The Girlfriend Allowance

I’m feeling excited, not because it is almost 2015 but because it is looking likely that I will very soon have a girlfriend! It’s not certain but it is looking likely.

Having been single for the last few months, it is refreshing having a girlfriend again, but I do remember much of the negatives of my previous girlfriend. I remember the arguments, the whining and complaining, and the constant put-downs. Maybe it’s my fault for being too much of a beta male and not manning up. Either way, it was a bad experience, and I need to learn my lesson.

Something I will be implementing with my new girlfriend is a “girlfriend allowance.” After we are in a relationship, or maybe once we date a few times, I will ask her for her bank account details and will direct a certain amount of income from my investments straight into her bank account. One option is to plow money into a high-yield ETF or managed fund that pays monthly distributions (e.g. APN AREIT Fund, Firstmac High Livez, Aurora Dividend Income Trust, or Betashares Australian Dividend Harvester Fund). Another option is to borrow money, buy a small apartment, and ask the property manager to rent the apartment out and send all rental income to my girlfriend’s bank account. Either way, money will be sent automatically into the girlfriend’s bank account every month. I will probably aim to provide about $500 to $1500 per month.

I have never done this before, so I have no idea what the results will be, but I think paying a girlfriend allowance will help the relationship significantly.

One of the problems with many girls is that they are influenced by mainstream culture, which gives people certain impressions about how girlfriends should behave and how boyfriends should behave. There are all sorts of rules, rituals, and customs. For example, when it is Valentine’s Day, you must buy a flower and chocolates. When there is an event, you must bring along the girlfriend. You must shower the girl with gifts. There are all sorts of duties that the girlfriend expects from you. If you are a man who wants to engage in these activities, a girlfriend allowance may not be necessary. If you don’t want to engage in these conformist social customs, you will not meet the girlfriend’s expectations and she will start to resent you. She will then start to complain, whine, and give you passive aggression.

This is where the girlfriend allowance comes in. If you are paying a girlfriend allowance, then you can afford the freedom of doing what you want. You are no longer shackled to the duties and obligations of “boyfriend services.” If, for example, you do not buy the girlfriend a gift on Valentine’s Day (because Valentine’s Day is an embarrassing marketing scam), she may resent you and may consider dumping you. However, if you are paying her a girlfriend allowance of $1000 per month, she will need to consider whether dumping you is worth sacrificing $1000 per month.

In my opinion, a girlfriend allowance will also allow you to enjoy higher quality “girlfriend services.” She will treat you better because she knows that if she does not treat you well, she will lose the allowance and it will be snapped up by another girl. In labour economics, this is the theory of the efficiency wage. A girlfriend allowance is effectively a girlfriend efficiency wage. A girlfriend allowance will ensure that you receive high quality and efficient services from your girlfriend.

Paying a girlfriend allowance will also reduce the likelihood that she will dump you. For some men (at least for me), it is expensive, time-consuming, and just plain difficult to get a girlfriend. A girlfriend allowance makes it more likely that you will spend more time with your current girlfriend rather than spend time hunting down girlfriends at nightclubs, bars, online, or via friends or family.

A girlfriend allowance will also provide the girl will more confidence and assurance in herself. If you are willing to pay a girl money, she feels she is worth it. Once a woman is at the receiving end of market demand, a price on her services will increase her morale, and she will want to treat you better.

A girlfriend allowance also recognises the fact that being a girlfriend is quite expensive. Girls are required to buy appropriate clothes, use make-up, perfume, shampoo, and have gym membership. Attractive girls also tend to have specific diets. Looking good comes at a cost.

Another good argument for a girlfriend allowance is that love is too difficult to maintain. Love is fickle and temporary. In a normal relationship, the bond is sustained by love, but love wanes over time. As the girlfriend gets tired of you, her attraction for you will also drop. The excitement and novelty of being with other men will tempt the girlfriend (or wife). Although love is difficult to maintain, the girlfriend allowance is not. The girlfriend allowance (as I will implement it) is a set value of income-producing assets whose rental or dividend income is directed into the lady’s bank account automatically every month by the fund manager or property manager. It is set-and-forget. You only need to reconfigure it once you break up with the girlfriend and need to distribute that income to someone else (or yourself if you are single). Maintaining a relationship on love requires constant effort and work. It is like having debt over your head or being bossed around by a bad boss. A girlfriend allowance, on the other hand, requires nothing.

To conclude, although the girlfriend allowance or girlfriend efficiency wage seems to make sense, theory does not always align with practice. I will update you all on how things go.

Love and Frugality

Last night I watched a romantic movie called Before Sunrise. It is about a young boy and girl who meet on a train, get off at Vienna, and spend the night in the city before they need to separate from each other the next day. I thought the movie was absolutely beautiful and I suppose by watching it I feel great loss that I never really fell in love with anyone. I’ve been on quite a few dates (most of which are first dates) and had one relationship that lasted for a year, but otherwise I’ve lead quite a simple life. I would love to fall in love like they do in the movies.

Of course, the frugal side of me tells me that just because something is glamorized in a movie it doesn’t mean I should follow it. Movies, TV shows, books, and other forms of art have a way of making you desire things more and creating greater expectations. Greater expectations normally lead you into spending more money than you otherwise would.

Saving up money is simple. You simply don’t spend much. Of course, if it were this simple, why are most people living under enormous debt? I think it is because most people have high expectations. An average person may earn $50,000 per year, but if his expectations are such that he needs to spend $50,000 per year in order to afford the things he feels he needs, he will not save anything. However, if his expectations are lowered. If he were to suppress his desires such that he can live on $10,000, he’d be able to save much more.

Where do expectations come from? There are two sources: internal and external. Expectations can come from yourself when you tell yourself that you need something or that you don’t need something. But expectations can come from others: friends, girlfriends, TV, movies, salesmen, etc.

When we talk to ourselves, we can try to convince ourselves that we don’t need something that we may desire. To react to external influences, we can avoid friends who spend more than we do.

To suppress feelings of love or desire, it is probably best if I avoid romance movies or books. If I keep watching these movies, I desire more.

The point I am making is that love is the tool that other people use to make you desire something, and desire leads to greater expectation, and this normally leads to greater spending. Marketers try to make you love a product so that you buy it. Women try to make you love them so that you spend money on them. It is sad then that in order to be successfully frugal that you must suppress your love. They say love is a beautiful thing, and it can be, but when I look at all the examples of love in the real world, I have trouble separating acts of love from acts of greed, envy, or hedonism. From one perspective, love is beautiful, but look at a different perspective and love is also vile or vulgar.

Can I live a life without love or desire? I doubt it. I am willing to spend money to pursue love, but it must be controlled.

Reduce Spending vs Increase Income

I currently aim to save 85% of my after-tax pay (as recommended by Early Retirement Extreme). I try not to tell too many people in real life about my high savings rate, but back in the days when I was more naive, I’d talk about my savings rate all the time, and one common response I hear is the recommendation that I should be focusing on increasing income rather than reducing spending.

My response to this recommendation is: why not do both? Why not increase income and reduce spending at the same time? Why assume that you can only do one or the other?

While I recommend increasing income and reducing spending at the same time, I recommend you put more effort into whatever gives the biggest bang for your buck. In other words, do what gives the greatest return on effort.

For example, when I graduated from university and started working, I was earning only $40,000, and four years later that has approximately doubled. I have received only one promotion. I am on a fixed salary with zero bonuses. I get paid the same amount regardless of my performance. I don’t consider this to be spectacular, but I have been saving approximately 80% to 85% during that time, and adding my salary plus my passive income from investments, my total income today puts me into a higher tax bracket whereby I pay approximately 40% on income tax. In other words, due to progressive income taxation, higher income is rewarded with higher taxes. I am a big fan of progressive income taxation mainly because it earns government significantly high tax revenues while also reducing the gap between rich or poor, but there is no disputing that for some people progressive income taxation reduces the incentive to work hard because once you are at a certain income, effort is not sufficiently rewarded.

This is why I prefer to save. Saving is easy. One very easy way to save money is to automate. For example, talk to HR and ask them to send 85% of your income into a separate savings account. All this will take about one hour. Assuming you earn an average salary of $50,000 and pay zero tax, you will be saving $42,500 per year. In other words, one hour of work will give you are return of $42,500.

Now suppose I were to try to increase my income. I’d have to search for jobs, catalogue my skills and achievements, update my resume, write a CV, talk to referees, apply for the job, talk to the relevant contact at the firm, practice for the interview, go to the interview, and follow up after the interview. All this will take maybe 50 hours and even then there is no guarantee I’ll get this job, and even if I do, the increase in salary is only about $10,000, and that is not counting taxation.

Which gives the better bang for your buck: one hour of work yielding $42,500 or 50 hours or work yielding $10,000? This is extreme example, but I think it illustrates my point.

Everyone is different. For those working in jobs that pay performance bonuses (e.g. real estate agents), a structure is in place that rewards hard work, so there is no question that you should be working hard at achieving these performance targets. Furthermore, while automatically saving 85% of income is easy for some, if your circumstances are such that you must spend a lot (e.g. you have a mortgage, children, or expensive housewife) then you may have no choice but to focus on increasing income rather than reduce spending.

The bottom line is that is does not matter whether you make money by making money or saving money (“a penny saved is a penny earned”). What matters is that you devote your limited time and efforts to whichever area provides the greatest return.