The male analogy: young guys blowing their military cash

There’s a male analogy to the sex workers mentioned in What the thinking escort is thinking… young guys who enlist in the military and then blow their cash. I’m chatting with a guy via email and he brought up the Netflix documentary Hot Girls Wanted… it’s a sad film, for lots of reasons… the number of women suited to doing sex work is not high, and porn is not a good idea today because the market flooded years ago… seriously, practically every porn ever made is online, on streaming sites or in torrent sites… so doing porn for money is stupid. Reddit’s full of unpaid peer-to-peer amateur porn. The market is glutted… gotta move on. The opportunities that existed for “porn stars” to make money existed from about 1970 – 2009… that window is now closed, but the high-end escort market still exists.

The guy I’m chatting with mentioned that in the documentary, most of the girls work for a couple months or a year, get paid a lot of money by teenage standards… and spend it all. One girl, however, has a boyfriend the whole time, saves her money, goes home after she’s done working, and has a bunch of investment cash at the end of her time. She avoids the purses, clothes, and whatever else young dumb girls spend their money on. She’s a disciplined investor who realizes that she’s only got a few possible years of good earnings.

The situation reminds me of guys in the military… you’ve probably known them… to a typical 18 year old 20 – 30k and low expenses seems like all the money in the world, so it’s easy to throw that money around. Disciplined guys get out in 4 – 6 years and have 50k+ saved up… chow is covered, housing is covered in some/many circumstances. Outside every big base, though, are a bunch of car dealerships… you’ve signed the enlistment papers… that’ll get you a high-interest loan so you can get the fancy vehicle… then you have to spend money on gas, parking, transporting the vehicle, insurance. The girl from high school is tired of working her minimum wage job, so she’s suddenly interested in getting married… she’s so pretty and willing… and she’ll be loyal to you while you’re overseas… of course she will, baby… a lot of guys can get out with nothing, sometimes less than nothing. Smart guys save that cash and use their educational allotments wisely when they get out.

This equivalence is not exact, obviously, so don’t stretch it too far… an attractive woman can make a million dollars with relatively low time commitments from age 20 – 30… living in a big city is far more fun than living on bases… military guys are very unlikely to make a million, even half that, and military guys have hugely more downside… just ask the guys who spent most of their time in third-world holes… but that similarity remains, lots of people who get cash early blow it. For most people, lifestyle expands to the amount of money you’re making… I’ve been guilty of this too in some ways.

The whole American edifice is built on debt… I admire people like Mr Money Mustache, who questions the whole debt/consumption treadmill. The things that really matter in life are 1. who you’re connected to and 2. what you’re making/creating. Most big-ticket spends (housing, cars, fancy clothes, pricey restaurants) don’t really improve either… they may be net negatives for both. I like game for many reasons, but one is that game helps improve connections and is also a form of making/creating (connections in this case, more than something tangible). It’s also relatively cheap… it costs some money for drinks/coffee, some money for simple meals, some money for a gym… compared to what most people spend on the big ticket items, it’s low cost. Freedom is the best thing you can buy, and you buy freedom by not spending money, particularly stupid money… most chicks don’t care what car you drive, as long as it’s clean and runs. For a lot of chicks, riding a fun electric vespa-type scooter / bike is a more fun and interesting date than spending a lot of $$$$. Ask what really matters and focus on that…

The smart girls also figure out that the real money isn’t in shooting porn starring themselves, it’s in recruiting other girls. Taking off your clothes and getting f**ked on camera takes no skill. Recruiting other girls to violate social norms by getting f**ked on camera… that takes a lot of skill, perceptiveness, psychological acuity, etc. It’s hard to do. If you think being a worker is hard… try being a manager… everyone thinks they can do what their boss does. Try it sometime.

Don’t trust stupid Internet financial advice. Compounding interest is real

It seems I have turned into the “anti-marketer” police on the Internet, first about location independent businesses and now about the time-value of money. A guy on Twitter spit out a retarded tweet,

If you drive a lot of miles out of necessity this is for you.

If you buy a new car for $30k and drive it for ten years it works out to $250/month or less than $10/day.

If you rely on that car to get you and your family where you need to be, and safely, it isn’t a bad deal.”

This guy might not be retarded but this piece of his advice sure is. I can’t tell about him as a whole because this advice is so bad that I don’t want to read the rest. He is forgetting the time-value of money. The true cost of the $30K car over ten years is not the cost of the car, but the cost of the investment foregone because of the car. Let’s imagine you buy a $15K car instead and keep the other $15K. Compounding interest formula is A = P(1+r/n)^nt

P = principal amount (the initial amount you borrow or deposit)

r = annual rate of interest (as a decimal)

t = number of years the amount is deposited or borrowed for.

A = amount of money accumulated after n years, including interest.

n = number of times the interest is compounded per year

Dont worry, I had to look this up. Let’s even skip that and look at the simple interest formula, A = P(1 + rt). If you save the $15K and invest it @ 5%/year, you’ll end up with $22,500, or $7,500 more. So now the cost is not $250/month, but $312.50/month.

That’s not all, however. 5% a year is conservative. In addition, neither calculation takes into account inflation. More importantly, neither calculation takes into account financing.

If you have $30K in cash to buy a car, fine, but you’re also probably in the financial elite, and you’re still not earning interest. Most people finance cars. If you finance $15K, you’ll probably be paying 5% interest. So you can add another $7,500 on top of your $7,500 in foregone income, under simple interest, and more than that under compounding. So now you are not paying $250/month but rather $375, if you account for foregone gains and for interest.

It’s even MORE complicated than this, because the interest in most consumer loans is front loaded. That means you’ll spend the first quarter to half of the loan term primarily paying off interest. If you end up having to sell the car…. congratulations, you just paid a lot in interest.

I pointed some of this out to the guy and he said, “Yeah I know buy a $5k hatchback and invest everything else in mutual funds. I love MMM and learn a lot from him, but his car advice is big practical for high mileage commuters imo.” There is a big gap between $5K and $30K and he knows it or should know it. That reply is sufficiently painful that it reinforces the idea that he’s not worth listening to.

It’s smart to try not to be a high-mileage commuter, but that’s not always possible (circumstances of work and housing sometimes mandate it). But the guy didn’t even begin to address the real financial cost of the thing he’s advocating. He says he is a “Personal finance coach with a passion for helping others remove stress and worry from their financial lives.” He has 27.5K followers, or about 27 times the number I do, yet I know 10x what he does about finance.

Simple or compound interest aren’t Black-Sholes or fancy shit that requires calculus. It’s simple math with some exponents, and the calculators are widely available online. Simple math shows the true cost is far higher than $30K. If someone wants to pay it, fine, do it, but to think that $30K is “only” $250 a month is why this guy is giving advice on Twitter and not working in finance. As far as I can tell no one else noticed this on Twitter. The fools are following the fools.

The more you know about finance, the more painful the decisions of many people around you will appear. “Normal” consumption patterns will begin to seem crazier and crazier. You will hear people brag about the “house” they bought, which in fact the bank owns, and you will hear them ignore closing costs (can be 10% of the total) as well as foregone investment opportunities. In some markets buying makes sense, in others renting makes sense. Buying property was great in 2010 – 2014. Probably not so great today.

Electric cars change the cost equations because right now their initial cost is higher and their long-term costs are much lower. That is another important consideration. They also don’t spew poisonous fumes into the air, which is nice.

Part of the reason you’re poor is because you don’t understand compounding interest or that the alternative to spending money isn’t sticking it under a mattress, it’s investing it in an index fund. You’re poor because you don’t know math. Don’t end the week with nothing in your career and don’t take financial or health advice from Internet randoms without checking it first. The same is true of me. Don’t trust what I say. Check it for yourself. Wikipedia says, “The Florentine merchant Francesco Balducci Pegolotti provided a table of compound interest in his book Pratica della mercatura of about 1340.” “Richard Witt’s book Arithmeticall Questions, published in 1613, was a landmark in the history of compound interest.” So this formula is around 400 years old, maybe older, but Twitter guy with lots of followers doesn’t know it. What else doesn’t he know?

Why everyone is fat and has no money

According to a 2017 report from the USDA’s Economic Research Service, millennials shop at food stores less than any other age group, spend less time preparing food, and are more likely to eat carry-out, delivery, or fast food even when they do eat at home.

Prepared food sneaks tons of sugar and simple carbs into your food. Prepared foods also cost more. That is why everyone is fat and no one has money. We get into our cars (fat-generating machines), drive to pay a lot of money for sugary, high-carb food, then eat it front of TVs and smartphones. Then people want to know why they have no money. Do the math on spending $3 or $4 a day on lunch instead of $7 or $10 a day over the three years. Over ten.

It used to be that when I would bring in food like chicken, roasted broccoli, and an avocado, I’d be the weird one. Now I see more people doing stuff like that. Not a huge number of people, but more. We know how not to be a fatass… most of us just don’t bother implementing the program.

Now I am not a Spartan and do sometimes eat out, etc. The choice is not 100% typical fattie or 100% perfection. It’s about setting yourself up to do the right thing consistently. Most fat millennials are not doing this.

My biggest trigger point is right after I’ve been really railing a chick. Then, I’m like, “Yes, I’ll have the cake and the cookie and the sandwich.”