Wednesday, October 29, 2014

Self-Justifying Poor Lifestyle Choices

More viewer mail....

A reader writes:
"I was wondering if you'd explain the rationale of constantly cooking at home versus ordering take-home instead. There are surely advantages of buying dinner for two at a Chinese place for $28.00. The biggest one being that the dinner-for-two deal will save you oodles of time cleaning dishes, which is time you could use making money.  I have done the math with this thing, and eating out all the time at sit-downs surely is a waste of time and money in the long run, but if you can order something on your way home -- assuming you call it in first and it's ready to pick up -- then take out is by far a better deal in terms of time.

When I lived in Columbus, Ohio, I cooked for myself all the time at home.  I loved to make fried chicken in a pan, but when all was said and done, the kitchen was stuffy, and there was grease everywhere; it was a mess from hell to clean.  Finally, I went to Church's or Popeye's and bought take-out: a 10-piece deal for 12 bucks.  For a couple more dollars, I could get some milk biscuits. That deal saved me tons of time. I don't totally agree that cooking at home all the time is the best deal.  Time is money, and dirty dishes and greasy pots and pans take time to clean.  If you are running a small business and time is of the essence, cooking at home is a lousy deal if you do it all the time.  If you are going to eat at home, the best deal is to buy pre-prepared foods like potato salad, frozen pizzas (the gourmet type), and and an assortment of other things.  That is just my take on it."
This is hard to parse on a number of levels.   First, let's address the "straw man argument".   The reader writes. "I was wondering if you'd explain the rationale of constantly cooking at home..." which implies that I am suggesting you should never, ever, ever go to a restaurant, ever.

I never said any such thing.   What I have said is that using a restaurant as your kitchen - eating restaurant meals five or more nights a week, is a very poor financial choice and horribly bad for your health.   And yet many Americans will eat out several nights a week, and also eat out for lunch at work, several days a week (if not all the time).
A restaurant meal should be a special occasion or an occasional thing.  It should be a special treat (after all, it is so expensive) and it should be good, and preferably you share it with someone special or a group of friends.   Sadly, most Americans use restaurants as their kitchen.  They pull up to the drive-though window with the same attitude they have when refueling their car.   How many calories can I get for my dollar?

And no matter what kind of restaurant you go to, it is a lot of money to spend.   Far more than you need to spend.
The reader continues: "There are surely advantages of buying dinner for two at a Chinese place for $28.00."   $28 for Chinese food?  That is a LOT of money!   You could buy ingredients to make four meals for that $28.  (maybe the reader is trolling me here? I don't know).
If you ate this way, every day, it would cost you $10,220 a YEAR.   Read that again - TEN THOUSAND DOLLARS!   That's a lot of dough.

And let's not forget the health cost - most Chinese food in America (which is not Chinese at all*) is loaded with salt, sugar, and MSG.   This is a health nightmare in a Styrofoam clamshell.

If you throw in lunch and breakfast this way, you could easily be talking $25,000 a year.  Last time I checked, that is a lot of money - enough to buy a nicely loaded Camry.   For someone making $100,000 a year, is it is a staggering amount of money.

And bear in mind, in order to have $25,000 to spend on restaurant meals, you have to EARN at least $40,000 to pay the State, Federal, Social Security, and Medicare taxes.   Is take-out Chinese food really worth an entire car every year?   Is it worth the inevitable type-II diabetes and heart attack?   Sadly, most Americans seem to think so.

The reader continues (digging himself in deeper):  "The biggest one being that the dinner-for-two deal will save you oodles of time cleaning dishes, which is time you could use making money."   I have posted before about "Opportunity Cost" arguments and why they have no place in personal finance.
When you resort to making "Opportunity Cost" arguments to justify a financial decision you've made, it is a sure sign you have made a poor financial decision.
Opportunity cost has a place in business and commercial finance.  If a company invests in plan A, that means they forgo the opportunity to invest in plan B.   Both are potentially money-making ventures.

Personal spending, on the other hand, is just spending.   If you borrow money to buy a car, opportunity cost doesn't enter the picture.   Why?  Because there is no other mythical "plan B" you could invest that money into, as you don't have the money in the first place (most folks, don't anyway - they just want a shiny new Camaro).   And comparing the risk of not paying loan interest (which is a safer "investment" than a government bond) to risks in the stock market, is comparing apples to oranges.
This myth that you could be "making money" instead of washing dishes or cooking is just that.   What are you going to do?  Drive back to the factory and punch in?
Or drive back to the office?  Oh, wait, a salary job doesn't pay you extra for working extra hours, does it?
What you really MEAN when you say "Make more money" is "Watch more television."  Because life and work doesn't work that way.   If I order take-out food from a restaurant (or delivery pizza) it doesn't mean I have "more time" to write an additional Patent or file another Trademark - for the simple reason that I can only do so much of that kind of work in a day before the mind gets fatigued.

On the other hand, I still have the energy to make my own meals, mow my own lawn, or vacuum my own carpets.   The idea that hiring others to do these things will free me up to write Patents 24/7 is just a fantasy.   Hey, why not take methamphetamine and then get back all that time "wasted" sleeping?  Have a colostomy and get back all that time "wasted" on the toilet?   Throw in a catheter while you are at it.  Just strap yourself into your chair and work 24/7.   Makes sense to me!
Now granted, there are instances where sending out for food makes sense.   You are in the middle of an Engineering project with a deadline, and everyone is working late to get it done.   But usually then, the boss sends out for food (if he has any common sense) so that people can keep working.   But that kind of intense labor is not something you can do every day - without burning out.

So, no sale on "opportunity cost."  When you resort to making "Opportunity Cost" arguments to justify a financial decision you've made, it is a sure sign you have made a poor financial decision.   Car dealers, mortgage brokers, and investment counselors will all resort to "Opportunity Cost" arguments to get money out of your pocket.   They want you to borrow as much as possible and go into debt.  These generally are people with economic interests that are diametrically opposed to your own.  So you expect them to make such arguments.   But to use them on yourself?   Who are you deceiving here?

Note there are some other "Straw Man" arguments presented here.   According to the reader, the only thing to compare take-out food with is the messy business of frying chicken - one of the most labor-intensive and messy meals to make.   By selectively picking one particularly difficult meal as representative of all home cooking, he can slant the argument in his favor.

But still, no sale.   I leaned to wash dishes long ago at the Old Tyme Gaslight Restaurant.   It isn't that hard and takes maybe 15 minutes, if that.  I find it easier and faster to hand-wash them than to use the dishwasher.

How do I know all of this?   At one time at my life, I made the same stupid arguments myself - I lied to myself to self-justify self-indulgent behavior.   Hey, I was billing out at $250 an hour as an Attorney!  For any activity that cost less than that to hire someone, I might as well just hire it out!

But two things happened in quick succession.  My credit card debt started to skyrocket - and I began to wonder "where the money all went".   The second thing was, I got fat as a house and started to feel like shit.  And it takes decades, if ever, to lose that weight.

That was, of course, false logic.   While I might bill out at that amount, it did not represent my hourly income.  And an hour "saved" from some more pedestrian task was not another hour billed, in most cases.   You can only do so much work, without losing your mind.   A better approach, I found, was to use my non-working time to attend to my own life - washing my own dishes, mowing my own lawn, and balancing my own checkbook.  After doing these things, I was mentally refreshed and able to go back to more intellectual work.   It also got me out of my office chair.

Restaurant food, fast food, take-out food, and prepared entrees, all have two things in common:  They are very unhealthy for you and they cost far more than making the same meals at home.   Read Anthony Bourdain's Kitchen Confidential sometime.  The "secret ingredient" restaurants use to make food taste good is butter and tons of it.   Order a steak?  They put butter on it.  It tastes more savory and juicy.   And we're not talking a small pat, either.   Some entrees have a whole quarter-pound stick.   And then they load up the meals with empty carbs (bread, rice, pasta).   It is very, very unhealthy, and as I noted in an earlier post, about four times as expensive as cooking at home.

What I learned over the last decade or so was that it is possible to go out and make a boatload of money in this country - $150,000 a year or more - and still end up broke.   And the simple reason is the "logic" that the reader is applying here - that "convenience" trumps cost every time, and that we are all so "busy busy" that it is OK to indulge yourself and stop keeping track of money.

The opposite is, of course, true.   Once you take your eye off the ball, all hell breaks loose.   Wealth - real wealth - is not measured in taxable income, but measured in your net worth.  High-paying jobs and businesses can be a trap, as they encourage you to think in terms of "opportunity costs" instead of real costs.   It is all-too-easy to think, "Gee, I am making so much dough, that I don't need to worry about small expenses anymore!  Let's send out for pizza!"

Such is the road to middle-class poverty.

* An American entrepreneur recently opened a restaurant in China, serving American-style Chinese food.  The Chinese, of course, were mystified.   They had never seen Chow Mein, General Tso's Chicken,  or Fortune Cookies.  These are not Chinese at all - nor is MSG or half the slop they put in "American" style Chinese food.    How our version of Chinese food got the way it did is an interesting question.   However, we've pretty much done the same thing to Mexican and Italian cuisine as well.