But I Don’t Want to Be Frugal

You’ve read a bit about financial independence, and perhaps your interest is piqued. But the more you read, the more you see a potential life of deprivation. People are saving 50-70% of their income, but they won’t buy a coffee! You know damn well that Sally enjoys eating out, but now she just stays at home with her spreadsheets and swears she’s happy. That doesn’t seem like much of a life, huh? Well, I agree. Let’s investigate whether being frugal is overhyped.

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Obviously, we’ve made some unconventional changes in our lives to provide for a strong financial position. We started eating out less, bought a house we could afford, sold an unnecessary vehicle, and continue to keep a close eye on our recurring bills. These expenditures, seen as essentials to most, just weren’t creating value for us.

And that’s just it, value. What truly brings value to your life?

More Savings = Less Happy?

Pursuing this lifestyle shouldn’t be something that makes you unhappy. By all means, if you love coffee shop culture and just can’t seem to nail that espresso at home, go get one boss! If you want to travel, go travel.

We spent in excess of a month abroad in the last year, including our recent trip to Mallorca in January. Sure, our savings rate took a ding, but who cares?! Travel is something immensely important to us, so achieving a goal of quitting our job means nothing if we can’t do what we love. Plus, we have a few tips to save big while traveling abroad.

Get the Big Stuff Right

It’s important to understand that your financial situation is largely dictated by a few key issues:

1. How much are you spending on the “Big Three”: housing, cars, and food?
2. Are you tracking your spending?
3. Do you track your net worth?
4. Are you investing your savings in a balanced and diversified way?

If you are nailing all of the above, you are set my dude or dudette. You really can’t go wrong with this strategy. And believe me, it’s going to take a hell of a lot of lattes to make up for paying $200,000 extra to live in a bigger house than you need. Or if renting, are you unnecessarily paying hundreds of dollars extra a month (for a variety of reasons)?

As usual, it makes no sense to sweat the details when 80% of your spending is tied up in 20% of your budget line items.

But the CC Family definitely used to sweat the small stuff when we first tried to increase our savings rate. And though we’ve learned that lesson, maybe it wasn’t so bad to find the bottom…

Being Frugal: Finding the Bottom

I’d say that 2016 was The Year of Austerity. We got serious about saving and investing in late 2015, but we really found our stride in 2016, learning to question every dollar. And when I say every dollar, I mean every dollar.

I’m someone who loathes waste to begin with. I’ll wear a pair of shoes until they literally fall apart. Throwing out food of any quantity (seriously, even a few bites) makes me want to crawl into the fetal position, suck my thumb, and cry. I can’t stand it.

So, it should be no surprise that we (or I) took it too far. We largely stopped leaving the house. I no longer went out to enjoy a pint in a city known for its breweries, something I once regularly enjoyed with friends. I brought in my change jar from home to fund the rare coffee away from the free cardboard-flavored stuff at work. We obsessed over the numbers: money in, money out, timeline projections, hurry up to financial independence. Then you’ll be happy.

The frugal (or rather full-value) collage. Clockwise from top: blown-out shoes still in heavy rotation, the once and still occasionally used change jar for coffee, and the “sucks but still works” water bottle that barely stands.

Diminishing Returns

As The Mad Fientist discusses, there’s a point of diminishing returns on frugality, especially for those of us who are naturally frugal. Spending an extra $40-100 a month on items or experiences that we truly value and enjoy will not make or break the budget. In fact, finding an appropriate spending baseline now makes for a more promising future.

There are real psychological consequences to pulling the “early retirement trigger” on a lifestyle that’s more suitable to someone in their 20s, and not having spending flexibility to live more comfortably (and more expensively) in the future. Check out this courageous and thought-provoking post on the downsides to retiring too soon, even with “enough” money.

Drawing the Line on Value

But…the reality is that many of us out there can afford to do some serious hacking and gnawing at our spending line items. For those that are in no way frugal, it’s going to be really hard to justify cutting expenses. Everything seems to bring value.

Hell, we still blow the grocery bill. But I’m not a rice and beans kind of guy, and you probably shouldn’t be either.

Any of us can come up with reasons for the things we buy. We are all conditioned in American culture to buy stuff, and the subtle messages are everywhere — TV, radio, peer pressure, everywhere. It’s forgivable if you’ve never even realized the mindless spending. Hey man, put a bag of tortilla chips on my lap, switch on Netflix, and I’ll get weirdly mindless too. Us humans are fickle birds.

The goal here is to put margin between income and expenses. Once you begin tracking your spending, you have a sense of where the vast majority of your money is going each month and year. Take a look at the top five line items, and ask yourself how you can reprioritize for value.

Here’s the bottom line: if you are struggling with your finances, something has to go. Not everything is bringing value.

The Frugal Sweet Spot

Ultimately, we believe that frugality is an endearing quality. There’s little doubt that the world would largely benefit from us buying (and later throwing away) less stuff. But I get it, we’ve evolved to the throne of the natural world and perhaps we deserve a few plush luxuries. Can we come down off our stoic high horse and have a coffee, an occasional night out, and turn up the heat once in a while?

Yes, yes we can.

Remember when I said 2016 was The Year of Austerity? It was, but we spent two weeks in France. Even in our “darkest” days of being frugal, we enjoyed one of the best trips of our lives.

If you are new to this game, I recommend you find the bottom. See what it feels like to cut back to bare bones, because you’ll know how lean you can get when necessary. But then find a life you enjoy, and make the financial frame fit the picture. Get a coffee, but not every day. Enjoy the occasional meal out, but learn to cook your own food too. Find joy in simplicity.

Where can you find margin in what really brings value to your life?

Remember, the best laid plans mean nothing if you can’t take action today. Have questions? Need some feedback? Hit us up on the Contact page.

Thanks guys, see you next week.