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Flattery is the enemy of Retire Early dreams. Once someone sees that retiring early is a goal within his reach, it is hard to talk him out of it. But flattery prevents many of us from ever seeing the possibilities.

The usual progression of thought starts like this. You hear a comedy act about "the high cost of living nowadays." You start feeling a little deprived. The idea gets reinforced by a politician, who says he wants to help the middle-class "deal with all the financial pressure they are under." You wonder, why did I have to be born at a time when ordinary people have it so tough? Finally, a neighbor kicks in with this thought: "You know, it's getting hard just to make a living." You shake your head, flattered.

Flattered, because the hidden message is that just the fact that you are getting by means that you must be a pretty tough character. It's like when a boy who survived a fistfight shows off his scars. We all enjoy this feeling, and the notion that we are struggling against a strong economic wind in our faces brings it on.

The next step is to reward yourself for all this toughness. As hard as your life is, you need to get away from it all every six months or so. And you need furniture which speaks for you, sending a subtle signal as to how special you are for having such survival skills. And a brand of coffee that gives you a lift through all the rough spots that come with making a living under such difficult circumstances.

At the end of the day, you're satisfied with yourself because you know you earned each and every one of those little rewards. But in examining my own attitudes from my free-spending days, what I think was really happening is that I was accepting unearned praise for a toughness I didn't possess.

Which wouldn't be such a big deal, except that the final step in this progression of thought was to blind myself to the consequences of my uncritical unacceptance of flattering ideas. Once I spent the money on the vacation, the furniture, and the coffee, I didn't want anyone telling me that such spending might be a bad idea. "Hey, buddy, I worked hard for every dollar I've spent. I don't need you to tell me what to do with it," I would think.

Which was true, in a way. I didn't need anyone to tell me how to spend my money, and I still don't. But it would have been nice if my own mind had been functioning well enough that I would have made decisions that were in my long-term best interest.

I spend a lot of time trying to figure out why my mind failed me for so long. I now am coming to believe that it was flattery that paralyzed my logic. The only reason to have cut back spending on things I liked would have been to acquire some other thing I liked better in return. Early retirement, for instance. But early retirement is a threatening notion to someone who pats himself on the back for his courage in getting through hard economic times.

To accept even the possibility of early retirement is to cast doubt on the popular worldview of economic hardship. If ordinary people are earning enough to retire earlier than ever before in history, it can't also be true that our financial struggles are tougher than ever today. To believe the former, you first have to stop believing in the latter.

It's surprising how powerful a force flattery can be. If someone tried to directly take away your chance at early retirement, you would resist with all your strength. But flattery slips in through the back door. It's a message pretending to be your friend, offering sympathy for your trouble.

Because it's not true, though, it doesn't help make the trouble go away. Instead, it makes the trouble worse. It's not true that the middle-class has it worse than ever before. The middle-class has it great, at least in financial terms. The biggest economic problem faced by the middle-class is that it is throwing away much of its financial rewards on things that offer little lasting value. It's paying for those things with its "Get Out of Work Early" card.

These thoughts were sparked by a report I learned about last week from a link on the Living Below Your Means board. It's called Time Well Spent: The Declining Real Cost of Living in America," published as part of the 1997 Annual Report of the Federal Reserve Bank of Dallas.(

The report is based on the proposition that it doesn't matter so much what something costs in dollar terms; what matters is how many hours of work it takes to earn the money needed to buy the item. The price of a pair of stockings was 25 cents a century ago, but the average worker earned less than 15 cents an hour. So it took 1 hour and 41 minutes of labor to buy those stockings, compared to 18 minutes today.

We've seen similar price drops for most other goods and services over the years, according to the study. The labor-cost calculations are based on the wages paid to production and nonsupervisory workers in manufacturing ($13.18 an hour in 1997).

The distance between common perceptions and objective realities is best illustrated by looking at what has happened to the price of housing. In 1920, the price of a new home was 7.8 hours of labor per square foot. In 1956, the price had dropped to 6.5 hours per square foot. In 1996, it was down to 5.6 hours per square foot.

These aren't huge drops, but they are significant. What's strange is that, if you asked the man or woman on the street what has happened to the cost of housing, you would hear that there has been no relief at all. You'd be more likely to hear complaints that prices had risen than satisfaction in our good fortune.

This seems strange in a way. Don't people want to hear good news? Aren't people naturally optimistic? It would make sense that people would trick themselves into believing that things are better than they are, but why would they want to think things are worse than they are?

My theory is that we're seeing the effects of the flattery that we're subjected to, in movies, in political speeches, in conversations with neighbors. We want sympathy for our struggles (many of which are real, just not the financial ones), and the little white lie we tell ourselves about rising costs gives it to us. Seemingly at no cost.

There is a cost, however, in the long run. The cost of not knowing the truth about our finances is that the decisions we make are based on incorrect information. A weak understanding of reality leads to bad decisions. If you know that living in a smaller house means you can retire at age 45, you might decide it's worth it to do so. If you've persuaded yourself that retiring early is beyond the reach of the average man, making such sacrifices is pointless (or "extreme").

Houses are cheaper today than they've ever been, but we've been flattered into thinking that we need larger houses to shelter our smaller-than-ever families. A lot of us really are economically pressed. But the reason is not that it's tough to make a living today. We make it tough with our choices. We buy houses twice the size of what people made do on 40 years ago, and then complain about there being nothing left of our paychecks after making the payments.

There is a logic at work in how we make our money decisions. If you are tied to a job until age 65 anyway, you might as well enjoy bits of fun where you can. If I've fooled myself into thinking that early retirement is not possible, why should I bother even worrying about how much that cup of status coffee is costing me? I might as well spend what I have if there is no possibility of making a significant change in my circumstances anyway.

I'm becoming more convinced that this is the reason for today's excess consumerism. People haven't allowed themselves to hear how good they've got it financially. So they act on incorrect understandings of their possibilities in life, and make decisions they would never make if all the information were before them.

If this analysis sounds harsh, that's not the spirit in which I think about it. More than anything else, I'm trying to understand why I made so many bad decisions for so many years myself. What was I thinking? I've come to believe that I wasn't thinking so much as I was feeling. Feeling flattered.
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