Could you live on $25k a year, and be happy?

Money, the outer container, and the inner journey

After I posted my year-end audit, someone asked me:

“How did you live on $27k last year?”

I replied:

“Because for the last 30 years, I’ve lived on $25k a year.”

Obviously embedded in their question is, “how could you be happy living on $27k a year?” The simplest answer: habits. Slightly more complicated answer: I believed in a certain way of life.

I’ve told the story a number of times, in FF1 and other places: I grew up in an immigrant family who fled the Communists for the US. Money was tight. When I was in college, my personal budget was $5,000¹. When I graduated in 1994, I got a job as a paralegal at the Justice Department and made $25,000 and spent $15,000. I felt rich! I was spending literally three times more than I was used to. I decided then and there, philosophically, environmentally, and financially, that that amount was enough to make me happy. So I decided that that was what I was going to spend annually from there on out. Each year, I only spent $15,000–$25,000 and invested everything else. When I got laid off in 2014, I realized that I had made enough money not to have to work anymore.²

My last 30 years were based on three philosophical, environmental, and financial beliefs (things I read in Your Money or Your Life, thank you my friend Vicki Robin!):

1. Spending more money wouldn’t make me happier,

2. Spending more money would degrade the environment, and

3. Spending more money meant I would have to work more years

Do you disagree with any of these propositions?

… and be happy?

What’s really interesting to interrogate is the second half of the question. You’re told every day that spending money will make you happy. Sure, it’s advertising and you see ten thousand ads per day. But the ocean of consumerism we swim in goes beyond that; it’s the social compliance our capitalist society enforces. The houses your friends live in, the cars your coworkers drive, the clothes the people you admire are wearing. They tell you you must buy certain things to belong and be happy.

We forget sometimes life is just as much about the stories we tell ourselves as it is the actions we take. It’s not just what happens to us in life, or what we did in our lives, but the meaning we tell about it. I’ve been able to live on $25k a year because I believe that spending more wouldn’t make me happier, that spending more would degrade the environment, and spending more would mean I give more life years to capitalism.

Most people believe the opposite: spending would make them happier. Their actions don’t matter environmentally. There's no alternative to spending forty or fifty years of their lives working.

What a waste, in so many ways.

That last point bears emphasizing because a lot of people have a ton of resistance when I tell them that financial freedom is possible for them. A lot of them say,

“Oh but Douglas, I love my job! I would keep working even if they didn’t pay me.”

To which I want to answer, bullshit.

1. We can like our jobs, but certainly not at the schedule and duration that capitalism demands of us. One of my favorite personal finances writers, Morgan Housel explains: "I wanted to work hard. But doing something you love on a schedule you can’t control can feel the same as doing something you hate.” Having control and agency over your time is worth it, not matter how you like your job.

2. If you listen to what people say about their jobs, actually listen, no one genuinely likes their job; they just prefer their job to another job they might have been similarly forced to have.

There are many salutary reasons to work: a pursuit of excellence, a sense of purpose, connection with colleagues. But all of them are more real when you have the freedom to say no. In other words, work is better when there’s meaningful consent. If you have to make money to live, coercion permeates the whole thing. You can’t feel if you truly want to work, to not work, or how and when you would like to work. You can’t feel the full weight of your desires.

If you were grateful, much money would you have to spend?

I want to write about meaningful consent in the future, but I’ll throw out two more spiritual rationales for financial freedom. First is gratitude.

I didn’t earn a lot of income during my journey to financial freedom. For the twenty years before age 42, I made about $36k per year. Most people I know, including most people who read this newsletter, are college-educated professionals. They make between $80k and $200k a year. My law school classmates make around half a million a year.³ And you DINKs, wow.

What happens for most people is, as they get older, they earn increasing amounts of money but they don’t get more grateful for the money they earn. They become more entitled in their spending. Very few people are as happy spending a $20 bill in their 40s as they were in their 20s.

Is that true for you?

When you hold the line on your spending, you’re giving awareness and attention to your consumption.⁴ Most people don't want to do that. Capitalism definitely doesn't want you to do that. Capitalism wants you to consume mindlessly and unconsciously.

Gratitude is the practice of grateful awareness. It fuels the three beliefs I wrote about above: happiness independent of spending, environmental stewardship, and reduced compliance to capitalism. It’s the spiritual practice I’m committed to, no matter what. All gratitude is is giving attention to the grace that surrounds your life. If you already knew your life was grace, that you were taken care of, how much money would you need to spend?

Acknowledging the good that you already have in your life is the foundation for all abundance. - Eckhart Tolle

The transition to the inner game

My second rationale for financial freedom is the development of the soul. Carl Jung wrote that we spend the first half of our life building our external world, and the second half developing our internal world.

Notice that there is an order to it. As Franciscan mystic Richard Rohr puts is, you have to build the container first, and then in the second half of life, you have to fill it. Financial freedom is the building of that container. When you can construct your personal finances so you don’t need to work anymore, you can fully attend to your inner life.

A key concept in Hinduism is purusartha, the four proper goals of human life. According to the Hindus, artha, the pursuit of wealth, career, financial security and economic prosperity, is a valid and important spiritual pursuit. Not as a means to anything else, but as an end to itself. I see this as a sticking point in a lot of liberal/progressive Americans and money avoidant people.

But attending to your higher spiritual aspirations without addressing the material world is a form of spiritual bypass. According to the Hindus, once you have enough money and economic security, you can pursue your dharma more fully than if you were economically insecure. That is why Hinduism’s four stages of life mirror Jung’s two halves of life. The first two, student and householder, are creating the outer material container and the second two, retiree and renunciate, are living the inner game of life. The external material home must be built to create the safety of the inner journey.

Needless to say, not everyone gets to the second half. Capitalism is all about external forms: status, performance, ego, and display. That’s why “soul activist” Bill Plotkin says we live in a patho-adolescent culture. We endlessly pursue the first half of life, admiring and following those who have bigger and shinier containers, and, as I wrote last week, thinking that is success. Chase the good and avoid the bad. We never get to the second half of life and wonder why our inner world feels impoverished or miserable. It’s because we haven’t surrendered the first half.

I think you have to grow up twice. The first time happens automatically. Everyone passes from childhood to adulthood, and this transition is marked as much by the moment when the weight of the world overshadows the wonder of the world as it is by the passage of years. Usually you don’t get to choose when it happens. But if this triumph of weight over wonder marks the first passage into adulthood, the second is a rediscovery of that wonder despite sickness, evil, fear, sadness, suffering—despite everything. And this second passage doesn’t just happen on its own. It’s a choice, not an inevitability. It’s something you have to deliberately go out to find, and value, and protect. - Nate Staniforth

Again, keep in mind, you can’t skip the first half task. That’s why financial well-being is so critical for developing spiritually. It’s the real-life boots-on-the-ground work that allows a greater internal liberation. So nothing I write here is an excuse not to maximize your income, save, and plan for your future.

How about you?

So I’m going to ask you a provocative question:

Could you live on $25k a year, and be happy?

[Note: If you have a family, use a higher number. My married friends Liv and Devin lived on $45k a year for the two of them in the Bay Area. My friend Emily Gowen, who runs Portland Money Coaching, spends $64k a year for her family of four (over a third of it on childcare). Whatever, just choose what you consider a very low number.]

1. If you can imagine being happy at $25k/$45k/$65k (whatever number you choose), then the question is: what is all the extra spending for?

2. If you can’t imagine being happy at $25k/$45k/$65k, the question is: if others can, why not you?

There are some things you have to spend money on. Fixing the plumbing problem. Buying the groceries. Paying the electric bill. But I’m going to be provocative again: when people say that they can’t be happy living below a certain level of spending, it’s really them wrestling with their egoic entitlement. As Morgan Housel says in his book The Psychology of Money:

Everyone needs the basics…But spending beyond a pretty low level of materialism is mostly a reflection of ego approaching income, a way to spend money to show people that you have (or had) money. Think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility… Saving money is the gap between your ego and your income.

What we’re really seeking is an inner sense of wealth, not wealth itself. When we rely on the outside game of wealth, we'll never get enough. We’re on the hedonic treadmill.⁵ In first half of life, we're addicted to our not-enoughness. That’s why you have so much more stuff than J.D. Rockefeller 120 years ago, but don’t feel as wealthy as he did. Again, I think it's developmentally necessary.

But that second half of life task, is about appreciating your inner wealth.⁶ Gratitude, like happiness, is an inner game. In fact, happiness and gratitude are intimately related. Have you ever seen a happy, ungrateful person? Have you ever seen an unhappy, grateful person? No such thing.

Tied closely to gratitude is humility, the most anti-capitalist trait. So anti-status, performance, ego, and display. So non-demanding, unentitled. Unsurprisingly humility is also so closely tied to grace. Knowing that we’re taken care of and we can accept it all. We’re in a world that supports us and gifts us in innumerable ways. None of it was deserved or due to us. At the end of humility, all there is is gratitude.

If the only prayer you ever say in your entire life is thank you, it will be enough. - Meister Eckhart

Could you live in $25k a year and feel grateful? Why or why not?

If you felt grateful, how much money would you have to spend? Your happiness, the environment, and how you spend your life hours may depend on the answer.

Your “gratuitous” (get it?) 90s callback:

1. Tuition at UC Davis started at $1800 my freshman year and was $4500 my senior year, which is another story about rising cost of college.

2. In this newsletter post, I go over my Social Security statements for the last 20 years and discover I only averaged $36k a year over 20 years. But if you only spend $25k a year, the math works out: How I retired at age 42 only making $36k a year.

3. People don’t like talking about about how much money they make. But that’s a problem because as the NYTimes writes: “What all this secrecy does, though, is place a curtain over economic inequality, these researchers said. People don’t talk about money — especially not with numbers attached — so the scale of disparities is unclear, the chasms between millionaires and upper class and middle class and working class shrouded in ambiguities. “Not talking about numbers allows us not to talk about inequality. It allows people to move through the world without having to openly acknowledge to themselves or others that they may have a lot more than other people.”

4. Definition of consumption: “to destroy”

5. “I cannot tell you anything that, in a few minutes, will tell you how to be rich. But I can tell you how to feel rich, which is far better, let me tell you firsthand, than being rich. Be grateful. . . . It's the only totally reliable get-rich-quick scheme.” - Ben Stein

6. Ha, there are multiple delightful puns there! “Appreciating” your inner “wealth!”