24/7 Insights

• This Redditor believes in renting over buying. 
• They are paying for all vacations using credit card points. 
• All clothes are purchased from consignment stores. 
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When buying a home or a car, the prevailing theory is that ownership is a smarter investment than renting. The belief behind this is that it comes from a place where anytime you rent and pay a lot of money, you won’t have anything to show for it at some point. This differs from buying in that although a car may cost more, it’s yours to resell, use as a trade, etc. 

In other words, you should have something to show if you’re paying thousands per month for a home and car, especially when renting things with a luxury price tag. This is the topic currently being discussed in r/fatFIRE in this Redditor’s post, claiming they are saving $100,000 per year by renting luxuries. 

What I love about this post is that it should be a wake-up call for those who want to live in the FIRE (financial independence, retire early) world. They should own and not rent. 

The Scenario 

In this Reddit post, the Redditor of an unknown age breaks down his mindset into four categories. The first is his home, which he rents due to the “low rental rate luxury properties command.” He believes he’s getting a deal since buying a $5 million home costs up to $150,000 in rent while buying would cost between $300,000 and $400,000. 

The same goes for a car. This Redditor believes he can drive a leased Ferrari for around $30,000 annually. His “research” indicates the depreciation curve would be too much of a hit should he buy. The third category heavily relies on credit card points to save on travel. He initially opened up credit cards that offer as much as 500,000 points, which can be converted for dining and travel. He believes he saves $30,000 annually on travel using credit card points. 

Lastly, his shopping habits further solidify a frugal mindset. Ultimately, his take is that he finds his clothes using second-hand luxury consignment shops. In total, he indicates his four-stage strategy saves him around $200,000 per year he can invest in the market. 

The Recommendation 

While I’m not a financial expert and can’t claim to be one on Reddit either, I have to question whether this individual qualifies as a member of the FIRE club at all. There’s no mention of his total net worth, and although he claims to drive nice cars and rent a luxury home, it’s hard to say exactly how much he earns. 

His theory has many holes, regardless of what he makes. The primary one concerns buying a home, which many people do with the idea it will appreciate and, therefore, make money in the long run. For some reason, this Redditor is ignoring this reality. As someone with equity in his home, this is a dangerous omission of what is honest about home buying. I can’t get on board with recommending renting indefinitely over buying. 

On the other hand, I also like leasing cars because I, too, exchange cars every few years. Knowing that it’s often less expensive than financing a vehicle, I’m on board with this idea, but only because it’s well-researched that it’s cheaper than buying. 

Many people use credit card points for travel, and there is a large community behind it. I’m on board with using points and am attempting to convince my spouse that we should have a travel credit card. I recommend sticking with the credit card idea, as it works. 

Last but not least, I recommend the second-hand idea when buying clothes. Places like Goodwill or Plato’s Closet are well-known for being gold mines for expensive clothing at a discount. This is a smart move, though I question if he’s saving what he says he’s really saving. 

The Takeaway

Look, in my eyes, there is frugal and frugal to the point of foolishness. In this case, and many of the Redditor commenters in this thread agree with me, this person is of the latter. I’m not sure if this person qualifies as a FIRE club member. 

Saving $200,000 per year doesn’t give us much to go on in understanding true net worth, and we don’t know this Redditor’s age or how long it will take them to retire. Overall, based on what we know, this person needs to stop being so frugal while understanding they aren’t ready to join any FIRE club. 

 

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