Our world of capitalism is geared toward constant consumption. More is better! From the first day on the job, everyone seems to chase the same: MORE. Yet, I want to challenge you to think about a question that no-one has probably ever asked. What is enough? (I sincerely hope you come up with a better answer than Jordan Belfort’s – the ‘Wolf of Wall Street – “more”.)
In this three-part series I shine light on three people I admire for their frugality despite their wealth. I discuss their lives, fortunes, spending behaviors, and their philosophies on life. At the end, I provide some food for thought and maybe even help you find happiness in your life. I hope these articles will trigger you to think about what income or sum of money is enough for you to live a happy life. (Link to Part One)
Today’s society moves increasingly more to a ‘gig economy’ – temporary project work, instead of full-time jobs. Job security is so babyboom! Income security is what millennials (should) strive for. While most of us have secured an income to sustain a certain standard of living, only few consider the fixed costs associated with it. That is what ‘living below your means’ is all about. To be satisfied with what you have, regardless of your level of income. Part Two of this series features an NBA player by the name of Kawhi Leonard. Born in Los Angeles in 1991, Kawhi currently plays for the San Antonio Spurs, where he drives his ’08 Chevy Malibu to and from work.
Enter Kawhi Leonard
Kawhi is known as a reserved player. He is always focused, humble, and mostly lives a no-nonsense lifestyle. He was drafted by the San Antonio Spurs in 2011 where he has played ever since. In 2014 he won the NBA title as well as being awarded the NBA Final Most Valuable Player – not a bad track record for a 23-year old.
Currently Kawhi is sitting on a US$90 million 5-year contract. Where Kawhi’s colleagues show up at work in the latest Porsche, Ferrari, or Lamborghini he commutes in his 2008 Chevy Malibu, because, “it still runs”. Under the surface, however, there is a more profound reason for his decision not to live a life of greed and superfluous luxury. Leonard can be described Calvinistically sober. Even as a teenager he wouldn’t celebrate his birthday. On the court, he preferred to pass the ball to other kids, “so that could shoot”. A perfect practice for him would be to play defense, make the opponent’s players ineffective, and sneak out without anyone noticing. According to his coach, “he loves the greatness, and doesn’t care at all about stardom.”
Determination with a capital D
On 19 January 2008 Kawhi lost a high school game. He broke up in tears, but not because of the loss. The day before, his father was shot and killed at the carwash he owned. Neither the killer nor the motive for the shooting was ever found. At age 16 basketball was Kawhi’s life. It was his escape from everyday dilemmas. He insisted to play the day after his dad’s passing, citing that playing would function as therapy. It is this kind of determination and perseverance that I recognize in people who have loved a relative. The death of a family member instills the realization that life is finite. It gives perspective on what is actually important in life. Having been through this experience myself (my dad passed away when I was 21), I questioned my assumptions and started to think about what was actually important to me. I stopped spending time and money on things like fancy clothes, new cell phones etc. I fully understand and respect Kawhi’s humbleness and frugal lifestyle. His focus and determination are admirable. He leads by example and I think we can all learn from his story.
2/3 NBA players are broke within five years of retiring from the game. This is quite an astonishing percentage, given that they have made millions in the previous years through salaries and sponsorships. The probability that this will happen to Leonard are, I reckon, pretty low. Why? When he signed with the Spurs in 2011, he asked his mom if she wanted to move in with him. She sleeps in the downstairs bedroom and manages the household for the two of them. Kawhi admitted to reporters that he asked her to move to Texas because he needed her in his life as an NBA player. To whatever extent necessary, he keeps him focused on his goal: basketball. Where most players enjoy sponsorships and endorsements to supplement (and often, exceed) their player’s salary, Kawhi has only accepted one small sponsorship. With Wingstop (a chicken wing restaurant chain). To give an idea about his assigned value to money, after signing his 90 million dollar contract he apparently freaked out after loosing coupons for free chicken wings. This winner was truly looking for a chicken dinner.
Fixed costs of life
How often don’t we see the following. Someone receives a promotion at work and, voila, buys a new car. Or upon receipt of the Christmas bonus decides to buy a new cell phone. These two things have something in common. Both involve an increase in someone’s net worth and both contain an element of increased fixed costs. Everyone has fixed costs, such as rent/mortgage, utilities, health insurance etc. Yet, one of the keys to financial succes and ‘independence’ (for lack of a better term) is minimizing fixed costs. Some approaches are a bit radical – like my social experiment of living rent-free for a year (see article). However, there are simple ways to keep your fixed costs at a minimum. It is essential not to increase your fixed costs the moment you get a promotion or bonus. What this actually does, is make you less financially flexible. Imagine you get fired, you cannot work because of an illness, or you decide to quit. In any of these circumstances you need to be able to ‘sit it out’ for a while. Sure, you’ll not go out to restaurants as much, may hold off on buying a new pair of shoes, or live off your savings for a while. Reducing your fixed costs, however, is usually not as easy.
How high should your fixed costs be?
As a rule of thumb, I try to keep my fixed costs low enough so that if I lose all income streams today, I can live for the next 6 months. This should give ample opportunity to find or (better) create new income streams. Moreover, it releases any pressures of having to stay at a job you might not like anymore (I remember colleagues telling me they wanted to quit, but couldn’t because of their mortgage payments). Another great side effect of low fixed costs is that it allows you to save like a financial samurai.
I think Kawhi’s lifestyle exemplifies a humble, frugal life anyone can learn from. I hope that this article made you think about your major money decisions or just made you cancel the subscription of that magazine you barely ever read…