rather harsh. She lived
at home until 28, when at 27 she married. Her older sister lived at home,
sharing a room with their younger sister, until she was 25 (I think), when she
finally married and moved out for the first time. Her husband lived at home
with his parents in a small room until he got married as well.

I was the odd one out, being American, and living on my own.

The entire family support structure is there. Living at home has many
benefits. They were able to go to school, focus on their education, and their
career early on without having to worry about paying lots of bills and taking
care of their own house.

You'd think they wouldn't be ready for the real world, but you'd be wrong. In
my brother-in-laws case, he had bought a house at about 20, and rented it out.
This was done with his money, that he had saved, because his parents paid for
everything (with some fun and interesting conditions along the way). But the
house was bought, and rented for many years before they moved in after being
married.

My wife and I benefit equally in many other ways from this close knit family
life. We have day-care providers next door: family we can trust. Family is
close, and we get the benefits that entail.

Sure, their are downsides, but overall, it's made me realize how harsh the
"American" view of an 18-year-old's responsibilities are. If anything, it does
less to support them in the long run.

No, living with your parents isn't bad. My wife has cousins in their 30's that
are still living with their parents, preparing for marriage. A couple are
preparing to move out, as they haven't married yet.

It's a different culture, for sure. But it's not as bad as it seems. I thought
it was odd when I first saw it first hand, but after years of seeing the
results, I can't help but think that throwing kids out at 18 is by far the
weirder approach.

> I mean, he's advocating all this extreme frugality as a way to afford camera
> gear, right?

No. He's advocating all these ideas as methods you can use to obtain the
things you really want.

> I mean, he's advocating all this extreme frugality as a way to afford camera
> gear, right?

~~~
aohtsab
my culture is the same - it doesn't make sense to throw out an 18 year old
(child, really), out on their own. I'd have lived with my mom had I not
attended college on the other side of the country.

------
jrockway
_Many Americans each waste many dollars every day on products laced with
addictive narcotics._

I don't think that word means what he thinks it means. Caffeine is a
psychoactive drug (so is your antihistamine), but it ain't a narcotic.

------
edw519
_...women don't give a crap what kind of car you have..._

How strange.

OP advises being able to afford anything by being "frugal" and then claims to
know what women care about. He must not be married.

I agree with much of OP's advice. Just be aware that the quickest way to stop
following it isn't loss of discipline but falling in love with someone who
doesn't want to live that way.

~~~
afterburner
"women don't give a crap what kind of car you have"

Not when you're married, no... but when you're single? It's taken as an
indicator of your wealth and status (whether consciously or not).

~~~
billybob
Personally, I think women who are concerned about your wealth and status
(beyond "he's not a bum") are too shallow to worry about, anyway.

~~~
afterburner
To a certain extent I agree, but to another extent, everyone worries about
your ability to provide. It's just... a factor, along with the rest. Not to
everyone, but to most people.

------
aymeric
I highly recommend the book "Your Money or Your Life".

It gives you a step by step process to take control on your expenses, and then
to move towards financial independence.

I read this book 6 years ago and it is still the most influential financial
book I have read since.

------
ganley
His calculations for the cost of commuting take a wrong turn (no pun intended)
somewhere. A 40-mile commute is 10K miles per year, which at IRS mileage rates
is $5K, not the $10K he cites. He gets this math right for the 20-mile
commute, but somehow multiplies the cost by 4 when he multiplies the commute
distance by 2.

------
altano
Obsessive frugality strikes me as antithetical to spartan living, a goal that
may not be the authors but does seem to be what most here are interested in,
judging by past submissions of the same genre.

------
nzmsv
So apparently Coke still has cocaine, and most companies are big
conspiracies... If you ignore the the tin-foil hat stuff though, there are
some good tips in the article.

~~~
tome
He didn't say it still had cocaine. He said the first half of the name "Coca-
Cola" comes from cocaine.

~~~
santry
And it once actually contained cocaine.

<http://www.snopes.com/cokelore/cocaine.asp>

------
swah
IMHO, there is good and bad advice there. I always liked how people seem to
miss the "live slight below your means" insight.

------
tjmaxal
This is simply untenable for most people, and certainly impossible if we all
lived like this.

~~~
BrandonM
Really? Which parts?

~~~
tjmaxal
For starters if none of us have children then eventually we cease to exist as
a species.

~~~
lacerus
You, just as many others here, have not noticed the sarcasm in the paragraph
about not having kids. He has two himself.

------
sailormoon
All this pain to drop $2.5k per year on a Nikon camera? Dude, seriously, just
take a few months and learn some skills at something, then get a decent job
using them. You'll be able to buy a new camera _every freaking month_.

I mean I'm all for living within your means and planning and frugality but
seriously, don't eat out except for the cheapest fast food around? That's the
wrong way to go about it. Upgrade your cash flow, not downgrade your life.

~~~
harpastum
Reminds me of Sun on the Moon by James Taylor:

    
    
      I’ve been talking to a friend of mine
      He says making money’s just a waste of time
      He’s a lazy gent, he don’t pay no rent
      He’s all bent out of shape from living in a tent
      ...
    
      One for a nickel and two for a dime
      Time may be money but your money won’t buy time

~~~
username3
Why won't money buy time? If I had money, I wouldn't have to work and then I
would have time.

~~~
narag
I don't know about that song, but other one says that "all your money won't
another minute buy". And you can't take it with you either.

------
erlanger

      > ==Live with Your Parents==
      > I'm serious: This is what I did! 
    

How to save money: Spend other peoples' money.

~~~
garply
That's not really fair. My parents and my gf's parents both have houses with
empty space that we could live in that's not being used. Essentially the space
is being wasted. I bet many people's parents have similar available space
(probably left over from when you were a child and living with your parents
already).

My gf, who is Chinese, would love to live with her parents (thankfully she is
even cheaper than I am). She nags me constantly about the $500 we pay our
landlord every month for our apartment. Unfortunately, I was raised in the US
where living with your parents after you graduate from school is a social faux
pas.

~~~
anamax
> Essentially the space is being wasted.

Would you say that an undeveloped greenbelt around a city is wasted?

Empty space in a house is both an option and space. The latter is quite
valuable.

Also, some people value the privacy.

~~~
Xurinos
I read something from a real estate blogger that has stuck with me since:
People often pay for a bunch of space they do not _need_ , even use. The
argument that the space is an option is the same argument used to justify why
someone would need to keep some random piece of garbage in their garage,
taking up space. "This is a potential hobby of mine, so I am keeping this
around," says a guy on the "Too much clutter in your house" reality show.

The disconnect here is that what people HOPE to use is not what they are using
in REALITY. Buy what you expect to use immediately or in a definite
foreseeable future with a timeline. Get rid of things that merely represent
possibilities; in many cases, those things become obsolete anyway. You might
as well try to get a return on your investments when others might find
immediate value on them.

When it comes to square footage, this is like any other investment on
potential. If it is not exercised, then it sits there, taking the extra
heating and cooling, adding to your taxes, and so forth. Buying bigger than
you need has more costs than the initial sale. A good budget keeps in mind all
these flows.

~~~
Kadin
A lot of people are willing to pay for 'possibilities.'

In other words, they derive intangible value by keeping that possibility
around, regardless of how often they may actually exercise the option it gives
them, if ever.

Many people have vacation homes or own boats that they rarely use, and could
probably rent (on an as-needed basis) more cheaply, but the value to them is
not simply in their actual use of the house/boat/whatever, but _in the
ownership itself_. They derive value and enjoyment simply from the knowledge
that they _could_ go use the house, or take out the boat, whenever they
wanted, even if they don't actually exercise that option very often.

It may not be a wholly rational choice when viewed from a purely economic
perspective, but that's because humans aren't anywhere close to rational
economic actors if you fail to take into account intangibles.

~~~
Xurinos
Sure. These choices are part of what separate the rich from the poor
(economically).

~~~
anamax
Rich people are more likely to have vacation homes. It's unclear that the
extra economic cost of that choice explains why they're rich.

------
afterburner
"When one group did a survey a few years ago, they discovered that the most
popular car owned by millionaires was a Ford. Why? Simple: the people who
still had and grew their money didn't waste it on luxuries to show off. All
showing off does is make others spend more effort trying to scam you. "

I suspect a large part of the reason is that these millionaires are, for
political reasons, whether in politics or not, showing that they buy American.
Or, they need a truck for their small business.

~~~
billybob
I dunno. Sam Walton (founder of Wal-mart) famously drove an old truck long
after he was rich. He said he liked it and didn't care about driving something
fancier.

Probably this attitude had helped him get where he was.

~~~
afterburner
Another factor may be that for those wanting to buy a fancy car, maybe they
don't have many other obvious way to show off or look good. If you have a huge
house, or own the world's largest retail chain, you probably don't need to
show off, the showing off is practically done for you.

