Thursday, June 4, 2009

The telos of saving

First, on an introductory and mission statementy note, we have not actually discussed what this blog is going to cover, aside from Phoebe's general suggestion that it should be about "how not to spend any money, ever." That's a pretty good starting point, since that is my only slightly exaggerated view of the purpose of financial management.

However, since a lot of the everyday ways not to spend money are geographically contingent--the rock-bottom cocktail prices during happy hour at this bar, or the strawberries at that ethnic market--and we all live far away from each other, I propose we keep the money-saving discoveries general, or at least generally applicable to our specific bourgie lives in America's most expensive cities. This means no promoting Uniqlo because, from Phoebe's descriptions, I'd be practically living in it if only they had a location in DC. But we might ponder whether discount store clothes are worth it, or actually cost more in angst (bad fit, rapid disintegration and replacement, poorly paid labor) than is indicated by their price.

I would also be in favor of blogging about broader cultural thriftiness (or spendthriftiness) and ideas about value and savings. Why does finding a bargain feel like a brilliant victory over the world that must be shared with anyone willing to listen? Why do people like Ed Andrews get subprime mortgages? Is thrift moral? Are poor people not thrifty, or are we unfairly castigating their spending habits? Are immigrants super-thrifty, or do they just have insider information that people outside the ethnic clan can't get?

My first question, however, is the one I posted at my blog: putting aside ambiguities about how best to save and assuming that thrift is good, what am I saving for? In the abstract, I am saving for 1) emergencies, 2) a hypothetical future family, and 3) a possibly insane feeling of satisfaction I get when I look at my balance in Mint (which, apropos of the blog's purpose to suggest ways to save, is absolutely the best free money management application ever). None of these purposes lend themselves to determining how much money I need to be saving though. The answer to that question by all these standards is just "more"--more in case of emergencies, more for my hypothetical future family, more for my insane ledger-lust. But this can only result in my feeling guilty over every single expenditure, since it could have contributed to the pile of "more."

So what I would like the unified theory of thrift to eventually address is not only the morality of saving, but also how to decide when and how much it's ok to spend. So far, the only suggestion I have come up with is that it's almost always ok to spend on gifts for other people (unless you agree with this view of gift-giving), and on time out with other people (unless it results in a $100 bar tab). So even my tentative hypotheses suffer from a lack of concrete boundaries.


PG said...

I'd say it's also almost always ok to spend on things that will contribute significantly to your emotional well-being on a daily basis. For me, that's getting a cleaning service every few weeks -- it's worth the money not ever to have to deal with arguing over who has let gunk accumulate in the microwave, or whose turn it is to scrub the toilet. For other people, that can be anything from pet-ownership to yoga classes. The main thing is that it relieve the stress of daily life, not just create an occasional high.

PG said...

Oh, also regarding the morality of saving: is this an abstract, quasi-religious morality unconnected to practical necessity? See, e.g., Greg Mankiw scolding Sonia Sotomayor -- a woman with a life tenure job, government pension and benefits, home ownership, no husband or child -- for not having more money in her bank accounts.

Miss Self-Important said...

Yes, it is. It's not divorced from practical necessity, but it's not done solely for the sake of it. The economic rationalist view of saving broadly makes sense--people do maximize utility, there is an opportunity cost of time, their savings behavior can be shifted by incentives and disincentives. But these things are just statistical observations, and have very little to say to someone deciding how much to save. "Maximize utility" as a command could justify almost any behavior, from spending all your money on crack to starving in order to add to your million-dollar savings account.

I think Phoebe's analogy to dieting is apt--being a glutton is bad in itself, whether or not it ever precipitates negative practical consequences. At the same time, it is also closely bound up with all kinds of practical considerations--being fat is not attractive, binge-eating is not healthy, etc.

So the criticism of Sotomayor wouldn't hold if you were simply asking whether her unwillingness to save was economically rational in her circumstances, but it might if you were making a character judgment, assuming you had all the information about her spending habits. Would it change your view of her to know that, while she has an assured salary and pension, she is spending all her money throwing lavish parties at NYC clubs? Or buying designer judge's robes? Or going into credit card debt? It isn't and shouldn't be against the law or anything, but profligacy and hedonistic spending are, like gluttony, kinds of immoderation that detract from virtue. Paris Hilton is acting rationally, given her parents' bottomless pockets, but do we admire her?

PG said...

Hilton isn't a very good example if you base it on her parents' bottomless pockets, because that ties into our sense that she has not done anything to merit her wealth, which is distinct from criticisms of how she expends her wealth.

My dad recently found out that he'd been hugely scammed by a stockbroker/hedge fund manager. When Dad thought the guy was working hard and making good money, he was unoffended by the broker's beach house in Malibu, Porsches and weekends in Vegas. Now that he know the broker's just been throwing away his and other investors' money (and that the broker has a multi-million dollar gambling addition), he judges those expenditures much more harshly even in addition to his condemnation of the theft itself. That is, if the broker had been committing fraud in order to pay for a parent's cancer treatment, Dad would still be upset about being a victim of the theft, but there wouldn't be the additional insult to injury that the money had gone to frivolous expenditures that Dad doesn't consider appropriate for himself.

Sotomayor seems to have merited her position, inasmuch as anyone merits life tenure on the federal bench, so I don't think Paris Hilton is analogous. Also, I don't know how hedonistic someone can be living in Manhattan on $200k/year before taxes, while paying the mortgage on a Greenwich Village condo. I suspect the profligacy would be on a scale of dining out often and well, being generous with family and friends (as her former clerks have reported her to be), and owning some nice clothes and possibly a car (as she lists $109k for the value of all personal property). Not an advisor for the Cheapness Studies, to be sure, but probably fairly typical for someone in her position (assured income, no financial responsibilities for others).