Have you ever made a bad decision and later wondered why you made it? Have you ever done something that, even though you know it is wrong, you just couldn’t stop yourself?
How we react to daily situations is a combination of our hard wiring (genetics and how we were raised) and the intellect that we use daily to make decisions. Deep down inside of each off us, we feel a certain way about ourselves (ego) and we act according to this self perception and about how we feel perceived by those around us.
When it comes to money, this is a powerful combination. We may know in our brain that we should act in a certain way, but the desire to feel loved, recognized and appreciated often undermines actions that we (know that we) should take.
Last summer I was overseas working with two colleagues. We were in a hotel (company paid) that had a free laundry service. The workers in the laundry were from Pakistan or Bangladesh. By Western standards, they were quite poor. I believe that their monthly salary was about $300 (US). This might not seem like a lot off money but as I talked to some of the them, I learned that it is quite a fortune. The average worker in their country earns about $50 per month with nothing left over for savings or luxuries. Working at this hotel, the worker could send home $50 to pay the family’s bills, take $50 for “spending money” and still save $200 per month. After a year long contract, the worker could return home with $2,500 and start a business. This one year long sacrifice could change that family’s situation forever.
Now add to the mix, about 100 American expat workers. Along comes the first “big shot” who “tips” the laundry guy $3 to wash the laundry that the worker is already paid a salary to wash. The American worker feels justified paying $3 for a tip because, after all, the laundry was “free” (paid by his employer). And then, the next guy thinks, “Oh yeah, he tipped, so I should tip too.” And a year later, when I arrived, EVERY guy was tipping $3 per week to get his “free” laundry done. Now, do the math. This $300 per month Bangladesh worker is now taking in his salary PLUS $3 per guy in tips per laundry load. Multiply this x 100 guys for four weeks per month. The “American do-gooders” were giving this guy, outside of his “normal” pay, an extra $1200 a month. This is a 400% tip on top of his regular salary that is already 600% of his national average!
Later, I refused to tip at all and the Bangladesh worker gave me a dirty look. When we picked up our clothes the next day, everyone else had folded clothes and mine were a half-wet ball in the laundry bag. His job was to wash and and fold. But because I didn’t tip, he REFUSED to do even the basic service that was required of him. We had spoiled this worker so that now he expects a tip. No, he demands a tip. My one colleague Matty tipped him $20 one day. I was livid. I told Matty that he was wasting his money and was “screwing the rest of us” because soon this worker will come to expect $20 each time he does our laundry. Matty’s reply was, “Well, don’t be so tight, you can afford it.”
Think about the logic of that. I can afford it.
That’s what poor people say.
I’m a millionaire and I doubt that Matty will ever be. He will constantly chase credit card bills, struggle to pay his mortgage and will complain that he “can’t get ahead.”
Think about the logic of this:
This Bangladesh worker is already earning 600% of his “normal” wage at home. This is the equivalent of an American worker taking a job overseas and getting $270,000 per year (six times national average of $45,000). Now, imagine if you took a job overseas making $270,000 working in Saudi Arabia. And then, as Saudis came in to get your services, they handed stacks of $100 bills. By the end of each month, your tips amount to a million dollars in cash. Does that seem reasonable to you? Well, that’s what we did with this man. We were giving him, when compared to the wages of his country, about a million dollars per month when compared to US wages and living standards.
Later, we went for a $5 haircut and matty paid $20 ($15 tip).
I debated with Matty and some other colleagues. I explained that we were giving this guy a fortune, and for what? Matty explained that he was “helping” the guy. I said that his regular salary was a small fortune and that his “help” was just a waste of his money. Matty then said something telling and I immediately understood WHY he tipped. He said, “When I give that guy the $20 and his face lights up, it makes me feel good.”
Ah ha. The reason why Matty was tipping was because it made him feel like a big shot. It made him feel rich compared to this lowly Bangladesh worker. I then realized that Matty didn’t care about helping this guy, he was showing off in front of him. I thought about how so many people love to over tip in America and I realized that it has less to do with manners and showing appreciation; it has more to do with showing off one’s success and wealth.
Now. If your net worth is over a million and you earn over $100,000 in passive income, your house and cars are paid, you have enough $ for your children’s college education and your 401(k) is maxed out, then go ahead. Tip away.
But, if not. You’re taking money out of your retirement, out of your children’s education, out of your gfamily legacy AND YOU ARE GIVING IT AWAY TO A STRANGER.
Think about it. To stroke your ego and to make you feel “rich,” you’re giving away your family’s legacy.
Some days, I walk around in a t-shirt and flip flop sandals. I still wear my expensive watch, but I dress comfortably. I might be at the mall and I’ll see some young guy with his Rolex, expensive car and I know that he’s up to his eyeballs in debt. I know INSIDE of myself that I’m the big shot. I don’t need to drop a 600% tip on a stranger to feel like a big-shot.
There is a difference between the two and they both revolve around your confidence level. People who are not confident in themselves need the placebo of success that comes from the 30 second “approval” they get from the waiter when they over tip. And in the end, that $3 here and that $15 there add up. If saved and invested, over a decade or two, they can mean the difference of having enough $ to buy that distressed rental property or to snatch up a choice asset in a fire sale. That one asset can turn into an income stream or a sale with a big dividend that can be invested again and again.
People who tip big always seem to be broke and complaining about money. I’m smart with my money and I don’t feel the need to impress anyone. I’ve impressed myself. That is all that is important.