Updated on 04.13.08

Sunday Conversation #1

Trent Hamm

For the next few Sundays, I’m going to post a conversation I’ve had with a person I know who has made interesting financial choices in their lives. Hopefully, these discussions will be enlightening and entertaining.

To kick off this short series, I had a conversation with John. John is one of my oldest friends and my closest friend over the last several years (besides my wife, of course) – he even served as best man at our wedding. John is a single male in his early thirties and he works in quality control in a technical industry, earning a pretty solid income. What sets John apart from the pack is that he spends far, far less than he earns, and he’s been doing this for as long as I’ve known him. The end result of that choice is that he’s now in his early thirties and is beginning to build up quite a bit of money in the bank – he’s nearing “walk away from it all” money.

Here’s the conversation I had recently with John. I thought it would be interesting to highlight someone who is living by the mantra “spend less than you earn” – and living by it hardcore.

You spend significantly less than you earn. Why?

For one reason, it seems shortsighted to spend significantly more than one earns. Unfortunately many people seem to be doing just that by accruing credit card balances and other debt.

I take the long view. Is there anything I really need today, be it extra excitement, gizmos, food, drugs, sex, rock & roll, or so on? I’m not afraid to spend an extra buck to try a new restaurant or a few hundred to jump out of a plane. But I don’t need to do those things every day or every week. The financial security of tomorrow is more important to me than a large high definition television.

About what percentage of your income do you save each month?

Against common advice, I don’t have a set amount of money budgeted to save each month. The reason is that I am not lost adrift in my finances and looking to get a foothold on saving. I don’t have bad habits that need to be broken. My general mindset is not to save as much as possible but rather to manage my expenses. It just comes as a pleasant surprise to realize how much is left over each month. And instead of spending the surplus, I save it. With my current lifestyle I ended up saving about 53% of my net income for 2007. In essence, about every other paycheck went into savings.

Recognizing that this is something different than what the average twenty- or thirtysomething American is doing, is this something you learned from your parents, or is it something you figured out in adulthood?

I don’t think I learned it from my parents in the sense of talking about money or watching them deal with money. I think it was more due to growing up below the federal poverty level and knowing the value of every penny. I know I’m showing my age, but finding a nickel on the ground was a cause of celebration because it could be spent at the local gas station for either five pieces of bubble gum or one large jawbreaker. It was only the mid-1980s, but I’m sure it sounds like the twenties. I learned to be frugal by simply enduring some financial hardship in my youth.

What are you doing with that extra money? Why?

The extra money is sitting in low risk investments. I’m not risk tolerant so I don’t go after the potentially high return investments. Yes, this means that I might not have as much money as I could have had, but I will have money in the future. I also don’t like to tie up money. The thought of being able to call up thousands of dollars immediately without having to borrow or suffer penalties, i.e., being liquid, is actually quite comforting. This gives the feeling of being my own master, answerable only to myself.

Within just the last two months, I put this liquidity to practice and paid cash for my car. It wasn’t a terribly expensive car, but I didn’t have to prove I had a job, give out my social security number, or dance through hoops to get a significantly better vehicle than my old one. If all goes well, I’ll be able to drive this one for as many years as my 1993 car lasted.

Do you have any spending weaknesses? Things that you spend money on that probably don’t make sense? How do you curb that from going wild?

The only spending weakness I have is gifts. Relative to what I would spend on myself, I spend much more on others. This isn’t saying I give many or expensive gifts. While I have spent $300 on something as trivial as a globe, this a lot more than I would spend on myself. A nice gift is one of the few outlets I have to let people know that I care. I usually counter the impulse by just getting one relatively nice gift and keep my personal bank account threshold in mind.

Do you have any long-term goals for the use of your savings?

One day I’d like to pay cash for a house. Not the down payment – everything, including closing costs. I don’t know if home ownership is in my future, but that won’t stop me from saving up for just such an occurrence.

Does having this kind of cushion change your future plans? In what ways?

Having financial flexibility hasn’t changed my plans, but it has changed my perspective. I’m much more apt to consider taking a new job or willing to move to be with another person. It really is the freedom to move about as life comes.

Do you ever feel compelled to spend more money than you do? If so, how do you curb that desire?

I am quite comfortable with myself – I don’t need to buy to feel happy, love, or acceptance. Be grateful for what you have, and you will always be happy.

What do you envision retirement to be like? Will you actually quit and just pursue hobbies, or will you take up a job that’s just for pure enjoyment? How old will you be?

I love what I do for work right now. It is difficult for me to envision retirement in the traditional sense because that seems like something that would bore me to death. Sure, I like to do some hobbies, but I find I usually need a break from them as well. I’ve spent a year living that life as an adult, and it did not make me a content person. There probably will be no such thing as retirement for me, as I’m the kind of person that enjoys having an objective. Ideally, I’ll be a 987-year-old brain in a robot when I’m incinerated upon a freak reentry accident to Mars – killed doing what he loved, performing null gravity experiments.

If you have any questions/comments, I encouraged John to peek in on the comments section here and answer anything he felt comfortable answering.

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  1. Vered says:

    It’s amazing that he saves so much. Wow.
    But personally I would think that after establishing en emergency fund, the rest of the money should be invested in a good mix of stocks and bonds, or it will be eroded by inflation over the years.

    Also, as far as I know, in many cases it actually makes sense to get a mortgage, even if you can pay cash for a house, b/c after tax deduction for the mortgage interest, you will make more on that amount if you invest it, than what you would save not paying interest.

  2. Jen says:

    Do you think it would be possible for me to get a date with John? :)

  3. Tas says:

    Interesting to see that even after acquiring quite a lot of money in his savings account he is still not very risk tolerant. I would have thought that reaching a certain amount of safe money would leave from for some more risky (well-diversified of course) investments since they statistically out-perform a low-risk bond or money-market portfolio.

    Yet, I have the same approach to saving and just recently liquidated almost all of my savings. However, that’s not only due to risk aversion but also to the fact that I expect to be needing the money within a year from now.

  4. Jay says:


    This series is a very good idea, and should give a broader, more big picture perspective. Keep ’em coming.


    I’d like some specifics, please… What specific practices and tips do you have for us? Are there any traditional tightwad tips or ways of saving money that you tried and loved, or tried and hated? How do you keep your housing, food, car, etc bills low enough to save that kind of money?

    Finally, as a college student how I can instill and learn your philosophy?

  5. I, too, would worry about his low-risk investments being eroded by inflation. But good for him for recognizing that his personality doesn’t react well to risk–too many people make themselves miserable by taking on more risk than they can really handle.

    This is where I hope to be in my mid thirties.

  6. Very original idea for a post. Your friend and my grandfather would have a lot to talk about. Gramps saved about the same through life, keeping most investments in low risk/higly liquid assets.

    The difference is poor gramps has been through a couple of divorces, minor setbacks in his eyes.

    I’d like to know where your friend got his motivation for such thrift, its rare for those that didn’t grow up in the depression.

  7. TwoHandsAndARoadmap says:

    Great interview. It’s really refreshing and inspiring to read a story like this.

  8. samulli says:

    Wow, that’s a pretty impressive mindset for a guy in his mid-thirties. I’m approximately the same age now and I never managed to save very much (back when I still had a job), or if I saved some money I blew it on traveling. Today I wish I had invested some of it more sensibly…

  9. D in CA says:

    I’m glad to hear that John sees the value in giving to others, which breaks the stereotype that “misers” are selfish. (I use misers as the term for those that live below their means, which seems to be how our consumption society views such behavior.) I am curious to know whether he tithes or gives to charity regular.

  10. Adwoa says:

    Thanks for posting this, Trent and John. Whenever people ask what I do for fun, reading this blog is one of the things I mention.

    John, that is a unique reason for buying a car completely with cash you have on hand. I’m currenlty maintain a savings account just for auto repairs and a downpayment on a new vehicle when it’s time to purchase another one. I only recently thought I may just be able to save enough to buy the car completely with this savings. I anticipate the purchase to be in or 2012, or if really lucky, 2015. That should be plenty of time, barring the strange and unusual happening to me.

    I was recently the victim of check fraud and perhaps even identity theft, and at this point, kind of paranoid about the whole financial services industry being able to protect its consumers from theives. So your idea to pay cash for a car to avoid giving out your SSN to yet another entity is spot on for me. Thanks.

    And once again, Trent, thanks for providing this forum.

  11. meg says:

    that’s awesome. an advertisement for being single and not having any kids!

  12. amy says:

    Great idea for a series, Trent. I really do enjoy reading about financial choices and the effects of them.

    As for the low risk investments, good on John for choosing what suits him.

  13. Maybe I’m just incredibly jealous of how much John saves and how comfortable he is with himself, but how happy is John really? What does he do for fun? Does he travel or have hobbies? That’s one question I would be curious to see the answer to. What’s the use of saving so much money if all you’re using it for is to buy a house with cash? I’m probably assuming too much since I don’t know enough about John, but it sounds like he isn’t using his money to enjoy life more, which is what I think it’s for.

    I’m curious to hear John’s thoughts on this and I hope it doesn’t sound rude.

  14. shane says:


    Thanks for the great post, I enjoy the interview format and new perspective. It is interesting that John doesn’t set aside a fixed amount for savings. I’ve found that saying I have X dollars for entertainment let me spend X when it could have been half that. Once I had control over my spending plan, I too moved away from budgets. This is the first time I’ve seen John’s approach discussed and I wonder if you have some thoughts on that.

  15. I wish I had more friends like your John. I think most people feel an outside influence to “keep up” with their friends. It’s nice to surround yourself with friends like John to keep help keep us grounded.

    Over 50 percent of his income into savings is amazing especially if its from a “solid” income.

    I hope that he is truly happy and not saving so much out of fear.

  16. Gary Hardin says:

    Way to go, John! You’re a great example to so many “instant gratification” folks who have little to show for their money except debt.

    I agree with other readers, John. You need to be investing your money in higher-return investments.

    By the way, what a great idea for a blog–to hear the finance stories of other people. Keep it up.

  17. gr8whyte says:

    Inflation and currency devaluation are the biggest dangers for anyone in John’s position, e.g., retirees with large deposit savings. I second previous commenters on a mixture of stocks and bonds, domestic and international, as protection against inflation and to hold 3 months’ to 2 years’ worth of cash on hand (depends on who you ask) for living expenses in case his job should vaporize. If John still prefers savings over stocks and bonds, I strongly suggest he look into foreign-currency savings accounts if he hasn’t already; it’s less safe to hold a single currency in a global economy.

    I share John’s preference to save up for larger purchases. John may not be ready yet to buy a home but given the current housing mess, now or soon may be a good time to do so, even with a loan. He should be able to get a decent loan rate with this stellar record and can be depended on to pay it off early as well. I’m going to guess that John’s the sort who would prudently buy enough home for his needs but not a McMansion.

    I assume John currently has medical/dental/vision/etc. insurance coverages from his job but before he bails out of regular employment, he should make look into what will be available to him in retirement (some plans may be unavailable to retirees) and to plan accordingly.

    Given John’s strong cash position, I strongly suggest he get long term care insurance if he hasn’t already. Get one with an inflation clause if possble. The monthly payment is low when you get it while you’re young. If John should get permanently disabled in a car accident tomorrow and have to enter a nursing home, the only thing that will (help) pay for it is long term care insurance. Shop around but buy it now. Don’t put it off.

    Made a will yet?

  18. George says:

    John should certainly be commended for spending less than he makes. That qualifies him in a elite group of people. I agree with Vered & others that Johns savings will be eroded by inflation. John is making a major mistake if his goal is to buy his house all cash. He should consider buy a home as soon as he qualifies and if he can get one at a reasonable price. The tax deduction is worth a lot. And yes, money is not everything. I too wonder what John does with his free time. We all need balance in our lives.

  19. imelda says:

    Hm. I, too, save a very healthy portion of my income–nearly half. But what gnaws at me is that John is saving all this money without a real goal. I sometimes find myself doing this, amassing money and panicking when I don’t have several thousand in the bank, and then thinking to myself–but why do I want that money? Saving for the point of saving is just Scrooge-ish, when you think about it. So I try to anchor myself with real, enjoyable goals.

    Of course, then I tend to blow that portion of my savings on the goal, which is the opposite problem. Is this a bad thing, if I’m reaching a goal? Should I be more worried about the future, even if I already have an emergency fund (not as large as it should be, but slowly getting there) and a healthy IRA?

  20. Venkat says:

    This is for “Vered”(this is not intended as a slam). Instead of paying interest to mortgage company or bank. You can pay the same amount of money to some good cause or charity and you can claim the same deductions from IRS during Tax Time. It is a much better feeling to be spiritually rich than make bank or mortgage rich.

  21. M.A. says:

    I would love to get John’s perspective of how he discusses money with the people he has had serious romantic relationships with. I too, save my money diligently. I am also newly single. I think I have a pretty good handle on how to observe people’s behavior and habits to determine how they handle their money. However, I am absolutely clueless and scared when it comes to how/when you share your personal financial information with a potential mate. John, have you been in this situation and if so, how have you handled it?

  22. CN says:

    Very impressive. One question I have regards marriage. Do you think that John would be able to accomplish what he has done if he were married?

  23. F.Klaassen says:

    @Meg (comment #11):
    > that’s awesome. an advertisement for being single and not having any kids!

    Actually I was in more or less the same situation. Since marrying and having two kids we save about one third of our net income instead of halve.

    @Writer’s Coin (comment #13):
    > How happy is John really? […] What’s the use of saving so much money if all you’re using it for is to buy a house with cash? I’m probably assuming too much since I don’t know enough about John, but it sounds like he isn’t using his money to enjoy life more, which is what I think it’s for.

    To answer it for my situation: I’m happy with what I’m doing. And I don’t think spending more money just because it’s available is going to increase my happiness.

  24. F.Klaassen says:

    @imelda (comment #19):
    > Saving for the point of saving is just Scrooge-ish, when you think about it.

    So, you start spending for the point of spending? Maybe after a few years of saving you’ll find you have been doing it for a real goal anyway, you just didn’t know it when you started…

  25. deRuiter says:

    Comment #10. Oh dear, what a blow to you! First contact the credit reporting agencies to 1. make sure your information is correct and 2. FREEZE YOUR INFORMATION SO NO ONE CAN TAKE OUT LOANS OR OPEN CREDIT CARDS WITH YOUR INFORMATION. This will cosat you less than $30. and give you peace of mind. Then trot over to Staples and get a little pack of gel pens, the mini size are $3.99. USE ONLY GEL PENS WHEN YOU WRITE CHECKS SO THE CHECKS CAN NOT BE WASHED AND FILLED OUT WITH LARGER AMOUNTS BY THE UNSCRUPULOUS! Good luck, you will overcome this.

  26. Deb Coyle says:

    Great post Trent! John, I’m just wondering what kind of car you purchased.

  27. Joanne W. says:

    great idea. Interesting to hear success stories.
    I have a 26 year old daughter that has begun to manage her finances, but as John mentioned, is very giving. So, when she could be saving more for herself and her future, she is usually helping friends that do not manage their money and helps them get food and clothes for themselves and their children. She has learned from them, to wait until she meets her soul mate, then properly jump into marriage and kids. Unfortunately, the circle of friends she has are all in financial trouble.
    John – would you be interested in travelling to NJ????? LOL

    Keep up the good work!

  28. This is a great series. I think John’s story reinforces the point that if you are secure in yourself, you don’t have to seek validation in the form of buying “stuff.”

    For all of the commenters that seem worried about John being Scrooge-ish, it seems to me that someone willing to spend $300 for a gift for another person is hardly a Scrooge.

  29. Carol says:

    Great post! I love this websit! I was sorry that meg felt this was a good advertisement for no spouse no kids:0 boo-hoo made me so sad! It is possible to save and have a small brood and be happily married. The real upside to this is you can teach your young ones to be happy savers while going to garage sales, shopping on ebay, etc. and teach them to earn their OWN money (not looking for their cashola from the folks). My hubby & I have 6 children ages kindergarten through college and it’s been so fun to teach them how to make, save and give money! And we live in New Jersey,the land of “high end” taxes. Life is short…don’t be short sighted :)

  30. Susan says:

    RE comment 13
    Sounds as though you drank the kool-aid. I believe it a flawed assumption that spending brings happiness. It’s more likely that the experiences which, admittedly, are sometimes (but not always nor necessarily)facilitated by being able to spend, result in feelings of happiness. Being a consumer is not a prerequisite for being content.

  31. ched says:

    As usual: great post.

    Congrats on living a responsible lifestyle.
    But more importantly, your ideal death is absolutely classic.
    A SciFi fan, I take it.

  32. Demi says:

    You didn’t ask John if he plans to marry and have children. And you didn’t ask about his dating/social life spending. It would be interesting to know how he plans to deal with money when another person is involved. Sounds like he is building a nest-egg at the expense of a “nest.” What’s the story on this?

  33. Tall Bill says:

    WOW Trent & John. How to influence friends, etc. One thing: NOW is a great time to be looking at real estate. Buy the smallest house in an area that is not declining & watch the returns in the next 5 years. You are blessed to have the one thing that is “just out of reach” of most: You have a job you love! That’s the basis for most anything & the rest follows. Take care.

  34. Phil A says:

    Impressive. Most impressive.

  35. If spending money can’t contribute to his happiness, then how does saving contribute? My point is, what’s the point of saving so excessively if he can’t get any happiness out of all the money that’s being saved?

  36. Linda C says:

    Trent – Bravo!

    John – Thanks for restoring my faith in humanity! There are people out there who can truly find value in themselves, rather than the latest gadget! It is obvious that you understand the meaning of life and how to live simply (not just simply live). You should share your story with kids heading off to college so they can shred those credit card offers and have a future!

  37. Antishay says:

    Hi John –
    Your answers are fascinating! You sound a lot like me. I, too, save 50% of my income and people look at me sideways for it, but hey, I’m happy. I just wanted to thank you for encouraging me to stay on my path! I know I’m happy, but it is frustrating to explain to people why I could retire at 35 but I may not, etc… :) Great interview!

  38. gr8whyte says:

    @ Writer’s Coin (comment #35) : No offence intended but your proposition that John’s happiness must necessarily be linked to spending or saving is false. IMO, John only appears to save excessively because his income simply exceeds his wants/needs by a large margin. His burgeoning savings may indeed make him happier in the long run (who wouldn’t be?) but it’s secondary to the math. John will have the means to do as he pleases, when he pleases. The buzz phrase is “delayed gratification”.

    @ Demi (comment #32) : Bowerbird?

  39. No offense taken. I’m not saying his happiness level is at all affected by his spending or saving. But I’m wondering how he’s delaying his “gratification” by saving that much of his income. What gratification will that pile of money bring him down the road? Early retirement?

    Here’s the gist of what I’m trying to get at: if money doesn’t bring him any happiness right now, why would a huge pile of it later on in life give him any gratification at all? Whatever he wants to spend it on later—can’t he spend a little of it now on that very same thing?

  40. citygirl says:

    I’m surprised how many people who read this blog think that just because John has savings that he’s not as happy as he could be! It doesn’t sound like he’s sitting at home being bored – he mentions eating at new restaurants and skydiving, and he has goals that he’s saving towards (like buying a house). Plus Trent mentions that John earns a “solid” income, so living on even half of that probably isn’t too hard if he isn’t constantly buying new cars or gadgets! For comparison, I made ~$25k last year and saved $10k of it, while living in metro Boston and having an extremely active social life and hobbies!

    Life is all about choices and it sounds to me like John is making excellent financial choices without compromising his happiness or values. Congrats!

  41. gr8whyte says:

    @ Writer’s Coin (comment #39)

    For starters, I don’t think it’s quite right to say “money doesn’t bring him any happiness right now”. I think the 47% of John’s income that he does spend covers both necessities and happy-stuff so part of it is buying happiness now. Why would he need to spend more when he’s sufficiently happy at the present time with the amount he’s currently spending on happy-stuff?

    To answer your questions, think of it this way : Discretionary money represents gratification that can be unleashed now, a year or 30 years from now and on whatever catches your fancy, then or now. It’s a personal choice. For example, some may choose to spend money on a fancy car now while others may choose to save for a trip to Mexico, retirement or the unexpected. All are or will be receiving gratification; the spenders immediately now, and the savers sometime in the future. Can savers spend some savings now for immediate gratification? Yes, they can and many do — there’s been many recent news articles on savers raiding 401(k) accounts and while all received gratification from doing so, those who raided for essentials probably received gratification of a different flavor than those who raided for fun stuff. I note that had these savers been spenders to start with, they wouldn’t have had a 401(k) to raid.

    IMO, John’s more of a saver-by-default than a put-the-last-dollar-in-the-bank saver; he just makes too much money for the lifestyle he leads so he banks the excess.

    I’m not sure I can explain this any better.

  42. John says:

    I am actually in a similiar situation as John: late twenties, save around 50% of my net income, and don’t feel the need to buy a lot of stuff that I’ll probably never use. My question though is how do you deal with friends and family that don’t live a similiar lifestyle? I sometimes get comments when I mention that something is expensive, that it shouldn’t bother me because I have so much money. It makes talking about money with my friends very difficult when they don’t realize that the money I am saving is all about the sense of freedom I have from not living paycheck to paycheck.

  43. Bill says:

    Inflation & more recently rapid dollar depreciation have eroded the several hundred thousands dollars I saved over the last 10 years.

    Even after the few months, that money would be triple had I invested in the stock market instead.

    Sometimes I feel like a chump for not buying the McMansion or living it up a little more.

  44. John says:

    It has been a few days so I’ll take the opportunity to address some of the comments concerning my interview.

    First, I must apologize for an omission in my savings. I mentioned savings after net income. The way I define net income however is after taxes and after my 401k/IRA. If I took the retirement savings into account, which are all in stocks, and related it to gross income, my savings is actually 57%. Because roughly 24% went to taxes, my lifestyle consumes only 19% of my gross income. Needless to say, when realize I pay more in taxes than for my rent, food, utilities, vehicle, and entertainment combined, I cringe.

    A few of people are thinking that a person who is not spending money is not happy. This is an interesting hypothesis but fails testing on the only subject that matters to me – me. If I loved yachts then not being able to afford sailing might make me unhappy. However, I enjoy doing things that don’t require spending money. These include talking with friends, walking around town, volleyball at a local church, basketball at the park, and reading books from the library.

    And then there are habits I have that compound my frugality. I intentionally live close to work and bike most days. I unplug my washer and dryer when I don’t use them. I recycle. I donate my most valuable resource, time, to my favorite causes because it means more to me. But not everything I do is practical. I don’t like automatic billing because I like to be able to know where all the dimes go and when. I’ll sacrifice some of the convenience for control.

    Saving money doesn’t make me happy. It makes me comfortable and optimistic towards the future. As to talking about finances with a significant other, I can’t really say. I’ve never had that conversation so I can’t offer any advice as Trent can. The only thing I do, right or wrong, is not advertise my net worth to people. I want people to like or hate me for who I am. Maybe that’s why I’m still single, ha ha ha!

  45. clevelis says:

    Trent, I really like this addition to your posts. Good interview questions!

    @ John, unfortunately, you might be right. I find that money, what you do, etc seem to rank highest on lists reasons why people will date you. LOL! My hang up is my love for service particularly in developing nations. It’s not something I ever want to “grow out of”. All the best to you!

  46. Jessica says:

    I know this is an older post, but I wanted to say to John, good for you! We could all learn a lesson from someone like you.

    I used to do the same thing as you–pay my basic bills only, put gas in my car and food on the table, and leave the rest in the bank. Because of this I saved up $2100 in 3 months, enough for half the down payment on my condo (where I still live today). I definitely need to get back into that lifestyle, instead of my current “pay the bills and spend the rest” thing I’m doing. I’m also in my early 30’s, married with no (living) children. (I was pregnant but my daughter was stillborn when I was 7 months along.)

    But again, good for you, very inspiring!

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