"The Necklace" – Timeless Financial Lessons for My Barista FIRE Journey

Recently I came across a YouTube video titled "How to Bankrupt the Middle Class in One Day", and it definitely caught my attention.  After viewing this video (in Chinese), I see many learning points I can incorporate into my financial journey, and hence I decided to write this post as a record for myself.  To do this better, I went to look for the summary of the classic literature, "The Necklace" by Guy de Maupassant. 

Summary of "The Necklace"

For those unfamiliar, the story follows Mathilde Loisel, a middle-class woman unhappy with her modest life.  She dreams of wealth, glamour, and admiration.  When she gets invited to a high-society ball, her joy turns into distress because she lacks a fancy dress and jewelry.  Her husband sacrifices his savings to buy her a dress, and she borrows a glittering necklace from a wealthy friend.  The ball is everything she dreamed of, until disaster strikes.  She loses the necklace.  Instead of confessing, she and her husband replace it with a costly duplicate, plunging themselves into crippling debt.  Ten years later, after a decade of grueling repayment, Mathilde learns the necklace was fake, worth almost nothing.

It is a tragic ending, but beneath the drama lies a set of financial truths that apply perfectly to my own goals, especially as I work towards Barista FIRE.

Lessons Learnt

1)     Lifestyle Inflation is the Silent Dream-Killer

Mathilde’s downfall began when she compared herself to the wealthy elite and decided she needed to look like them.  That is lifestyle inflation in a nutshell, letting one's spending rise just to match a certain image, even if it is beyond one's means.

In my Barista FIRE journey, lifestyle inflation is a constant threat, but not a major threat.  I do not chase after branded goods nor splurge on grab rides everywhere I go.  However, if my income increases or I get extra cash flow, I am easily tempted to bring my mum to more expensive holidays.  One example is the race for miles that I have written here.  The mile-chasing game made me realize that I am silently inflating my lifestyle in one way or another, and I have to constantly remind myself not to spend mindlessly.  

Barista FIRE works only if my passive income and active or part-time income can comfortably cover my expenses.  If I knowingly let my lifestyle creep up now, I will either delay my goal or be forced to work more hours later, which is exactly what I am trying to avoid now.  Thankfully I have reached my goals to the miles game, and I decided to end the miles game.  I suppose I just need to bring my mum to experience business class once together, and we can revert future trips back to economy or budget.  I know she does not mind that.

2)     Honesty Saves More Than Just Money

If Mathilde had simply told her friend the truth, she would have saved herself ten years of back-breaking debt.  In personal finance, honesty is equally important, not just with others, but with ourselves.

I need to be honest about what I can and cannot afford, about whether a purchase really adds value to my life, and about whether I am spending to impress others.  Self-deception in money matters is just as dangerous as lying to someone else, it piles up invisible “debt” that I will have to pay for later.  This applies to failed investments as well.  It is important to realize one's mistake, and not throw good money after bad.  Cutting loss does not mean failure, instead it is probably a wise move to allow one to turn the tables around before the situation gets out of hand.  Currently, I am in the midst of clearing up my finances beyond my investment portfolio.  I will share my experience after I have settled the issues I am facing currently.

3)     Debt Can Steal Your Freedom

The Loisels’ decade-long debt repayment is the perfect metaphor for how debt can enslave you.  While some debt, like a mortgage, can be strategic, taking on high-interest or unnecessary debt for luxury is poison to FIRE goals.

If I get trapped in debt for the sake of appearances, I will not be able to work towards Barista FIRE.  Instead, I will probably be working endlessly to pay off my past mistakes.  Avoiding unnecessary borrowing is non-negotiable if I want financial independence.  However, this is just advice for myself.  I know there are other investors who take on margin or leverage.  Most importantly is to know what one is doing and have a backup plan.  Margin and leverage is just not for me.

4)     Material Possessions Do Not Equal Happiness

Mathilde thought the necklace and a beautiful dress would bring her joy.  In reality, they brought her misery.  I have learned that buying “stuff” rarely creates lasting happiness.

In Barista FIRE, my joy needs to come from time freedom, meaningful experiences, and peace of mind, not from what I wear, drive, or own.  If I keep chasing “shiny objects”, I will just keep running on the hamster wheel forever, which is something I do not want.

5)     Emergency Funds and Protection Matter

If Mathilde had insurance or even modest savings, the loss of the necklace might not have been catastrophic.  In my case, having a healthy emergency fund is an important part of my Barista FIRE safety net, but this is the section that is inadequate in my journey.  Thus far, I have been rather fully invested, with limited cash reserve.  I have only started to accumulate my emergency cash last year, and hopefully, moving forward, even if life throws curveballs - medical bills, home repairs, job changes - I hope my plan can withstand them without derailing my progress.

Final Reflection

"The Necklace" may be a work of fiction, but the pain Mathilde endured is real for anyone who lets pride, comparison, and lifestyle inflation dictate their financial decisions.

As someone striving for Barista FIRE, I see the story as a warning.  The biggest threat to my goal is not a bad investment or a market crash, instead it is my own choices.  If I can continue to keep my expenses grounded, stay honest with myself, and resist the pull of unnecessary luxuries, I will have a much better chance of reaching my version of financial freedom.

In the end, I do not want a “fake necklace” lifestyle that looks good on the outside but is crushing me on the inside.  I want a life that is real, sustainable, and mine.  Barista FIRE, here I come...!