Bryan Caplan  

Free Economic Advice for Joe Matt?

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Jonathan Cohn Needs Masonomics... Ongoing Escalation of Income...
Seth: You should try working for a living! I've got six illustration jobs waiting at home for me and they're all due by the end of the week!

Joe: Yeah, well... maybe if you tried saving your money like me, you wouldn't have to work so hard. It's a simple equation.

Seth: Don't start.

Joe: I can't help it -- I'm in love with the whole concept of interest! Just leave that money in the bank, or better yet -- mutual funds, and the whole thing just grows and grows! Like a snowball rolling down a hill!

The thing you need to realize is that every time you spend a dollar, you're not just spending that dollar -- you're spending all the accumulated interest that dollar might've made over the next twenty years!

                             --Joe Matt, Spent
If, like Arnold, you think Tim Harford's latest book exceeds the bounds of good taste, do not buy (or even read the description of) underground cartoonist Joe Matt's Spent. But if you want to read an economically compelling autobiographical graphic novel about a unique eccentric, this book's for you.

Economically compelling? How so? You see, Joe Matt's goal is to live every day exactly as he pleases, and he's willing to live like a pauper - and save like Scrooge McDuck - to do so. His goal, as he explains elsewhere, is to accumulate a $100,000 nest egg and live off the interest. (An idea that would really appeal to me if I actually had to suffer to make a living).

Suppose Joe Matt asked you for some free economic advice. What would you tell him? When I met him at Comic-Con, I suggested he switch to index funds. What other practical advice does modern economics have to offer him?

P.S. Don't say "Check your email at your local public library" - Joe's way ahead of you!


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COMMENTS (11 to date)
dearieme writes:

Jerusalem artichokes will grow in poor soil, in shade, with very little cultivation, year after year. They'll keep you in soup all winter. Be sure to find a nonfarty recipe.

Telnar writes:

For most people, leisure and money are complements (even if their budget constraint forces them to substitute them at the margin). To the extent that it's under his control, he may want to cultivate leisure preferences which are free or nearly free to make this lifestyle more pleasant.

Buzzcut writes:

I'd say that food is an area ripe for savings.

What level of caloric instake can you really live on?

Can you live on just buttered pasta? I bet you could get your food bill down to $1 a day.

Mason writes:

Advice from a 20something planning to retire by 50;

If you can, start saving early.

ETFs; exchange traded funds - are bought and sold as easily and cheaply as stocks, but are linked to the performance of indexes. They generally have very low operating costs like index funds, but no minimum buy in amount and can be bought and sold at any time.

Most major index fund companies like Vanguard offer ETFs and there are several companies like iShares or Proshares that just do ETFs.

ETFs and indexes are often divided into growth and value; from what I can find value out performs growth.

If you don’t mind not touching your money for a few years (until you’re 59.5) get an IRA, or Roth IRA (go to Wiki to find the difference), this will give you significant tax savings on your investments. (Personally I prefer Roth because it reduces the risk of changes in the tax code, plus I am young and currently in a low tax bracket.)

If your company matches investments make sure you take full advantage of that, regardless of the investment options its free money and the return will almost certainly be greater than what you could get else where.

On a related not don’t hold too much stock in the company you work for. Your job is already a huge investment with them. If they offer discounted stock option it’s probably a good idea to take advantage of, but don’t hold it for too long, buy at the discount then sell ASAP.

If you’re investing for a few years (10+) go aggressive. Small cap stocks have returned 17% over the past 70 something years. It does mean you’re in for a bit of roller coaster but if you can stomach it things should work out very well.

I once heard an econ professor tell me he had invested in emerging markets; I’ve taken that to heart, and recommend it as an excellent way to diversify without sacrificing returns.

Unless you are willing to put in serious time and effort into researching stocks it’s probably best not to hold individual stocks. There are tones of people out there with sophisticated software programs who make a living picking stocks, but it takes work (above market returns require effort).

Disclaimer, while I have implemented some of these myself I am not in a position to have implemented all of them, but they are part of my game plan.

Dan Weber writes:

You can "retire" at the age of 30 if you live meagerly enough. And by "retire," I mean "you can stop working at any point you want and maintain your current standard of living."

You have to put off kids, though. And this is definitely harder for women, because their child-bearing years are more limited.

On a practical matter, do insurance companies sell immediate annuities to young people? It's the best way to be able to "live off the interest" without worrying about the ebbs and flows of the credit markets.

floccina writes:

Always get the highest deductible insurance that you can find. That goes for health insurance and any other insurance. Popcorn makes a great snack. Read “Your Money or Your Life”. BTW I think that an intelligent person can live a good life in America today on minimum wage.

Floccina writes:

PS More advice: Read Robin Hanson on healthcare. He may help you save money on un-helpful healthcare.

Mason writes:

"do insurance companies sell immediate annuities to young people?"

While I haven't looked it up, I'm sure the answer is yes, you can get anything at a price, and in this case the price would be reduced returns.

"Joe Matt's goal is to live every day exactly as he pleases"

While he may not be living as other people please (as is the case while working) is he really living as he please on $10,000 a year?

I suppose there must be some people don't desire tasty food (buttered pasta for the rest of my life, no thanks), or a warm bed.

How much time would he have to do exactly as he pleases (reading, tv, time w/ friends)? Walking everwhere eats into ones day, so does clipping coupons, but perhaps doing these things pleases him.

Patri Friedman writes:

a man so lazy that he urinates in a bottle rather than walk to the bathroom

OMG, I did that for years! Just at night, not during the day (due to sleep apnea I peed like 5x a night.)

He should try to find a woman like the Chloe Sevigny character in The Last Days of Disco. The one who said, "There's something really sexy about Scrooge McDuck'.

Brian Doherty writes:

I was interviewing Joe Matt on stage at ComicCon where Bryan met him; he's a pal, and I know some details about his finances he doesn't want shared, but nothing that contradicts the general points Bryan is explaining. I can say that some of his techniques certainly involve "doing without"--like not having health insurance--some involve leisure preferences for walking and biking and chatting with friends (no car, and in Los Angeles) and for other cheap or free things--books from libraries, constantly recycling through trading in to used stores his small collections of books and DVDs. He does have a warm bed, but no soil of his own to grow his own food, alas. He DOES seem to me to be "wasteful" on food expenses at times---he and I eat out together frequently and he doesn't seem to blanch at spending 4-6 on meals out, which obviously could be 5 or 6 meals if relying on pastas and beans and the like at home...but I can say he is as happy with little in the midst of one of America's biggest and most expensive cities as I could imagine...but certain things he COULD do to make his life cheaper in my view, like joining Netflix (he'd get more DVDs for less than his buying, trading and renting habits currently), he refuses to do because it requires certain accoutrements, like credit cards and computers, that he just doesn't want in his life.

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